Financial and Operating Plan Kevyn D. Orr Emergency Manager June - - PowerPoint PPT Presentation

OFFICE OF THE EMERGENCY MANAGER

Financial and Operating Plan Kevyn D. Orr Emergency Manager

June 10, 2013

OFFICE OF THE EMERGENCY MANAGER

Detroit spends more than it takes in – it is insolvent. It has borrowed hundreds of millions of dollars and has deferred just as much in obligations in

• rder to support City operations.

This path is not sustainable.

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OFFICE OF THE EMERGENCY MANAGER

Over the past several decades, the City’s population has declined over 60%

Note: December 2012 population estimate based on SEMCOG’s December 2012 Report on Population and Household Estimates. 685 714 951 1,028 1,203 1,511 1,670 1,850 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 DEC-12 JUN-10 JUN-00 JUN-90 JUN-80 JUN-70 JUN-60 JUN-50 (Population in 000’s)

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OFFICE OF THE EMERGENCY MANAGER

While unemployment has improved recently, it is still significantly higher than historical levels

18.3% 23.4% 16.0% 13.6% 14.0% 12.0% 6.3% 7.0% 0% 5% 10% 15% 20% 25% JUN-12 JUN-10 JUN-08 JUN-06 JUN-04 JUN-02 JUN-00 JUN-98

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OFFICE OF THE EMERGENCY MANAGER

As a result, income tax revenue has declined almost 40% since 2000…

$233 $217 $276 $284 $291 $324 $378 $362 $100 $150 $200 $250 $300 $350 $400 JUN-12 JUN-10 JUN-08 JUN-06 JUN-04 JUN-02 JUN-00 JUN-98 (in millions)

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OFFICE OF THE EMERGENCY MANAGER

…and overall City revenue has declined approximately 20% since 2008

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$155 $164 $143 $183 $148 $276 $241 $217 $228 $233 $180 $173 $183 $177 $181 $73 $72 $65 $65 $57 $250 $267 $264 $239 $173 $383 $365 $336 $340 $319 $75 $250 $- $300 $600 $900 $1,200 $1,500 2008A 2009A 2010A 2011A 2012A

General Fund Revenue

Property taxes Municipal income tax Wagering taxes Other taxes State Revenue Sharing Other revenue Financing proceeds

$1,393 $1,281 $1,457 $1,232 $1,111

(in millions)

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$1,393 $1,281 $1,457 $1,232 $1,111 $1,155 $1,446 $1,405 $1,279 $1,289 $1,233 $1,077 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 2008A 2009A 2010A 2011A 2012A 2013P

Revenues/Expenditures

Total Revenues Total Expenditures

At the same time, the City of Detroit continues to incur expenditures in excess of revenue – even despite recent cost-cutting measures

Proceeds from debt issuances (in millions)

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NOTE: FY 2013 is preliminary estimate which is illustrative only, unaudited, and subject to material change.

OFFICE OF THE EMERGENCY MANAGER

The City’s accumulated deficit has grown significantly since 2007…

* Fiscal Stabilization Bonds (“FSB”) were issued in FY 2010, which caused a one-time deficit reduction, but increased debt by $250 million $(89) $(142) $(332) $(156) $(197) $(327) $(374) $(250) $(250) $(250) $(250) $(700) $(600) $(500) $(400) $(300) $(200) $(100) $- 2007A 2008A 2009A 2010A 2011A 2012A 2013P

General Fund Accumulated Deficit

With FSB* Wihout FSB* (in millions)

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NOTE: FY 2013 is preliminary estimate which is illustrative only, unaudited, and subject to material change. FY 2013 excludes any impact

• f refinancing transaction.`

$(406) $(447) $(577) $(624)

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… and the City’s current cash flow outlook is very dire

(1) End of month balances, net of accumulated property tax distributions owed to other taxing authorities. (in millions)

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Short-term cash flow forecast (1)

$24 $62 $39 $8 $66 $1 $(20) $4 $(27) $(117) $(50) $(97) ($150.0) ($125.0) ($100.0) ($75.0) ($50.0) ($25.0)

• $25.0

$50.0 $75.0 $100.0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Cash balance Cash balance net of deferrals

OFFICE OF THE EMERGENCY MANAGER

Since his appointment on March 25, 2013, the Emergency Manager has focused on developing a comprehensive restructuring plan to ensure that the City of Detroit is able to:

• Provide or procure governmental services necessary and essential to the

public health, safety and welfare of its citizens

• Assure the fiscal accountability and stability of the City
• Promote private investment in the City and revitalization of the community

in a sustainable fashion

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OFFICE OF THE EMERGENCY MANAGER

