Financial adviser wary of Detroit's reliance on aid
The man who helped steer New York City away from the brink of bankruptcy in 1975 knows a thing or two about troubled municipalities.
Comparing Motown to the city some were calling "the Rotten Apple" 40 years ago, Richard Ravitch on Tuesday told the second meeting of Detroit's post-bankrutpcy Financial Review Commission: "Detroit is in far more difficult shape."
That was the bad news. The good news is Ravitch, who serves as a pro bono senior adviser to the commission, feels Detroit has the leadership and support to successfully move ahead now that it's exited bankruptcy.
"I've known a lot of mayors in my life and I've never met a mayor who knows and understands as much about public finance as Mike Duggan," Ravitch told the commission. "You also have the governor, who's willing to do all the right things. I remember his fight against the Tea Party to get the 'grand bargain' legislation through in Lansing. Those are big pluses."
On the negative side, Ravitch pointed out 20 percent of the city's budget relies on state aid, a source that can be subject to the whims of politics and the state's own budget issues. Cuts to federal aid also hurt the city's efforts to restructure itself, Ravitch added. He also emphasized the city's need for an adequate cash management system so financial shortfalls don't go unnoticed and pile up year after year.
A new system there is in the works, as well as a new procurement and purchasing system, the city's new chief procurement officer, Boysie Jackson, told the commission earlier. The city's old paper-based purchasing process involves shuffling forms and documents from office to office and floor to floor in City Hall, a process that's being modernized. Jackson said the process has been cut from 120 days when he took over to 60 days, and he aims to get it down to 30 days.
Jackson has also put in a process to make sure city vendors don't owe the city money, and is warning them they won't be paid for any work started without a properly approved city contract. He estimated the improved process was saving the city at least $600 million.
Many of those contracts will come before the commission, which is charged with approving any contract worth more than $750 million or lasting longer than two years. The commission approved 19 contracts Tuesday, but focused more on the question of making sure the members don't OK contracts the city can't afford if its income falls below expected levels.
Detroit's new chief financial officer, John Hill, assured the commissioners his office is working to create a process that will give clear and early warnings to them whenever city revenue falls below the budgeted amounts.
"As soon as I know revenue is not coming in, I will be the loudest voice that you hear screaming," Hill told the commissioners. "We absolutely have to meet our budget every single year. We will very quickly, if that ever happens, identify where the cuts need to be in order to come in at the end of the year on budget."
In that case, the city that put the world on wheels will share one important thing with the city that never sleeps: adopting generally accepted accounting rules.