MAYOR KWAME M. KILPATRICK
State of the City Address
March 14, 2006
Max M. Fisher Music Center 7:00 p.m.
Photography by Ron Harper

President Cockrel, President Pro Tem Conyers, Members of City Council, Distinguished Guests, Citizens of Detroit. And also, Governor Granholm, thank you for being with us here tonight as well.

Good evening.

Tonight, Detroit, we're going to have a serious discussion about our financial condition and how I plan to lead our city out of the situation we face. And I also will talk to you about creating the Next Detroit.

Clearly, we face serious challenges, challenges far different - and in some ways far greater - than any faced by this city throughout its more than 300 year history.

Despite our problems, Detroit is positioned to be a major force in this new millennium. If we make the courageous decisions the times demand of us, the result will be a Next Detroit every bit as great, if not greater than the Detroit that put the world on wheels.

Tonight, the State of our City requires a unity of purpose and focused commitment to create the Next Detroit.

Detroit has renewed itself a number of times in our history. It began as a French outpost and farming town in 1701. Detroit was completely destroyed by fire in 1805 and had to rebuild. It became a center for manufacturing everything from cigars to stoves in the 19th Century. And it put the world on wheels in the 20th Century. Now it is time to renew ourselves once again and create the Next Detroit.

We saw the potential for the Next Detroit last summer when we hosted the most successful All-Star game in the history of Major League Baseball. We saw the potential again this past February when we put on one of the most successful Super Bowls ever.

Super Bowl XL produced a unique sense of purpose in this city and this region, a joint dynamic of everyone pulling in the same direction that too often has been lacking in matters that involve both Detroit and our suburban neighbors.

That sense of purpose and renewal drove change in our city. But it is important to remember that everything my administration did for the Super Bowl we would have done anyway. Everything we did as city government was designed to provide a framework for continued investment in Detroit. The Super Bowl surely provided a sense of urgency and a sense of focus that helped us and all of our partners move in a faster, more efficient way.

We have seen the movement towards the Next Detroit in a number of other ways in the past 12 months.

We saw Next Detroit when, for the first time in decades, this city led our region in new housing starts. In a year when total new housing starts in the region were actually down 20 percent, they rose by 11 percent in Detroit, to more than 1,000 new homes. What's more, we are on track to more than double that pace and break ground for more than 2,400 new units in 2006.

We saw Next Detroit when, after years of effort, we began the demolition of the cement silos on the east riverfront. That demolition is a milestone in the historic rebuilding now underway on our riverfront.

The internationally acclaimed Brookings Institution recently identified what we are doing on our riverfront as one of the five most important urban redevelopment efforts in the world.

We saw Next Detroit when Police Chief Ella Bully Cummings developed and implemented a complete restructuring of the Detroit Police Department. Her plan reduced manpower and reduced overhead while putting more officers in the street than we've seen in years. Even as we were forced to lay off 150 officers and even though we are down almost one thousand officers from where we were four years ago, tonight 90 percent of the officers assigned to districts are available to respond to calls for service, compared to 70 percent who were available before the restructuring.

We stand tonight at a turning point in Detroit history. Next Detroit is not going to be like the Detroit of the 20th Century. Those days, as great as they were, are never coming back.

At the beginning of the 20th Century, Detroit was blessed with a unique gathering of visionaries, men like Henry Ford, Ransom Olds, Will Durant, Walter Chrysler, the Dodge brothers and many others. They created an economic engine that put the world on wheels, produced a brand new middle class in America and made Detroit a Mecca of opportunity that drew people from all over the world.

Detroit was transformed, growing from the 13th largest city in America in 1900 to the fourth largest by 1920.

Today the industry and the economy those men created face severe challenges. General Motors and Ford are in the midst of major job cuts as they face international competition.

Some of their major suppliers - including Delphi, Tower Automotive, Collins & Aikman and Dana Corporation - are all in bankruptcy court. Our major air carrier, Northwest Airlines, is in bankruptcy court. Our state, Michigan, is last in the nation in economic growth.

It would be completely unrealistic to expect that the economic distress all around us would not directly impact the City of Detroit. Detroit, it has economically impacted us in a negative way.

Today, despite all of our potential, there are people who question our ability to come back. Well, I know a little something about coming back. Trust me; those so-called experts are not always right. Trust me.

