DALLAS -- Detroit Mayor Mike Duggan says the city is on track to exit state fiscal oversight by 2018, after a third straight year of balancing its books.
Duggan offered the assessment in his State of the City address Tuesday night.
"When Kevyn Orr departed and we left bankruptcy in December 2014, a lot of people predicted Detroit would be right back in the same financial problems, that we couldn't manage our own affairs, but instead we finished 2015 with the first balanced budget in 12 years and we finished 2016 with second and this year we are going to finish with the third," Duggan said, referring to the emergency manager who took Detroit into Chapter 9 bankruptcy in 2013.
"I fully expect that early 2018 we will be out from financial review commission oversight because we would have made budget and paid our bills three years in a row," Duggan said.
The city faces tough challenges to meet that goal including an unexpected gap in pensions and the absence of a long-term economic plan that leaves the city vulnerable to further setbacks. The city's ratings remain deep in junk territory at B2 and B from Moody's Investors Service and S&P Global Ratings, respectively. Both assign stable outlooks.
Duggan focused most of his speech on future goals.
"If we want to fulfill the vision of a building a Detroit that includes everybody we have to do a whole lot more," he said.
Duggan said the city has work to do to bring back jobs. That's the aim of a new job training program that matches citizens to training programs and then to jobs. Although Detroit's unemployment rate has improved from 18% three years ago to 9.8%, it still has the highest rate of any city in Michigan.
The potential move of the National Basketball Association's Detroit Pistons to the new Little Caesars Arena in downtown Detroit offers a job-creating opportunity for the city, Duggan said.
"After the action of the Detroit city council today in support of the first step of our next project very shortly the Pistons will be hiring people from the city of Detroit," he said.
The bond-funded arena is to open in September as home to the Detroit Red Wings hockey team, which will abandon the Joe Louis Arena on the Detroit riverfront.
On Tuesday, the Detroit City Council voted to support plans for the Pistons' move but said the vote wasn't an endorsement of the complex deal involving millions in tax breaks.
Moving the NBA team carries a $34 million price tag to adapt the design of the nearly finished arena.
The city has agreed to contribute toward the cost for the redesign which Duggan said will be funded through savings generated by the refinancing of $250 million of 2014 bonds issued by the Detroit Development Authority. The city, which appointed First Southwest as its financial advisor for the sale, has slated the bond refunding for early this year.
A city spokesperson said the DDA was expected to decide at a meeting later Wednesday on an underwriting selection.
The bonds were originally sold in 2014 with Bank of America Merrill Lynch in the lead spot to finance the $650 million venue. They are supported by tax increment financing revenues collected by the DDA.
Duggan reiterated his commitment to stand with Detroit Public Schools Community District and its new school board President Iris Taylor against the threat of school closures. The Michigan School Reform Office has identified 38 underperforming schools – 25 of which are Detroit schools -- that could be candidates for closings.
"We aren't saying schools are where they need to be now," said Duggan. "They need to be turned around but we need 110,000 seats in quality schools and closing schools doesn't add a single quality seat, all it does is bounce children around."
The city also remains committed to its demolition program that so far has taken out 11,000 abandoned homes. Over the next few years, Duggan expects another 10,000 abandoned homes will be demolished.
After some delay, the city received $42 million in funds from the U.S Department of Treasury's Hardest Hit Funds program for its blight removal program in October. The funding is the first installment of a new $130 million blight allocation for the city that was part of a spending bill Congress passed in December 2015.
The October installment had been suspended by Treasury for two months after a review found that internal controls needed improvement.
"Now we have a team of state employees and land bank employees and a new process in place to get the program up and running and this time our goal isn't only to be fast but to be in federal compliance too," Duggan said.
Duggan also questioned how much of an impact Republican-backed legislation that would cut or phase out the state income tax would have on citizens, saying he prefers the state focus on policies that would cut car insurance costs.
Lowering the income tax rate will save workers "a couple hundred bucks," Duggan said. "If you solve the car insurance, you'll put three or four times that back in people's pockets, and you won't hurt any state services," Duggan said.
Duggan said he will continue to push legislators to alter the state's laws in a way to allow insurance carriers to offer coverage that lowers rates for Detroiters.
