Detroit — Mayor Mike Duggan on Monday presented his “post-crisis” budget proposal to the City Council that reflects revenues will return to pre-pandemic levels.
Duggan said he’s prioritizing retiree pension contributions, improvements to transit services and restoring the city’s workforce cut during the pandemic as he joined the council in its chambers at the Coleman A. Young Municipal Center.
His major spending priorities include removing blight, neighborhood improvements and beautification.
Duggan stressed as he detailed his $1.2 billion general fund spending plan that the city regained local control of its finances four years ago when it emerged from the strict oversight of the Financial Review Commission put in place as a condition of Detroit’s bankruptcy. The city’s overall proposed budget is $2.45 billion budget for 2023, a $115,000 increase from the prior year.
The mayor’s major spending plan for the fiscal year begins July 1 and comes after Detroit cut $400 million from its budget two years ago due to COVID-related revenue losses.
It will be the eighth-straight balanced budget, “Something that didn’t seem possible, not too many years ago,” Duggan said.
“It’s a return to normal budget… and we need to thank the Council for the fact that the city of Detroit came through the financial strains of COVID in a financially responsible way,” he said.
The city had $130 million remaining from the fiscal year 2020 that Duggan is suggesting be appropriated in one-time allocations.
To better position the city, he is proposing a one-time payment of $30.7 million to the city’s rainy-day fund, which would increase the balance to $138 million. He’s also proposing a $5 million recurring increase to scheduled contributions to the Retiree Protection Fund and a $30 million one-time deposit to the fund.
So far, the city has set aside $370 million in the Retiree Protection Fund, which is obligated to start paying out to retirees in 2024. In the proposed budget, Duggan said they have increased their initial contributions so that the city’s total contribution reaches $460 million by 2024.
Another $17 million is proposed for blight funds and $50 million in one-time capital would be used for maintaining buildings, parks, neighborhood planning studies, contributions to the city airport and museums.
“These are one-time expenditures that we think are strategic and in need to be made,” Duggan said.
‘Transit needs to operate better’
About $72.3 million in the city’s general fund would support improvements to DDOT transit service and the People Mover. It includes a $5.8 million increase to improve paratransit services and vehicle operations.
Riders told The Detroit News last year that they had waited hours for pick-ups from and were sometimes dropped off at the wrong addresses. Detroit officials are taking more oversight from the French transportation provider, Transdev, which riders have been advocating for.
“We have done a really poor job of providing quality dial-ride services for the elderly and disabled,” Duggan said. “We are tearing the process apart and DDOT is actually going to book the appointments and we are going to contract with first-class providers to provide transportation.”
District 6 Councilmember Gabriela Santiago-Romero questioned Duggan on a lack of competitive wages for bus operators. He responded that the council approved a new contract last year providing a 20% wage increase and the city is aiming to fill 120 bus operator positions.
“We’ll also fill another 40 positions to keep them clean because the quality of the cleanliness to me was not an acceptable standard and we’re going to be adding additional mechanics,” Duggan said. “I don’t believe we’ve got unspent money in this budget…The entire administration is focused on recruiting, starting training classes, offering opportunities to existing employees.
“I would love to come back and propose more money for more service but right now, more money is not going to change anything. We need to operate better,” he said.
An additional $2 million is proposed for the elections department with a mid-term election set for this fall, Duggan said.
Detroit’s City Council will host budget hearings over the next month before voting on the budget on April 14.
Minister Eric Blount from Sacred Heart Catholic Church in Detroit questioned what could be done to adjust the income levels to provide residents more assistance, how much of the police department budget is being put towards surveillance and how to reduce water bills.
“I complained about my water bill and ended up going 14 months without a water bill consumption billing,” Blount told the council during public comment. “We need more detail on why the ‘other’ category is always the largest revenue amount.”
Ruth Johnson, who spoke on behalf of the Community Development Advocates of Detroit, asked the council to increase funding for the Detroit Affordable Housing Development and Preservation Fund.
“Fund a home repair program, not a loan program, that focuses on the needs of seniors and people with disabilities. Fund the right to counsel program that provides full representation and supportive services for Detroiters facing evictions, and fund experienced community development organizations and other nonprofits to build, preserve, and rehabilitate single and multi-family housing for low-income Detroiters,” she said.
Gambling revenue offsets income tax losses
On Feb. 25, the Revenue Estimating Conference determined that the city had a 5.5% increase in revenue. Income taxes continue to drive growth despite an ongoing loss from an empty downtown and remote work.
Duggan credited internet gaming and sports betting revenue from the city’s three casinos for offsetting revenue losses from non-resident income tax.
There’s an inherent risk, going forward, with limited opportunities to invest, Chief Financial Officer Jay Rising told the City Council. The city has lost about 47,000 jobs during the pandemic, most of which are expected to be restored with more blue-collar jobs being added with Amazon, Ford and General Motors Plant Zero, he said.
“The projection is that we’ll be at pre-pandemic levels of payroll employment. Again, remote work affects us and will take us down, I believe, 20%,” he said. “These are more blue-collar related jobs so the average payroll will go up.”
City Council President Pro Tem James Tate questioned if there were any incentives to bring people back to work downtown to which Duggan replied: “I don’t feel like it’s my place to tell private companies what to do. I think most of the major downtown employers are bringing people back. The question is what is it going to be like long term because a lot of folks have gotten used to working from home.”
Revenue projections are conservative, officials said, with about a 2% annual growth rate.
In March 2020, about 2,000 employees were placed on part-time or furlough, all of which were able to return through $60 million in federal CARES Act and stimulus funds that kept the city afloat.
Duggan said the city will be operating with a tight long-term budget with 10,500 employees, 100 fewer than last year.
Last March, Duggan proposed more money for the city’s election office, police force and recreation department. He also wanted more funding for affordable housing, expungement programs and ensuring Detroiters get fair opportunities for recreational marijuana entrepreneurship.
The council approved the first recreational marijuana sales ordinance in November 2020, but a federal judge ruled it likely unconstitutional in June for giving too much preferential treatment to some Detroit residents. The decision stalled the city’s efforts to license recreational pot businesses at a time the industry is growing at a rapid pace in Michigan.
Tate introduced a second cannabis ordinance in February that opens benefits to all residents from Michigan’s 184 disproportionately impacted communities, rather than just Detroiters.
Last year, the council approved Duggan’s plan for $826 million in American Rescue Plan money to address intergenerational poverty in the city over eight categories. He dubbed the proposal the “Detroit Future Fund.”
Of the allocation, Duggan has proposed $250 million for city services, $95 million to address bight, $50 million for neighborhood investment, $67 million in housing initiatives, $105 million for job creation, $50 million to improve public safety, $53 million for beautification and recreation improvements, $40 million to help small businesses and $45 million to bridge the digital divide.
“We are coming through the COVID crisis financially strong and in a position to get rid of the Financial Review Commission once and for all,” Duggan concluded.
As he embarks on his third term, Duggan is set to become the second longest-serving mayor in the city’s history, following Coleman A. Young, who served as the city’s first African American mayor for 20 years.
The budget proposal is the fifth in a 10-year period of passive oversight from the state. If the budget is balanced again in the coming year, “We’re halfway of having the state gone for good,” Duggan said.
“I hope you will share with me a passion to make sure that the city of Detroit never again loses its right to self-determination,” he said.
He is also expected to present his State of the City address on Wednesday.