CHICAGO - Detroit Mayor Mike Duggan Tuesday presented a $1.1 billion 2016 budget, largely written by the city's former emergency manager, while warning that the city's state aid could be threatened by Michigan's own fiscal problems.

Most revenues are hitting projections outlined in the two-year spending plan by former emergency manager Kevyn Orr, Duggan said in his presentation to the City Council Tuesday morning.

Orr submitted the budget in mid-December as part of a three-year budget plan required under state law.

Duggan told the council he had "very little to do" with the budget, but that he is "committing to managing this budget so it will stay balanced."

Detroit is tackling its budget process early this year as it implements guidelines imposed on the recently bankrupt city by a new state law. City officials will send the budget to the financial committee that oversees the city, hoping it will be the first of three straight balanced budget that will help allow the city achieve financial independence by 2018.

Duggan urged city council members to "act responsibility" by approving the spending plan with few amendments to make a good first impression on the oversight committee. That will allow the city "to get year one out of the way," Duggan said.

If the city is able to craft and achieve balanced budgets for three years in a row, the committee will go dormant. The city is required to submit a four-year budget plan to the commission by March 23.

"If we get out of oversight in 2018 and we run a deficit in 2019, [the review commission comes] back and we have to start the three-year period all over again," Duggan said. "I don't know whether I will be here in 2018 but we must empower elected leadership and get self-determination."

Council president Brenda Jones told Duggan she was worried about state revenue aid, which is the city's second-largest revenue source, in light of Michigan's own recently announced deficit.

Duggan said he was working with lawmakers to ensure that the state does not reduce the city's aid, but said the future is uncertain. "We're going to have to be vigilant but, so far at least, they're not proposing cuts in revenue sharing," the mayor said.

He warned that a bigger challenge could come if voters reject a May ballot referendum to increase the state sales tax to generate more money for roads and bridges.

If that's rejected, "and the Legislature comes back in June and decides to use general fund money for the road problem, we could be facing a whole different challenge in revenue sharing," Duggan said.

Property taxes are expected to generate $114 million in fiscal 2016, up from the $102 million forecast.

But income taxes, the city's top revenue source, are coming in slightly under projections, at $254 million compared to the $255 million expected. The decline is due to collection problems as well as other factors.

Duggan said the state will take over the collection process because Detroit's system is "hopelessly antiquated," according to local reports.

He also said he's working with 20 other cities and state lawmakers on a new state law that would force suburban companies to withhold income taxes on Detroiters who work in the suburbs.

Revenues will be updated again in May.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.