Coronavirus Budget Address

April 14, 2020

City of Detroit
Mayor Mike Duggan
America has never seen anything like the Coronavirus
Only 1 month ago, on March 13, Detroit had its first case
 In the month since, the pain suffered by
our community has been enormous
We have lost 424 Detroiters to this disease.

We have lost 8 of our fellow city employees:

3 from Police Department
3 from BSEED
1 from Fire Department
1 DDOT

We have lost 26 Detroiters living in nursing homes.
 At first, Detroit got hit as hard and
as fast as any city in the country
And we quickly learned the average Detroiter couldn’t get tested.
Some thought we would be overwhelmed.
In March, there were only 125 Coronavirus lab tests being
done each day in the enSre State of Michigan
When they said there was no lab capacity in Michigan, Jamie Dimon and JP
Morgan Chase helped us strike a deal Bioreference Labs of New Jersey.
When they said there were no medical staff to take the tests, we partnered
with Henry Ford Hospital, DMC, Trinity Health (St. Joe’s and St. Mary’s), and
WSU Medical School
When they told us we couldn’t start because there were no lab kits for us,
Dr. Roberto Romero and the NIH made up special tesSng kits for us in the
prenatal care labs.
When they said there were no doctors to write prescripSons for the
uninsured, we recruited 30 Detroit offices to take new paSents.
When they said there was no way to test those without cars, we got Gary
Torgow and TCF to provide $2 rides to the test site.
And we’ve been operaSng one of the most successful
drive-thru test sites in America.
We Did Our 8,000th Drive Thru Test Today
 When our police force was hit hard by the virus and had
more than 600 officers quaranSned
Detroit became the first city in the U.S. to get instant tests
 Detroit has now done 2,000 instant tests in 2 weeks

We have been able to return nearly 1,000 police

officers, firefighters, EMT’s and bus drivers to work

We have also found nearly 200 who tested posiSve
and were able to get them proper medical care
Detroit has stepped up as a leader for the enSre region

We’ve tested Wayne County Sheriffs DepuSes to

make it safer for them to work in the jail

We’ve done tesSng for Michigan correcSons officers

We’ve acSvely cared for those at homeless shelters
and nursing homes.

We’ve tested nearly 4,000 of our neighbors in
Wayne, Oakland, and Macomb CounSes.
 The City has been backed by 100 partners
FUNDERS

AAA Gary Torgow Quicken Loans

Ajax Paving General Motors Quicken Loans Community Foundation
Ally Financial Google The Kresge Foundation
Big Sean Gretchen Valade The Rockefeller Foundation
BN Bahadur Humanity Forward Tony Michaels and the Parade Company
Boji Group Huntington Bank United Auto Workers (UAW)
Camelot Venture Group Hyundai United Way for Southeastern Michigan
Community Foundation for Southeastern Michigan ITC Transportation Company WSP
Detroit Medical Center Foundation Knight Foundation
Detroit Pistons Lear Corporation
Detroit Public Safety Foundation McGregor Foundation
Detroit Red Wings Mercedes Benz Financial Services
Detroit vs Everybody MGM Grand Detroit
Diversified Members Credit Union Mitch Albom
DTE Energy New Economy Initiative
Facebook North American Chinese Coalition
Faircourt Dental and the Asian Chinese Coalition of
Fiat Chrysler Automobiles Detroit
 Who have been with us every step
PARTNERS

Accenture InvestDetroit
Accounting Aid Academy JP Morgan Chase
Angel Share Metro Solutions
BioReference Laboratories Michigan Health Information Network
Black Theatre Network National Black MBA Association - Detroit
Central City Integrated Health (CCIH) Ramada by Wyndham Southfield
Community & Home Supports Detroit Salvation Army
Corporation of Supportive Housing (CSH) SEMHA (Southeastern Michigan Health
Detroit Area Agency on Aging Association)
Detroit Economic Growth Corporation Shopify
Detroit Food Policy Council Southwest Housing Solutions CAM
Detroit Medical Center TechTown
Detroit Rescue Mission Ministries Trinity Health
DTE Foundation Wayne State Medical School
Flash Delivery Wayne State University Physicians Group
Forgotten Harvest Dr. Roberto Romero and the Wayne State
Henry Ford Health Systems University Perinatal Research Branch
Henry Ford Hospital Wayne, Oakland, and Macomb Counties
Hilton Garden Inn Detroit
Homeless Action Network Detroit (HAND)
The people of Detroit have strongly supported our
social distancing message.
The 1,000 bed emergency field hospital opened last Friday
at the TCF Center, expecSng 250 paSents this week.
As of this acernoon, they have 8 paSents.
But while we are starSng to succeed right now, we
cannot let up and return to old habits.
As we bagle the Coronavirus itself, we also have to
bagle a major budget deficit
City of Detroit Budget Process

Detroit Fiscal Year runs from July 1 – June 30.