I believe we have entrepreneurs and visionaries in Detroit today every bit as great as the entrepreneurs and visionaries who created 20th Century Detroit. And I believe that working together with these new visionaries we will renew this city and create the Next Detroit.

Our first job in achieving renewal and creating the Next Detroit is to balance our city budget. Over the past four years our revenues have actually fallen by several hundred million dollars. At the same time our costs for everything from health care to gasoline have continued to rise.

Detroit, you know what happens in your own household when your pay is cut. That doesn't stop your electric bill from going up, your gas bill from going up, your food bill from going up, or the price you pay for gasoline from going up. You have to make cuts - sometimes painful cuts.

Like your household, Detroit has to balance its checkbook. We have to bring what we spend in line with our revenue.

We are in a position where we either transform or die.

Detroit, we're not dying on my watch.

That is why after last fall's election I set up the Next Detroit transformational team. The team is divided into several subcommittees. One subcommittee looked at restructuring city government. Another looked at what we need to do to grow our job base and our residential base. Their focus was on the question of where Detroit is going to be in the year 2020 and what things we need to do over the next year to assure that 2020 is a good year in Detroit. We call it our Vision 2020 plan.

We must do more than just balance our budget for the coming year. We must find new ways to deliver the most effective services to our citizens and to attract the investments and new residents that will be a part of the Next Detroit.

We must develop a competitive advantage for our city if we are to compete with the rest of the world and achieve our Vision 2020.

We cannot do that alone. I have already reached out to Detroit Renaissance to help fund a company to come in and help lead the restructuring effort. As GM and Ford and Chrysler and companies around this country go through restructuring, they don't do it on a shoestring budget. Thanks to Detroit Renaissance we won't have to do it alone, either. I am grateful to Detroit Renaissance for answering the call and leading the charge to help us in the city of Detroit help ourselves.

I will outline the full plan for restructuring our finances on April 12 when I present my annual budget message to the City Council.

Council has a critical role to play in getting our house in order. As someone who came out of the legislative branch of government, I respect and appreciate the role of City Council. I believe a healthy tension between the legislative and executive branches produces better legislation and better decisions.

City Council is the board of directors for the city of Detroit. They are the deliberative body in which all that we are proposing will be considered and acted on.

At the same time, the members of Council are leaders in this community. It will be important as we make these difficult decisions that they go out and communicate honestly with members of the community on the circumstances we face and the hard choices that must be made.

I will be reaching out to Council throughout this process. That will begin when I sit down with some community partners and the leadership of City Council to start this revolutionary process to build the Next Detroit. I have invited Council President Kenneth Cockrel Jr., and President Pro Tem Monica Conyers to participate in this beginning session as an indication of my determination to work in partnership with our City Council.

I will engage each member of Council individually following the presentation of the budget in April to share as much information as possible and develop the consensus we need to create the Next Detroit. We will be meeting with their staff, we will be working to bring private citizens into the process and we will be going out and having budget meetings throughout the city of Detroit just as we went out into the neighborhoods for conversations last year.

As we work our way through this process, we would be wise to heed the words of Abraham Lincoln in his annual message to Congress in December of 1862 when he said, "As our case is new, so we must think anew and act anew."

Clearly, our case is new in 2006. As we prepare to build the Next Detroit we must think anew and act anew.

First we must examine this very basic question: Which are the core services city government should provide?

We went through that decision making process in regard to the Detroit Zoo and the Detroit Historical Museum. These institutions are part of the fabric that makes our urban area great. But fiscal reality dictated that we find new ways to pay for them outside of our city budget.

Once we determine the core services we should provide, we need to make a second decision: Should we continue to provide those services directly as a city or would it be better if they were spun off to other providers?

For example, is police protection a core service? Clearly, the answer is, "Yes." Does city government need to provide that service? Again, the answer is "Yes."

Is trash collection a core service? Again, I believe the answer is, "Yes." Does city government need to provide that core service? Frankly, at this moment I don't know. I don't know that it requires that workers be on the city payroll to insure that trash is picked up on time every week.

