December 19, 2012 / 8:50 PM / 5 years ago

Detroit hopes to reap $50 mln by collecting delinquencies

* Detroit collections effort first of several revenue initiatives

* Mayor Bing to tax delinquents: “We’re coming after you”

By Eddie Allen

DETROIT, Dec 19 (Reuters) - Detroit Mayor Dave Bing on Wednesday outlined a 10-point program to raise revenue and cut expenses totaling $50 million in the city’s latest effort to heal its finances.

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.

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

A tax amnesty program, which Bing said would not be long-lasting, is expected to raise $4 million in back personal income taxes.

Bing said that too often in the past Detroit has settled for partial payments or not been aggressive enough when a business disputes a tax bill. He said city officials have worked through mountains of data and now have a solid foundation upon which to seek money it is owned.

“We are in a position to take this fight forward and that’s what we are going to do,” said Bing.

The mayor said he will not hesitate to seek payments for debts from all Detroit, even if they are politically connected.

“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 target by the June 30 end of the fiscal year.

The city has increased its corporate income tax rate to 2 percent from 1 percent. 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 Michigan Governor Rick Snyder, who on Tuesday appointed a financial review team to check the status of the city budget. That could lead to the appointment of an emergency financial manager.

State officials also hold the key to $20 million of funds the state is holding until the city meets certain conditions, including cooperating with them on the overhaul of the city’s finances.

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 turn, Michigan released $10 million of payments 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 into the funds available to Detroit.

“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.

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