LMich
01-01-2007, 11:32 PM
Some good news and some uncertainties, but you take the good whenever you can get it.
Detroit's budget gets back on track
City may end fiscal year with balanced books, but less state funding and loan payments could hurt.
January 01, 2007
Christine MacDonald / The Detroit News
DETROIT -- When Mayor Kwame Kilpatrick goes to Wall Street this month to sell analysts on the city's cost-cutting progress, his staff says the message will be the rosiest in recent years.
Kilpatrick's budget director said the city is on track to end the fiscal year in June with a balanced budget and has made headway in scaling down the $1.4 billion general fund. Most revenues are coming in as expected, and the mayor even predicted surpluses in coming years at a year-end press conference.
"We are a thousand times better this year than we were last year," said Pam Scales, the city's budget director. "You can see the light at the end of the tunnel."
That would be a significant turnaround for the city, which has racked up a string of deficits since 2002, with the most recent on record soaring to $155.5 million in 2004-05.
Even critics acknowledge the city has made headway in trimming the budget and staving off potential receivership with about $60 million in savings from union wage and health care concessions and $67 million in revenue from a new trash fee.
Still, there's plenty of skepticism and uncertainty.
The city doesn't know how much last fiscal year's deficit ballooned over initial projections, but it could be $157 million, City Council staffers predict. Detroit's state revenue sharing likely will take a hit as the state grapples with its own funding shortfall. And Kilpatrick is counting on $30 million in one-time land sales -- such as Rackham Golf Course -- that may not materialize.
There are other unhealthy signs: The city still owes the general pension system a $28 million payment from the last fiscal year that it delayed and plans to continue to borrow millions in short-term debt this fiscal year so there's enough cash on hand to pay bills.
"The city's budget and cash flow have largely been managed by short-term borrowing," said Irvin Corley Jr., the City Council's fiscal analyst. "That's not a good sign."
Analysts could ask Kilpatrick and his staff about those areas in mid-January before the city sells $75 million in bonds mostly for vehicles and another $60 million in bonds for upgrades to parks and buildings and other improvements.
The city's bond ratings, which can affect how much Detroit pays in interest, vary but in general are a notch or two above junk status. That could change if analysts like what they hear from Kilpatrick.
One of the biggest uncertainties is just how much the city went over budget last fiscal year.
The city planned for a $67 million deficit, but Scales acknowledged it is larger. She said it's not "significantly higher," but wouldn't cite specifics. Auditors are scouring last year's numbers and Scales said she hopes to have a solid estimate soon.
Whatever the difference, it must be cut from this year's budget and Scales said she is already looking at ways to trim.
Part of the problem last year was the city had to pay about $11 million more than anticipated in sick and vacation time for laid off employees, Scales said. And the city budgeted for $40 million in land sales but only sold $11 million, she said.
Corley predicts the 2005-06 deficit is closer to $157 million.
Council analysts have had a better record than Kilpatrick's staffers. The past several years, Corley's office has correctly predicted that city deficits are higher than the mayor's estimates.
Scales didn't supply numbers in writing to back up her projections on the current budget, saying a more formal mid-year analysis is due after January.
A financial picture of July through September given to council in December showed a potential $16 million shortfall so far this fiscal year, but Scales said that analysis wasn't complete.
Eric Lupher, director of local affairs for the Citizens Research Council, said it's plausible this budget could end balanced because it was more reasonable.
"It's a lot easier to meet your expectations when you start with realistic expectations," Lupher said.
You can reach Christine MacDonald at (313) 222-2396 or cmacdonald@detnews.com.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070101/METRO/701010341
Detroit's budget gets back on track
City may end fiscal year with balanced books, but less state funding and loan payments could hurt.
January 01, 2007
Christine MacDonald / The Detroit News
DETROIT -- When Mayor Kwame Kilpatrick goes to Wall Street this month to sell analysts on the city's cost-cutting progress, his staff says the message will be the rosiest in recent years.
Kilpatrick's budget director said the city is on track to end the fiscal year in June with a balanced budget and has made headway in scaling down the $1.4 billion general fund. Most revenues are coming in as expected, and the mayor even predicted surpluses in coming years at a year-end press conference.
"We are a thousand times better this year than we were last year," said Pam Scales, the city's budget director. "You can see the light at the end of the tunnel."
That would be a significant turnaround for the city, which has racked up a string of deficits since 2002, with the most recent on record soaring to $155.5 million in 2004-05.
Even critics acknowledge the city has made headway in trimming the budget and staving off potential receivership with about $60 million in savings from union wage and health care concessions and $67 million in revenue from a new trash fee.
Still, there's plenty of skepticism and uncertainty.
The city doesn't know how much last fiscal year's deficit ballooned over initial projections, but it could be $157 million, City Council staffers predict. Detroit's state revenue sharing likely will take a hit as the state grapples with its own funding shortfall. And Kilpatrick is counting on $30 million in one-time land sales -- such as Rackham Golf Course -- that may not materialize.
There are other unhealthy signs: The city still owes the general pension system a $28 million payment from the last fiscal year that it delayed and plans to continue to borrow millions in short-term debt this fiscal year so there's enough cash on hand to pay bills.
"The city's budget and cash flow have largely been managed by short-term borrowing," said Irvin Corley Jr., the City Council's fiscal analyst. "That's not a good sign."
Analysts could ask Kilpatrick and his staff about those areas in mid-January before the city sells $75 million in bonds mostly for vehicles and another $60 million in bonds for upgrades to parks and buildings and other improvements.
The city's bond ratings, which can affect how much Detroit pays in interest, vary but in general are a notch or two above junk status. That could change if analysts like what they hear from Kilpatrick.
One of the biggest uncertainties is just how much the city went over budget last fiscal year.
The city planned for a $67 million deficit, but Scales acknowledged it is larger. She said it's not "significantly higher," but wouldn't cite specifics. Auditors are scouring last year's numbers and Scales said she hopes to have a solid estimate soon.
Whatever the difference, it must be cut from this year's budget and Scales said she is already looking at ways to trim.
Part of the problem last year was the city had to pay about $11 million more than anticipated in sick and vacation time for laid off employees, Scales said. And the city budgeted for $40 million in land sales but only sold $11 million, she said.
Corley predicts the 2005-06 deficit is closer to $157 million.
Council analysts have had a better record than Kilpatrick's staffers. The past several years, Corley's office has correctly predicted that city deficits are higher than the mayor's estimates.
Scales didn't supply numbers in writing to back up her projections on the current budget, saying a more formal mid-year analysis is due after January.
A financial picture of July through September given to council in December showed a potential $16 million shortfall so far this fiscal year, but Scales said that analysis wasn't complete.
Eric Lupher, director of local affairs for the Citizens Research Council, said it's plausible this budget could end balanced because it was more reasonable.
"It's a lot easier to meet your expectations when you start with realistic expectations," Lupher said.
You can reach Christine MacDonald at (313) 222-2396 or cmacdonald@detnews.com.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070101/METRO/701010341