Our guiding principles in making that decision, whether involving trash collection or any other service, must include these questions:

1. How do we provide the best service to our citizens?

2. Does it cost the city more to provide that service than it would cost someone else to do it for us?

3. Are Detroiters doing the work?

We are going through each and every existing city service right now - Police, Fire, EMS, Transportation, Recreation, Health, DPW and every other department - and asking these questions. We ask these questions because we have a fiduciary responsibility to balance our budget. And we have a civic responsibility to deliver a level of service that will help create the Next Detroit.

As I talk about these decisions we must make, I do not want to leave you with the impression that we have not taken aggressive steps over the past four years to bring our spending in line with our revenues.

We reduced our total city workforce by more than 25 percent in my first four years in office. When we took office Detroit had more than 20,000 city employees. Today there are fewer than 15,000 city employees, the smallest number in the lifetime of almost any Detroiter alive today.

But we have not cut indiscriminately. We have made reductions carefully, doing all we could do to preserve core services.

In the process, our civilian payroll has dropped almost 40 percent, from more than 8,700 employees to just over 5,300. That was accompanied by a 24 percent reduction in professional services contracts.

Our police payroll has dropped about 20 percent, from 4,200 to 3,300 today, and our fire fighting staffing has been reduced from a little more than 1,400 to just fewer than 1,200.

None of the options have been easy. If they were easy, they'd have been cut a long time ago, long before Kwame Kilpatrick was Mayor. One of the more unpopular cuts we made was the elimination of bulk trash pickup. My own grandfather complained to me about that.

But the bulk trash pickup program was costing $20 million a year. That $20 million is about the cost of about 250 police officers. I'm confident that most Detroiters would rather lose bulk trash pickup than have an additional 250 police layoffs. Those are the kinds of choices we must make to pave the way for the Next Detroit.

We also have been involved in intense negotiations with our City employee unions to develop benefit packages that are more realistic in the 21st Century. The truth is our labor costs are killing us.

In the private sector, the normal rule of thumb is that fringe benefits cost an employer about 30 percent of employee salary costs. The city of Detroit has an average of 88 percent benefit cost for all salaried employees. In the Detroit Department of Transportation - DDOT - it's 92 percent.

That means for every dollar spent on a DDOT employee in salary, the City spends an additional 92 cents in benefits. To put in plainly, if you are paying somebody $30,000 in salary, you end up costing the city $57,000 because of your benefit package.

That's why we are pursuing a new Alternative Health Care Plan that will increase employee co-pays to levels that reflect the realities of the workplace in this new century. We are at the table with our unions right now and I expect those negotiations to be successful.

I want to thank the attorneys in the Law Department, who are represented by the Public Attorneys Association, for being the first to sign up for this new health care plan. The members of the association, led by Phil Brown, also have agreed to join me, my appointees and the hard working non-union city workers in accepting a 10 percent pay reduction for one year. Thank you, Phil Brown and PAA for taking a leadership role in efforts to turn around this city.

We also need to find ways to get our retiree costs under control. For example, we paid out $77 million for retiree health care in 1998. By 2004 we paid $146 million - 21 percent of our payroll.

At the current rate of increase, the budget for health care and pensions for our retirees will rise to $445 million in 2009. That means in 2009 retirement benefits would cost us more than 30 percent of our budget. Remember, that's before we have paid for a single police officer or fire fighter or any trash to be picked up. We've got to do something about this now.

The city of Detroit today has more retired city employees than it does active city employees. The latest count is that we have 20,322 retirees drawing benefits from the City, compared to fewer than 15,000 people on the payroll now.

It's the same problem private sector employers like General Motors and Ford are dealing with - they have more retirees than they do workers. It is eating them up and it is going to eat us up if we don't find ways to change things now.

We also need to work together with our employee unions to turn around the growing problem of absenteeism in city government. The workers creating this increased absenteeism are hurting our ability to provide services while at the same time laying a heavy burden on their hard working brothers and sisters who do show up for work every day in city government.

In the Police Department and in our Department of Public Works there's an average of 30 percent absenteeism on any given day. That's 30 percent of police officers who are not on the street. That's 30 percent of people who should be collecting trash but who are not.

I'm putting a call out to the unions tonight. I know that we will have our battles. But can we at least start by agreeing that if you collect a check from the people of the city of Detroit, you ought to show up for work - you ought to earn that check?

