As the Detroit City Council began hearings last week on Mayor Ken Cockrel Jr.’s 2010 budget, the council’s top fiscal analyst largely praised the proposed spending plan while questioning aspects of Cockrel’s plan to eliminate the deficit.
In a memo to the council last week, long-time council analyst Irvin Corley Jr. called mayor’s budget “the most realistic estimate of the prior year or accumulated deficit (at $280 million) that we have seen in some time.”
But he deemed Cockrel’s plan to enter into long-term leases of three city assets to generate up-front cash payments as “questionable and overly optimistic.”
“Quite frankly, we hope that Mayor Cockrel’s securitization proposals work,” Corley wrote. “But it is highly unlikely that they will come to fruition in 2009-10 and generate the level of cash ($275 million) the mayor anticipates.”
Under the mayor’s $3.7 billion budget, the city would lease its half of the Detroit-Windsor Tunnel, as well as the municipal lighting and parking departments, to a private operator for an up-front cash payment that Cockrel estimates would largely eliminate the $300 million deficit.
The budget’s only borrowing includes issuing $450 million of water bonds. Previous plans to issue general obligation bonds and short-term revenue notes are not included in the budget.
“We generally concur that it will be difficult selling city bonds at the present time,” Corley said in the memo, noting Detroit’s recent downgrades by all three rating agencies. But he said he’s concerned about the city’s ability to finish a number of capital projects if it does not sell GOs.
Meanwhile, Detroit is gearing up for a special election next week to determine who will finish the term of indicted former Mayor Kwame Kilpatrick.
Cockrel faces off against local businessman and former Detroit Pistons star Dave Bing. The winner will still face a new election Nov. 3.