Detroit voters defeated proposed charter revisions that Mayor Mike Duggan’s administration had warned would jeopardize the city’s fiscal progress and trigger state oversight and potentially a return trip to bankruptcy court.
About 67% of voters in Tuesday’s election said no to Proposition P, based on a preliminary count. The charter was last revised in 2012. It establishes the ground rules for government operations, details the roles of the executive and legislative branches, enables the election process and mandates the departments, programs and services the city must provide.
The nine-member Detroit Charter Revision Commission put in place by voters in a 2018 referendum to conduct a review called those numbers inflated and based on faulty assumptions, with an independent assessment predicting just $7 million in new annual costs for mandates. The commission must disband three years after its Aug. 6, 2018 creation.
“There’s no doubt Proposal P would have put this city in a financial crisis, no matter who was the mayor,” Duggan said after the election results were known.
Duggan, who was elected while the city was in Chapter 9 bankruptcy, is seeking a third term. He was the top vote-getter in the non-partisan primary with more than 72% of the vote. The top two vote-getters square off in the Nov. 2 general election. Anthony Adams, an attorney who is a former deputy mayor to Kwame Kilpatrick, came in second with 10%.
Duggan had raised alarms in recent months that the revisions could imperil the city’s fiscal standing. With the threats looming, the
The state commission was put in place after the city’s December 2014 exit from Chapter 9 to monitor compliance with the plan of adjustment and provide oversight of the city’s financial and operational activities. The waiver continues through June 30, 2022. Until then the commission’s role is limited to monitoring the city’s compliance. The commission remains in place for at least 13 years post-bankruptcy.
The commission first released the city from direct oversight in 2018 after it met required targets laid out in statute. The city’s current fiscal condition is holding steady with a balanced $2.3 billion budget that includes a $1.1 billion general fund for the fiscal year that began July 1.
To maintain independence the city must show the use of revenue projections from an estimating conference, adopt and maintain a deficit-free budget for at least three years, adopt a four-year financial plan, and a certification from the state treasurer and city’s chief financial officer of the city’s market access is required.
The city’s Retirement Protection Fund – to which the city has been funneling money to help blunt the impact when pension contributions resume -- and legacy costs are also reviewed and the city must maintain a rainy day fund equal to at least 5% of recurring expenses.
As he seeks re-election, Duggan can boast of managing the city through the COVID-19 pandemic. Last year, the city faced a $400 million deficit across fiscal 2021 and 2022 but cut spending and drew on reserves. Revenues have since picked up.
The city issued $80 million of general obligation debt last October for public safety, recreation and transportation projects, marking its second stand-alone deal without support since emerging from bankruptcy. The city returned in February with a $175 million stand-alone GO issue under a $250 million blight removal bond program approved by voters last November.
The city has won a series of upgrades since emerging from Chapter 9 but its ratings remain speculative grade. Ahead of a recent $175 million general obligation sale for blight removal, S&P returned the outlook on its BB-minus rating to stable from negative. Moody’s Investors Service rates the city Ba3 with a positive outlook.
And while Duggan may tout the city’s progress, serious challenges remain due in large part to the pension demands. The city’s Retirement Protection Fund, known as the RFP, held $234 million at the end of March and the city aims to bring it up to $365 million through scheduled and supplemental annual contributions to help the city cover roughly $202 million of pension contributions that resume in 2024.
Contributions were put on hold to give the city breathing room after the bankruptcy, but the special trust fund will help the city only through fiscal 2027. A structural imbalance occurs heading into fiscal 2027. If revenues do better than projected, a structural gap is delayed a year or two.
The charter revisions encountered a
Lower courts agreed but a Michigan Supreme Court
