Proposed Detroit charter revisions could spur ‘fiscal crisis’
Detroit – Proposed changes to Detroit’s city charter would spark “an impending financial crisis” that would place the city in debt with $ 3.4 billion in four years, trigger the appointment of an emergency manager, and violate its bankruptcy warrant, tax officials warned City published in a memo late Monday.
The dire financial outlook was set out in a February 19 memorandum distributed Monday night by the office of the city’s chief financial officer to the Detroit city council in response to the amendments proposed by the charter revision commission.
Detroit’s assistant CFO Tanya Stoudemire called the proposals “very worrying” and argued that they would make the city unable to balance its budget.
The proposals are contained in a draft as recommendations; After formal approval by the Charter Commissioners, it would go to the Governor and Attorney General for review, and ultimately before the voters later this year.
The draft is the culmination of the Charter Commission’s three-year process of proposing changes to the 2012 Detroit Charter. The city electors in 2018 commissioned the nine-person commission to carry out the work.
Detroit Charter Commission Vice-Chair Nicole Small countered that the government’s criticism was a vague last-minute “bullying” tactic to derail the proposed charter revision.
“It’s a fear tactic,” said Small. “They want to bully us into submission and we are not too tolerant of it.”
Stoudemire wrote in her memo to the city council that the proposed changes requiring additional elected city commissions, changes to economic development policies and changes to the city’s contracting process would increase city spending by well over $ 800,000 annually.
At the same time, she claimed the revisions would result in lost revenue from the creation of a free fare system for buses, new requirements for the water pricing system, and new calculations of median income that would cost Detroit Federal Grant Grant dollars.
The charter proposal, she said, does not comply with state budget rules or local finance laws. It would expose the city to litigation and financial risks after bankruptcy “that cannot be easily quantified,” said Stoudemire.
“In the 2014 bankruptcy, large urban assets such as art and the water system were key parts of the solution,” said Stoudemire. “I am deeply concerned that a return to bankruptcy would jeopardize the pensions of all Detroit city retirees as the Pension Fund is the only remaining asset creditor to pursue. Detroit’s right to self-determination will almost certainly be lost.”
John Roach, a spokesman for Mayor Mike Duggan, said the administration had no comment beyond what was set out in the CFO office’s memo.
The City Charter is a document that works under the US Constitution and the Michigan Constitution, defining how city government is structured, what powers and responsibilities it has.
The Charter Revision Commission set up by the electorate, through public meetings and community engagement, identified the recommended changes to improve government transparency and accountability.
The Charter Commission is expected to vote on a final draft of all amendments on June 8th, according to a timetable set by the Commission.
Nicole Small, vice chair of the charter commission, said the memorandum, submitted after the February 12 feedback deadline, was not detailed enough.
“We will consider any responses and recommendations that are supported by some kind of factual documentation,” she said.
Small said the administration’s financial conclusions were not substantive. The charter proposal is more than 190 pages long and many of the criticisms are too vague.
“What’s catastrophic? Everything? The whole gammoth? You can’t just miraculously make up a number,” she said. “They want to cut all the work. This will not be based on admitting to the opposition.”
The Commission, she added, has reviewed the financial implications of the plans when formulating the proposal and has and will continue to make adjustments.
According to Small, the task of the Commission is to fill the loopholes in the existing Charter.
“There are no checks and balances,” she said.
The Charter Commission has until February 27th to sign the proposed changes. The document will be addressed to Michigan Governor Gretchen Whitmer and the Michigan Attorney General for a 90 day review. If approved, the proposed changes will be presented to voters in the August 3 primary, Small said.
The aim of the commission is to perfect the charter to better represent the interests of the people in the city and to ensure that they have access to the government.
Detroit councilor Janee Ayers was looking for them Evaluation of the statute amendment plan from the CFO’s office. On Monday evening, she told the Detroit News that the memo would be discussed during a Wednesday afternoon subcommittee meeting and is expected to be returned for discussion with the entire council the following week.
She said she would like the CFO’s office to present their conclusions before commenting.