For Fiscal Year 2019-20, we are in the 4th quarter of the year.

For Fiscal Year 2020-21, Detroit City Council is currently considering next
year’s budget which must be adopted next month.


 The State Financial Review Commission

The State Financial Review Commission was set up by state law in 2014
and had power to approve all city budgets, labor agreements, major
contracts, debt issuance, and city policies.


The law allowed Detroit to get out of acSve oversight if we met
requirements for 3 straight years for balanced budgets, prompt bill
payment, proper accounSng, compliance with State laws, and balanced
four year plan.
 In April, 2018, Detroit met those condiSons and
acSve state oversight was ended.
However, if we run a deficit in a single year, acSve state
oversight goes back into effect for 3 year minimum

 Annual City Budget FY 19-20
Total General Fund Budget: $1,086 Billion
Total Employees: 8,000 Employees
(not including DWSD, 36th District Court and Library)
Budgeted Sources of General Fund Revenue
Income Tax $ 324 Million 30%
Revenue Sharing $ 204 Million 19%
Casino Taxes $ 184 Million 17%
Property Taxes $ 115 Million 10%
Fees, Other Rev. $ 259 Million 24%
Total $1,086 Billion

Other Funds $ 55 Million DDOT Bus fares, BSEED construcSon fund revenue
(shorjalls backed by General Fund)
 What’s happening to those revenues?
Budgeted Sources of General Fund Revenue
Income Tax $ 324 Million Projected to drop 13%
Revenue Sharing $ 204 Million Sales tax share projected to drop 11%

Casino Taxes $ 184 Million 100% Loss Since March 17

Property Taxes $ 115 Million Expected to drop

Fees, Other Rev. $ 259 Million Lost revenue from parking, courts, licenses
Total $1,086 Billion

Other Funds $ 55 Million Bus fares suspended, construcSon acSvity stop

 With the Casinos closing, Detroit is gelng hit harder
with revenue loss than nearly any city in America
Budgeted Sources of General Fund Revenue
Income Tax $ 324 Million Projected to drop 13%
Revenue Sharing $ 204 Million Sales tax share projected to drop 11%
Casino Taxes $ 184 Million 100% loss since March 17
Property Taxes $ 115 Million Expected to drop
Fees, Other Rev. $ 259 Million Lost revenue from parking, courts, licenses, permits, inspecSons
Total $1,086 Billion

Other Funds $ 55 Million Bus fares suspended, construcSon acSvity shut down
(shorjalls backed by General Fund)

 With the Casinos closing, Detroit is gelng hit harder
with revenue loss than nearly any city in America
Revenue Losses ImpacSng General Fund

FY 2020 FY 2021
16 Month Total

Income Tax -$ 49 Million -$101 Million -$150 Million
Revenue Sharing -$ 7 Million -$ 14 Million -$ 21 Million
Casino Taxes -$ 52 Million -$ 60 Million
-$112 Million
Property Taxes -$ 1 Million -$ 7 Million -$ 8 Million
Fees, Grants, Fares -$ 45 Million -$ 12 Million -$ 57 Million

-$194 Million -$348 Million
Total -$154 Million

 The following plan applies to roughly 8,000
employees under the execuSve branch.
Does not apply to:
Detroit Land Bank
Detroit Water and Sewer Department
Detroit Public Libraries
Detroit Public LighSng Authority

The LegislaSve and Independent branches and
agencies will also have to make their own decisions:
City Council Detroit Auditor General
City Clerk Detroit Inspector General
 How Do We Eliminate a $348 Million Revenue
Shorjall in 16 Months?

City Government is largely people delivering services.

Out of $1 billion budget, more than $650 million goes
to salaries and benefits paid to our 8,000 employees.

If we took 65% of the deficit from employees, it would
equal more than 20% pay/benefits cut or the layoff of
more than 1,800 full Sme employees
 During bankruptcy, the Court-approved Plan of
Adjustment assumed City income tax revenues would
grow by 2% a year
Our success bringing new business and people back
to Detroit far exceeded that projecSon.
We exceeded the income tax projecSons by $80
million last year alone.
 Instead of expanding government, we put most of the
growth in savings: Rainy Day Fund, ReSree ProtecSon Fund
Nearly all the expansion in services from these surpluses
went to the Police Department and Blight Removal
 To eliminate the $348 million shorjall in 16 months,
our plan is based on 6 principles:
1)  Maximize the use of the Rainy Day fund and other savings
2)  Police, Fire, EMS, and Bus services should not be cut
3)  Temporary and part-Sme workers should be reduced before
culng full-Sme city employees.
4)  This virus is temporary – we should try to reduce hours instead
of laying off, so we don’t lose our employees’ talents for good
5)  PrioriSze making sure our employees and their families don’t
lose their health care
6)  If it’s a choice between blight funding and employees delivering
city services, city services must take priority
 How do we address $348 million hole?
Our strong financial management will let us cover 80% of
our shorjall without culng employees wages or benefits