Too often, when services do not meet people's expectation, they don't call my office and complain. They don't go to City Council and complain. They just leave. They've been leaving this city for 50 years. The people of the City of Detroit have been voting with their feet.

We can't afford to tiptoe around these issues any more. We are going to have to engage our employees and our employee unions in these discussions. We have to commit to being partners and move our city forward together to achieve the Next Detroit.

The Next Detroit is also about creating new jobs and new residences. I'm sure you've heard about the remarkable growth that we are experiencing downtown.

Compuware's global headquarters the new downtown YMCA the Hilton Garden Inn the renovated Kales Building the Lofts at Woodward the new lofts at Merchants Row One Kennedy Square the new Rosa Parks Transit Center now under construction the new Detroit Wayne County Port Authority public dock and terminal all are bringing new vitality to a downtown that has 69 new businesses.

On the east riverfront, we have chosen developers to build more than 600 new housing units on three separate sites. We are preparing to issue a contract for redevelopment of the Uniroyal site that will include 1,500 to 2,000 residential units as well as commercial development and public park space.

But tonight I want to talk to you about what is happening in our neighborhoods.

I mentioned earlier that we will break ground on more than 2,400 new units of housing this year, more than twice what we achieved last year in an effort that led this region. There is a secondary benefit to the growth in new housing as well, because it is encouraging more people to rehab houses they already occupy. As they see new housing nearby it is spurring them to renovate and upgrade their own homes.

While we encourage new housing and renovated housing, we also are stepping up our code enforcement efforts to deal with property owners who are not keeping up their property. We are more than doubling the number of code enforcement officers in the neighborhoods. We are consolidating them in the Environmental Department and we are designing a plan where we will send them out one neighborhood at a time to aggressively pursue people who are trashing our community and won't keep up their properties.

And we are stepping up our collection and enforcement efforts for those who are ticketed. Thanks to a new law we can put liens on their house or their car or their business if they don't pay their fines.

It is totally unacceptable to trash our city. We are serious about keeping our community clean.

Our efforts to strengthen our neighborhoods also involve efforts to reduce the insurance and tax burdens being experienced by our homeowners.

We are in discussions now with representatives of the insurance industry, as well as the State Legislature, to identify ways to reduce the unfair insurance premiums being imposed on Detroiters. Let me be clear, if these discussions do not produce results, we are preparing a lawsuit against the practices of the insurance companies in the city of Detroit. I want to thank Sharon McPhail and Lucius Vasser for their untiring efforts to bring equity to this situation.

We made a significant start last year in reducing property taxes when the Legislature amended the Neighborhood Enterprise Zone Act. The new law allows Detroit and other urban core communities to cut property taxes for qualifying current and future residents in high tax areas of the city.

The new law will enable us to reduce property taxes in 25 neighborhoods in 2007, 15 neighborhoods in 2008 and 10 neighborhoods in 2009. I will announce the 40 neighborhoods that will be covered in 2007 and 2008 in the near future.

We are following this timeline because under the legislation, the deadline for designating the neighborhoods was Dec. 31, but the law did not take effect until Jan. 1. Thus 2007 is the first year in which the reductions can go into effect.

Another way to help our neighborhoods is to create new jobs and to help Detroit's small businesses. Over the past three years we already have helped create 124 new small businesses in our neighborhoods.

A key tool in creating new jobs will be the $42.5 million small business development fund that is being funded by Detroit's casinos as a part of the revised development agreement that I negotiated with them in 2003. This development loan fund will help finance 11 different programs designed to spur business development throughout the city. These programs include the Detroit Community Loan Fund that targets small businesses and the Office of Neighborhood Commercial Revitalization micro loan program.

All of the $42.5 million is targeted to help existing small businesses throughout the City of Detroit, particularly in our neighborhoods. This program will be rolled out in May of this year.

In addition, I want to single out the efforts of Charter One Bank and CEO Sandy Pierce, which in partnership with my administration has established a new $200 million loan fund that will loan businesses $40,000 for each full-time job they can create. Again, another small business opportunity.

I also want to acknowledge the job creation efforts of Gov. Granholm. Last year the Governor worked with the Legislature to create a $2 billion Jobs Fund to spur economic growth in Michigan in the 21st Century.

