CHICAGO -- Detroit is ready to move ahead with a major part of its budget-balancing plan, thanks to the city council's enactment Wednesday of an 8% wage cut for the city's 2,700 nonunion workers, according to Mayor Coleman Young.
In a statement released late Wednesday, the mayor said the city can now continue negotiating with unions for wage concessions, which are a significant component of his plan to eliminate a two-year $248 million budget deficit.
The council's action "appears to be a major step forward," Mayor Young said in the statement.
Bob Berg, the mayor's spokesman, has said that talks with the majority of the city's unions were stalled until the issue of nonunion pay cuts was settled. Of the 50 unions, which represent over 15,000 employees, the city only has agreements for 10% wage cuts with six unions representing about 1,700 workers, he said.
Mr. Berg said yesterday that the mayor will continue to seek 10% wage reductions from the remaining unions.
To that end, Mayor Young pointed out the council "guaranteed" to the American Federation of State, County and Municipal Employees that if its members agree to a 10% cut, "the same reduction will be in force for all elected officials and for all nonunion city employees." The federation is the city's largest union, representing about 6,000 city employees.
"If such an agreement is reached, union members can vote on it secure in the knowledge that if they ratify, there will be an equality of sacrifice for all city employees," the mayor stated.
The mayor and the city council had disagreed on how much to cut nonunion wages. The council originally passed a 2% salary cut, while the mayor issued an executive order for a 10% reduction.
The executive order triggered legal action by the city council, which charged that only the council is empowered to set wage levels. The council obtained a temporary injunction halting implementation of the order from a Wayne County Circuit Court Judge, who scheduled an Aug. 27 hearing on the council's request for a permanent injunction.
City Council President Maryann Mahaffey said yesterday that the council will continue to seek a permanent injunction against the mayor's order.
Detroit took a step backward in its deficit elimination plan on Tuesday when voters rejected the restructuring of $122 million of limited tax debt sold for a Chrysler Corp. automotive plant development into unlimited tax debt. The restructuring would have allowed the city to raise its property tax levy to pay debt service on the bonds that were sold in 1989 and free up $12.7 million a year in the general fund to pay other expenses.
While the Young administration plans to resubmit the proposal to voters next year, the city made up for the $12.7 million shortfall caused by the negative vote on the restructuring by eliminating a fiscal 1993 principal payment on the $107 million of five-year deficit funding bonds the city sold Wednesday.
J. Edward Hannan, the city's assistant bond accountant, said that while no principal payment on the five-year bonds is scheduled during the current fiscal year, the bond issue was structured so that principal payments over the next four years will increase by about $3.6 million annually to compensate for the eliminated payment. The city's fiscal year ends June 30, 1993.
The mayor's budget stabilization plan also calls for a $33.5 million a year decrease in Detroit's contribution to city pension funds.
Meanwhile, despite voters' approval on Tuesday of $135 million of new unlimited tax general obligation bonding authority, the city still plans to issue only about $20 million of GO debt annually for infrastructure needs, said Freda Johnson, a special consultant with Government Finance Associates Inc.
Detroit has a Ba 1 rating on its GO debt from Moody's Investors Service and a BBB rating with a negative outlook from Standard & Poor's Corp.