Voters pass Detroit bond revamping, pick two for mayor race.

CHICAGO -- Detroit voters on Tuesday approved the restructuring of $118 million of bonds to save the city $12.7 million a year -- a key part of the city's fiscal stabilization plan that voters had previously rejected.

Voters also selected former state judge Dennis Archer and Wayne County prosecutor Sharon McPhail out of a field of 23 candidates for the mayoral runoff election in November.

According to unofficial results from the city clerk's office, 54% of voters favored restructuring the limited tax general obligation bonds into unlimited tax GO bonds.

Bella Marshall, Detroit's finance director, said the restructuring will free up $12.7 million a year for 10 years for the city's general fund. Detroit sold the bonds in 1989 to acquire and clean up land for a new Chrysler Corp. automotive plant.

Marshall attributed the turnaround in voter attitude to the fact that Tuesday's primary election ballot was not crowded with bond proposals, as was the case in the August 1992 election when voters had several bond-related measures to consider and rejected the restructuring.

She also said the Chrysler plant has been receiving "more positive press" about its operations and about the popularity of the Jeep Grand Cherokee it produces.

With the restructuring into unlimited tax debt, Detroit will use revenues from an increase in the city's property tax millage instead of general fund revenues to pay debt service on the bonds. Under Michigan law, all new unlimited tax GO debt must be voter approved.

In addition, the city plans to refinance the debt, which carries interest rates of around 7%, within the next 30 days in a deal headed by Merrill Lynch & Co., Marshall said. The city is anticipating a present value savings of about $3.5 million, according to J. Edward Hannan, executive assistant director of Detroit's finance department.

Marshall said voter approval of the restructuring puts one of the final pieces in place for the fiscal stabilization plan Mayor Coleman Young unveiled in April 1992. The plan, aimed at eliminating a $248 million two-year budget deficit, includes layoffs, pay and service cuts, fee increases, and several bond-related measures.

She called the $12.7 million general fund savings from the Chrysler bond restructuring "a gift from Mayor Young to the new mayor."

Much of the plan has already been implemented. Detroit sold $107 million of deficit funding bonds in August 1992, has won 10% wage concessions from unions, and has reduced by $33.5 million annually its contributions to pension funds.

Next week, the city plans to refinance $165 million of revenue bonds sold in 1985 for its Cobo Hall convention center and use the savings to pay debt service on $20 million of GO bonds it sold in 1989 for the center. Marshall said the city is ready to do the deal despite the continuation of a legal challenge to legislation that allowed the refinancing.

She pointed out that wage concessions from police and fire unions and agreements from all unions on health-care cost containment are the only elements not yet implemented in the mayor's plan.

Rating agency officials acknowledged the progress made in putting the plan into place, but cautioned that Detroit's economy remains weak.

"The fiscal stabilization plan the city has been pursuing has been an important thing for keeping [Detroit's] head above water," said Charles Kishpaugh, an assistant vice president at Moody's Investors Service. "They continue to have some economic problems and fiscal challenges. and our concerns in that area are still there."

In July 1992, Moody's dropped Detroit's GO rating to the non-investment grade level of Ba1 from Baa.

Joe O'Keefe, a director at Standard & Poor's Corp., said while the rating agency has been "impressed" with Detroit's ability to scale back its budget deficit, "challenges remain to balance the service burden with the tax-raising capability of the city."

Standard & Poor's rates the city's GO debt BBB with a negative outlook.

Archer and McPhail, who will face off in the Nov. 2 general election for mayor, had been the leading candidates in a field that exploded to 23 contenders when Young announced June 22 that he would not seek a sixth term in office.

Archer and McPhail were the top two vote-getters in Tuesday's non-partisan primary election, with Archer receiving 53% of the vote and McPhail garnering 26%. Archer, a former associate justice in the Michigan Supreme Court, is a partner at the law firm of Dickinson, Wright, Moon, Van Dusan & Freeman. McPhail is a division chief in the Wayne County prosecutor's office.

Detroit voters also selected 18 candidates from a field of 115 who will vie for nine at-large City Council seats in November.

And in anticipation of a possible affirmative vote to revise the city charter in November, voters also picked 18 candidates from a field of 58 to face a runoff for nine seats on the city charter commission, which would be charged with revising the charter.

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