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  #621  
Old 04-30-2018, 03:45 PM
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http://www.detroitmi.gov/News/Articl...Se7VTQ.twitter

Quote:
Detroit exits active state financial oversight, achieves full self-governance for first time in four decades
Spoiler:
The State Financial Review Commission, which was created in late 2014 to oversee Detroit’s finances as it emerged from bankruptcy, voted unanimously today to end active oversight after the city delivered its third consecutive audited balanced budget.During its three years of active oversight, the FRC had final decision making power on all city budgets, collective bargaining agreements and contracts larger than $750,000.



The FRC will continue to exist for a 10-year term, although it will play no active role in City of Detroit operations. The city will be required to submit monthly financial reports, and will also submit its adopted budget and 4-Year Financial Plan each year. So long as the city continues to balance its budgets and meet other basic fiscal requirements, the FRC will stay inactive for the rest of its existence.



Not only does the end of active state oversight signal the end of the last vestige of the city’s bankruptcy, it brings to an end a 40-year stretch where some aspect of city government was under the oversight of a state or federal entity, including:

36 years of federal court oversight of the Water & Sewerage Department over environmental issues
A decade of US Justice Department oversight of the Police Department regarding police use of force and lockup conditions.
Nearly a decade of HUD control of the Detroit Housing Commission due to poor performance


With the end of the FRC’s active oversight, Detroit regained the ability to negotiate contracts and make budget changes without the commission’s approval. Mayor Mike Duggan called the end of all active oversight a great milestone in the city’s continued progress and a testament to the city’s new commitment to strong fiscal management.



“For the first time in four decades, Detroit’s elected leadership will be in complete control of government functions,” said Mayor Mike Duggan. “Thanks to the outstanding team we’ve assembled here at the city, the leadership of our partners on Detroit City Council and our hard working city employees, Detroit is once again finally a city of full self-governance.”



The mayor also thanked members of the FRC, appointed by top state officials, for their professionalism and dedication to ensuring fiscal responsibility in Detroit. Not once in its three active years did the commission find cause to veto a budget or contract.



“Today is an important day in the history of our city,” said Detroit City Council President Brenda Jones. “Now, with the dormancy of the FRC and a reduction in state oversight, local control is returning to our city and its elected officials can assume the role that voters expect us to carry out. With five years of partnership under our belt, the legislative and executive branches will continue to work together to ensure Detroit’s financial recovery remains solid. My colleagues and I are committed to conducting the due diligence required to balance the budget, while ensuring that services are delivered to meet the needs of all Detroiters.”



In addition to delivering three balanced budgets with surpluses, the city also has created a 10-year budget forecast to ensure continued stability, garnering the attention of national credit rating agencies, which have significantly upgraded the city’s bond rating.

FRC Oversight

The city’s General Fund balance was up to $592.8 million at the end of FY 2017 vs. a $73 million total fund deficit at the end of FY 2013. Property tax collections increased nearly 10% over the last four years and income tax revenues increased 15 percent over the same period.



“Today marks a milestone for the people of Detroit and the resilience of their city. It wasn’t long ago we entered into the Grand Bargain to lift up a bankrupt Detroit, and over the past few years, the state, city and members of the commission continued to work together to set a framework for success,” Gov. Rick Snyder said. “Today’s vote validates Detroit’s remarkable progress and path toward continued financial stability. Detroit is America’s Comeback City and I have every confidence that we will continue to see Detroit reach new heights under the city’s leadership.”



The path to self-governance in Detroit

Starting in 1977 with federal court-ordered oversight of the Detroit Water and Sewerage Department, the City of Detroit has been under some kind of federal or state oversight. In that period, Detroit faced oversight in seven different areas, including; the Detroit Water and Sewerage Department, the Detroit Police Department, the Detroit Housing Commission, the Detroit Department of Transportation, the Assessment Division, the city’s finances and the entire city under the emergency manager.


