What actions will the EFM take?

[Novine]

"Well the good news is that if they stop pension benefits for new hires or anyone with less than 10 years of tenure, then the pension liabilities will eventually decrease as pensioners die out. "

True. In about 30 years. Until then, you have to keep paying into a system that doesn't have any new members coming in and contributing to the cost. Which is why switching from a pension plan to a 401-k style plan actually ends up costing you more money over the short and medium term than sticking with the pension plan.

[corktownyuppie]

"Well the good news is that if they stop pension benefits for new hires or anyone with less than 10 years of tenure, then the pension liabilities will eventually decrease as pensioners die out. "

True. In about 30 years. Until then, you have to keep paying into a system that doesn't have any new members coming in and contributing to the cost. Which is why switching from a pension plan to a 401-k style plan actually ends up costing you more money over the short and medium term than sticking with the pension plan.

I'm not following. Pension isn't like social security, where the new employees contribute to cover for the benefit of the older employees. My understanding was that it's a pay-as-you-go plan, with companies contributing to your pension fund when you start in order for the money to be there when you're retired.

So with those assumptions -- which may be false, I'm not sure -- switching from a defined benefit to a defined contribution plan saves you money immediately since you are no longer contributing to the newer employees' pensions. Of course, to be fair, the companies should pass on that savings directly to the employee in the form of a raise. But even with that, since all our pensions are underfunded anyway, the moment you stop making promises to future recipients, the sooner you stop the bleeding from getting worse.

[corktownyuppie]

I'm not following. Pension isn't like social security, where the new employees contribute to cover for the benefit of the older employees. My understanding was that it's a pay-as-you-go plan, with companies contributing to your pension fund when you start in order for the money to be there when you're retired.

So with those assumptions -- which may be false, I'm not sure -- switching from a defined benefit to a defined contribution plan saves you money immediately since you are no longer contributing to the newer employees' pensions. Of course, to be fair, the companies should pass on that savings directly to the employee in the form of a raise. But even with that, since all our pensions are underfunded anyway, the moment you stop making promises to future recipients, the sooner you stop the bleeding from getting worse.

I stand corrected, Novine. I was confusing the meaning of "Pay-as-you-go"...

"The City has a long standing practice of paying OPEB liabilities as they become due from current revenues. [[Pay-as-you-go or Pay-go)"

City of Detroit, Enterprise Funds Deficit Elimination Plan, July 22, 2011

OPEB = Other Post Employment Benefits

In other words, at some time there was a decision to fund Detroit employee pension benefits in the same way that Social Security is funded, based on current revenues with no cash reserves.


A reserve fund should have been established to hold cash to pay for future pension benefits.

.

[kenp]

Watching the Mayor and the Council standing on stage ripping the EFM policy and saying Detroiters are the only ones who should be dealing with Detroit [[unless of course there is money coming from outside the city) was laughable. What they are really saying is you cant take away my big pay check, staff, car, body guards and whatever other perks they get.
My proposal is to let the council continue to function but at purely on a volunteer basis to help the city. Lets see how many want to stay and help fix this mess.

[Scottathew]

Watching the Mayor and the Council standing on stage ripping the EFM policy and saying Detroiters are the only ones who should be dealing with Detroit [[unless of course there is money coming from outside the city) was laughable. What they are really saying is you cant take away my big pay check, staff, car, body guards and whatever other perks they get.
My proposal is to let the council continue to function but at purely on a volunteer basis to help the city. Lets see how many want to stay and help fix this mess.

I agree with the first part, take away the council perks, no car, no staff. But Detroit council is a full time job, and I think they ought to be compensated. But how much, I have no idea!

[SWMAP]

CC's big job is to approve the annual budget. Since they will have no say over any budget under the EFM , why employ them full-time?

[Scottathew]

There are other functions they do as representatives as well. I see your point, they've failed, they'll soon have very little power, why pay them?

But some of them may go MIA because they'd have to take jobs if we don't pay them.

[SWMAP]

What other functions? They have no power over departments, cannot require any actions, etc.If they go away - what harm?

[Melocoton]

If the Wright museum can not survive in the largest blackest city in the country...perhaps they need to examine the business model.


Good point!!!

It's actually a lousy point. Museums aren't businesses, and therefore don't have "business models." They always, everywhere, require subsidies, whether it's from the state, philanthropists, other rich people, etc., to survive.

[Kevgoblue]

So with those assumptions -- which may be false, I'm not sure -- switching from a defined benefit to a defined contribution plan saves you money immediately since you are no longer contributing to the newer employees' pensions. Of course, to be fair, the companies should pass on that savings directly to the employee in the form of a raise. But even with that, since all our pensions are underfunded anyway, the moment you stop making promises to future recipients, the sooner you stop the bleeding from getting worse.

