President Councilmember Mary Waters present Mr.

Chair, you have a quorum present.

Thank you, Madam Clerk.

They'll move us on to the approval of the minutes from our uh January 7th meeting.

And uh with that, if uh entertain a motion to approve the minutes.

Motion.

All right, we have a motion without any objections.

The uh minutes will stand approved.

Next we'll move on to chair remarks.

I'll keep it short and sweet.

Uh say good afternoon to everyone.

Uh and for folks who are joining us for the first time, uh happy new year to you all.

I think we can still say that for a few more days.

Uh and just again want to make sure that we are uh conduct the business in this committee in a way that is um educational and is transparent for our residents and make sure we are being good stewards of our dollars here in the city of Detroit.

Um that is all I have for chair remarks.

And um now I will call for public comment.

We're gonna accept public comment um and cut it off at 11.

And so I don't see any folks in the room for public comment.

Uh are there folks on Zoom?

Yes, Mr.

Chair, there are currently a total of six hands raised.

Okay.

We'll take folks starting on Zoom.

Yes, Mr.

Chair.

You'll have two minutes, so my apologies the first caller, Mr.

Chair is Owner Papa All right.

Go right ahead.

Good afternoon, and through the chair, may I be heard?

Yes, you may, good afternoon.

Good afternoon.

I I see some um uh memorandums that are on the table, uh, one 6.4 and the other 6.5.

Two very important um documents that need to be uh presented to the public.

You say that you are for transparency, and I hope that you mean that.

Um I would like to see these reports um given to the public uh before budget season, if that's possible.

And I would like to know why do we see Corktown on our um our budget and our agenda so frequently, and we don't see many other places, but we see a lot of um Corktown, and uh this is like deja vu.

Um the same people are getting the same dollars or our dollars, and it's not being distributed.

And I think that we should probably with as the audit department, we should find out where all of the C D BG money went, uh, what districts, since we are broken out into districts, I would like to know by district how the money was allocated.

Um my understanding of the census is that the census is created for a particular reason, and that's for distribution of federal dollars.

That's one reason.

I would also like on 6.1, we have a lot of questions about the retirement system.

I would like for someone from the OCFO's office to explain um this annual report that we've received.

Um, and I'm wondering um if we could make that happen.

Um thank you and thank you for your time.

Thank you so much.

And absolutely, we will make sure that we do get um the report in 6.1 um explain it for folks, and then we can definitely look into uh the money by district by for the CDBG.

Um Mr.

Chair, the next caller is William M.

Davis.

Commissioner Davis, are you there?

Good afternoon, young people.

I uh can y'all be heard.

Yes, you may.

Good afternoon.

Okay, I also like more information as related to 6.1.

Uh, especially as it relates to the fact that if the retirement system is not underfunded, uh perhaps it should be easier for them to discontinue the clawback.

And also, when they do information like that, it should also uh be a breakdown of just what's the funding level, you know, be it 64% or 68% or 62%.

Um separately, as uh long-term district seven resident.

In fact, I've been in living in district seven longer than at least one of y'all been living.

Well, uh we have a lot of children and young people in this district, but we do not have one single recreation center.

That's not one recreation center open in District 7.

And I still think that's horrible.

And I'm not gonna say anything else today, and that's the fact that uh it seems like some areas get better service and get better everything than some of us.

Thank you.

Thank you, Mr.

Davis.

And just for folks to know, um, if you go to the city's website, um, Detroit Mi.gov and under the City Council and the calendar, you will be able to click on the agenda for today's meeting.

Um, and on the agenda item, you can also view the report for 6.1.

Um, just for folks to know.

And uh, Mr.

Davis, since you mentioned District 7 and the recreation center, does something that the team and I are constantly in communication about, and we're gonna um get down to see.

Um, make sure that the groundbreaking happens very soon on our recreation center.

So thank you.

Next person, Mr.

Chair.

We do have an in-person public comment uh from Jadante Smith.

All right, Mr.

Smith.

Uh good afternoon.

Good afternoon.

My name is Jante Smith for the record.

Uh I don't have the the point that I tried to make earlier, the specific language about uh Conrad Matt Mallet meeting with the Maroon family owned Kronos Crown uh Kronos concrete mixing facilities, lawyers every two weeks.

But I'm gonna make sure I send it over and I highlight the exact section when I send it over to everybody in city council so that they can read it.

How uh our corporation council is on city dollars dime meeting with these these lawyers to help protect them uh and they're polluting our environment, which is environmental justice.

So um, I'm also running for office, which is I'm not gonna talk about that too much, but um, environmental justice is one of my big things, and so I'm gonna reach out to the Jane Finder Pack.

Surprisingly enough.

Also, I think uh we do need recreation in District 7, uh, as William Davis stated.

I think that's very important.

We need to look out for the retirees, we need to look out for the young people.

I want to advocate for more um advocacy around uh the trades for young people.

I'm gonna reach out to Joan Howard, who's uh director of youth affairs for CD betrayed.

I think that we need to uh try to address the the unemployment gap for young people from 18 to 25 or even 18 to 30, because these are young people who are driving crime, they're desperate, they're impoverished, um, they're turning to drugs, they're turning into different things.

But if they had a pathway from even high school up until their young 20s or whatever, to do skill trades, or if they had the information even it would be easier to keep them off the streets, keep them out of courtrooms, keep them out of jail sales because that's a for-profit industry.

The school to prison pipeline is real.

We need to get the school to trade pipeline set up because most people don't go to college.

I didn't go to college myself, even though I read tremendously well, better than some people who have been to college because they don't seem to read as much.

But I think the trades are a very important thing for young people.

We need to advocate for that.

Um, as politicians, I think you guys should be advocating for young people in your districts, also the homeless, because this has been an issue for a very long time.

Um, some of you up here have done a really good job about that, but we need to get a little bit better at it.

Thank you.

Thank you so much, Mr.

Smith.

The next caller is caller number ending 039, caller number ending in 039.

Caller, are you there?

Caller and 039.

Are you there?

Yeah, I'm right here.

It's uh young blood.

And Dennis Works is busted, cold busted, seating in Detroit elections, and lying on Zoom at the Detroit Election Commission meeting, April 25th, 2024.

She said he said the findings on the allegations of voter fraud by anonymous citizen report for every member of council, the mayor's office, and the law department, which is a cool blue face, independent lie.

My word, and I'm rude, and it's up now, the director of the Detroit Department of Elections, Gina Avery Walker and Daniel Becker, her cohort.

I busted, busted, busted, and I ain't lying about chicken running ice tea, and I stand on mine all the time.

Now, Nini won't what she won't.

If they don't give it to her, I'm gonna make it shake.

The city is already turned upside down.

I did it, and my word is fine, and I stand on mine.

Now I got all these other monikers too.

But that's not important.

Now Angela with Bill Callaway, who headed the committee this morning, internal operations had a funny look on her face when she saw me.

And I appeared in person, but they wouldn't let me talk in person because I was on the phone.

Well now I'm outside, outside, outside, Ru.

Waiting.

And Nini got to get what the ass she won't.

K2011 112 did not shoot herself.

Jermaine McClell did it.

Thank you.

Um, and just to note that public comment has been cut off.

Um, next person on Zoom.

The next caller, Mr.

Chair's caller number ending 482.

Caller number ending 482.

All right, caller number ended in 482.

Are you there?

Caller number ending in 482.

Are you still there?

