Deluded thinking or willful deception. Take your pick. Either way, this much is certain: The proposed budget Detroit Mayor Kwame Kilpatrick submitted to City Council last week is a fiction fraught with real danger.
By ignoring political reality and banking on proposals with little chance of materializing, Kilpatrick is increasing the likelihood of state intervention.
The mayor is relying on the city’s unions to accept both a massive hike in health care costs and wage cuts in the form of days without pay. He’s counting on regional cooperation to gain savings on the management of Cobo Center and the Detroit Department of Transportation. And he’s expecting voter approval of tax increases on fast food and real estate transfers.
If Kilpatrick’s numbers are correct, this specific combination of spending cuts and increased revenue represents more than one-third of his administration’s plan to eliminate the $309 million deficit facing the city.
Taken separately, each one of those proposals carries with it a huge question mark; assuming that all will occur is an act of fantasy.
“That budget is only as sustainable as political reality will allow. That reality is almost zero,” says political analyst Bill Ballenger, publisher of the newsletter Inside Michigan Politics. “I’ve got to believe almost anybody would say the same thing.”
More negativity being promulgated by the press? Kilpatrick would certainly say so. After all, in his speech to council, the mayor referred to the recent media “sniping” regarding his delay in making the structural changes needed to keep the city solvent.
“Looking in the rearview mirror wastes time and is, quite frankly, dangerous when we need to keep our eye on the road ahead to respond to that oncoming traffic.”
But Kilpatrick’s record is entirely relevant. And this is what the past tells us: View this proposed budget with great suspicion.
One year ago, Kilpatrick submitted a spending plan that either failed to recognize or covered up a $93 million deficit for the ’04-’05 fiscal year. His administration refuses to say whether that was the result of incompetence or deceit. Either way, they expect us to believe that they’ve got it right this time around.
Don’t bet on it.
The Kilpatrick administration asserts that the city faces a $309 million deficit for the coming fiscal year; Corley, the council’s fiscal analyst, says the actual deficit may be as much as $50 million more than that.
That gap is only part of the problem. Equally disconcerting are the proposed measures that have little chance of being implemented in time to have the effect Kilpatrick’s “balanced” budget banks on. Some seem unlikely to ever happen.
“Every budget is based on a series of assumptions based on our experience and our goals,” the mayor told council. “This budget is no exception. It contains a number of measured assumptions.”
Chief among those assumptions is complete cooperation from unions representing city workers.
According to Kilpatrick, Blue Cross and the HMOs providing health care coverage to city workers recently hit Detroit with a $47 million price hike. Kilpatrick is expecting city workers to pick up the entire increase.
He’s also expecting the unions representing city workers to accept 26 days off without pay, or DOWOP, annually. That amounts to a 10 percent pay cut, saving the city an estimated $36 million a year.
What are the chances the unions will agree to both a hike in health care costs and a 10 percent reduction in pay?
“Absolutely zero,” says John Riehl, president of AFSCME Local 207, which represents Water & Sewerage Department workers.
Kilpatrick included the DOWOP savings in his budget even though the unions informed him earlier this year that days without pay are not negotiable. This decision was made, at least in part, because the administration refused to guarantee no more layoffs in return for the concession.
Kilpatrick has the additional hurdle of a credibility gap to overcome in his attempt to gain concessions from the unions. “His name is mud around here,” Riehl says. “Nobody trusts him.”
Nonetheless, Kilpatrick’s budget assumes that the unions will agree to all his requests — even though no formal proposal has been issued and negotiations have not yet started — with a deal nailed down and implemented by the start of the next fiscal year on July 1.
“I don’t know that we’ve ever negotiated a contract on time,” Riehl says. “Those talks can last a long time.”
At least with the unions Kilpatrick has the threat of more layoffs to use as a hammer in an attempt to get concessions. But gaining the cooperation of area leaders will require a degree of goodwill that has not been present in the past.
Kilpatrick envisions saving $10 million in the next budget year by transferring operation of the city’s bus system to the Detroit Area Regional Transportation Authority (DARTA). But that agency is having financial problems of its own. It recently requested $2.5 million from the federal government so it can “continue regional efforts to improve public transportation service,” according to a press release it issued. It’s also looking for a CEO to run the operation.
Furthermore, unions have filed suit challenging DARTA’s authority to oversee a merged bus system, with a Wayne County Circuit judge ruling in favor of the unions. That decision is being appealed. The bottom line: The whole issue of DARTA is going to be tied up in the courts for the foreseeable future.
Even if legal issues are resolved, says DARTA board member Dick Blouse, president and CEO of the Detroit Regional Chamber of Commerce, there’s “an awful lot of conversation that has to take place before a plan can be worked out.” Saying the idea has merit, Blouse points out that it’s a conversation that has yet to be initiated.
“The mayor has not spoken to the DARTA board about this,” Blouse says. “And, to my knowledge, he hasn’t spoken to the leaders in the three counties about this.”
If that conversation does occur, Kilpatrick isn’t going to like what he hears from Oakland and Macomb counties, where leaders say they’ll oppose any plan that requires them to subsidize Detroit’s portion of the system.
And if they’re opposed, then there is no plan.
The same can be said about Kilpatrick’s desire to save $6 million a year by regionalizing management of Cobo Center, home to the North American International Auto Show.
As with the bus system, any plan that requires suburban subsidies is almost certainly doomed.
Oakland County Executive L. Brooks Patterson is on record as being diametrically opposed to any sales or property tax increases to fund such a plan. And it’s not going to be funded with existing funds.
“We live in the same world as the city of Detroit,” says Bob Daddow, Oakland’s deputy county executive. “We don’t have that kind of money.”
Nancy White, chair of the Macomb County Commission, says she is likewise certain her county won’t be signing on to any plans that require subsidy.
Then there’s the proposed tax hikes. Kilpatrick wants to generate an estimated $12.5 million next year by placing an additional 2 percent tax on fast food sold in the city, and $2.5 million by taxing real estate transfers. Even if they do make it onto the August ballot as foreseen by Kilpatrick, voters will have to approve them. And both are almost certain to face organized — and well-funded — opposition.
Regarding the fast-food tax: “It will receive pretty strong opposition from the Restaurant Association, and I don’t think it will make it into law,” says Rob Gifford, executive director of the Michigan Restaurant Association.
Likewise, Realtors are expected to oppose the property transfer tax.
“The Michigan Association of Realtors never heard from the mayor prior to his delivery of the budget message, but I think there will be some resistance,” says Bill Milliken, president-elect of the Detroit Commercial Board of Realtors. “MAR is opposed to the imposition of the transfer tax.”
In his speech to council, Kilpatrick quoted former first lady Eleanor Roosevelt, saying, “You must do the thing you think you cannot do.”
In the same speech, the mayor portrayed himself as a leader willing to make tough decisions during tough times.
It’s all rhetoric. The reality is that a mayor facing a difficult re-election bid has avoided making hard choices by producing a fantasy budget.
Numbers on a piece of paper don’t mean a thing if they’re based on illusions.Staff writer Nancy Kaffer contributed to this piece. Curt Guyette is Metro Times news editor. Contact him at 313-202-8004 or [email protected]