Message to Detroiters:
Stand Together to Set a Responsible Financial Course
Last week, Fitch Ratings downgraded the City of Detroit's municipal bond rating further into junk status. Its reasoning was that the city has "optimistic revenue projections." This is troubling as it reveals evidence of the City's dire financial straits. The financial community is not seeing the progress it expects in a turnaround effort.
This message was also posted online in the Detroit Free Press today.
Along with the Auditor General's report, financial advice from past City budget directors, the council's financial research team and my legislative staff, the drop in the bond rating is the final nail that drives home the point that City Council must maintain its stance on the budget cuts.
When Moody's dropped the city's bond rating in 2009, the firm mentioned the various one-time fixes and speculative revenue as part of its reasoning for the downgrade. The Fiscal Year 2012 budget has the same form of speculative revenue which places our City in a tough financial position. The accounting gimmicks must end, now!
As Detroit City Council we must stand firm on the $50 Million cuts we made to the mayor's budget. This figure is a compromise from the more than $100 Million originally sought to address the "if-come" revenues and start paying down the deficit.
I will not support the mayor's amendment to place $30 Million from the DTE utility escrow fund and additional revenue sharing from the State of Michigan back into the 2012 budget. This is not new money! These funds should not be applied to anything other than the structural deficit. The funds were already projected and expended in the current year's budget. Further, the new development of our lower junk bond rating means that we must take swift action to address our financial position.
The lower bond rating also means that the amount we pay on current outstanding bonds may increase. We already pay millions of dollars in interest annually on debt, mostly municipal bonds.
Think of it in these terms: That interest could either wipe out the accumulated deficit or be invested into services. However, that cannot happen until we restructure financially. As a result of the new bond rating, we also have limited opportunity to refinance our debt.
We must make serious cuts to the budget so Detroit can get back on its feet. It is going to be painful in the short term; However the consequences of moving forward with the same type of "if come" revenue projections is obvious -- the City's financial ratings will continue to plummet, which will exponentially harm the City's ability to become fiscally secure.
Performance audits by consulting firm McKinsey, commissioned by the mayor's office, give a roadmap to make the cuts without severe detriment to essential services like public safety. I am curious as to why the department directors have not utilized these recommendations that were given last fall. Change is difficult, but how many more warning signs do we need? These cuts should show a good faith effort to citizens and the financial community that we are effecting the real change -- which has been lacking for the past decade.
Wall Street is looking at the balance sheet, the economic climate and the census numbers to send Detroit a message. Detroit's elected officials must respond by standing strong on financial restructuring. I for one will not relent on being a responsible fiduciary for Detroit taxpayers.
We must transform our financial structure and restructure city government much like the now thriving Big Three auto companies did. Our time is running out. I ask every Detroiter and elected official to stand together to set a new responsible financial course.
Together, we possess the power to become the best of Detroit.
Gary A. Brown
President Pro Tem
Detroit City Council