Public Safety spending represented 46% of FY 2012 expenditures

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Public Safety $569 46% Debt Service $133 11% Other Departments $290 24% Other Operating $240 19%

FY 2012 General Fund Expenses (in millions)

(1) Debt service excludes UTGO debt service and enterprise portion of pension obligation certificates, which are reported separately (1)

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While the General Fund will experience some short-term debt service relief, principal payments will begin to increase again in 2018

$41 $43 $31 $32 $13 $14 $15 $15 $17 $16 $16 $4 $4 $5 $5 $5 $5 $6 $6 $6 $42 $38 $36 $33 $34 $35 $34 $35 $37 $23 $21 $2 $2 $2 $2 $2 $3 $3 $3 $3 $23 $30 $33 $37 $41 $45 $46 $48 $51 $53 $56 $- $20 $40 $60 $80 $100 $120 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

General Fund Debt Principal

LTGO 2012 Refinancing UTGO DSA -UTGO Other POC (in millions)

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$106 $111 $106 $108 $96 $102 $102 $107 $112 $101 $103

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In recent years, tens of millions of dollars of pension funding and other payments have been deferred

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Contribution Made $31 Contribution Not Made $103

FY 2013 Required Contributions (General Fund) ($ in millions)

NOTE: FY 2013 figures above is a preliminary estimate which is illustrative only, unaudited, and subject to material change.

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The City is currently evaluating options to adjust its funded debt obligations to better fit its projected cash flow profile, which may include a range of alternatives that could include, among other things:

• Rescheduling principal amortization without reduction in principal
• Permanently reducing the principal amount of debt outstanding
• Reducing interest rates, as appropriate, to achieve targeted cost savings or

compensate for lost/extended principal

• Issuing new debt to provide certain cash recoveries to creditors

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Other Post-Employment Benefits (OPEB) Unfunded Liability

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(in millions) ILLUSTRATIVE ONLY NOTE: FY 2012 column is illustrative only; latest actuarial OPEB valuation was performed as of June 30, 2011 (FY 2011) $4,824 $4,971 $4,971 $5,718 $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2008A 2009A 2010A 2011A 2012P

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POC’s (including Swaps) represent the largest component of interest payments

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$23 $21 $18 $16 $14 $14 $13 $12 $12 $11 $10 $4 $6 $6 $6 $6 $5 $5 $5 $5 $4 $4 $21 $19 $17 $15 $13 $12 $10 $8 $6 $4 $3 $8 $8 $8 $8 $8 $8 $7 $7 $7 $7 $7 $39 $38 $36 $35 $33 $31 $29 $27 $26 $24 $21 $45 $45 $45 $45 $45 $45 $45 $44 $44 $43 $42 $- $20 $40 $60 $80 $100 $120 $140 $160 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

General Fund Debt Interest

LTGO 2012 Refinancing UTGO DSA - UTGO Other POC POC Swap (in millions) $140 $137 $130 $125 $115 $109 $104 $99 $93 $88 $119

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Limited-Tax General Obligation (LTGO) Debt Service (including FY 2013 Refinancing)

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$41 $43 $35 $37 $18 $19 $20 $21 $22 $22 $23 $27 $27 $24 $22 $20 $19 $18 $17 $16 $15 $14 $- $10 $20 $30 $40 $50 $60 $70 $80 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Principal Interest (in millions)

OFFICE OF THE EMERGENCY MANAGER

Unlimited-Tax General Obligation (UTGO) Debt Service

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$42 $38 $38 $35 $37 $37 $37 $38 $39 $26 $24 $29 $27 $25 $23 $21 $19 $17 $15 $13 $11 $10 $- $10 $20 $30 $40 $50 $60 $70 $80 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Principal Interest (in millions)

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General Fund Expenditures

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$(454) $(472) $(437) $(423) $(403) $(61) $(49) $(43) $(99) $(64) $(227) $(221) $(222) $(228) $(226) $(126) $(173) $(134) $(141) $(144) $(578) $(490) $(442) $(398) $(397) $(1,500) $(1,200) $(900) $(600) $(300) $- 2008A 2009A 2010A 2011A 2012A Salaries, wages and overtime Pension Benefits Debt service & POCs Other expenditures

$(1,446) $(1,405) $(1,279) $(1,289) $(1,233)

(in millions)

OFFICE OF THE EMERGENCY MANAGER

The City must develop an operating budget that allows it not only to operate

• n sound financial footing, but to restore the City to a vibrant, thriving and

safe metropolis that can attract residents and new business. That path will require painful sacrifices from all interested parties.

It is a necessary path to save an iconic American city.

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OFFICE OF THE EMERGENCY MANAGER

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