Kilpatrick’s 2007 budget on the right track

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April 13, 2007

Editorial

Kilpatrick’s budget plan has the right priorities

The Detroit News

Detroit City Councilwoman Sheila Cockrel had the best reaction to Mayor Kwame Kilpatrick’s proposed new budget: The “broad strokes” of the budget are encouraging.

Kilpatrick is proposing a $3.1 billion total budget, down from $3.7 billion in the current year. The city’s projected $1.4 billion in General Fund expenditures on operations are down $27 million from the current year. Despite the spending cuts, the mayor vows to hire an additional 106 police officers, as well as fill 94 vacancies, increasing the strength of the force.

The mayor noted in his budget message to the council Thursday that during the past few years the city has cut its work force, won concessions on health care costs and instituted administrative improvements that will continue to pay off in reduced costs year after year.

And major city revenues — such as property taxes, casino taxes and municipal income taxes — are projected to increase from the current year.

Still, Detroit has a cumulative $96 million deficit and is relying on some major one-time fixes to solve its budget problems.

These include $30 million in land sales that need to be approved by the end of the current fiscal year and the successful completion of a deal with the city of Windsor to lease the Detroit portion of the Detroit-Windsor tunnel. The tunnel deal could yield a one-time payment of $75 million, but the mayor said the city has conservatively booked $58 million from the plan in the proposed budget.

If all goes well, the city will have erased its cumulative deficit by the end of the next fiscal year, the mayor promises.

But there is, as the mayor noted in his address, “no margin for error.” Adding to the unknowns are the details of a possible major bonding proposal that will be unveiled next month.

This mayor deserves credit for working diligently to bring costs in line with revenues, including making a successful case to arbitrators in police and fire pay and benefit negotiations and winning pay concessions from other city workers.

But as the mayor knows, Detroit must continue to try to expand its own revenue base. It remains unhealthily dependent on state and federal revenues — and they are volatile and declining. Total state revenues and grants to the city are expected to amount to more than $448 million — a total that dwarfs the revenues from each of the separate major city taxes — though not their combined amount.

Federal revenues are projected to reach nearly $223 million, an amount in the same range as the yield of each of the major taxes. And combined state and federal revenues are expected, in the proposed budget, to decline from the current year by $5.5 million.

That’s why Kilpatrick’s pledge of no tax hikes is vitally important — and why any new costs or fees on business, such as a possible $14 million waste disposal inspection fee, should be weighed carefully.

The best long-term hope for Detroit remains a rising tax base of new firms and new residents. The increase in police officers and the cut in spending in this budget, if they can be sustained, could help attract them.

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~ by Keith A. Owens on April 16, 2007.

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