Saved Surpluses from 2016-2020 $101 Million

Available Rainy Day Fund $ 50 Million
Blight Funds For FY 20 and FY 21 $ 72 Million
Delay capital projects FY 20 and 21 $ 33 Million
CFO Cost Culng Order of April 3 $ 6 Million
New Federal CARES Funds for transit $ 36 Million
Total $298 Million
 We have to reduce employee wages/benefits
expense by $50 million
Reducing part-Sme/temporary employees first – $6 million
•  We will have to lay off 200 part-Sme, temporary and
seasonal employees.
•  Mostly 20 hour a week recreaSon department
employees like play leaders, life guards, locker room
agendants.
•  Some temporary administraSve special services staff
•  City HR will be filing your unemployment claims for
you this Saturday.
 We need to reduce expenses from full-Sme city
employees by $44 million
The 8,000 full-Sme city employees will fall into 4 groups:
A: 10% workers Work 10% hours/get 10% pay and health care
No pay increase 7/1
B: 80% workers Work 80% hours/get 80% pay and health care
No pay increase 7/1
C: 95% workers Work 100% hours/get 95% pay (over $125,000)
No pay increase 7/1
D: 100% workers Work 100% hours/get 100% pay
No pay increase 7/1

 Here’s what each group of savings generates:

Savings Through 6/30/21

A: 10% workers 900 employees $17 million
B: 80% workers 1,300 employees $19 million
C: 95% workers 100 employees $ 1 million
D: 100% workers 5,500 employees $ 7 million
Total Full-Time Employee Savings: $44 million



 900 Category A Workers
DPD Traffic Control Officers
DDOT Ticket sales tellers
DPW Drivers road repairs and other services
BSEED Permits/Buildings staff
Office Assistants

Draw 10% city pay every other Friday
Keep your city health insurance
Get state underemployment insurance for the reduced Sme
Get $600 a week federal unemployment through July 31

We hope to call you back as economy restarts
 1,300 Category B Workers
Office Management Assistants
Accountants
InformaSon Technology Specialists
Financial Analysts

Draw 80% city pay every other Friday
Keep your city health insurance
Get state Work Share benefits for the reduced Sme
Get $600 a week federal unemployment through July 31

We hope to move you back to full-Sme as economy restarts


 85 Category C Workers

Elected Officials, appointees, and execuSves who make more

than $125,000

Taking immediate 5% pay cut unSl July 1, 2021

Asking that you conSnue to work full Sme

No pay raise July 1st
 5,500 Category D Workers
Police Officers
Firefighters
EMT’s
DDOT Drivers
DDOT Mechanics
Others who have to cover public-facing shics

Pay, benefits, work hours remain same.

For those who have a contractual pay increase due July 1st,
we ask that you forego that increase.
 For the temporary, part-Sme and Category A and B
employees, how will state payments work?
On Saturday, April 18th, the City HR Department will file your
unemployment claim for you. You do not have to file anything.

On Friday, April 24th, you will receive your last full city
paycheck. That’s to pay you for your work April 6-19.

You will receive a State Debit Card
in the mail shortly. You’ll get your first
state payment on May 8th.

Your current home address must be on file.
 If you’re in Category A (10% workers)
On Friday, April 24th, you will receive your last full city paycheck.
That’s to pay you for your work April 6-19.

On May 8th, you will receive your city pay for 10% of your Sme for
the period April 20-May 3.

On May 8th, your state debit card will be credited with
underemployment pay for 90% of your Sme plus $600 a week.

You will get both payments on payday every other Friday.
If you’re in Category B (80% workers), works the same way
except that your city check will be larger and your state

payment will be smaller.
For City of Detroit Residents, we will protect Police, Fire, EMS, and
Bus Service, but there will be many other cuts to service for awhile

Delayed road repairs

Closed recreaSon centers
CB Patrols will remain suspended
Blight is going to get worse in neighborhoods
Many city services will only be available at kiosks or online
 What does the future look like?
How does our city and country restart?
It will have to happen in phases based on medical advice.

The DPD restart may offer some guidance:

1)  Extensive testing of officers and staff
2)  Thermometer testing at start of each shift
3)  Masks to prevent spread of disease
4)  Intense cleaning protocols of stations and vehicles
 The economy cannot restart all at once
without being reckless with our health
The restart will have to look something like this:

Early phase: Landscaping, road/sewer repairs,

construction
Middle phase: Retail, office, manufacturing
Later phase: Sit down restaurants, movie theaters, sports