Detroit's Budget

With the City of Detroit on the verge of running out of cash, according to a report prepared recently by the accounting firm of Ernst and Young, I thought that now would be a good time to remind everyone about a series of budget recommendations that I sent to Mayor Dave Bing back in July of 2011.

The full text of my letter to Mayor Bing is below. For the record, neither he nor any of the officials that I this letter to ever responded to it.

I do not believe the City of Detroit - or the rest of Michigan, for that matter - can afford the luxury of additional delay in these matters.

July 2, 2011

Hon. David Bing
Mayor of Detroit
Coleman A. Young Municipal Center
2 Woodward Avenue
Detroit, Michigan 48226-3437

Dear Mayor Bing:

The Detroit City Council recently reduced the City of Detroit s operating budget by $25 million, in an effort to bring our communities expenses closer to being in line with the revenue received. I have since read in the local newspapers that you are not certain as of this moment precisely how to manage those cuts without harming the services that Detroit residents and businesses depend upon. As such, I thought I would send along for your consideration a few general suggestions as to how the City of Detroit could save more than $25 million and still make improvements in public services. 

Since the Detroit Police Department is the largest single expense in our budget, and since my research shows that the department has one of the largest budgets of any police department in the nation on a per resident basis, I believe it is appropriate to start there. I have long argued that the fundamental problem with our police department is that it spends a ridiculous amount on administration, has too many assistant and deputy chiefs, and short changes our front-line operations. I believe that there is no better time than the present to begin addressing these matters. 

The Detroit Police Department spent just over $4 million to operate its Payroll Section and Human Resources Bureau, according to our budget for fiscal year 2011. The police department is the only department that has its payroll and human resources needs met within the department. The rest of the City of Detroit s bureaucracy, encompassing our fire, public works, and other departments, had their payroll and human resources needs met for roughly half that amount, even though there were a much larger number of employees in those remaining departments. 

I therefore respectfully recommend eliminating the Payroll Section and Human Resources Bureau. I believe those responsibilities should be transferred to civilians outside of the department. This would save taxpayers more than $3 million. 

In addition, if the payroll and human resources functions were transferred from the police department to civilians, there would not be as much work for the Deputy Chief Management Services to do since oversee 
those two areas are his responsiblity. We could thus eliminate the Office of Deputy Chief - Management Services, transfer their remaining responsibilities to the Office of the Assistant Chief - Administration, and save taxpayers more than $8 million.

The Detroit Police Department currently operates an Office of the Assistant Chief - Operations as well as an Office of the Deputy Chief - Patrol Operations, even though the two job functions largely overlap. I recommend eliminating one of them, which would save taxpayers another $1.2 million. 

The Department's Office of Public Information currently costs more than $700,000 to operate and is staffed almost entirely by police officers. If the Office were instead staffed by 4 or 5 civilian public relations professionals, it would be able to provide comparable services with a savings of roughly $400,000. 

These recommended cuts to our police department total $12.6 million, which would still leave the Detroit Police Department with one of the largest budgets of any police department in the nation on a per resident  basis. More importantly, they would not harm any of the services that our fellow residents and businesses depend on and would not place our police officers in any greater danger. Of course, I do not believe that our police department is the only place where cuts should be made.

The City of Detroit spent $317.6 million on debt service during fiscal year 2011. As a former financial adviser, first with Merrill Lynch and later with Prudential, I reached out to some of my former associates for any estimate as to how much the City of Detroit could save if its debts were fully refinanced. The exact amount, of course, will depend on a multitude of factors. However, even under the most conservative of estimates, the City of Detroit could realize a savings of $19.5 - $39 million by refinancing all of its debts. I respectfully recommend that you begin the process of refinancing the City of Detroit s debts. There are several challenges in doing this. For starters, not all of the bonds that the City has issued over the years are callable. However, after several conversations with various attorneys, I can assure you that it is indeed possible to address each and every issue associated with refinancing our debt.

In addition, one of the things that Ken Cockrel recommended during his tenure as interim mayor was to transfer the collection of our resident and non-resident income taxes to the Michigan Department of Treasury. This allows for a more efficient collection of income taxes as well as a lower cost to the City of Detroit. According to an estimate that was released during Mr. Cockrel' s time in the Mayor's Office, this would save taxpayers approximately $1 million.

I also recommend merging the professional staff for City Planning Commission and the Planning Division of the Department of Planning and Development. There is a considerable amount of overlap between the two functions. Such a move would save Detroit's taxpayers approximately $1.9 million.

Finally, I hasten to point out that a short walk through the Warrendale neighborhood where I live, or any of Detroit's more stable neighborhoods, shows a significant number of properties that are gross offenders of the City's Property Maintenance Code. This includes properties with waist-high grass, bulk trash that sits in front of the home for months, and additional offenses that no other community in Michigan would tolerate. When one reviews the ownership records from the Wayne County Registrar of Deeds, it is clear the vast majority of offenders fall into one of four categories.

  • Bank-owned properties;
  • Rental properties, with property owners who don't care what the house looks like as long as they get paid every month;
  • Real estate speculators; and
  • City-owned properties. 

There are enough offending properties in the Warrendale neighborhood to generate $800,000 - $1 million in revenue from fines, if the City of Detroit were to start issuing these citations. If one were to include some of the other larger, relatively stable neighborhoods (Corktown, Mexicantown, University District, and so on) that total can easily climb to $8 - $10 million in revenue from fines.

There will, of course, be some expenses associated with this, which would likely be around $1 million or so. Add in another million or so for maintaining city-owned properties that are not demolished and that leaves a net gain for the City of Detroit of approximately $6 million.

My suggestions, of course, are not intended to be an all-encompassing list. They are merely a starting point in developing a strategy for reducing the costs of local government and improving services to Detroit 's residents and businesses. 

I thank you for taking the time to consider my thoughts. I look forward to your forthcoming announcement as to how your administration will administer the cuts that were made by the City Council. 

Frank P. Nemecek

CC: Hon. Richard D. Snyder
  Governor of Michigan
 Hon. Charles Pugh
  President of the City Council
 Hon. Gary Brown
  Chair of the Public Safety Committee
 Hon. Kenneth V. Cockrel, Jr.
  Member of the City Council
 Mr. Norman L. White
  Chief Financial Officer, City of Detroit
 Chief Ralph L. Godbee, Jr.
  Chief of Police, City of Detroit
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