Detroit officials, commission fight over whether charter revision would put city back in bankruptcy – Crain’s Detroit Business

Detroit's financial officials and members of the body elected to revise Detroit's charter are feuding over the city's allegations that proposed changes would be too costly and put Detroit on "the road to a second bankruptcy."

Mayor Mike Duggan's administration argues the changes to a legal document that is essentially Detroit's constitution would cost upward of $2 billion over four years and jeopardize the financial solvency the city has achieved.

The nine-member Charter Revision Commission, separate from the city's mayoral administration and created in 2018 via a public vote, was organized to propose amendments to the charter.

The three-year process may not be on all business communities' radars, but any changes ultimately passed by voters will greatly affect the employers and employees of Detroit.

The current version, aimed at increasing rights for residents, requires the city to offer free WiFi, bus rides and other services, and would also make police and fire departments independent of the mayor's administration.

Duggan officials on Monday presented their analysis of the proposed charter revisions to the Detroit Financial Review Commission, which until 2018 oversaw Detroit's finances. The commission could reactivate that emergency state intervention if Detroit sinks back into years of budget deficits an outcome officials argue will come to pass if the charter revisions go into effect.

"The draft revised charter would cost $2 billion over four years by imposing 65 provisions with new mandates that increase expenses or reduce revenues," the city's financial department wrote in a slide show presented to the FRC. "There are no provisions that would reduce expenses or grow revenues (to help make up for new expenses)."

Multiple Charter Revision Commission members on Monday disputed the city's cost estimates, saying they haven't seen the underlying numbers to back them up. Charter commissioner Richard Mack said during public comment that the body has been asking the city for a "detailed explanation" of the budget assumptions for months and they've "refused."

The Financial Review Commission posted the documents to its website late Monday afternoon.

The city estimates the charter changes alone would take up nearly half the city's revenue next fiscal year $488 million out of a projected $995 million. The figures are similar for the next couple years, with the charter requiring 46-47 percent of anticipated revenue.

"We would be on the road to a second bankruptcy," the presentation reads. Tanya Stoudemire, chief deputy CFO for the city of Detroit, said it is laced with "unfunded mandates" and would make business investment in the city less attractive.

"The charter that's proposed ... will send us straight back to state oversight and bankruptcy," Duggan said in response to media questions at an unrelated event Monday in Grandmont Rosedale. "You put in things like free sidewalks, free buses, free internet ... no way to pay for them, this is how Detroit got in the mess it was in. The governor has to decide whether it's legal, and then from there the voters will get a chance to decide, we'll see how it plays out."

Prompted by the Duggan administration's concerns, Stoudemire also on Monday asked the Financial Review Commission to create a subcommittee to review the proposed charter revisions.

Michigan Treasurer Rachael Eubanks, the FRC's chairperson, said it makes sense to do so as the FRC considers whether or not it will, for the fourth year, continue to waive its rights to active financial oversight of Detroit. That vote is in June.

Charter Revision Commission members spoke up during public comment, saying the city is knocking a process with which it has refused to help. The city didn't provide cost-estimating assistance or work with the commission enough in general, charter commissioner Joanna Underwood said. Members also argued the city's cost estimates are overly large.

Lamont Satchel, the Charter Revision Commission's general counsel, said it's not accurate to call charter revisions unfunded mandates.

"Any charter provision is going to be an unfunded mandate, because the charter commission has no authority or ability to provide funding for a specific proposal," Satchel said. "That is always left up to the city to provide the funding for any specific proposed charter revision."

Underwood said the commission plans to respond to what she calls the Duggan administration's "exaggerated" cost estimates.

"We don't want to put the city back through bankruptcy, either," said Mack, also a charter commissioner.

But he hopes the Financial Review Commission will go through the city's estimates with a fine-toothed comb. He says there are some "deeply flawed" budget assumptions.

The commission is expected to present its own side of the story at the next monthly Financial Review Commission meeting, May 24.

Detroit's budget team analyzed a previous draft and said it would cost the city $3.4 billion over four years. The commission made changes to the 2012 charter, which the city reviewed to get the new $2 billion figure. Those then got submitted to Gov. Gretchen Whitmer March 5. She needs to approve it before it goes on the city's ballot.

The Charter Revision Commission expects the charter revisions to go for a vote on the Aug. 3 primary ballot.

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Detroit officials, commission fight over whether charter revision would put city back in bankruptcy - Crain's Detroit Business