It appears they have dropped off, Mr.

Chair.

So we can go to the next caller if they come back before we be back into the business.

I we can go back to them.

The next caller is Betty A.

Varner.

Ms.

Varner, are you there?

Yes, I am.

Good afternoon to all within the sound of my voice.

I'm Daddy A.

Varner, the president of the Soda Ellsworth Black Association.

Uh, we're advocating for our community.

We have been working with the uh old administration, Mayor Dougins team to uh revitalize our Finkel corridor.

We've had some good meetings, and uh there's work had been done as far as cleaning up Finkel.

Uh we need that work to continue, but a lot of the projects that they were talking about, they were saying money was not available, but they were going to be trying to get money and this, that, and the other, but it seems like it's mute and silent.

I'm asking that um, hopefully, uh some of the um administration.

I'm quite sure that someone that's listening from uh our honorable mayor Sheffield's office.

I'm hoping that the Finkel Corridor will be on her radar because we would like our corridor corridor to be brought back to life, like other corridors.

We want the same type of attention and money spent in our area that was spent Avenue of Fashion.

There's a uh big project on Dexter, uh Mexican town, uh uh what is it?

Livenoise and six mile.

We deserve the same type of attention.

We want development, new development.

We need new businesses to come to our area, but think of corridor has to be cleaned up.

We need that attention.

Also, uh my uh association.

We have created a park.

We bought bought vacant land, and we had the Diva community park.

So we now have bought additional land from the land bank, and we want to expand our park.

We need help with all of that.

Thank you.

Thank you, Miss Varner.

Next call.

The next caller is uh Renard Munjanski, are you there?

Yes, I am.

Good afternoon, good afternoon.

Um, first and foremost, happy new year to everyone in the committee, and congratulations on your election and or re-election um to council.

Umard Myshenski, Detroit People's Platform and organizer of the transit justice team.

I know you guys just got in the office and there's a transition, but just want to take the insight as a question as to um when the budget hearings um and what committees uh will take place uh in what committee that will take place in.

And also uh the city of Detroit is planning to do a um revenue estimating conference soon, just so we can get an idea of what resources we have available for our neighborhoods as well, too.

Um, because we want to make sure that our core services are taken care of, but also that we're um able to um have equitable development in our communities in our neighborhoods um that were long neglected as well.

So just a question about the revenue estimating conference, and then the budget um hearing process as well, too, just so we can have a lot of people participate um in our city's budgeting process.

Thank you, and I see the rest of my time.

Thank you so much.

So, yes, there will be a uh revenue estimating conference in February, and I'm looking at Mr.

Corley on the exact date.

Uh thank you, Mr.

Chair got the no city council.

Good afternoon.

Uh Friday, February the 13th.

Friday, February the 13th will be the February revenue estimated conference.

And then we will be sure to get the uh budget hearing schedule out to folks and make sure that does publicize as well.

All right.

Thank you.

Next caller.

Mr.

Chair, that was the last call before you cut off public comment, and I do not see that other caller from earlier online at this time.

All right.

Well, thank you again for folks for attending and for joining us virtually.

That'll move us along on the agenda to there is no unfinished business, that'll move us to new business.

Um and this is uh move us to 6.1.

A report related to the uh fiscal year 2025 local government retirement system annual report.

Uh with that out entertain a motion to discuss line item 6.1.

Without any objections, we'll move into discussion and with us from uh the administration we have is is that correct me if I pronounce it wrong, but um Mr.

Uh Negleck Neglass Yeah, um nice to meet you, Councilmember McCampbell.

Um my name is John Naglik.

Uh I'm the chief deputy CFO uh finance director and controller for the city.

Um I report to Tanya Stademeyer, and uh I've been with the city uh a little over 12 years, so I started right right when the bankruptcy was filed and kind of went through that whole process.

And um, so you haven't met me yet, but it's a pleasure to meet you, and um you know, we we frequently appear before me and my colleagues before the budget finance and audit committee.

Um so if I could share my screen.

Absolutely.

I'll request that.

Yeah, so I'm sharing the screen now, and I'll um um this this report uh and for all prior years that we've done it are also on the city's website.

So under the office of the chief financial uh officer, uh our reports page, and this is specifically under a category called other reports.

Uh, but it's an interesting report as some of the public commenters mentioned.

Um I want to just give those that are listening, and and of course the committee, the history behind it.

In 2017, the state of Michigan passed a law called Public Act 202 of 2017, and it was um it was an attempt by the state of Michigan to create transparency for all of the local units of government in the state that offer a defined benefit pension plan or retiree health care benefits.

So there'd be one place that uh a resident or a citizen could go to to look at their city or a city they cared about and see how they were doing in terms of meeting these obligations.

So ever since then we've published this each year and and brought it before the council.

Um there's a lot of numbers on the page, and I'll walk through it as as much as you would like me to.

Um, but again, the the interest of it was that the state of Michigan felt and probably brought about brought upon us by the city of Detroit's bankruptcy, and then the financial troubles in Flint that local units of government are very typically made promises to retirees to uh provide a retirement benefit to them or or a health care benefit in retirement.

And and when I say local units of government, you know, we're of course the largest city in the state of Michigan, but it would include all the cities, villages, townships, uh, utility districts.

Any local unit of government that makes a promise to retirees has to comply with this act where you we post to the state of Michigan Department of Treasury website our version of this report.

So and then we're also required to submit it to city council and post it on the city's website, which of course we've um done.

So again, the goal of the state was one place where someone that cared about um retirement systems or or retire health care plans could look at whether these things are being funded or not.

And it was very typical of many governments to make a promise and then not set the money aside for that promise, but to promise to fund it in the future.

So the state believed that one of the key elements of transparency here is to track that if you've made a promise, how much money have you set aside to meet that promise?

Because as our retirees so painfully found out in the Detroit's bankruptcy, when there is an awful situation like a city bankruptcy, if there's not enough money, unfortunately, those people are going to get their retirement and retiree health care promise cut, which happened to our retirees, and of course we all you know can continue to hear from them and understand that it and I've been on record saying that the largest losses in our bankruptcy were taken by the city of Detroit's uh retirees.

So with that, um I'll just go through the report.

There's a cover letter where um our CFO Tanya Studemeyer submitted it to City Council, uh, but then the report itself, and I'll I'll blow it up.

Um, so we have there's four columns to this uh report that we file.

We actually have four different retirement systems at the city.

Uh at the time of the bankruptcy, the two legacy pension plans were frozen.

So as of June 30th, 2014, those plans were frozen.

Any of us that were working prior to 2014 earned no additional benefits once June 30th, 2014 occurred.

And then people that were in retirement status, as is this committee and other council members have heard from retirees, they had their benefits modified.

Uh it was through a bankruptcy process, there was balloting, the the grand bargain you know came into play here, which you know the judges worked out as a way of hopefully um muting the effect on retirees, although the effect was still you know pretty pretty big.

Um but but our legacy plans were then called the component two plan.

So there's one for general uh retirement system uh employees, so that would be all of us that work in the administration, uh it would be um uh the water and sewerage department, uh it would be DDOT, um uh it would be the library, it's it's COBO, so all general employees were in the legacy general retirement system or the plan we called GRS.

And then all of our public safety employees, police and firefighters are in a separate plan called the police and fire retirement system.

And their plan as well, that legacy plan was frozen for police and fire on June 30th, 2014.

