Cityscape

Detroit to lay off, furlough 3,000 employees to help bridge $348M shortfall


April 14, 2020, 8:04 PM by  Violet Ikonomova
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The city of Detroit expects to lay off or cut nearly all hours and pay for 1,100 part- and full-time employees to help bridge an estimated $348 million revenue shortfall over the next two fiscal years.

Mayor Mike Duggan announced the proposed cuts in a Tuesday evening address for Detroit employees, calling it "the biggest budget crisis the city has seen in seven years," since it became the largest U.S. city to file for bankruptcy.

Just over $150 million in revenues are expected to be lost through the fiscal year ending June 30, and just under $200 million will be lost in the next. The city's annual operating budget is about $1 billion.

Duggan hopes to save $44 million over that period through personnel cuts, which will include more modest furloughs and reductions for another 1,900 of the city's approximately 8,000 employees. A two-year suspension of demolitions will save an additional $72 million.

To cover the remaining $151 million projected deficit, Duggan said the city would tap into rainy day and surplus funds.

The personnel cuts are as follows:

  • 200 part-time or temporary employees, like those at rec centers, will be laid off.

  • 900 full-time employees who may be less needed during the crisis will have their pay and hours slashed by 90 percent. These include police traffic control officers, department of transportation ticket sales tellers, public works drivers and road repair crews. They will not be laid off completely so they can keep their health care, Duggan said.

  • 1,800 full-time employees will have their pay and hours cut by 20 percent. These include office management assistants, accountants, financial analysts, and IT specialists.

  • 85 mayoral appointees and elected officials earning more than $125,000 per year will have their pay cut by five percent and maintain their current workload.

  • 5,500 employees, including those working for police, fire, and EMS, keep their hours and pay, but will be asked to forgo a July 1 increase. Employees who interact with the public will continue to receive hazard pay during the duration of the outbreak.

Those facing layoff and furlough will be eligible for unemployment or under employment benefits, with the city to file for them. The cuts go into effect Monday and will last an unspecified period of time.

Much of the shortfall is the result of casino closures, which have cost the city about $600,000 per day in taxes and are expected to result in the loss of $112 million over two years. Income taxes are expected to drop $150 million over two years as people lose their jobs or face pay reductions. 

Additionally, property tax revenues are expected to fall slightly as values drop. Additional losses are expected from things like parking tickets and meter fees.

The city is in a unique predicament because it derives just 10 percent of revenues from property taxes and nearly 20 percent from casinos. Duggan said that, other than Las Vegas, Detroit's finances will likely be the hardest hit of any major city.



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