Something I find interesting is the fact that regardless of which population you're referring to, the young ones are always the only ones asked to sacrifice. The older generations had much greater opportunities to earn money. Yet and still the only ones being asked to sacrifice are the younger generation. Whether it be this conversation about Detroit, or a private company killing pensions for new hires, or the federal government only willing to change social security / medicare for future recipiants.
Shared sacrifice anyone?

[SWMAP]

"It's actually a lousy point. Museums aren't businesses, and therefore don't have "business models." They always, everywhere, require subsidies, whether it's from the state, philanthropists, other rich people, etc., to survive."

You can't be so poorly informed. Large museums absolutely do have individual business models. First, they have to decide on the population the institution will serve and determine whether that population will be well-served by the building of a collection and building. Then, if that vetting indicates that the project should go forward [[sometimes takes years), the museum staff and Board work annually to determine how many paid entries they can expect, how many private events such as corporate dinners, etc. that they will solicit; how many school tours to solicit; how many many bus tours - and all at what price points so as to compete with limited dollars in every audience. How many wills and bequests will they solicit? How much other fund-raising will be necessary. How much additional subsidy can they count on on from year to year, etc. That is a business model. If the MAAH hopes to survive in the blackest city in America, they have to go out and get the support they need from those segments - not rely on the City of detroit to keep the heat on.

[313WX]

"It's actually a lousy point. Museums aren't businesses, and therefore don't have "business models." They always, everywhere, require subsidies, whether it's from the state, philanthropists, other rich people, etc., to survive."

You can't be so poorly informed. Large museums absolutely do have individual business models. First, they have to decide on the population the institution will serve and determine whether that population will be well-served by the building of a collection and building. Then, if that vetting indicates that the project should go forward [[sometimes takes years), the museum staff and Board work annually to determine how many paid entries they can expect, how many private events such as corpaorate dinners, etc. that they will solicit; how many school tours to solicit; how many many bus tours - and all at what price points so as to compete with limited dollars in every audience. How many wills and bequests will they solicit? How much other fund-raising will be necessary,. How much additional subsidy can they count on on from year to year, etc. That is the business model. If the MAAH hopes to survive in the blackest city in America, they have to go out and get the support they need from those segments - not rely on the City of detroit to keep the heat on.

You can't be I absolutely

I think they meant Museum are non-profit.

But yeah, there is a difference between what he said and what he meant.

The American Red Cross and Colleges are also non-profit, it doesn't mean they don't run on a business model. It essentially just means most, if not all of the money they bring in goes straight back into the business or to charity.

[corktownyuppie]

Did anyone hear an interesting interview on WDET today with a guy named David Osborne? He is a municipal consultant and wrote a book called, "Reinventing Government". He talks about how one of the reasons why municipalities are struggling is because they were designed and came of age during the industrial era. Consequently, they are generally "top down" organizations with complex bureaucracies that are slow to change to a quickly moving environment of the modern era. They need to transform themselves the same way that companies have transformed themselves. We need to think "less IBM" [[rigid, conservative culture of obedience and conformity) and more "Apple" and "Google" [[organizations that reinforce positive behavior, punish poor results, and reward creative thinking to solve complex problems).

Really fascinating stuff. He talks about the unique and extremely challenging puzzle Detroit is, and how the obstacles it's facing combined with the political environment will make this a very, very difficult job for either an EM/EFM or for the current Mayor/City Council.

What I found both very poignant but very crucial for Detroit is this: Osborn states that successfully turning the city around will mean finding a balance between [[1) cutting non-essential/non-revenue-driving costs out of the budget WHILE ALSO [[2) being willing to simultaneously INVEST money into programs, changes, and system and re-designs/upgrades that will result in boosting income and revenue in the long term.

Of course, that's easy to say. But in practice, it's hard to tell 20 people they're getting laid off out of a non-essential department while simultaneously agreeing to spend $5MM on training and system upgrades to bring property tax collection from 30% up to 95%. And I can just hear everyone yelling, "CORRUPTION! HE'S LAYING US OFF AND THEN GETTING KICKBACKS THROUGH HIS CORPORATE CRONIES."

Well, of course, I don't blame them for thinking that, since our ex-Mayor is up for RICO charges with the Fed. But that said, the process of cutting non-essentials plus re-investing into revenue-producing departments....that's *EXACTLY* what Detroit needs to be doing.

Here's a promo of the interview as well as the link....