So that's where most of our city retirees get their benefits is from those legacy plans.

And then two brand new plans were started on June 30th, 2014.

We those are called the component one plans, and those are the plans for us active employees.

So the plans for all of us that are active employees, we all have, and you do too as council members.

You get a deduction taken out of your paycheck of 4% that gets sent over to the retirement system, and then the actuary calculates how much the city needs to match the employee contribution, and we do that every single pay period.

The two legacy plans, as you've heard from retirees, had what was called a tenure uh holiday from city funding.

So the benefits were frozen.

The only new money coming into those legacy plans for 10 years came from the grand bargain, the money that the state, the Detroit Institute of Arts, and the Foundation for Detroit's future uh put in.

And we're now in our third year of resuming city contributions.

So this is where you've heard that and seen in our financial statements.

We have a retiree protection fund.

Uh the general fund as well has a sizable contribution to these legacy plans.

So we are now making our full required contribution to those legacy plans, and um and the funding policy said that we would do that over 30 years.

So from 2024, so again, 2014 they were frozen, 10-year funding holiday to 2024.

By 2054, both of those legacy plans are designed to be fully funded.

The city must contribute money over this 30-year closed period that it'll take to get them fully funded.

So one of the public commenters brought up the question well, what is the funded ratio of these plans?

And line six of the report shows that.

So for the component one general retirement system plan, the plan for actives, the good news is it's 107.8% funded.

So we have more than enough money in that plan to cover the liabilities.

And if you look at the two lines above it, you can see that while there's substantial assets and it's growing, the assets of this plan, it's a young plan.

It's got 371 million dollars of assets and a liability where the actuary calculates how much that promise to all of us would amount to is 344.

So the good news there is the city is fully funded the component one plan for actives.

The next column shows the general retirement system legacy plan.

The folks that we commonly hear from during public comment that are legacy retirees, this is where their benefit is coming from.

And you can see this is a large plan, but it's got a large liability still.

So there is in the general retirement system component two plan, 1 billion 384 million of assets, so 1.4 billion of assets, which is a substantial amount of money.

But when the actuary calculates how much we would need to have to be 100% funded, so those retirees never had to worry about where their check was coming from, that's 2.2 billion.

So that plan is that's our our lowest funded plan.

It's at 63.5%.

And again, if you follow my thought, now that the city is meeting its full funding obligation, over this next 27 years, that plan will eventually get to 100%.

But we've got to stay on the path, and we're required to by law make those contributions.

The next column three shows the active plan for our police and firefighters.

They had assets of 475 million and a liability of 503 million, so pretty close to fully funded, 94.4%.

And then you look at their legacy plan, a little larger than the general retirement system, and our police and fire colleagues always remind us they don't receive Social Security, so benefits, pension benefits or police and firefighters in the city of Detroit and many other places are greater than the pension benefits for general employees owing to the fact that police and firefighters don't participate in Social Security unless they uh contribute through some other job.

So that plan has 2.3 billion in assets, but a liability of 3 billion, so that's 76.9% funded.

And the reason those funded ratios are important is that under this state law, if any plan falls below 60% funded, then we all need to answer to something called the municipal um you know um uh retirement board, municipal security retirement board that would send us a letter saying you've fallen below 60%.

What is your plan to get this above 60%?

So the goal of the state was none of these plans across the whole state should fall below 60%.

That's just kind of a benchmark that people that are pension professionals say if you're making a future promise to retirees, you got to at least have 60% of that money set aside, and again, we would like it to be 100%.

And our new plans, again, you see the beauty of them, they were designed to stay fully funded so that the city would never fall into the same trap.

So then I won't walk through every line, but there's a number of very interesting statistical things showing how many active members there are, meaning how many people are still working that are in these plans.

Uh, number of inactive members, that would be somebody that has earned a partial benefit in the in the system, but hasn't received a retirement age, and we're just waiting around for their retirement age when they could start to draw.

And then line 13, which actually shows how many retirees and beneficiaries are earning benefits.

And again, it's important to see just how large these plans are.

If you look at system two, the general retirement system component two, there's 10,713 retirees and beneficiaries drawing a monthly stipend from the from the city in general.

And if you go to column four, system four, there's 7600 police and firefighters.

And you can compare that to the component ones where we only have 845 people drawing from the general, 460 from police and fire.

So again, the picture I'm painting for you is we have these legacy plans where most of our retirees are drawing their benefits.

They're not 100% funded, we're working towards that, and then we we show how the new plans are behaving.

And then to continue down the report, the state actually made this more complicated.

When the actuary calculates what that liability is, they have to use certain assumptions.

But then the very bottom part of the report is the state in their attempt to make this apples to apples for someone comparing Detroit to Grand Rapids or Traver City, you have to have the actuary calculate all those numbers that you presented up above on the basis that you use the same all use the same assumptions.

So the state treasurer resets these every year.

So, sir, I know that's a lot of words, but but that that is, you know, I wanted to give you the background of this report.

We all of us that work in pension reporting think it was a very good state law.

Before this, you had all kinds of local units of government, even wealthy ones that weren't setting money aside to meet the promises to retirees.

And the state law makes all of us put it out on a website so that the public can scrutinize it and then you know have a day like today where we present it to our governing body, in our case our city council, uh, and um and and and are available to answer any questions that that might come up.

So that's the upshot of it.

The other place you will see as a committee as you you know, one of the callers mentioned we all know we're about to go into budget season.

You will see one of the presentations we will make to this committee and the committee of the whole is how much do we need to contribute to the pensions next year, and why is that the right amount?

And will you know LPD will scrutinize all the actual reports that come up with that?

So people that care about this will see it again.

It's it's a significant, it's still a significant obligation for the city.

Just because there was a bankruptcy didn't take us off the hook, it's still very important to make sure that we're you know never gonna put our retirees in the position that they were in during the bankruptcy where their benefits get cut because we didn't do we as official city officials didn't didn't do the right thing and set money aside.

So uh with that, sir, I'll pause and see if you have any questions.

Thank you so much, sir.

Sir, I will uh turn it over to my colleagues for any questions first.

Um begin with member waters.

Yeah, no questions.

Oh, okay.

Oh, I'm sorry.

My apologies.

Oh, uh you want me?

I can go to vice chair.

Okay.

Apologies, apologies, uh, Vice Chair Johnson.

Thank you, Mr.

Chair.

That's okay.

You just keep her on her toes, that's all.

Um I do have a few questions.

Um so one, I am curious to know.

So when we talk about the general retirement system, two, it's kind of a turnover question as it relates to city employees.

So I understand you have to be vested, I think, for 10 years in order for you to receive a pension.

Are we seeing, do we see that there are employees that contribute to the general retirement pension plan, um, but they never receive those dollars because they have less than 10 years of employment with the city of Detroit.

Do we see those dollars and and is there any impact in the general retirement system too that helps to address the gap of the dollars that are there and the dollars that should be there to help increase that 63 and a half percent?

Yes, yeah, you're asking an excellent question.

Um so all of us, you know, um, you know, again, I'm gonna general retirement system participant by virtue of my job here, and I've been here more than 10 years, so I now have a vested benefit.

So if I retired tomorrow because I'm of retirement age and have been here 10 years, I could start drawing a benefit.

But as you point out, many appointees, you know, and it's very typical in local government where people don't stick around 10 years.

They they join when uh a mayor is elected, you know.

If that, you know, then they maybe don't stay.

