CHICAGO -- With his recent decision to lay off hundreds of workers, Detroit Mayor Coleman Young is playing hardball with city unions that will not accept a two-year 10% pay cut, a major part of his plan to stabilize the city's budget.
The city sent layoff notices this week and last to more than 600 members of the American Federation of State, County and Municipal Employees, which overwhelmingly rejected the pay cut last week. The federation, which represents 6,000 Detroit workers, is the city's largest union.
In a press release, the mayor said he regretted the layoffs, but has a responsibility "to keep city spending within the limits imposed by our revenues.
"I understand some members of [the union] have claimed I am only bluffing," the major said. "Let me assure them, I am not bluffing. One way or another, we will achieve the necessary savings."
Faced with a two-year $248 million budget deficit in the current fiscal year and the next, Young proposed the pay cut as part of a plan to restore financial balance to the city's operations.
Ed Rago, Detroit's budget director, said the city had hoped for a 10% across-the-board pay cut for all 17,000 municipal employees, with an annual savings of $55 million. So far, only 20 of the city's 50 unions have agreed to the wage cut for approximately 3,000 employees, he added.
Bruce Miller, an attorney for the federation, said the wage cut was rejected because members "are not convinced the financial problem is as severe as the major has represented it to be." He added that the federation will file suit this week against the city to block the layoffs, which are effective Oct. 16.
Rago said the city has already laid off about 280 employees from other unions since July.
In addition to the wage concessions, Young's plan, which was incorporated in the $2.12 billion budget for the fiscal year that began July 1, calls for a $33.5 million a year decrease in Detroit's contributions to the city's general and police and fire pension funds.
Rago said that while there is no agreement yet, negotiations continue and the administration is confident an accord will be reached with the pension fund boards.
Another aspect of the mayor's plan involves the issuance of $107 million of five-year deficit funding bonds, which were sold in August.
Also in August, however, voters rejected the part of the mayor's plan that would restructure $122 million of limited tax debt sold in 1989 for a Chrysler Corp. automotive plant into unlimited tax debt. The restructuring would have saved the city's general fund $12.7 million a year. City officials have said the restructuring will be resubmitted to voters next year.
Detroit's financial problems led to a downgrade in July of its $272 million of general obligation debt to the non-investment grade rating of Ba 1 from Baa by Moody's Investors Service. The city has a BBB rating with a negative outlook from Standard & Poor's Corp.