Beyond the departure of the emergency manager and financial stability that led to the end of the FRC’s oversight, reforms among the departments and improved efficiencies in city services led to the removal of additional layers of oversight. The Detroit Housing Commission improved financial and management requirements, which led to the commission receiving its first passing HUD inspection score for every public housing development in decades. The Detroit Police Department drastically reduced uses of force and established new offices to review and maintain best practices, leading to the end of the federal monitor at DPD. DDOT improved bus maintenance and improved on-time bus departures to remove the federal oversight of that department. And the Assessor’s Office initiated a city-wide reappraisal initiative in 2014, a process that had not been undertaken since the 1950s.
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  #622  
Old 05-01-2018, 05:05 PM
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https://www.detroitnews.com/story/ne...trol/34408755/

Quote:
Detroit in full control of self for 1st time in decades
Spoiler:
Detroit — The city emerged from state oversight Monday in a historic milestone that ends the last vestige of Detroit’s bankruptcy and marks the first time in four decades that the city has full control of government operations.

The restoration of local control comes as Detroit touts stabilized finances with a projected $36 million surplus in fiscal year 2018, increasing property tax revenues and a plan to have $335 million set aside by 2024 when the city resumes pension payments.

The nine-member financial review commission voted unanimously Monday to release Detroit from the state’s oversight. Since 2014, the commission has had the final say on all city budgets, collective bargaining agreements and contracts larger than $750,000.

More:Howes: City oversight ends, business investment deepens

“Today is one of the most important days that I’ve had since I’ve been on council,” Council President Brenda Jones said after the commission meeting. “It’s an important day for the history of the city of Detroit.”

Jones, who also sat on the commission, praised Mayor Mike Duggan for not vetoing any city budgets and made a promise to continue delivering quality city services to Detroiters. Under the state’s watch, Detroit posted three consecutive budget surpluses, which was a major threshold to regaining independence.

Duggan called the exit from state control a “celebration,” noting some state officials doubted Detroit could achieve financial order in three years.

“This is the earliest we could have done it,” said Duggan, who also sat on the commission. “Today, we have returned self-determination to the people in the city of Detroit.”

Finances in Detroit were the last remaining operation under oversight by state or federal officials. The water and sewerage department was placed under oversight in 1977 for more than three decades over violations of the Clean Water Act.

Other city departments that have been regulated by state and federal entities in the last 40 years include the housing commission, police department, transportation department and assessing department.

While the financial review commission won’t have active oversight, it will still have a “passive monitoring” role, officials say. The city will be required to submit monthly financial reports, along with its adopted budget and four-year financial plan to the commission each year.

The commission will vote on a waiver annually to continue local control in the city. If the city continues to balance its budget and meet fiscal requirements for 10 straight years, the commission will dissolve, officials say.

Detroit ended the 2017 fiscal year with a $53.8 million general fund operating surplus and revenues exceeding expenditures by $108.6 million. The city ended the 2016 fiscal year with a $63 million surplus. For 2015, the surplus was $71 million.

Income tax revenue increased 15 percent in the last four years— it is $292.1 million for fiscal year 2018, up from $253.8 million in fiscal year 2014.

The property tax collection rate has also increased to more than 80 percent in fiscal year 2018 compared to 69 percent in fiscal year 2014. Chief Financial Officer John Hill attributed this to the value of real estate in Detroit going up as more homes are sold and the city attracts residents.

“This is a day that we all had hoped would come,” Hill said of the exit from state oversight. “Nobody knew that it would come this quickly.”

Hill said the city has been working to address the biggest long-term financial risks of its future, such as its pension contributions and debt service expenses.

The funding plan that helped the city exit bankruptcy in December 2014 relieved Detroit of most payments to its two pension funds through 2023. But in 2024, the city will have to start funding a substantial portion of the pension obligations from its general fund for the General Retirement System and Police and Fire Retirement System.

It’s unclear how much those payments will be, Hill said, but the city’s Retiree Protection Fund should have collected $335 million, plus interest, by 2023. So far, $105 million has gone to the fund.

The city’s four-year financial plan from 2019-22 includes a provision of $170 million for the pension funds.

Detroit is also taking action to reduce recurring debt service expenses. The city has used $30 million from surplus to pay down part of its exit financing debt and $52 million of surplus to redeem outstanding C-notes among other actions.