State officials are beginning their review of Detroit’s finances, the first step towards possibly appointing an emergency manager over the city. Many analysts say only an emergency manager would have the authority to conduct the kind of government restructuring they say Detroit needs to become cost effective and efficient. Several emergency managers in Michigan say their blueprint for restructuring is the book “Reinventing Government,” co-authored by consultant David Osborne. WDET’s Quinn Klinefelter asked Osborne what a restructured government looks like in the real world…

[Wesley Mouch]

I added that because it is being done in Kalamazoo and is proposed in Benton Harbor.

Personally I don't think it works to combine the two because each job has a lot of training and skills required and while there is some overlap, the jobs are very different.

The fact that many cities exist w/ a combined department suggests that this is not an obstacle to efficiency.

Arresting someone and spraying water are different. But dispatching of officers vs. firefighters not so much. Administration is similar, so you can reduce the ranks of supervision and increase staff in the field. Buying helmets vs. uniforms is not so different. Both use vehicles, so their maintenance divisions could be combined.

Why don't large cities combine fire/police like most small towns?

1) Entrenched power structures of fire and police departments
2) Union contracts. [[This is a great example of where our labor laws prevent innovation.)

[Dexlin]

I don't support combining police in fire in any municipality beyond a small town. You scale up the size of a city, and you need specialization. Patroling and fire fighting in a city with skyscrapers and freeways and complex overpasses and factories and briges and gangs and etc... is far different than patroling and firefighting in a village where the entire "downtown" is on a single street and every residence is a single family home. It just is. The skill set needed gets more complicated the bigger and denser a city gets. Period.

If we're going to start making sweeping judgements about why certain cities don't combine fire and police let me just add my piece. Cities larger than small towns that do combine them do for no other reason than money, not because it actually makes more sense, logistically to do so, because it simply doesn't.

[mwilbert]

I have no particular opinion about combining police and fire, but surely there are forms of combination where you still have separate people doing the policing and the firefighting. GE is one company, but some people make jet engines and other people make bad loans. They don't switch off. I find it hard to believe that there aren't administrative tasks within those departments which could be combined. I would think tasks like arson investigation [[assuming any is being done) would be better combined.

That said, Detroit has historically been unable to administer its police department properly; a bigger, combined department might not be easier.

[Hermod]

I added that because it is being done in Kalamazoo and is proposed in Benton Harbor.

Personally I don't think it works to combine the two because each job has a lot of training and skills required and while there is some overlap, the jobs are very different.

The jobs are different for the three functions [[police, fire, and EMT) and the front line workers must be trained in and perform the unique functions [[i.e. the cop is not a fireman and is not an EMT), much of the dispatch and support structure has common functions and there is some savings in combining the departments.

You would still have fire stations and police stations, but the downtown and regional headquarters could be combined.

[Danny]

If I was EFM I would do these things to Detroit city government:

1. Cut all payroll by 25% to all city workers including the mayor, city council and its top aides.

2. Eliminate health care benefits and all city employees including the mayor city council and its top aides.

3. Let them rely on Obamacare like programs.

4. Eliminate bonuses and raises to all city employees including the mayor, city council and its top aides.

5. All city planning and municipal services must be checked and approved by the EFM before construction.

6. Focus on retooling Detroit Police Police Department, Fire Dept and EMS services to get troubled areas in faster response time. Start community policing to reduce violent crime.

7. Have the Detroit Department of Waterworks under regional authorities.

8. Have Detroit Public Lighting Department under private authorities.

9. All local laws being passed by city council and mayor with finances must be approved by the EFM.

10. Have the Detroit Department of Transportation under private authorities.

11. Present financial proposals to lure global regional corporations to invest in Detroit's infrastructure.

12. Hunt down any Detroit resident who are deliquent on their city property taxes during the last 2 years. Hunt down suburban residents who work in Detroit who are deliquent on its property taxes during the last 2 years.

[skyl4rk]

Here is an interesting tidbit:

The Mayor and Council would like to enter into a consent agreement with the state, rather than an EM, because they would then keep their authority and pay.

Bing has said that his deficit reduction plan depends on union concessions.

Under a consent agreement, the City would have no authority to amend union contracts. That authority only comes when an EM is appointed.

If the unions make no concessions, it is likely that an EM will be named.

Upon appointment of an EM, the Mayor and Commission immediately lose their pay and authority, fait accompli.

The Council's paychecks rely on agreement of the unions, volte-face.

.

[R8RBOB]

Looks like the state just blinked.....

http://www.freep.com/article/2011120...text|FRONTPAGE