CHICAGO — Weeks of intense negotiations with Detroit’s 48 unions could be for nought as the tentative contracts don’t generate enough savings to stave off a state takeover or prevent the city from going broke by April, according to a new fiscal analysis.
The report, written by the Detroit City Council’s fiscal analysis division, comes just days before a state review team is set to report to Michigan Gov. Rick Snyder the results of its 60-day review of the city’s books.
The review team can recommend that the governor appoint an emergency manager, work with local officials on a consent decree, or it can ask for a 30-day extension. The team is expected to report its findings Friday.
Friday is also the day that the 1,000 layoffs called for in Mayor Dave Bing’s deficit elimination plan are set to take effect.
Bing has been scrambling for weeks to reach new agreements with those 48 unions.
The administration’s plan to avoid an emergency manager relies on $102 million of annual savings achieved with new labor amendments, with about $65 million coming in this fiscal year, which ends June 30.
But the agreements — which have been tentatively signed by labor leaders but not yet ratified by members — would bring only around $31 million of savings, according to the city’s chief fiscal analyst, who presented the report to City Council members Tuesday afternoon.
The report warns that even with the new agreements, Detroit will still run out of money by April.
It suggests that the city might be better served by allowing current contracts to expire in June.
“The overall tone of the agreements on the surface appears to be much more favorable to organized labor with minimal quantifiable savings for the city,” the report says.
“Is it now becoming more feasible to allow the current contracts to expire in June 2012, somehow get through June cash-wise, and impose on the unions contracts to achieve even more quantifiable savings moving forward to more effectively address the city’s cash flow and provide long-term solutions to the structural deficit?”
Part of the problem is that it’s nearly impossible to attach a dollar amount to the proposed labor amendments, according to one source who has seen the contracts.
“The agreements beg more questions than giving answers,” the source said. “There’s no clear path to how they’re going to save the city money.”
City Council members who reviewed the contracts complained that, like Bing’s other proposals, they do not cut deep enough. The administration, for example, agreed to give up proposed 10% pay cuts from police and firefighters.
“We may not be able to make payroll in 30 days,” Council President pro tem Gary Brown was quoted as saying in local reports.
Despite the new agreements and this month’s layoffs, that April “payless payday” is coming, said the source familiar with the city’s fiscal position.
“Even with layoffs, you’re not going to get savings [this year],” the source said. “We are going to be out of cash in April. What is the governor going to do?”