“Our biggest obstacle to dealing with these issues is time,” said Hill of the pension funding. The city has started planning early so there is “a longer period of time in order for us to put whatever plans in place to deal with those financial issues,” he said.

While elected officials celebrated their independence Monday, some residents said Detroit has not progressed in all areas.

Russ Bellant, who was among residents who filed a lawsuit in 2013 challenging the constitutionality of the bankruptcy, said retirees are in a “crisis” following the restructuring.

“The city can claim success, but it’s still on the backs of people who were victimized by the bankruptcy,” he said.

Bellant, a community activist, said the city continues to focus on the development of downtown.

“That part is good, but that’s masking the neglect to the neighborhoods, the neglect of the retirees and the loss of assets that we will never get back.”

Resident Helen Moore said she was glad the city exited state oversight but still believes there are “two Detroits.”

“We don’t live downtown, we live in the neighborhoods, and we are not getting what we deserve,” Moore said during the commission meeting. “I am hoping that all of you here, when you disburse ... will understand that Detroit is in terrible shape.”

City and state officials have predicted for months that Detroit would emerge from state oversight this spring. Duggan credited his administration and the City Council with getting Detroit’s finances back in order.

The city filed for bankruptcy in the summer of 2013 and officially exited on Dec. 10, 2014, with a plan to shed $7 billion in debt and pump $1.7 billion into restructuring and city service improvements over a decade.

In approving a deal that would be known as the “grand bargain,” which helped pave the way for the city to exit bankruptcy in December 2014, Michigan legislators required that a financial review commission oversee the city’s finances, including budgets, contracts and collective bargaining agreements with municipal employees.

The commission was established as a condition of a financial aid package approved by the state Legislature to defray cuts to Detroit retiree pensions and shield the Detroit Institute of Arts collection from bankruptcy creditors.

State Treasurer Nick Khouri, who serves as chairman of the financial review commission, praised Detroit, saying the city has created a “sturdy financial infrastructure.”

“I am confident the city will continue on its path of a balanced budget, strategic investments, improved services and progress in paying down the city’s debt,” Khouri said. “So I am pleased to say this financial emergency is resolved, and I look forward to the city’s continued success.”
https://www.bloomberg.com/news/artic...ncial-recovery
Quote:
Detroit Exits State Oversight as City Mounts Fiscal Recovery
By and
April 30, 2018, 1:26 PM EDT Updated on April 30, 2018, 3:59 PM EDT
Financial Review Commission votes to end Michigan’s oversight
Once-bankrupt city achieved three straight years of surpluses
Spoiler:
Detroit exited years of state financial oversight Monday, showing the city has made strides toward reversing the long economic and fiscal decline that pushed it into a record-setting bankruptcy.

Michigan’s Financial Review Commission, set up in 2014 to monitor Detroit, voted unanimously to end its oversight of a city that officials said has been under some form of outside supervision since 1975. The vote, which came after Detroit ran three years of budget surpluses, drew applause from residents and activists who attended the meeting in the city’s downtown.

No one expected Detroit to move out of state supervision within three budget years, the soonest time available, according to Mayor Mike Duggan.

“I don’t think anybody expected us to work together so well,” Duggan said Monday before the commission’s vote. “This has been a great collaborative effort.”

Detroit has slowly been on the mend since it eliminated $7 billion of debt in bankruptcy, allowing it to arrest a downward spiral that resulted from decades of population loss, declining tax revenue and the disappearance of automobile-industry jobs. With the economy improving, Detroit’s income-tax collections rose 8 percent in 2017, while rising home prices this year lifted the assessed value of property for the first time in at least 17 years.

“There’s much to do, but much has been accomplished over the last three and a half years,” Michigan Treasurer Nick Khouri said after the commission’s vote. "The progress has been nothing but amazing."

To keep the recovery going, Detroit needs to continue revitalizing neighborhoods left blighted by vacant homes after residents moved out for decades. The population fell to 673,000 in 2016, down about 6 percent from 2010, according to data from the U.S. Census bureau, and more than a third of its residents live below the poverty line.

