CHICAGO -- Detroit could save $168.3 million a year if it privatizes a number of city services, according to a study released last week by the Detroit office of the Heartland Institute.
However, the privatization strategies outlined by the Midwest think tank sparked little interest from Mayor Coleman Young.
The study says Detroit will "strengthen its finances" and increase the "quality and quantity of services provided to citizens" by selling city assets; transferring the delivery of services to private firms, organizations, or other governments; and competitively contracting with firms for the provision of public services.
In addition, the study says metropolitan residents could save $168.7 million a year in fees through the privatizing the operation of the water and sewer department.
Thomas Shull, the institute's executive director, said the group undertook the study at the end of 1991 when "it became clear the city was facing financial difficulties and a long-term restructuring rather than short-term accounting gimmicks were needed."
Teresa Blossom, a spokeswoman for Mayor Young, said that while the mayor has not seen the study, some of its recommendations may not be realistic.
"The mayor does believe that certain aspects of city government can and should be privatized," Ms. Blossom said. "The issue is not privatization, but whether someone will step up with the money to buy these things. I don't think anyone would reject a serious buyer with cash on hand."
She noted that the mayor has already privatized the operation of city golf courses and contracted out to private firms for printing services. He also has been considering other options recommended by a special committee of business professionals he appointed in January, she added.
Robert Daddow, a certified public accountant who co-authored the study, said the study was only meant to identify what aspects of Detroit's government could be candidates for privatization. Those candidates include the city's convention center, airport, and public health operations, which are assets or services that require a subsidy from the city's budget to operate, according to the study.
Mr. Daddow said the savings the city could realize from privatization could help the city raise its debt ratings.
"From the standpoint the city is in some fiscal distress and to the extent the city is able to reduce that fiscal distress, one would expect the bond ratings to improve as a result," he said.
In July, Moody's Investors Service dropped Detroit's general obligation rating to a non-investment grade Ba1 from Baa, citing "weak credit fundamentals." A month earlier, Standard & Poor's Corp. affirmed a BBB rating with a negative outlook for the city.
Facing a two-year $248 million deficit, the mayor and city council put together a $2.12 billion budget for the fiscal year, which began July 1, that included a plan to stabilize the city's finances.
The plan called for the issuance of $107 million of deficit funding bonds, the restructuring and refunding of outstanding debt, employee concessions, layoffs, service cuts, and other cost-saving measures, such as decreased contributions to city pension funds.
While the deficit bonds were issued last month, the budget plan was dealt a blow when voters on Aug. 4 rejected the restructuring of $122 million of limited tax GO debt the city sold in 1989 to acquire and clean up land for a new Chrysler Corp. automative plant.
City officials have said the restructuring, which would save the city $12.6 million a year, would be resubmitted to voters next year.
Meanwhile, Ms. Blossom reported progress on the employee concession front with 14 of the city's 50 unions, representing about 2,300 workers, agreeing to a 10% wage cut. Union workers account for about 15,000 of the city's approximately 17,000 workforce.
She added that some headway has been made with one of Detroit's pension funds to decrease the city's annual contributions. The budget plan calls for a savings of $33.5 million a year from the decrease in contributions.