So in our in our plan, the way it works is that if you don't make it, and again, all of us have you you do too.

We all have four percent coming out of our check.

If we leave before 10 years, we can go across the street to the retirement system and ask for that money to be refunded to us.

So one of the plan provisions is that you don't lose that four percent, it's refunded to you.

Although you don't get any of the income that that that money generated, and the city's match stays in the plan.

You don't get that either.

So it's very important, you know.

Again, it's a it's a great benefit if you make it 10 years, then you have a defined benefit pension for the rest of your life, and and you can designate a beneficiary and and and put part of your money to them.

But once you're at 10 years, you in the general system, you have a choice.

You can either take your 4% back or you can start to draw a pension.

Those that don't make it, that employer contribution, the part that we contribute, which is also approximately 4%.

We do that every pay period.

So every payroll, when we all get our Ulti Pro payroll, and you can look on your check stub and see how much was taken out.

The city every payroll then takes our matching contribution and sends it across the street to the retirement system.

For those that don't make it, that money stays in the system, and then the actuary, it actually serves to reduce the city's contribution going forward because that money stayed in and it didn't wasn't needed to fund a benefit.

Police and fire is a little different.

They don't have a choice.

They if they get to 10 years, they must take the defined benefit pension.

Their plan is just a little different.

Um, but but yes, so you asked a good question about the active plans.

The legacy plans didn't have an employee contribution, those were all um city money back in the day.

And and so those people, again, those are very mature plans, frozen as of 630, 14.

So there's not many people still working that'll get their benefit.

Those of us that started before June 30th of 2014, and I didn't start much before then, we get a little benefit out of that plan, and then most of the benefit out of the new one.

So, you know, people that have been here a long time, uh, any of the department heads you see who have been here a very long time, it's very typical that when you looked at how their pension amounts computed, they're getting part of their benefit paid out of that legacy plan for what they earned through June 30th, 14, and then part out of the out of the new plan.

Okay, thank you.

Thank you for clarifying that.

You uh shared a couple of things that I was not aware of.

Um so I appreciate that.

My second question is relative to last year, and I believe coming up sometime this year, the 10 million dollars that the city provided for retirees.

Um, when I do the calculation, and and perhaps I'm looking at the wrong numbers, but when I do the calculation, trying to figure out roughly how much each retiree would receive is different from what I've heard commenters call in and say they receive.

Um, and so we don't have to do it now, but I'm really interested in the calculation and how that 10 million dollars was utilized to provide that quote unquote 13th check, um, because I know there's another one that will be coming up soon.

Um, so would like to perhaps offline get a better understanding of that calculation.

Um, and then the other thing that I wanted to ask is so you indicated that across the board, the anticipated rate of return is 6.75%.

I'm interested in knowing who dictates where the dollars, the pension dollars are invested.

I know all of them have boards, um, but who identifies where the dollars are invested to get to that 6.75% rate of return or higher.

Gotcha.

Yeah, excellent questions.

Um, so I'll address that one first.

So part of the bankruptcy plan of adjustment was that for a period of 20 years, each pension plan has an independent investment committee.

So none of us that are appointees um can are on those investment committees.

Um, I will tell you the backstory on that was that you know the state and the grand bargain believe that former city administrations weren't responsible with investing decisions.

So they on purpose took it out of um appointees hands in terms of investing that money for a period of 20 years.

So our two retirement systems each have independent investment committees.

Um, and and they they were all people originally appointed by the state.

There's been turnover in those roles.

The way that it works is if someone leaves, which people have, they elected their their replacement.

We don't have any say in it.

Um, but again, if you think about it, we're already 12 years into the 20.

You know, it would it's it's actually very atypical to have a pension system like Detroit's where those of us that are on the board have no say in how the money is invested.

Um both of those investment committees, though, I would tell you, I attend every one of their meetings.

They're responsible investment professionals.

They're doing what you would expect them to do for a pension plan or a wealthy family, they diversify the money into all kinds of different asset classes from stocks and bonds and real estate and private credit and they private equity, they they they divide the money up so that you know no one bad thing in the stock market could you know cause us to lose the money.

Um but those those groups have uh approximately seven more years to go, and so in seven years, the city then would could say we've been through 20 years of independent investment committees, we're ready to take that on ourselves again, but we still have seven more years to go.

Uh the $10 million question is actually pretty easy to um we actually have done it, you remember, twice now, um, and the budget that's going to get submitted.

I you know, I know that my colleagues have are working ahead with Mary Sheffield's team, council member uh our um um mayor Sheffield, I'm sorry, um, and her team and and are working on a draft budget that will be presented to city council.

So I don't know that there's another 10 million in it.

I haven't just seen that yet, it may be.

But for the last two years, the mayor put in an incremental 10 million, which then council agreed to.

And the way that gets divided is it's essentially taking 10 million for each system and dividing by that line that's called retirees and beneficiaries.

So if you took for the general resistance, it's only for the legacy plans.

If you took the 10 million dollars and divided it by 10,713, you get this, and the amount was the most recent amount.

Each retiree and beneficiary of the general plan got 476.

And then um each, and then there was a separate 10 million for police and fire.

They have 7,647 active retirees and beneficiaries.

If you divide that out because there's less people, they got um $661.

And so again, it was something that you know the former mayor and city council wanted to do, recognizing that the legacy retirees took such a big hit in the bankruptcy, it was a way to give something back.

So this 10 million was not guaranteed to happen every year.

Uh if it's in this year's budget and council approves it, we would still need to come to you and get your approval to send that 10 million.

But when that happens, it doesn't come out of the regular system assets.

The city actually wire transfers 20 million dollars to the retirement systems, and then on that first day of the month that the distribution occurred, they they distributed it, you know, out to all the retirees.

So that's how that works.

And again, it'll be interesting to see thing to see this budget season.

We'll will be proposed to do it again.

I I just don't know what this time.

Okay, thank you.

I do have some additional questions about that, but um we'll relinquish the floor.

I would be interested in knowing when the investment committees meet.

I would love to um just kind of witness what's going on, who's there, what's what's happening, uh, because I actually have some thoughts on um ways that we might be able to address some of the concerns that we hear from retirees.

So if you can share um with all of us when the investment committees meet, that would be great.

Thank you so much for the detailed information.

Thank you, Mr.

Chair.

Yeah, and and and um council member just I I don't, you know, I know I could respond separately bit since others are hearing this question.

The re if if anyone goes to the city of Detroit's retirement systems webpage, there's a separate tab for the general retirement system and the police and fire retirement system, and all of the meetings of both the boards as well as the investment committees are posted as public meetings.

Uh they each meet essentially six times a year.

They are public meetings, they do take public comment.

Um again, because I'm not on it.

I'm actually when I I go to them because I really care about what they're doing, and I know that you know, if they're doing a good job or bad job, impacts what the city's budget's gonna look like, so it's important to pay attention.

But all of us are invited, uh they're public meetings, uh, they they and and um so I yeah, I would encourage anyone to to attend.

It's it's not something that people typically do attend, and uh, and and as I view it, it is a very important thing to keep track of as you pointed out.

Thank you.

Thank you, Mr.

Chair.

Okay, thank you, Vice Chair.

Um, and we'll go over to Member Waters.

Thank you, Mr.

Chairman.

Uh okay.

Yeah, I have a few questions.

So um how do Detroit's uh retiree pension and health care benefits compare to those offered by say Chicago, Cleveland, St.

