Detroit one city of broken dreams.

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Detroit CFO sees elimination of $125M deficit

The man charged with correcting Detroit's financial woes and hauling the city from a $125 million budget pit says his task is not insurmountable.

Even at a time when city job cuts are likely and Detroit's unemployment and foreclosure rates are among the nation's highest, Joe Harris is upbeat.

"I think we will have a reason to be positive," said Harris, the city's former auditor general and new chief financial officer. He was lured back to work by new Mayor Ken Cockrel Jr. after Kwame Kilpatrick resigned in September as part of a plea to two criminal charges in a text messaging sex scandal.

"Pessimists are usually right," Harris told The Associated Press in a recent exclusive interview. "But no positive thing has occurred unless it's been done by an optimist. I am an optimist."

The deficit is only part of the financial crisis facing Detroit.

The city's tax base continues to wither as the foundering local economy and poor public schools give some residents little reason to stay. The city's 15,000-strong work force — already cut by more than 5,500 since 2002 — is expected to be trimmed even more under a $3.1 billion budget passed earlier this year by the city council.

And some unspecified city services also could get the ax.

Other big cities around the country face similar troubles.

Philadelphia is facing a $108 million deficit that city leaders fear could grow to more than $1 billion by 2013. Some libraries and swimming pools will be closed, and more than 800 jobs cut. Chicago will have an estimated $400 million shortfall, while Los Angeles city leaders are grappling with a $406 million budget shortfall.

Harris is considering creative ways to dig out of Detroit's budget deficit.

Detroit must erase an annual $13 million subsidy of the aging Cobo Center convention center — home to the lucrative North American International Auto Show, he said. Talks with state officials and leaders in surrounding counties about turning Cobo's operation over to a regional authority are ongoing.

By the middle of next year, Detroit is expected to pay the final bond installment, about $55 million, for the city's trash-burning incinerator operation. Harris also said that selling part of the city's revenue from Detroit's half of the Detroit-Windsor, Ontario international tunnel could bring in up to $50 million.

The Detroit City Council had shot down a similar tunnel plan by Kilpatrick due to missed deadlines and unanswered questions about the deal.

Agencies, like Fitch Ratings, are monitoring Detroit's predicament.

Fitch warns that though it has removed Detroit from Rating Watch Negative, a downgrade could be imminent. The outlook also is negative for general obligation bonds. Positive ratings make it easier for cities to sell bonds.

But whether those ratings improve may be out of the city's hands.

"The wild card for them right now is what's going on in the auto industry," said Melanie Shaker, a director in public finance for the international firm. "Their economy is concentrated in auto manufacturing. That resulted in a very high unemployment rate," she said.

General Motors Corp. and Ford Motor Co. reported dismal third-quarter earnings Friday and both automakers announced further job cuts on tops of the thousands of blue collar and white collar positions lost over the past few years.

"Let's face it, we're in a recession," Harris said. "Income taxes are down because people are not only moving out, but those who are still here, many have lost their jobs.

"Revenues are not going to go up. I'd be willing to put money on that."

Detroit can't get the help it needs from outside sources because it's not doing much to attract necessary investment, said Scott Horsburgh, chartered financial analyst and president of Bloomfield Hills, Mich.-based Seger-Elvekrog, Inc.

"Does the city have its own house in order where people feel like it's productive?" Horsburgh said. "The city needs to address that issue, itself, before it can expect help."

Detroit had been notoriously late in getting its financial reports audited under Kilpatrick, who started a four-month jail sentence Oct. 28, the culmination of a nine-month-long text-messaging sex scandal with his ex-top aide.

The June 30, 2006 reports were finished last February. Harris now is working on completing the late 2007 statements by Nov. 30. Cockrel expects a deficit elimination plan for the city within a week or two, said Harris, blaming part of the problem on the antiquated way Detroit has processed financial reports and lack of qualified staff.

Not all financial records and statements are collected in computerized databases.

"We have paper galore," he said. "It's clear to me that we have to have outside help. We've got to bring in accountants. We've got to bring in people who understand the business; contractors to help us generate these financial statements until we can attract and train the individuals we need in order to do this ourselves."

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Op zondag 9 november 2008 16:13 schreef sitting_elfling het volgende:

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Je hoeft niet bepaald op een dewey mountain top te zitten om dat te begrijpen.
Beetje persoon die de economie volgt in Amerika, weet dat de auto industrie harde klappen krijgt. En waar begon die auto industrie in Amerika ? Juistem, in detroit. Gooi er dan nog wat incapabele bestuurders bij en je hebt een gemeente die het niet al te best doet ..
1+1 = 2 niet waar? Niet bepaald wereldschokkend nieuws ..