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Financial calamity worsened over years« Thread Started on Ja

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Financial calamity worsened over years« Thread Started on Ja

Postby admin » Thu Jan 26, 2012 10:32 am

Financial calamity worsened over years« Thread Started on Jan 13, 2005, 10:31am » --------------------------------------------------------------------------------Financial calamity worsened over years By Natalie Y. Moore / The Detroit News Brandy Baker / The Detroit NewsDr. Sharon Castro examines Cassandra Mitchum at the "Detroit Department of Health & Wellness Promotion" in the Herman Kiefer complex in Detroit. City health programs are likely to be spared deep cuts under Mayor Kwame Kilpatrick's plan. Detroit's financesDo you support Mayor Kilpatrick’s financial plan to combine layoffs, pay cuts, curtailed bus service and revised pensions with modest tax increases on utilities, cigarettes, liquor and fast food? Yes No Get results and comments Comment on this storySend this story to a friendGet Home Delivery DETROIT -- Job cuts to the tune of 923. Salary reductions of 10 percent across the board for city appointees and nonunion employees. No more city cars or overtime. As Mayor Kwame Kilpatrick unleashes his plan to resuscitate Detroit from what some believe is the road to receivership, one thing is clear -- such cuts were a long time coming. For decades, the city's declining population yet relatively uncut workforce has been increasingly draining. Add to that the lack of stable revenue, a jobless rate prompted by a recent recession, a squalid tax base exacerbated by businesses exiting the city and mounting pension costs gnawing at the general fund. These main factors have created the financial swamp that has bogged down the city, which faces a $230 million budget shortfall for 2005-06. "It's been in crisis mode. This is no secret," said Sean Werdlow, the city's chief financial officer. "It began occurring 30 to 40 years ago and you cannot correct it in one year," Werdlow added. "We're at the point now where you have to make private sector-like decisions." Experts -- nationally and locally -- have sounded the alarm that if Detroit does not deal with the financial calamity, it will be on the road to bankruptcy. Link to Post - Back to Top botAdministratormember is offline Joined: Nov 2004Posts: 4,324Re: Financial calamity worsened over years« Reply #1 on Jan 13, 2005, 10:31am » --------------------------------------------------------------------------------"Detroit is not yet into recovery," said David Osborne, author of "The Price of Government: Getting the Results We Need in an Age of Permanent Fiscal Crisis." The city's long run toward its current crisis has been prompted most by the one-two punch of rising pension and health-care costs and its dwindling population, but other factors -- some unique to the city -- have added to the problems. City expenses Pension and health care costs continue to skyrocket and strap the city. Pension costs now represent 11 percent of the city's general fund versus 5 percent in 2003. For 2003-04, the city paid $155 million in pension costs compared with $90 million in 1993-94. According to the city, employee health care and pensions increased by 22 percent for 2004-05, which is part of a national trend and fluctuations in the stock market. But some city departments are also undergoing scrutiny as officials assess what the core services to residents should be. So far three areas have been identified: transportation, public lighting and the health department. They tap the general fund by $106.5 million a year. The Detroit Department of Transportation represents the biggest portion at $80 million, and the mayor said it will be subject of review. Meanwhile, Kilpatrick has pledged not to lay off police officers. But the police department is one of the biggest expenditures for the city, costing nearly $400 million for 2004-05. Other hefty areas are public works at $130 million and fire at $192 million. Some experts say governmental help on the national level to navigate the tough times is a long shot. Williams Spriggs, a senior fellow at the Economic Policy Institute in Washington, D.C., said there are no longer "true urban advocates." He said the federal government -- saddled with its own tribulations with Medicaid and Medicare -- is not helping cities with its woes. Dwindling population At its peak in 1950, there were nearly 2 million residents dwelling in the city. Today there are about 901,000 residents and that number is expected to dip into the 800,000s margin over the next several years. No one has a definite answer as to why, but officials suspect it's attributable to high city taxes and insurance rates and a deteriorating school system. "We did not plan for depopulation," Mayor Kwame Kilpatrick said at last week's Detroit Economic Forum. "We really need to plan for the depopulation ... so we can grow again." The city's workforce has not reflected the decline in population. There is one city employee for every 50 residents. And the total general city payroll represents $600 million of the $1.6 billion general fund budget. Sixty-four percent of the budget consists of salaries, wages, pension contributions and health care benefits for the 18,000-plus city workforce. "It comprises a huge chunk of our budget each year before we even begin to spend money on light bulbs, lawnmowers ... essential (items) to delivering services. We have fixed costs that increase annually," said Howard Hughey, spokesman for the mayor. City Council Fiscal Analyst Irvin Corley Jr. has said there could be a total deficit of as much as $350 million by the end of 2005-06. Among his predictions were a $90 million deficit for 2003-04 because of overspending and lower collections in taxes and other revenue and a $90 million deficit for 2004-05 -- including a $15 million deficit from the Greater Detroit Resource Recovery Authority and a $4 million deficit in the parking department. The lack of a hockey season this year has hurt revenues in that department, he said. Last summer, after the Kilpatrick administration started projecting next year's shortfall, Corley questioned why more job cuts weren't budgeted. If police, fire and emergency medical services are exempted from layoffs, about 20 to 26 percent of the general fund civilian workforce will receive pink slips, Corley said.
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