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20120604 FMW Re-Align Detroit Fiscal and Operational Structure C419044567

20120604 FMW Re-Align Detroit Fiscal and Operational Structure C419044567

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Published by Stephen Fuzzytek
Foster McCollum White & Associates

FMW 17 point draft plan to re-align Detroit’s fiscal and operational structure
1. Understand and accept the real debt load and deficit situation for the City of Detroit. Detroit has a long term principal and interest debt bubble. The principal debt and relationship for the debt is as follows: a. General Obligation Bonds
Foster McCollum White & Associates

FMW 17 point draft plan to re-align Detroit’s fiscal and operational structure
1. Understand and accept the real debt load and deficit situation for the City of Detroit. Detroit has a long term principal and interest debt bubble. The principal debt and relationship for the debt is as follows: a. General Obligation Bonds

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Categories:Types, Letters
Published by: Stephen Fuzzytek on Nov 27, 2012
Copyright:Attribution Non-commercial

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07/07/2013

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Foster McCollum White & Associates
 _____________________________________________________________________________
 Fiscal Restructuring PlanJune 4, 20121
FMW 17 point draft plan to re-
align Detroit’s fiscal and operational structure
 
1.
 
Understand and accept the real debt load and deficit situation for the City of Detroit.Detroit has a long term principal and interest debt bubble. The principal debt andrelationship for the debt is as follows:
a.
 
General Obligation Bonds - $1,034,505,000.b.
 
Revenue Anticipation bonds - $5,190,891,968.c.
 
Pension Obligation Certificates - $1,468,799,999.d.
 
Other principal debt - $363,928,233.e.
 
Post Employment benefits - $4,982,355,243.f.
 
Pension Liability - $615,701,032.g.
 
Downtown Development Authority loan to City - $33,600,000.h.
 
State of Michigan Drinking Water Revolving Loan Fund (Sewage Department) -$2,028,744.i.
 
State of Michigan Drinking Water Revolving Loan Fund (Water Department) -$45,512,406. j.
 
Municipal Parking Department Bonds - $25,800,000.k.
 
Hedging Derivatives extra
 – 
$1,136,007,248.l.
 
D-DOT Bonds - $2,406,855.m.
 
Unlimited General Obligation Bonds (Police & Fire HQ) - $100,000,000.n.
 
2010 fiscal year interdepartmental loan fund balance (loans from department todepartment to cover shortfalls in operating expenses) - $447,000,000.o.
 
2011 fiscal year unaudited interdepartmental loan fund balance (loans from department todepartment to cover shortfalls in operating expenses) - $334,000,000.p.
 
Water fund bond commitment shortfall for 2010 fiscal year - $6,446,061.q.
 
Sewage fund bond commitment shortfall for 2010 fiscal year - $36,348,689.Total Detroit Obligation principal = $15,830,331,478The interest debt and relationship for the interest is as follows:a.
 
General Obligation Bond interest - $467,740,950.b.
 
Water Fund Revenue Anticipation Bond interest - $1,943,976,879.c.
 
Sewage Fund Revenue Anticipation Bond interest - $2,075,424,762.d.
 
Other principal debt interest - $39,400,000.e.
 
D-DOT bond interest - $1,626,495.f.
 
Pension Obligation Certificates Government Interest - $482,844,364.g.
 
Pension Obligation Certificates Water Fund Interest - $32,157,154.h.
 
Pension Obligation Certificates Sewage Fund Interest - $36,439,627.i.
 
Pension Obligation Certificates D-DOT Interest - $42,521,802.
Total Detroit Obligation interest = $5,122,132,033Total Detroit Obligation principal & interest = $20,952,463,511Total Detroit Obligation principal & interest per 2010 citizen population (713,077 persons) = $29,383.17per person.Total Detroit Obligation principal & interest per 2012-2013 proposed budget revenue ratio($2,538,750,778) = $8.25 debt obligation to $1 of proposed revenue.
 
 
Foster McCollum White & Associates
 _____________________________________________________________________________
 Fiscal Restructuring PlanJune 4, 20122
Annual Minimum Debt Service contribution to meet minimum payment obligation -$568,000,000.Annual minimum Pension Plan Contribution - $110,000,000.Annual minimum Post Employment Benefit Contribution - $313,900,000.Annual Minimum Long Term Debt & Obligation Payments for Detroit = $991,900,000.Current unrestricted accumulated deficit $1,612,643,641 (total deficit if city of Detroitsold all assets to pay all existing obligations if payments were due immediately).Total net assets as of fiscal year 2010 = $265,114,621 decreased from $1,983,454,227 in2002.
2.
 
Revise revenue estimates to realistic levels
a.
 
General fund revenues have been overestimated for the past 10 years by 5.17% to29.93%. We are projecting a 15% decrease in general fund and enterprise fund revenuesto be realistic. The adjustment would result in the following revenue projections:i.
 
2012-2013 General fund revenue = $1,111,783,467 reduced by $196,197,082.ii.
 
2012-2013 Enterprise Fund revenue = $984,592,098 reduced by $173,751,546.iii.
 