Louis, Minneapolis, those cities.

How does ours compare to theirs?

Uh do you know off the top of your head?

Um Madam Councilmember, I don't know off the top of my head.

I know legislative policy division and Mr.

Corley or Mr.

Whitaker and Mr.

Corley's group do a good job of then doing that benchmarking.

And I know they intend to, since we just published our annual comprehensive financial report, uh they plan, you know, first uh the the auditor general will bring Plant Moran in to present to your committee the results of our audit.

They're I know working with uh with your committee to have Plant Moran come in.

So they'll present that'll be your chance to see here from our auditors and those uh same auditors, Plant Moran audit not only the city, but both retirement systems.

So that's something you know to to look forward to.

Uh and then Mr.

Corley's group typically then uh publishes a benchmarking report that does compare us against those other.

I mean, it's as we all know, it's hard to find an exact match for the city of Detroit.

We've got some you know unique challenges, and obviously our 139 square miles makes us very unique.

But you know, it's definitely something that you know all these benefits are collectively bargained, and it's something that our colleagues in you know human resources and labor relations are dealing with right now of uh all of our union saying, hey, we compare ourselves to Ann Arbor, and we think they're doing this and you aren't, and you know what can we do?

So there is constant benchmarking going on, but again, I don't know off the top of my head, but I know Mr.

Corley's group does a great job of of showing those benchmarks against other cities.

All right, then we'll we'll request that from uh Mr.

Corley's.

So going forward, um what changes, if any, are needed um to ensure Detroit's retiree benefits are remain competitive, that they remain fair and financially sustainable.

Well, I think as you've seen this report is certainly one way.

Um the other, you know, that you know because you were here last you know, last several budget cycles, you've seen that when we when the OCFO presents the non-departmental, that's where the pension contributions are are shown.

So we will go through the details that are backed up by not just how much we think should be going in, but what the actuaries um uh um say.

And and again, I think and and you know, we've known each other a long while now.

You you've you've seen our strategy.

What we did in the early years when the city didn't have to make a pension contribution, and we were outperforming in terms of income tax collections.

We set aside money in the retired protection fund, and now we're drawing that down to help make our contribution each year.

So parts coming from the general fund, part is coming from um from the retired protection fund, and then certainly enterprise funds, you know, cover cover their own.

So um the our our model, if you will, and in the you know, again, you know, I was here when our first CFO was the architect of creating this idea that we have a four-year financial plan.

I think that's where our real security comes from is that you know and I again I've seen it, and I'm not just saying this to be kind.

The amount of debate that council goes through with the budget and the hearings you have, to me that's like great government because it exposes to the light of day where do these numbers come from?

Are we putting the money in?

Where you know we're supposed to, and and I know in my heart we are, you know, that the when the OCFO presents that budget, it's gotta be a four-year balanced budget, and you know, when council, as you're able to wants to move stuff around, we you know, we have to you you all are very good at about if we're gonna add something to one category, we've got to take it away from something else.

So I think that's where the security for retirees come should come from is that you see as long as we stick with these four-year plans, vigorous debate about the budget before council approves what the mayor submits.

I I think personally that's as as good as it gets.

We're you know, we're really a best practice now from a city that was in such trouble in 2013.

Now people look to us and say, oh, this is how you do it.

You do a revenue estimating conference to make sure the revenues are right, and then you debate where the money gets spent.

I think I think that's to answer your question, that's where security comes from for people.

Um so I'll probably pose this one too, um, Mr.

Corley, but I just wanted to look at the retirement eligibility rules in comparison to the seat of Detroit and and other cities.

And in terms of the the times that it takes to vest, it takes us 10 years, Mr.

Corley.

Corley, I wonder how many years it takes some of those other cities.

So but I wanted to put put that out there so you know that those questions will be coming.

So the pensions uh contributions are 11.2% uh of revenues do we have any flexibility um does the city have you know if the cost should increase and you might you might have hit that but sometimes it's very difficult for I mean to get all of that at once.

Well we again this is I guess you know the benefit to retirees is that if we had a tough year and said we want to skip a pension contribution we don't have an ability under law to do that.

We are now we are now obligated to fully fund these legacy plans over a closed 30 year period we're in our third year of the 30 uh and um we've been very fortunate the stock market of course can go up and down but the last couple years has been very good and and the investment committees have actually done a great job of exceeding their anticipated rate of return that takes some pressure off the city but if we you know we could wake up one day and see the stock market having a big crash that that would impact us in a budget um there are there are safety valves and the way actuaries do it that if you have one bad year in the market they spread it over uh a period of three to five years so there's a little bit of a of a moderation of that but we are on a path now where you know it this has really got to be a first budget obligation of you know just if we if we and I'm not saying council does because I I know you greatly care about retirees but if there was a year where someone said hey why don't we fund this thing instead of pensions we we aren't allowed we aren't allowed to do that under law all right and then you know with me being the chairperson of that retiree task force we've gone through a number of these things um during that time and I still continue to ask some of the same question you've just kind of touched on it the assumed rates of return when you talked about in terms of us being able to lower um those rates of return and adjust the funding strategies so I'm not gonna ask you to go back through that not at this time anyway maybe in another year we'll take a note another look at it to see if in fact those things are are needed so balancing public safety and um staffing and overtime and all basic service delivery um how does that kind of in your opinion play into all of this you know you just said we have to do the pension first and foremost that's the first thing we have to do yeah that's right that that and our our our city obligated debt service where you know we've pledged the city's full faith and credit um I would say the biggest dynamic that occurs and it's our colleagues in human resources and labor relations that are um are responsible for this any changes to pension plans in the state of Michigan are required they're a mandatory subject to collective bargaining so right now I know our public safety unions have contracts that allow them after January 1st to talk to the city again about what those benefits are um the colleagues we have that are police and firefighters that are you know typically the union officials are very smart about these things they look at what they want and where they would like enhancements and um and it's it's something that it's it's it'll be collectively bargaining and as you know because you've seen it then when the collective bargaining agreement it comes before city council and you all get to see you know what's been negotiated and you you have to approve it so that is the dynamic it's not usually us offering more it's usually collective bargaining that says and and you know this because you recall it during your last council term um police and fire got some modifications where they pointed out that hey we don't get social security uh you know those of us that are you know uh in this new plan are not going to get the pension benefits that people used to get and we'd like to increase the multiplier and we you know we brought that plan amendment to you at city council you approved it and it became law and now those people's benefits get enhanced so it's it's that dynamic it's this um uh mandatory um um um um bargaining that must occur uh mandatory subject collective bargaining that must occur okay and so I I just want to say to my colleague from the fourth district it certainly if she has some idea how we can make our retirees whole I'm looking forward to that I've been pulling my little bit of hair out uh trying to figure that all out I know she's a numbers person but I just want to put this last question on the table because it's something that's been bothering me for the last four years.

I've been pulling my little bit of hair out, uh trying to figure that all out.

I know she's a numbers person, but I just want to put this last question on the table because it's something that's been bothering me for the last four years.

Um the bad investment that was made as relates to retirees oh my god.

Maybe I'm not supposed to ask this question.

I don't know.

Um that led them to having to repay this money on the annuities.

At the time, I think I don't know what the rate was.

They said, well, we'll give you a rate of 7.75.

I'm just throwing the number out there, 7.75%.

And so that way your return is gonna be a lot more money, and so I'm sure retirees retirees were getting very happy about that rate of return.

