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TMCNet:  Detroit expects boost in public safety, continued population decline [Detroit Free Press :: ]

[July 16, 2014]

Detroit expects boost in public safety, continued population decline [Detroit Free Press :: ]

(Detroit Free Press (MI) Via Acquire Media NewsEdge) July 17--The City of Detroit's plan to reinvest $1.4 billion over 10 years as part of its bankruptcy exit strategy will result in 12.5% more police officers on the streets and 17% more firefighters, according to new details of the spending plan made public this week.


The reinvestment would boost public safety personnel up to an "ideal level" of 998 firefighters and 248 paramedics, according to a report that used financial projections as of July 2 and prepared by Charles Moore, the city's operational restructuring adviser and a senior managing director for Conway MacKenzie, a Birmingham-based financial advisory firm.

But the projections suggest that the financial restructuring of Detroit city government won't be enough to keep residents from leaving the city.

Population in the city will fall by 1.3% each year through 2020, with the figure falling from 685,000 today to about 610,000 by 2025 before increasing to 641,000 by 2053, according to the expert reports.

The expert reports are filed by those who plan on testifying in the upcoming bankruptcy trial. The Free Press last week filed a Freedom of Information Act request seeking access to the documents. The city posted the reports on its website.

Moore is one of 12 experts for the city expected to testify during next month's trial in federal bankruptcy court to determine whether the city's restructuring plan is fair and feasible.

A specific number of police officers was not included in Moore's report, although it cautioned 50% of existing uniformed officers will be eligible for retirement within five years.

The city's investment in the police and fire departments through 2023 will be nearly $559 million.

In addition to more manpower for public safety, the city plans to spend $16 million on new crime-fighting equipment, including $5.2 million on nonlethal Tasers, $3.1 million on bulletproof vests and nearly $2 million on body cameras, which some cities have deployed to prevent misconduct by citizens and officers.

The investment in public safety is expected to improve the city's unacceptable response times and case closure rates, according to Moore's report.

Overall, the 10-year reinvestment plan is projected to provide the city $358 million in cost savings and raise about $483 million in revenue.

Ernst & Young consultant Caroline Sallee projected the city's reinvestment plan would have a "modest impact" on tax revenues but would not stem the population decline or the collapse in residential property values.

According to the expert reports: -- A massive residential property reappraisal effort, expected to last about three to five years, will result in an immediate 15% drop in residential tax value in the 2020 fiscal year, according to Sallee's report. From 2016 to 2020, taxable value is expected to fall by 2% to 4% each year.

"Based on historical data showing how the city came out of past recessions, the evidence does not support a quick rebound," Sallee said.

-- The city expects to raise its woeful residential property tax collection rate from about 50% today to 70% by 2020. Overall, the city expects to increase its collection rate for all property taxes from an estimated 65%-70% today to 84% by 2020.

-- Investment banking firm Miller Buckfire, which is pursuing $300 million in fresh loans called "exit financing" for the city, expects an 11-year note at a 6% interest rate, according to a report by Ernst & Young consultant Gaurav Malhotra. The city would make interest-only payments for the first four years and equal principal payments in the successive years.

-- Employment in Detroit is expected to fall by an annual rate of 0.5% to 1% through 2021, according to a report by Ernst & Young consultant Robert Cline.

-- Industrial taxable value is expected to fall by 12% from 2013 through 2023.

-- The Detroit Institute of Arts' building and land are worth about $18.5 million to $43 million, according to an estimate by Hilco Real Estate Appraisal consultant John Satter.

-- The city's retiree health care cuts affect 17,000 retirees and 8,400 dependents, Milliman actuarial consultant Suzanne Taranto reported.

About 11,700 of the 25,400 people relying on the health care benefits are not eligible for Medicare. Detroit has proposed paying $450 million to two retiree health care trusts to escape a crushing $4.3 billion retiree health care liability.

-- Casino tax revenue, a critical source of cash for the city, will fall by 1% in the 2015 fiscal year and 0.5% in the next two years, then increase by 1% starting in 2018.

-- The city's information technology infrastructure is outdated and prone to network outages. According to Detroit chief information officer Beth Niblock's report, 80% of the city's 5,500 computers are more than five years old and 85% of the city's work stations operate on Windows XP or an older version of the operating system.

The reports include information about how much the city is paying each expert. Their compensation varies.

For example, Miller Buckfire is expected to collect a fee capped at $28 million if the city of Detroit is able to restructure its debt in bankruptcy.

Moore, of Conway MacKenzie, is paid $495 an hour. Niblock is not paid beyond her $160,000 annual salary as chief information officer.

Contact Joe Guillen: 313-222-6678 or jguillen@freepress.com ___ (c)2014 the Detroit Free Press Visit the Detroit Free Press at www.freep.com Distributed by MCT Information Services

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