CHICAGO -- The Detroit City Council passed a largely unchanged version of Mayor Coleman Young's proposed $1.9 billion fiscal 1994 budget last week.
Edward G. Rago, Detroit's budget director, said the council's changes were largely confined to block grants and the budget for the legislative branch. "I would describe it as not having a lot of extensive changes," he said.
Rago said the mayor has until, Thursday to decide on a veto and that no decision had been made as of Friday morning.
In April. the mayor had proposed a budget for the fiscal year that begins July 1 that he called precarious but balanced.
At that time, Young said the plan was based on many assumptions about factors outside of the city's control. Those included voter and legislative approval for restructuring city debt and union agreement to wage cuts for many city workers.
The city managed to implement some but not all of these savings in fiscal 1993. Accordingly, the mayor said in April that a $30 million deficit would probably be carried over into the fiscal 1994 budget, with the gap to be filled in by the end of that fiscal year if events break the city's way.
Last week Rago said the carryover deficit will probably be under $30 million. The city began fiscal 1993 with a $271 million deficit.
In passing the fiscal 1994 budget, the City Council approved a continued 10% wage cut for city employees that began in the current budget, Rago said.
More than 5,000 of the city's unionized and nonunionized workers have agreed to the 10% cut. although Rago said that the city's largest union -- the American Federation of State, County and Municipal Employees -- is still against the plan. The city has laid off 800 members of that union to offset the lack of wage cuts.
Rago added that negotiations with Detroit's 5,200 uniformed union employees are continuing.
The council also agreed to resubmit a debt restructuring plan to voters in September, he said. The plan, which voters rejected last August, calls for restructuring $118 million of limited-tax bonds sold in 1989 for a new automotive plant into unlimited-tax bonds to save the city's general fund about $12.6 million a year.
Meanwhile, a debt proposal left over from the budget for the current fiscal year ran into some trouble in the Michigan Legislature last week.
A bill that would allow the city to refinance $180 million of revenue bonds sold in 1985 for its Cobo Hall convention center had been passed by the Legislature and sent to Gov. John Engler. However, Senate majority leader Dick Posthumus, R-Alto, pulled the bill off, the governor's desk last Tuesday in an attempt to force Senate Democrats to act on some other bills, according to his spokesman. Andy Anuzis. State Attorney General Frank Kelley said Thursday that the action was not valid and that the bill has automatically become law because it was not vetoed by the governor within 14 days of reaching his desk. Anuzis said Senate Republicans are contending that Kelley has no jurisdiction in the matter. Still, Bella Marshall, Detroit's finance director, said the city has checked with attorneys and believes that Kelley does have jurisdiction. She said the city will proceed with the refinancing in the next few weeks regardless of what happens to the bill. The refinancing is estimated to give the city $17 million in present value savings that it will use to pay debt service on $20 million of bonds Detroit sold in 1988 for Cobo Hall.
On another front, the city has to contend with last week's announcement by Southwest Airlines that it is pulling out of Detroit City Airport, effective Sept. 15. The air line, the only major carrier using the facility, said it was leaving because runways had not been improved.
Rago said the Legislature and City Council have hindered the mayor's plans for an expansion of the airport that would probably be funded by bond issuance running into hundreds of millions of dollars. Southwest's decision should not have a big effect on city finances, he said.
The good news for Detroit is that city income tax revenues are up 2% from last year. Rago said. "It's clear that this year, for the first time in three years, we're seeing positive growth instead of negative," he said.
Rago reported that the city has also successfully negotiated a $33.5 million decrease in annual contributions with its two pension funds.
Steve Murphy, a director at Standard & Poor's, Corp., said the rating agency will have to review the final budget before making any comments. The agency rates Detroit's debt BBB with a negative outlook. An official at Moody's investor's at Service, which rates the debt Bal, did not return telephone calls.