But they were given bad information.

So I want to understand.

Uh first of all, I want to know if that company who made those recommendations are still here.

I hope we're not still doing business with them on any level, that they're not making any recommendations to the city in terms of how people should invest in their annuities and so forth.

So maybe you can kind of speak to that briefly because I know that is exactly what led to some retirees who having to pay a whole bunch of money back, monies that they cannot even afford.

Yes, you know, I'd be I'd be glad to, because as you know, I participated along with you and Councilmember Durhall on your retiree task force, where we've you know heard that this seems to be one of the biggest issues that retirees bring up that seems totally unfair that during the bankruptcy, if they um had what was deemed excess returns in their annuity savings fund, they had to pay it back.

Um and you've heard me, I think, tell this story during the retiree task force, but I'll I'll tell it again real quickly for the benefit of our new colleagues.

Well, could you first say if that company is that is that investment company still around doing business with the city?

I want to know that.

Well, I don't want to name names, but it wasn't a company, it would have been the elected officials at the time that were at the city that were granting these, so it came from people that were appointed to the board that made the decision, not not you know, to my and I I didn't start with the city till 2013, so I certainly wasn't here.

I don't think it came from an advisor saying it was the right thing to do.

Um, and in fact, the our uh you know, your predecessors um that did it, they never did the same thing on police and fire.

It was just a way to get greater returns to the general.

Well, how would they know as an elector unless they were experts in that area?

I mean, that's the thing, I don't understand.

They were not experts in that area.

Yeah, you right, you wouldn't think so.

Um, or or we, you know, we I guess could now say with hindsight, they you know, we know that they they weren't um you've I think heard this story, and I think it's worth repeating.

What would happen is there would be years back then the rate of return was I believe 7.5%.

So if the plan earned more than 7.5%, the group, the appointees that were on the board would say, hey, let's give people more than 7.5% because the money earned more than 7.5%.

But then the next year, let's say, because this occurred in a couple of years, the market lost money.

They still gave the people 7.5%.

So the argument was, and it wasn't the people's fault.

They didn't request it.

The the uh elected officials and appointees that were on these boards, thought this was a good idea to reward themselves by paying this money on annuity funds.

And again, annuity funds are voluntary.

You could take money out of your check, put it in the annuity.

It wasn't any participant who said, I want 7.5, even though you didn't earn 7.5, it was whoever was on that board at the time that decided that.

Then, and you all remember this, when the city was heading towards you know, what became then the bankruptcy filing in 2013, the state of Michigan came in and and started interacting.

They had consent agreements with uh with the mayor and city council on things that had to happen so that the state would keep the city solvent, the city was struggling.

And in 2011, city council actually changed the rule of how much could be credited to these accounts.

So it was city council's own decision at that time that they couldn't continue to pay amounts on these annuity funds that weren't being earned.

What the bankruptcy court then did, which was the very cruel thing, is said, well, that was a great idea that city council did in 2011.

We're going to apply it retroactively.

And so for even years before 2011, they said, if you city employee have more money in the plan than you would have got if this 2011 rule would have been adopted several years earlier, here's how much you owe us back.

Some retirees, as I hear the story, knew it was too good to be true, and they had transferred their money out to a separate retirement, they rolled it over to a different retirement account, thinking, hey, the city won't be able to get it because I've taken my money out.

People that weren't retired yet didn't have the ability to move their money.

So what then happened in the bankruptcy, which is again very cruel, is that anyone that had a balance in their account had no choice.

The retirement systems were just directed to take that money from the retirees accounts and put it back in the pension fund.

Those that had transferred their money out got a limited time to pay it back.

Or if they didn't, they got this clawback that you know you and Councilmember Durhell and I heard heard so much about.

This clawback for the rest of their life was now what they signed up for.

And then, as you know, what council did in your last session is we at least, and we're going through this right now, we at least reopen the window that some of those people now are saying, gosh, had I thought about this more, I wouldn't have wanted this coming out of my check for the rest of my life.

I know I missed that chance to pay it off.

Can I get another chance to pay it off?

And and that's what we granted, which of course is not what everybody wanted.

They would just like this to all be undone.

The hardest part, as you've heard me say, though, is it's a terrible lot of money.

It was 200 million dollars that was taken.

So if we if we could, and again, even if all of us feel like it was a very unfair provision of what the bankruptcy dictated, and we wanted to make people whole, we'd we'd need 200 million dollars.

That's that's the tough part of fixing this.

So, and again, I know you've worked with us on this, and you're not totally happy with the solutions that we've come up with though so far, but like most recently, and it's going on right now, those people at least got the window reopened where they could pay it off and stop the clawback.

But um, yeah, so I know I'm painfully taking you through what we've kind of hashed over many times before, but that's the crazy background on this story.

Um, is that again, you'd have to look back to who was here in 2011.

I mean, some of those people that were in appointed roles, you know, some of them, you know, I don't want to name names, but some people went to jail over some of the things they you know they were directed to you know to do with retirement system assets.

So there was definitely some problems caused by people that were in charge of these pension boards that led to the retirees getting hurt as bad as they got hurt.

There is no question that, you know, it you know, I can't blame an outside advisor.

I would have to say it was more people that didn't have the best interest of retirees in their hearts when they're sitting on that pension board making decisions that caused a problem for them later.

Well, I thank you for going through that.

And it was an educational piece, especially for our chairman here, and to some extent for for uh vice chair, um I I've got to tell you, I wouldn't want to be in a position as a council member to make that kind of decision.

I that is not what I do.

So I don't understand.

You know, no, I say the same thing when council member Johnson was just bringing up the fact like who makes these decisions.

Actually, one of the good things about my job and being on the pension board is I don't have the pressure of making a decision on is it a good investment, bad investment?

It got taken out of my hands.

There's a lot of pressure on the people that make that decision.

And again, you you think you know me, I would be super honest with how I did it, but I'd always be worrying about am I doing the right thing.

We at least have this independent group now that does it.

Now, some people would say, well, geez, it's the city's money.

Why does an outside group get to decide how we invest it?

You know, do they think about investing in Detroit?

You know, when maybe they are investing in Texas or California, like there it brings up those kinds of questions.

Like there, it brings up those kinds of questions.

But the fact that we all, you know, again, we had to battle out of the bankruptcy first, that got taken off our plate.

And you know, I would tell you it's not an altogether bad thing because then the people that know you can make an investment decision, they're they're looking to meet you and figure out what they gotta say to have you invest in their thing.

And I'm just glad that right now, uh I at least and none of my fellow colleagues that are appointees, we don't have any of that pressure right now.

Yes.

Oh boy, what a story.

Okay, thank you, Mr.

Chairman.

Thank you, Member Waters.

Um thank you.

I just have a few additional questions.

Um regarding uh the legacy, the general retirement system and the legacy uh I know it's close to the 60%, but in your opinion, you've as long as we continue in the funding mechanism that you talked about, you feel confident that we're on the right path of that being fully funded.

Absolutely, sir.

I I see it climbing right up.

Again, none of us know the stock market any day could you know really disappoint us with some you know what they call black swan event happening where all of a sudden the market's been up and up and up and never seems to you know have a big correction.

All of us that are been in this long enough know that corrections will happen.

So that's something to be worried about.

Again, they're because it's so diversified, we're insulated against it.

But I know that, and you're gonna see it at budget time, we are contributing the full contribution that's necessary to get this thing to 100% funded over the remaining 27 years.

