VPISU

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VPISU

• this is a time when each of us must reaffirm
  our sense of common purpose. In times of great
  stress or grief we need to count on one another,
  for through the university we all are linked by a
  belief that life is not only precious but also is
  sustained in a shared search for knowledge. This
  is the basis of our community, and it is the
  source of our strength.

Irvin Reid, President WSU, April 17, 2007
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Mayor wants to lease tunnel to help reduce
Detroit's deficit

• BY MARISOL BELLO and JOHN WISELY
• FREE PRESS STAFF WRITERS
• April 13, 2007

http//www.freep.com/apps/pbcs.dll/article?AID/20
070413/NEWS01/704130325/1001
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Rosier-than-expected budget

• Detroit Mayor Kwame Kilpatrick proposed a
  rosier-than-expected budget Thursday that would
  include no layoffs or service cuts, hire more
  police officers and anticipate more revenue --
  all the while eliminating the city's growing
  deficit.
• But the key to reducing the deficit hinges on a
  deal in which Detroit would receive 75 million
  this year in exchange for leasing its half of the
  Detroit-Windsor Tunnel to Windsor for 75 years,
  once its current lease ends in 2020. Terms of the
  deal are incomplete, but it is supported by
  Windsor officials and expected to close by the
  end of June.
• The budget does not fund the mayor's neighborhood
  initiative in six target communities. Instead,
  Kilpatrick said, the city will target services to
  those areas, such as building demolition, street
  repair and tree cutting.
• The mayor said he still plans to present a
  proposal in May for a 1-billion bond deal to
  fund the neighborhood project.

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Value of Lease
This will bring 75 M in ONE TIME revenue
For discounting purposes 75 years is close to
infinite! At an interest rate of 5 per year,
this implies 75 R/0.05, or R 3.75M per
year.
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1 B in Bonds

• Must pay interest on the bonds.
• Current municipal bond rate is 4.56.
• This would mean almost 46 million per year in
  interest payments to bond holders, not including
  a payback of the principal.

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Expenditures

• Wages and salaries would rise.
• Just about all other expenses would fall.
• Doesnt seem to account for the interest payments
  on the bonds.

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Budgeted Positions
Major Revenue Sources
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Other Items

• Kilpatrick proposes a new inspection fee to
  ensure that businesses that use private trash
  haulers comply with city rules. The fee will
  range from 150 to 1,000 per business.
• That, the residential garbage fee and the final
  bond payments on the incinerator in fiscal year
  2008-09, will make trash service self-sustaining,
  Kilpatrick said. The city subsidy on trash
  collection has been as high as 75 million in
  recent years.
• Two issues remain imperative to balancing the
  budget.
• State revenue sharing, slated to fall by 8
  million in the next fiscal year, but which the
  mayor acknowledges remains up in the air.
• Land sales. This year, the mayor budgeted 30
  million from selling city-owned property. So far,
  it has collected 10 million. Kilpatrick said the
  city needs the full 30 million this fiscal year
  to keep the budget in line and satisfy
  bond-rating agencies.
• "If we don't get the 30 million, we're in
  trouble, because two years in a row we didn't do
  what we said we were going to do," Kilpatrick
  said.