Detroit Chief Financial Officer John Hill said in an interview ahead of the vote that the panel will still continue reviewing the city’s financials because it will be required to formally waive its oversight annually for the next decade. Moreover, he has said Detroit may not return to the bond market to issue general-obligation bonds -- which cities routinely sell to fund public works -- until two to three years from now.

Given the losses that investors took in bankruptcy, even that may be optimistic, said Gabe Diederich, portfolio manager for Wells Fargo Asset Management, which oversees about $40 billion of state and local bonds, including what was formerly Detroit water and sewer debt.

“The city continuing on a step ladder toward improvement, that is a very good thing for their citizens and I think investors,” Diederich said.

"But the economic conditions in Detroit, while improved, still don’t convey material strength,” he said. “While the core has gotten better, you still are surrounded by a ring of pretty distressed areas.”

A full recovery for a municipality the size of Detroit may take more than a decade, said James Spiotto, managing director at Chapman Strategic Advisors, which advises on financial restructuring. The city needs to reinvest, focus on economic development and attracting businesses and residents, he said.

“You’ve got to stay the course,” Spiotto said. “You’ve got to keep fiscal responsibility as a key issue.”

Sandy Baruah, president and chief executive officer of the Detroit Regional Chamber, a business group, is optimistic. He said investment has increased because the private sector is “voting with their feet” and checkbooks.

“When I moved here in 2010, downtown was pretty much dead all the time,” Baruah said. “Now it’s pretty much vibrant all the time. It’s a pretty significant change.”

While parts of Detroit are thriving, others are still economically-depressed and crime-ridden, said Luther Keith, executive director of Arise Detroit, a neighborhood community group. There’s still a “significant number” of residents who feel the progress hasn’t come to their block because the improvements aren’t as widespread as they should be, he said.

“We have not recovered,’’ Keith said. “We have not completed the comeback. We are coming back. There are signs of that, but we still have huge, huge issues that we are confronting, but we are moving the needle in the right direction.’’


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  #623  
Old 05-04-2018, 10:12 AM
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http://www.governing.com/week-in-fin...oversight.html

Quote:
The Week in Public Finance: Detroit May Be Out from Under State Oversight, But Its Problems Are Far From Over
The Motor City still has massive debt and pension obligations. Remaining independent will involve a precarious balancing act.
Spoiler:
Less than five years after it declared what was then the largest municipal bankruptcy in history, Detroit emerged from state financial oversight on Monday. But the milestone is largely a symbolic one: The Motor City is still deeply troubled.

There's no question that Detroit has improved. The city has reported balanced budgets in each of the past three years, a big turnaround from the years leading up to its $18 billion bankruptcy. But a big part of that success is because it was able to unload $7 billion of its liabilities during the bankruptcy process. That deal also gave the city temporary pension payment relief, meaning its current budgets don’t include the full cost of the city’s retirement obligations.

Detroit officials say they're focused on preparing to resume debt and pension payments in 2024. The city is projecting a $36 million surplus this year, thanks in part to increasing property tax revenues. Those trends play a big role in officials' plan to have $335 million set aside by the 2024 deadline to restart payments.

RELATED
Bankrupt Cities, Municipalities List and Map In Scranton, Pa., Fiscal Progress Comes With Political Costs How Did America's Richest State Become Such a Fiscal Mess? The Story Behind San Bernardino’s Long Bankruptcy Bankrupt Cities? What About Distressed Cities?
Still, notes S&P Global Ratings, the current balance is fragile: “The city's challenge will be to manage these rising costs in relation to economic growth, and the costs the city incurs to support [that] growth."

One such cost the city is grappling with when it comes to growth is blight removal. Bankruptcy may have helped the balance sheets, but it didn’t change Detroit’s physical problem. Thanks to the half-century of population decline, entire neighborhoods have been practically abandoned, thus making it difficult and expensive to serve the remaining spread out, isolated pockets.

What's more, to spur reinvestment in abandoned neighborhoods, the city is spending millions to raze vacant buildings. It cost the city nearly $70 million last year and is projected to cost more than $150 million in 2018 and 2019. Seeing as Detroit’s total general fund budget is about $1 billion, these are no small considerations.

