On April 5, 2012, the State of Michigan, the state-appointed Review Team, and the City of Detroit entered into a "Financial Stability Agreement" that established a Financial Advisory Board for the city and obligated both the state and municipal governments to specified actions. Key goals of this state intervention include the adjustment of city revenues and expenses to ensure that the General Fund operating and accumulated deficits are eliminated and ensuring the restructuring of the municipal government so that it is fiscally sustainable in the future.
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A number of strategies may be employed to achieve these goals. It is, however, necessary to understand the municipal government’s funding structure in order to assess the effects of state intervention and of changes in departmental organization, privatization, sale of assets, transfer of functions to other governmental or nongovernmental entities, and other changes that may be proposed to reduce the General Fund deficit and restructure the municipal government. This report will describe the structure of the city government; later reports will address the city’s economic base and the city government’s budgeting process, revenues, expenses, debt and credit ratings, alternative service delivery structures, and related topics.
The City of Detroit is a multi-billion dollar operation that is responsible for the provision of a wide range of services. Revenues to fund the provision of those services are received from a variety of sources, with a great deal of the revenues dedicated to the provision of specific services. If those services are eliminated or transferred to a different entity, the funding received for the provision of those services will cease or be transferred as well. The cost of certain services that are supported by dedicated funding does not contribute to the General Fund deficits that warranted state intervention. General Fund activities constitute only about two-fifths of the entire cost of operating the city government as it is presented in the adopted budget.
The city government is organized into departments for management and budgeting purposes; citizens are familiar with this organizational structure. But some knowledge of the fund structure is necessary in order to understand the changes that must occur to ensure the future viability of Detroit municipal government.
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