City council members last week reviewed the charter plan and made various recommendations to the charter commission regarding the language and terms of the plan.
Detroit City Councilor Scott Benson said it had paid close attention to the charter revision process and had “serious concerns and reservations about this draft charter”.
“In less than 18 months we will have a $ 200 million pension payment for our retirees,” he said. “I don’t want to break our promise to retirees ever again.”
In 2014, Detroit ended the largest municipal bankruptcy in U.S. history with a deal that allowed the city to reduce its debt of $ 7 billion, restructure another $ 3 billion, and $ 1.7 billion Invest in service improvements.
The city was able to protect the city’s art collection from creditors in bankruptcy through a financing package that shaped the “big bargain” and mitigated cuts in pensions for retirees.
The city’s debt reduction plan relieved Detroit of much of its pension payments through 2023. In 2024, Detroit will have to fund a significant portion of these obligations from its general fund for the general retirement system and the police and fire department pension system.
Over the past several years, Detroit has set up a special fund to raise $ 377 million for pension payments.
Since the bankruptcy, the city has set up successive balanced budgets and has been released from strict government oversight. But the COVID-19 pandemic dealt a massive financial blow to Detroit, which resulted in cuts and budget revisions that totaled more than $ 410 million in virus-related deficits.
“I am very aware of our fiscal policies and the prioritization of spending in the city of Detroit,” said Benson.
The charter proposal would incur operating costs of approximately $ 850 million per year. The number, he said, would nearly double what Detroit is allocated each year in its $ 1 billion budget for the General Fund.
“This document in its current form would nearly double the cost of running the city of Detroit but not generate any additional revenue,” he said. “But I’m still checking. It’s going to be a very challenging document.”
Detroit City Council’s Legislative Policy Division assessed the proposal in a February 15 memorandum, stating that the commission and residents “are clearly concerned about increasing transparency and making it easier for citizens to participate in governance.”
While most of the Charter Commission’s recommendations are important and valuable, the Policy Division’s letter states that they are not necessarily adequate, “extremely expensive to implement, and, unless large revenue streams suddenly emerge, could hamper efficient government “.
“The city has only recently emerged from bankruptcy and faces an uncertain financial future,” said the report by Director of the Legislative Policy Division, David Whitaker.
Small said Monday the Legislative Policy Division’s report was “insubstantial” and “very contradicting”.
Among the proposals, the Commission wants the city’s chief lawyer to be elected instead of remaining mayor, and seeks the addition of two elected bodies: a group of fire chiefs and election commissioners.
The Charter Commission is pursuing changes that would mandate candidate debates and issue forums for city elections and electoral initiatives.
Other changes range from requiring contractors to provide detailed reports on recruitment and wages, a task force on reparations and African-American justice, housing affordability measures and a five-year cap on certain tax breaks.
Stoudemire’s memo to the council states that the draft charter would violate state budget and local finance laws and that proposals, if implemented, would return Detroit to active oversight by the Financial Review Commission .
In addition, the city remains obliged to adhere to its bankruptcy adjustment plan ordered by the US bankruptcy court. The proposed charter would add new annual spending requirements, including youth employment, changes to the city’s contracting process, pavement maintenance and costs related to the police department.
The city would also lose additional revenue, argued the CFO analysis, which was based, among other things, on new economic development requirements and new guidelines for water rates.
The Legislative Policy Division’s report indicated that the charter plan would require Detroit’s purchasing department to produce contractor reports detailing where employees are from, what jobs and wages they provide, and what union membership they are.
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“This is an inappropriate provision and will affect the city’s ability to secure contracts,” she warned. “It looks for personal information about people who don’t work for the city – too intrusive.”
Overall, Stoudemire said, the proposal would undermine the city’s ability to have a balanced budget and four-year financial plan annually, which is against state law and sparking “an impending financial crisis”.
Small said the commission would hold a special meeting on Wednesday and Saturday to discuss their proposal. The biggest challenge, she said, is getting adequate funding to produce materials and correspondence to educate voters on the basics of the revision plans.
“We have to be very creative to achieve this,” she said.