So the only thing that could mess us up is if we you know go through some, and we all know we live in a very scary, you know, federal government space right now.

There's always something that could happen to that market that would be a concern, but um uh from a standpoint of the city's budget, what what the council's before you and what I trust you will do too is you will pass a four-year balanced budget and it will have four years of full pension contributions in there, and that's that's why I'm so confident that that we will climb up from that 63.5 percent.

Thank you for that.

And I I think this this is a question related to the conversation that um Vice Chair Johnson brought up around um the investment committees that might be within the um for their pre um view, but do you foresee, as you mentioned the market, do you foresee any dangers there?

I mean, one thing that comes to mind is as folks are thinking about a AI bubble bursting or anything like that.

Is that has that come up in your thought process around this?

Yeah, I think everyone who works in the space of following public markets knows that you know there's an old saying, trees don't grow into heaven.

Um, you know, there will be a market, there will be a storm, the market will have corrections.

But all of us that believe in the market believe that over time there's no better place to have your money than a fully diversified market.

So I think that, yeah, definitely.

I mean, certainly what all of us witnesses happening with you know the current federal administration, there's a lot to worry about.

Um, but the market seems to shake it off and continue going, but I would fully expect at some point there'll be a correction.

But if our investment committees have done their job where they've diversified this money, they you know they don't have it all in one thing.

You know, they they really do.

You know, all of us that have taken you know finance classes, the first thing they teach you is that the best thing you can do if you have a lot of money is divide it up into a lot of different things.

You don't put it all in Tesla stock and then have you know the you know CEO, you know, uh do what he did, you know.

Um, or or you know, I'm picking on Mr.

Musk, obviously, but you know, that's why you don't invest in just the one hot stock.

That's why you diversify it into all these different things.

And I really so I can't certainly could never say there won't be a time that that markets could go down a lot in any one year, but you know, all of us that have been in it tell you that you know, the the at that time it's you got to just stick stick by your guns and say we're gonna stay invested.

The people that pull their money out are the ones that then don't participate when it goes back up.

I appreciate that.

Thank you.

I have one more question, but before I will um yield to member waters for our additional question.

All right.

Well, someone just text me this one, and I know um that that you've answered it before, but if you could say it so that they they're listening so that they uh can hear it.

How do the number of general retirees that pass away each year affect the funding levels?

Um definitely factored in by the actuary.

Um you know, I'm I'm not displaying that whole report, but you know, the city uses a very um esteemed actuarial group called Gaber Roder and Smith.

They've been the uh actuary for the city for probably a hundred years.

Probably not exaggerating.

Um they actually do a count of how many retirees we start with.

They they project, I mean, as as we all know, not none of us are you know gonna get out of here alive, right?

We're all gonna die at some point.

It's it's cold to think about, but actuaries know that that's gonna occur, and they have tables to figure out how many people do we expect that will pass based on their ages and their genders.

Um, and so then each year they reconcile.

Well, here's what we thought, but you know, here's what happened.

Um I the retirement system boards are gonna be actually going through those actual reports at our upcoming meetings.

I know member waters, I think I've heard that you're gonna be on general retirement system with us, so that's great.

Uh, you'll get to see that reconciliation.

And um it you you will see that this year, I believe what I saw when I saw the draft today, um, less retirees died than people thought.

Um so it's not it's not helping us or hurting us.

We certainly hope every retiree and beneficiary lives to their full life expectancy, but the actuary does every single year have to figure out how many people did we lose in our retirement systems, as you can imagine, they have to do all kinds of tracking to find out that if someone did pass that you know, the checks not going to somebody that it shouldn't go to, that we pull them off the roll.

So it's looked at very closely, but um I would just tell you it hasn't had a big impact on helping us or hurting us, uh at least currently.

You you heard right when Mayor Duggan took office the first you know kind of dirty trick of the bankruptcy was that the city's contributions were based on mortality tables that weren't the the up to date ones, and it made our contribution much higher.

So we did have that little flap at the beginning, uh, but but since then we've not had an issue.

Mr.

Chair.

Vice Chair Johnson.

Thank you, Mr.

Chair.

Just wanted to clarify something.

So earlier when we were talking about the 10 million dollars that was provided as a 13th check.

Um because I did a very quick calculation.

Mr.

Nag, look, I just want to make sure our residents know that the 10 million dollars was split between the general retirement system and police and fire.

So the calculation that was provided was uh roughly 460 some odd dollars um for individuals to receive because when I did the quick calculation based on 10 million dollars for each of the legacy systems, it was 933.

So I just want to clarify that the 10 million dollars was split between the two, and that was the calculation and the amount of the checks that the retirees received.

Yes, thank you, Councilmember Johnson for correcting me.

Um yes, there were two 10 million, one for last fiscal year, one for this fiscal year, but then in each year that 10 million was split, five million to each system.

So general retirees got five million twice, and police and fire got five million twice, but from two different fiscal years.

So you're you're exactly right.

You have to take the five million divided by the number of retirees to get to that number that I told you, and I I know for a fact it was general retirees got 476 dollars, and police and fire retirees got six hundred and sixty-one dollars on this just this last December 1st.

We did that, you know, council had asked us to try to do it before we got to the end of the calendar year so people could have it for the holidays, and and we were able to uh get that done.

But that that's the current fiscal year.

We've spent the money that you appropriated for that purpose on December 1st.

Thank you.

Thank you.

And I just wanted to clarify that because of the the numbers, and that's why I was saying perhaps we can talk about it offline because my calculation was different uh based on each receiving 10 million dollars twice.

So thank you for that clarification.

Thank you, Mr.

Chair.

Thank you.

And I just have one final question.

On the annuity claw back, is the amount still 200 million?

Was that the original amount or is that the current amount that is doing to be paid back?

Yeah, thank you, um, council member um McCampbell.

Um 200 million was the total amount.

If you looked at the Judge Rhodes' oral opinion when he approved the city's bankruptcy, he talked about that 200 million in total.

And so a large part of it, like I indicated, people that had money in their account didn't have a choice, it got taken out.

And then some people got like everyone that was left got the opportunity to pay it back.

Many did not.

On the balance sheet right now, what's left, uh, and and we've got a you know, we've got um an allowance because again, not all retirees unfortunately make it to their full um expected, you know, um uh date of life.

Um that's about 50 million that's still left.

So most of that 200 million already came out of people's accounts or got paid back, and what the retirement systems now have, like when that line four that I went through on this report that shows the retirement system's assets, uh, one of the assets is this receivable from people that are getting it taken out of their check.

So for those people, it's like an auto loan they can't pay off.

You know, they had their clawback amount calculated at 6.75% interest, and unlike an auto loan that was three years, it was calculated over their life expectancy.

And you might say, why would they calculate it over such a long period?

They wanted the deduction to be as little as possible.

So someone that was a younger person who's gonna live to age 83, you know, has now a very long car payment, and again, under the plan, once they missed that original date to pay it back, they had no choice.

We just had to take it, and that's what you've heard us talking about is counts the last counsel uh before you authorized a plan amendment to give people the ability to uh to pay it off, but it's coming out of each person's check over their and it's different for each person based on how old they are, it's over the their life expectancy this this amount will come out.

And to answer your specific question, there's about 50 million on the book still that's yet to be collected.

So if we did have a way to just say, let's just stop it, which would require a plan amendment, it would take 50 million from the city to stop it.