2012-2013 Total City of Detroit projected revenue (in line with 10 year trendadjustment of 15%) $2,096,375,565.3.
 
Reduce the number of core retained agencies within C
ity of Detroit’s operational authority.
 Even with the proposed reductions of Human Services, Health & Wellness Promotion, HumanRights and Airport, Detroit is attempting to fund too many agencies that do not impact quality of life, the buying decision of residents and businesses or satisfy a statutory requirement of governance. Also, eliminate the designation of enterprise and general fund departments. All of thetraditional enterprise agencies have received general fund subsidy via direct contribution or inter-department loans. The maintained agencies in the New City of Detroit budget and projected2012-2013 expenses allocation would include:a.
 
Budget Department (mandatory fiscal operations) = $2,023,517.b.
 
Department of Public Works (impacts QOL & buying decision) = $101,246,334.c.
 
Fire Department (impacts QOL & buying decision) = $159,954,156.d.
 
Human Resources (mandatory governmental operation) = $8,007,953.e.
 
Law (mandatory governmental operation) = $8,631,938.f.
 
Mayor’s
Office (mandatory governmental operation) = $3,953,534.g.
 
Planning & Development (Impacts buying decision) = $45,989,612.h.
 
Police (impacts QOL & buying decision) = $339,593,842.i.
 
Recreation (impacts QOL & buying decision) = $12,268,611. j.
 
General Services Department (impacts QOL & buying decision) = $39,099,514.k.
 
Auditor General (Impacts QOL & improves operations) = $2,942,305.l.
 
Board of Zoning Appeals (Impacts buying decisions) = $606,566.m.
 
City Council (mandatory legislative governmental operation) = $8,296,003.n.
 
Ombudsman (Impacts QOL) = $592,292.o.
 
Inspector General (Impacts QOL & improves operations) = $592,292.p.
 
City Clerk (mandatory governmental operation) = $2,070,070.q.
 
Elections Commission (mandatory governmental operation) = $5,092,776.r.
 
36
th
District Court (mandatory judicial governmental operation) = $31,033,117.s.
 
Non-Departmental staff (specific divisions of government) = $57,649,723 (Non fixedcost factored).
 
 
Foster McCollum White & Associates
 _____________________________________________________________________________
 Fiscal Restructuring PlanJune 4, 20123
t.
 
Building Safety & Engineering (impacts QOL & buying decision) = $23,135,868.u.
 
Municipal Parking (Revenue generator for operations) = $19,214,738.v.
 
Debt Service (mandatory budget obligation) = $74,426,582.w.
 
Total base projected appropriations = $946,421,343New revenue projections based on these departments can be totaled into the following categories:1.
 
Taxes & State Revenue Sharing = $695,000,000.2.
 
Sales of services = $200,000,000.3.
 
Grants & shared taxes = $66,000,000.4.
 
Special assessment taxes = $60,000,000.5.
 
Non-departmental verified revenues = $75,000,000.6.
 
Casino infrastructure assessment = $17,000,000.7.
 
Fines, penalties & forfeits = $6,000,000.8.
 
License & permits = $6,000,000.9.
 
Cable franchise fee = $6,000,000.10.
 
Revenue from assets = $4,000,000.11.
 
Sale from assets = $3,000,000.12.
 
Detroit Building Authority revenues = $1,000,000.13.
 
Total projected base revenues = $1,139,000,000
We also project the following “surplus revenues” from the following activities
(adjustments from the 2012-2013 proposed budget)
1.
 
Relief from dedicated subsidy to phased out city departments = $72,000,000.2.
 
Reallocation of General Services Department Budget once combined withDepartment of Public Works = $18,000,000.
FMW projects total operating revenues at
$1,229,500,000 for 2012-2013 fiscal year
 We would recommend the follow appropriations changes to the budget:
 
Increase the Budget department appropriations by $8,000,000 to shift various accountingfunctions from Finance department.
 
Increase DPW appropriations by $21,099,514 transferred from General ServicesDepartment.
 
Decrease net appropriations amount by $10,000,000.
2012-2013 City of Detroit total projected appropriations =
$936,421,343
 2012-2013 City of Detroit total projected revenue =
$1,229,500,000
 2012-2013 City of Detroit projected budget surplus (deficit) =
$292,078,657
 
4.
 
Pass the proposed public safety millage for City of Detroit.
9 mils would generate thefollowing annual amount of revenue Detroit Estimated SEV at $8,000,000,000:a.
 
Public Safety Millage (impacts QOL & buying decision) = $72,000,0005.
 
Separate out EMS division from Fire Department and implement proposed billing modelchanges for service options and expand units to service excess medical treatment andtransport capacity.
Work with City Lobbyist or hire expert lobbyist to lobby for federal changesin Medicaid & Medicare billing for medically distressed and disproportionate share communitydesignation and state statue change for medical transportation service delivery. Implementedchanges could result in following revenue enhancements for Detroit:a.
 
Potential 2012-2013 realized revenue opportunity (at a 33% projected minimum

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