CHICAGO - Detroit officials are getting their act together and taking it on the road.
Mayor Dennis Archer and top officials are meeting this week with investors and rating agencies to pitch their vision for returning the city to "world-class status."
At a meeting with investors Wednesday in Chicago, Archer gave a report card on Detroit's progress over the 11 months since he became mayor.
He said the city's fiscal 1994 budget deficit projection, originally estimated at $88.5 million, has shrunk to under $60 million. But the issuance of new deficit funding bonds to take out the deficit is apparently no longer under consideration.
The budget for fiscal 1995, which began July 1, calls for the issuance of about $43 million of bonds and the restructuring of $82 million in remaining principal from the city's 1992 issuance of $106 million of five-year deficit funding bonds. Proceeds from the new debt issue, along with debt service saving from the restructuring, would give the city enough money to eliminate the fiscal 1994 deficit.
Archer said bonding would be a component of a new deficit elimination plan that he declined to discuss.
However, a five-year financial forecast that the city prepared indicates it is mulling the issuance of $100 million of bonds to capitalize a self-insurance fund during the first quarter of next year. The fund would cover claims against the city, such as judgments and other casualty or insurance-related expenses, according to the report.
The creation of the fund would free up to $73 million in fiscal 1995 appropriations that would be used to eliminate the previous year's deficit.
The limited tax bonds, which are allowable under state law, would be secured by the city's premium payments to the insurance fund, the report said. The city council would have to pass an enabling ordinance to create the fund.
Detroit's five-year forecast also calls for the budget to increase from just over $1 billion this fiscal year to $1.22 billion in fiscal 2000. Meanwhile, the city Projects it will end each fiscal year in the five-year period in the black, starting in fiscal 1996, which begins July 1. The forecast indicates a $9.3 million balance that year, increasing to $47.4 million in fiscal 2000.
The city also projects that it will replenish its budget stabilization fund, which was emptied of its last $22.1 million in fiscal 1992. The forecast shows 4.6 million in the fund in fiscal 1996, growing to $74.4 million in fiscal 2000.
City officials said the five-year forecast does not include projected revenues from unrealized projects such as the possible designation of an empowerment zone for Detroit by the federal government, a new stadium for the Tigers baseball team, or the introduction of casino gambling in the city.
Archer said that while he expects gambling to come to Detroit, the added income would allow the city to possibly reduce city taxes.
The city's projected turnaround would be dramatic given Detroit's troubled history over the last few years. After experiencing five years of budget surpluses and building up its rainy-day fund to $76 million, the city's financial picture began to slip in fiscal 1990 with the onset of the last recession. Despite depleting the fund and turning to measures such as layoffs, wage cuts, and deficit funding bonds, the city has been unable to shed its red ink.
J. Edward Hannan, the city's budget director, reported that the current $1.1 billion budget remains balanced and that some revenues are doing better than expected.
Eric Tucker, Detroit's finance director, said the city has taken steps to save money and enhance its revenue collection ability, including a planned crackdown on people and businesses that have not paid their property or income taxes.
The forecast report shows that the city plans to issue between $30 million and $40 million of unlimited tax general obligation bonds annually over the next five years beginning in the first quarter of next year. A refinancing of some outstanding Greater Detroit Resource Recovery bonds, callable in 1995, is also under consideration.
Detroit's road trip is a departure from past practices by long-term Mayor Coleman Young, who retired from office early this year. One city official said he could not remember the former mayor participating in a road show for the city. Besides the investors meeting in Chicago, Detroit officials were scheduled to meet yesterday with officials from the rating agencies, including Fitch Investors Service, which does not rate the city's debt. Detroit's GO rating is Bal with Moody's and BBB with a negative outlook with Standard & Poor's.
Another investors meeting was scheduled for today in Boston, according to city officials.
Archer said he is trying to not only change the way the city is run but to be more open about the city government.
"It's an opportunity to meet with the mayor and to increase [investors'] comfort level so when we do sell bonds it may reduce their questions or cause greater interest in the city," he said. "We want to talk about the city and share with others that Detroit is working to regain its world-glass status."
