Detroit City Council OKs $156 million surplus spending

Detroit — The Detroit City Council on Tuesday approved a measure to amend the city's current fiscal year budget to accommodate Mayor Mike Duggan's request to spend a $156 million surplus.

Detroit Council Members Mary Sheffield, James Tate, Fred Durhal II, Latisha Johnson and Coleman A. Young II approved the request. Members Scott Benson, Mary Waters, Angela Whitfield-Calloway and Gabriela Santiago-Romero were not present for Tuesday's meeting.

The surplus of funds is from the 2021-22 fiscal year, which ended June 30. The city's overall budget for the fiscal year was $2.33 billion and increased to $2.45 billion for the 2022-23 fiscal year.

Duggan's administration attributes the surplus to "much higher than projected revenues primarily due to growing income tax revenues generated by the thousands of new jobs coming into the city."

Under Duggan's request, the city will spend $86 million in mostly neighborhood-level capital upgrades, such as park improvements, blight remediation, dangerous tree removal and sidewalk replacement.

The city is slotting $10 million for its Retiree Protection Fund to reduce risk when the city’s pension obligation spikes starting next year. Another $60 million will be put into the risk management fund to protect basic city services from being affected by the cost of lawsuit judgments and settlements.

The city is expected to resume paying out pension obligations in the next fiscal year that begins July 1. It has two pension funds: the General Retirement System (GRS) and the Police and Fire Retirement System (PFRS). The city will make payments of $135 million annually for the next 10 years before the amount increases to $154 million as pension reserves are exhausted and the Grand Bargain bankruptcy agreement expires.

Pension obligations are nearly 12% of the city's next general fund budget. That payment amount could change based on a pending court ruling on the city's motion filed in August to restore the amortization period over 30 years rather than 20 years. Pension payments will be made using a mix of reserves and general fund revenues.

“Last year’s surplus is a clear indication that the city’s economic recovery is continuing and will be put to use largely to make physical improvements to many of our neighborhoods,” Chief Financial Officer Jay Rising said earlier this month in a statement. “This reinvestment will help stimulate future growth and stability in the city’s finances, which will allow for more of this type of neighborhood investment in the future.”

Key spending priorities for the surplus are neighborhood capital improvement projects that could be under construction this summer, city leaders said. Those include:

• $20.5 million for a neighborhood sidewalk replacement program to address 70,000 damaged sidewalk slabs across the city.
• $16.2 million to renovate city parks "on a faster schedule than previously planned," according to the proposal. It is estimated that more than 20 neighborhood parks with new landscaping and equipment is in the works.
• $13 million for demolition of unsalvageable buildings and the acceleration of the city’s efforts to rid the city of blighted properties that are not able to be funded out of voter-approved Proposal N bonds. The city did not specify which buildings.
• $5 million for dangerous/dead tree removal. The city has removed more than 30,000 trees in the past eight years; however, the city said it still receives complaints of trees on private property that present a potential danger to the community.
• $19.9 million for transportation to cover the cost of purchasing replacement cars for the Detroit People Mover and part of the cost of adaptively reusing the dairy cattle barn at the former state fairgrounds for use as a new transit center for the Detroit Department of Transportation. 
• $17.9 million in one-time spending, including replacement bulletproof vests for police officers, elections equipment, citywide blight mapping, city fleet electrification and COVID-19 pandemic response.

The administration forecasts an additional $74 million of 2021-22 surplus revenue, for a total of $203 million, to roll over into Duggan's fiscal year 2023-24 proposed budget, which he will present to the City Council on Friday.

New budget pressures

A study released in February by the University of Michigan concluded that Detroit’s economic growth will continue, despite an expected mild national recession. The city, however, still plans to be conservative in its fiscal approach to ensure it has the cushion necessary to withstand any economic fluctuations, Rising said.

In January, the Citizens Research Council of Michigan issued a report stating "the end of Detroit’s reprieve from pension payments will bring new budget pressures." It stated challenges for the city lay ahead with an uncertain amortization schedule, projections of a mismatch between revenues and expenditures beginning in fiscal year 2029 and the expiration of Grand Bargain money. 

Since its exit from bankruptcy almost 10 years ago, the city has operated with balanced budgets. General fund revenues have exceeded spending, resulting in budget surpluses each of the last seven years, according to the Citizens Research Council. This will be Duggan's ninth budget as mayor since he was elected in 2013.

Detroit, one of the hardest-hit cities in the nation, received assistance at the state and federal level to help bounce back from the pandemic.

On March 30, 2022, Michigan Gov. Gretchen Whitmer signed a supplemental appropriations bill to provide the city with one-time funding, including $75 million for lead service line replacements, $15 million for home repair, $5 million for energy assistance, $60 million for the Joe Louis Greenway and $13 million in hold harmless funding to prevent retroactive census adjustments, due to potential undercounting of Detroiters in 2020.

The city also received a total of $826.7 million in federal funds from the American Rescue Plan Act. Here's how they intend to spend the money.

srahal@detroitnews.com

Twitter: @SarahRahal_