UPDATE 1-Detroit hopes to reap $50 mln from tax delinquents

Wed Dec 19, 2012 5:51pm EST

* First of several revenue initiatives

* Mayor to tax delinquents: "We're coming after you"

By Eddie Allen

DETROIT, Dec 19 (Reuters) - Detroit Mayor Dave Bing outlined a 10-point program on Wednesday to raise revenue and cut expenses in an effort to raise $50 million more for the city's coffers.

The "revenue enhancement initiative" includes more effective collection of property and income taxes. Also, the city will be more aggressive in collecting on a variety of programs, including delinquent licensing fees and parking tickets, as well as fighting workers compensation fraud.

The city also wants to sell a $4 million building on the downtown riverfront to the United Auto Workers union, but the price has yet to be negotiated.

"This is just the beginning," said Bing, indicating that there will be more rounds of cost-saving initiatives.

The city will also get a boost from some bills signed into law on Wednesday by Michigan Governor Rick Snyder.

Collecting delinquent taxes and other payments from businesses, non-profit agencies and individual citizens will help the city right its financial house, Bing said.

Detroit will save about $10 million annually by eliminating between 400 and 500 jobs starting Jan. 1, according to the city's chief financial officer, Jack Martin. More than half of those cuts will come from retiring workers, who will not be replaced or from voluntary attrition, he said.

The expected savings from job cuts is in addition to the $50 million initiative announced by Bing.

Detroit's city workforce has fallen to about 9,700 from 14,539 when Bing took office in mid-2009.

A tax amnesty program, which Bing said would not be long-lasting, is expected to raise $4 million in back personal income taxes. The mayor said he will not hesitate to seek payments for debts from everyone, politically connected businesses.

"It doesn't matter about the politics for me," said Bing. "If you owe the money, we expect you to pay the money, or we're coming after you."

Bing said that so far, the city has collected about $11 million and expects to reach its $50 million target of additional revenue by the end of the fiscal year June 30.

Detroit also hopes to collect $2 million in delinquent property tax, $2 million in parking judgments and $10 million in "miscellaneous receivables" that were not paid to city agencies such as emergency medical services and the fire department.

Property owners can also look for bills as the city attempts to collect $2.5 million for fire marshal services.

Bing said the city also expects to collect between $5 million and $7 million after an audit to curb payouts to non-qualifying dependents on medical and dental insurance.

It will have to hire outside agencies to conduct many of the audits and collect data in the revenue-gathering effort, largely because the city's payroll has been cut to about 9,700 from nearly 14,000 when Bing took office in mid-2009, he said.

LATEST SALVO

The move by Bing is the latest salvo in an attempt to stave off a state-appointed emergency financial manager. Such a manager could declare the largest municipal bankruptcy in U.S. history.

Bing hopes to show improvement to the governor, who on Tuesday appointed a financial review team to determine if Detroit's fiscal situation warrants the appointment of an emergency financial manager.

State officials are also withholding $20 million of funds raised from a bond sale until the city meets certain conditions tied to reform measures.

Last week, the Detroit City Council dropped its opposition to Bing's hiring an outside law firm to work on issues related to a consent agreement between the city and the state. In return, Michigan released $10 million of bond money to the city.

A preliminary state review of the city's finances issued last week found a "serious financial problem" exists. The report showed wide swings in Detroit's cashflow.

"A cash flow estimate in August 2012 projected a cash deficit of $62 million by June 30, 2013, but estimates for October and November projected deficits of $84 million and $122 million, respectively," it said.

BILLS SIGNED TO AID DETROIT

The Republican governor signed bills that he said would help spur long-term economic development in Michigan's largest city.

They included a measure creating a municipal lighting authority empowered to issue revenue bonds backed by utility user taxes to fund an estimated $160 million in street lighting repairs and expansion.

The new law also sets a 2.4 percent income tax rate for Detroit residents and 1.2 percent rate for nonresidents as of Jan. 1. Those rates would fall to 2.2 percent and 1.1 percent respectively once the lighting authority debt is paid off and utility user tax revenue is no longer pledged to the authority.

Snyder also signed into law legislation for a regional transit authority in the southeast Michigan counties of Wayne, which includes Detroit, Oakland, Macomb and Washtenaw. The transit agency would be authorized to issue bonds.

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