Given these concerns, some think the city’s emergence from oversight was incredibly speedy. By comparison, Flint, Mich., which never went into bankruptcy, was under state receivership for more than six years, and some cities in Pennsylvania have been under state oversight for decades. Rather than suggestive of an actual turnaround, municipal analyst Matt Fabian suggests the exit from oversight shows "that the state continues to value a narrative of quick rebound versus evidence that [one] can be sustained."

Too speedy or not, the decision this week to release Detroit from oversight is significant in a larger sense: Since 1977, at least one city agency has been subject to some kind of oversight by a government entity. With Monday's announcement, it's the first time in more than 40 years that Detroit’s elected leadership has complete control of government functions.

To remain independent, most agree that leadership and disciplined spending will be key. On that last item, S&P happily notes that Detroit's revenue forecasts are conservative and don’t assume increases from economic expansions that have been announced or are already in progress.

Observers are further encouraged by the city's economy: Quicken Loans and Ford Motor Company have been investing hundreds of millions in business operations in the city. On the same day Detroit exited from state oversight, the Ilitch family -- owners of the fast food pizza franchise Little Caesars, among other things -- unrelatedly confirmed plans for another $200 million investment in the city.

"Capital goes where it’s invited and stays where it’s welcomed," Detroit News columnist Daniel Howes, who credits Mayor Mike Duggan and the city council, recently wrote. "Right now, Detroit is showing a refreshing ability to do both: to attract investment by business leaders who know the city, its leaders and its foibles best."

But, notes Fabian, elected officials come and go. "Not only is the path forward threatened with each election cycle," he says, but the state is unlikely to intervene with any more aid if the city’s recovery hits a setback. "Going forward,” he says, “the city is likely on its own."
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  #624  
Old 05-26-2018, 04:16 PM
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https://www.detroitnews.com/story/ne...oit/634145002/

Quote:
Detroit gets credit rating upgrade

Spoiler:
Detroit — Giving a nod to the city's improving financial reserves, Moody's Investors Service on Tuesday announced an upgrade in Detroit's issuer rating and its outlook.

The rating comes just weeks after the city emerged from the strict financial oversight put in place as it exited bankruptcy in 2014. The city regained local control over its budgeting and contracts with a projected $36 million surplus in fiscal year 2018, increasing property tax revenues and plans that will earmark $335 million by 2024 to deal with payments that will come due to its two pension funds.

Besides upgrading the city's issuer rating, Moody's also revised its outlook to stable from positive. The upgrade does not apply to any of the city's $1.9 billion in outstanding debt.

Moody's said its upgrade reflects an improvement in the city's financial reserves, which have allowed Detroit to implement a funding strategy for its looming pension obligations "that will lessen the budgetary impact of a future spike in required contributions."

Under the terms of the debt-cutting bankruptcy plan, the city must pay $20 million annually through the 2019 fiscal year to its two pension funds. Its contributions will increase significantly beginning in 2024.

"The stable outlook is based on the city's strong preparation for challenges ahead including the need to make capital investments and absorb pending spikes to fixed costs," Moody's wrote. "Underperformance of pension assets and revenue volatility remain notable budgetary risks, but the city has amassed a large reserve cushion and adopted conservative budgetary assumptions that provide breathing room to respond to adverse developments."

Detroit's Chief Financial Officer John Hill celebrated the positive action on Tuesday, noting the city's hard work to get its financial house in order.

“A second rating upgrade in just seven months from Moody’s shows that we have created the financial management infrastructure necessary to continue to meet our obligations and enhance our fiscal position,” Hill said in a released statement. “Working with the mayor and City Council, our team has made a variety of improvements to financial management practices and our financial planning and budgeting practices are strong, as reaffirmed by Moody’s in their report.”

The upgrade, Moody's added, also factors in "ongoing economic recovery that is starting to show real dividends to tax collections."

Further growth in the city's reserves and tax base growth to fund capital projects for either the city or its school district could lead to additional upgrades. A downgrade could be spurred by slowed or stalled economic recovery, depletion of financial reserves or growth in the city's debt or pension burden, fixed costs, or capital needs, Moody's warns.


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