Governor, I want you to know we're coming after some of that money. Working through our transformation growth subcommittee, we are organizing our growth efforts in a way that has never happened before in the city of Detroit or in Michigan. Mid Town is working with Downtown. Downtown is working with Wayne State. Wayne State is working with Tech Town and Next Energy. Next Energy is working with the DMC. The City of Detroit and Detroit Renaissance and all of those partners are writing a joint application. We're coming after 20 percent of those jobs fund -- $400 million.

Governor, we're sure that since you're here with us that you'll look favorably on our application. I want to say, "Thank you, Governor," in advance.

As many of you know, downtown Detroit is already completely wireless. What I want you to know tonight is that we also are making tremendous progress in tying our neighborhoods into the Internet. Under the direction of Chief Information Officer Derrick Miller, the entire City will be completely wireless by January 1, 2008. That means every child in every neighborhood, and every adult for that matter, will be able to log onto the Internet through a wireless connection by the beginning of 2008.

Any discussion of the well being of our community and our neighborhoods also must address the question of violence. As of late, we have seen an unacceptable level of violence, which now has extended into our schools and even a church.

When violence becomes a police problem, a crime already has been committed. So we need more than just police to address this problem. We need to come together as a community to provide the educational and spiritual nurturing that it will take to turn down the level of violence in our community. Next Detroit is about the community coming together to solve community problems.

Next week I'm putting out a call to everyone involved in the criminal justice system to come together to lay down whatever differences we may have with each other to work together on this problem of violence.

I will include the Michigan State Police, the Michigan Department of Corrections, the Michigan Attorney General, the Wayne County Prosecutor, the Wayne County Sheriff, the ATF and the judges of the 36th District Court and Wayne County Circuit Court in this call to action. The Department of Corrections is particularly important to this discussion because many of the people we arrest already are on parole or probation. Thank you, Governor for your commitment to assist us in this process.

Any discussion of violence in our community also must include the issue of mental illness.

Mental health services in our community have been in a shambles since the administration of Gov. John Engler gutted them. Locally, in recent years Wayne County has sent back to the State of Michigan tens of millions of dollars that could have been used for needed services.

70 percent of mental health clients in the county are in Detroit and the current set-up is simply not working. Far too many of the people committing crimes in Detroit today have a mental illness. We can't solve our crime problem if we don't solve our mental health problem.

We are working with Sen. Bev Hammerstrom to pass her legislation to create the Detroit/Wayne County Mental Health Authority. I will be reaching out to other members of the Legislature and the Governor in the coming weeks to support this measure which can have a tremendous impact in serving one of the most vulnerable portions of our community and help us impact our problem with crime and violence.

The book of Proverbs tells us, "Where there is no vision, the people perish."

Through more than 300 years Detroit has been built and then rebuilt by men and women of vision, energy and determination.

We are poised to build the Next Detroit.

Already, the City of Detroit is experiencing a larger percentage of property value increase than any city around us. We have more housing under development than any city around us and we're doubling that this year. We're carrying out $2 billion of redevelopment on our riverfront. We're hosting major events with a skill, an energy and success that has impressed the world.

My invitation to those of you watching tonight is to come join in building the Next Detroit. If you are looking for a place to invest either from a business perspective or a residential perspective, Detroit is the place. Many of the markets outside of our city have maxed out. Next Detroit is the new place to invest.

From a cultural perspective, Detroit is all shades, all flavors, all colors, creeds, religions and ethnicities. This city is becoming a mosaic of dynamism that people are wanting to be a part of.

During Super Bowl week, everybody felt good about Detroit no matter where they live. They saw, we all saw, in that one week the great potential that our city has. We all saw what the Next Detroit can be.

Now that we know it is achievable my job as Mayor, City Council's job, and the job of all Detroiters is to take the necessary steps to get us there, however tough those steps may be. We must make Next Detroit a reality.

I have a prayer tonight. It is a prayer for all of us who have Detroit love.

I pray that our vision will know no limits.

I pray that our strength will be equal to our tasks.

I pray that our focus will stay on the greater good.

I pray that we will not be bogged down in petty or selfish differences.

And I pray that together we will build the Next Detroit that this city can be and will be when we work together in unity.

Thank you, and may God bless you.