But then, as member waters has heard me say, the group you'd have to be concerned about would be those that said, well, wait a minute, uh I didn't have a choice.

I was part of the 200 million and my money is totally gone.

Why did you now forgive it?

I I guess I was the dumb one.

I should have you know found a way to not not you know have my money done.

So I tend to think we would need 200 million to rectify it.

I know member waters a number of times, you know, focuses on exactly what you brought up, which is how much is left?

You know, how much is really the obstacle?

And it's it's really fifty, it's 50 million that's still left on the books.

Okay, thank you.

And and thank you for the presentation.

Uh the answers are definitely learned a lot.

Uh Mr.

Corley, do you have any questions?

Thank you, Mr.

Mrs.

Hierz.

I just a couple.

Um you all had wonderful questions.

Um did the bankruptcy court have to approve this last 13 check.

I think you mentioned before that the 10-year uh window expired, so bankruptcy court no longer had to um weigh in and approve the 13th check.

Are we are we out of the uh bankruptcy court process?

Yeah, um, thank you.

So through the chair to um uh Mr.

Corley, um your your recollection is right.

We do no longer we no longer have to go back to the bankruptcy court for plan amendments.

Uh we went back to them for the first 10 million uh and because that was a plan amendment, and we also went back when police and fire negotiated changes to their plan, and the judge actually pointed out to us that when you read the plan of adjustment, the city was only banned from making changes for 10 years, and we were outside that 10-year period.

And so the judge actually called it a comfort motion.

He said, You really don't, you know, in so many words, you really don't need my approval because you're beyond the 10 years, but I understand you're looking for a comfort motion so that you're sure this is okay, and he granted it, but at that point, you know, I looked at our lawyer for Miller Canfield and I said, So I think what he's saying is we don't need to come back for anything more, and our lawyer said yes, that's that's correct.

And and I think as you know, we're very the bankruptcy case is still open.

It's very close to being closed out.

The um there's a next status date coming up in um um um you know uh you know, the early part of this year where you know the judge has basically said to Miller Canfield, look, it it's time to wrap this up.

As you know, we had some complexities with some creditor classes that you know were waiting for their their distribution, and we finally got the ability to you know make those distributions.

So I guess it's a long answer to your question.

The bankruptcy case is still open.

We do not need to go back.

The judges made it very clear.

If we do any plan amendments, we're outside the 10 years, we don't need to go back.

But I also expect that in the next several months we're gonna have a the case fully closed as well.

So a couple more.

So if the city does it does um agree to do a plan amendment, you know, like the 10 million dollars that were set aside with the 13th check, um state law requires, however, the city to fully fund any plan amendments that we make.

So uh a couple years ago, uh fortunately the state of Michigan granted a grant of about 20 million dollars for the general retirement system to help bring the general retirement system to 60 percent and above fully funded.

But in that state, still that state law requires if we want to make any changes, you know, improved benefits for the retirees, we have to make sure that the money is there to do so.

Is that a good assessment?

Um yeah, through the chair to Mr.

Quirley, it's a good assessment, but it actually only applies to one of the four systems.

The only system that that grant applied to was the general component to, because the grant only went to that legacy one.

So the other three don't require that.

But as you know, a plan amendment in the state of Michigan of a public pension plan does have to come before the governing body, does have to have an actuarial cost study.

So again, if if this year's budget has another 10 million in, we would and and council approve that we would then come back for another plan amendment with an actuarial cost study that says we got the money appropriated, it's gonna you know come in and go out, you know, to cover that.

We're not hurting the plan by doing it.

That would that would be all we would need to do to comply with law is that um under, again, as you know, better than me even, state law requires that the governing body of a public pension plan has to have an actuarial cost study, you know.

In other words, so they go in with eyes wide open, that someone doesn't convince them to do something that then is gonna hurt the budget for years to come.

My last question, so looking at the form, um, and you alluded to this, Mr.

Naglett.

So when you go down to line 26, and this is under the uniform assumptions.

I think you were you were saying that those uniform assumptions are developed by the state.

So when you look at the uh general retirement system column, um the unfunded ratio is 16 1.6 percent versus 63.5 percent on line six.

Yes, sir.

So which line is the state looking at and that we should be, you know, city council and the citizens should be concerned about.

Is it line is it line six or is it line 26?

Oh, you're asking a great question.

Um, and you're right.

The you if you look at who publishes these uniform assumptions under this public act 202, um the state treasurer um issues those, and the biggest difference between their assumptions versus ours is the state um is their uniform assumption is that you had to fund it over a closed 15-year period, and as you know, we're doing a closed 30-year period.

So that's the reason the funded ratio drops a little bit.

So the state definitely looks at it under their uniform assumptions because they again they want to govern all their local units the same way.

But for us, that's really a pro forma calculation for us and for council and for UN LPD, I would say the top part is the most important.

How are we really doing with our own adopted funded policy funding policies, which were this, as you remember, this 30-year level principle closed 30 years, and actually the two new plans are or over 15 years.

So we've all been with your yours and council's help, very diligent about with the new plans that we're not gonna let those things fall behind, like happened you know, with those legacy plans, you know, governed by our predecessors.

So but that's the answer.

The the the biggest change in the uniform assumption is that the state assumes you have to fund it quicker than we are.

They can't make you do it, but they can at least make you show if you were all doing what we think everybody should do, this is what we would do.

This is what we would do.

Yeah, I guess my concern, and this is my last question.

So I get I guess my concern there, you know, if the state is saying that you should amortize it over 15 years, and the funding ratio goes below 60 percent, and you know, the combined contribution is above 10 percent.

You know, that sounds like that could be a trigger.

You know, where the state will require to see Detroit to come up with a plan to address that.

Yes, that's that's the only concern me here.

Yeah, no, and as you know, this is the world we live in.

As soon as we file our annual report with the state, you know, if there are any corrective actions that were identified by their our auditors, and there are some, be it be you know, you know this committee will see a presentation by plant moran in the next couple of um meeting sessions from from them.

Um you know, we're used to writing corrective action plans.

I mean, I I think what I what we would say would be we adopted, and you were you remember when we did this, we adopted a very reasoned approach with this 30-year level principle setting up the retired protection fund.

It's why the bond rating agencies have rated us higher as they feel that what we did is responsible.

So our corrective action plan, if that were to happen, you know, if I'm sitting in the seat and writing it, I would say we hired consultants, and we were darn sure that 30-year level principal with this retired protection fund is gonna be just fine.

And that's our corrective action.

And I guess I you know, not being a lawyer, I don't know what the state could do to you if they said, well, but we think differently.

I guess maybe we would just say, you know, I guess you feel differently.

But we you know, we we answer to our mayor and city council, and we feel quite comfortable with what we've done.

Thank you so much, Mr.

Thank you, Mr.

Corley.

Thank you, Mr.

Nuglet.

Uh I will just say that uh you as we think about as we see this spreadsheet, we also know that these are folks' lives and and folks who are put a number of years in service to the city.

Uh and you know, I I agree with with the wording of the bankruptcy ruling being very cruel, um, especially to our retirees, um folks that were promised something in return of them working for the city and serving the residents.

So I uh for our retirees and our residents in the city of Detroit, I I hope you see that you have folks on this committee and folks who are working hard that really do want to make sure that uh folks are served in the correct way and and that we get these questions answered and that we get the right governance around their money as well.

So um thank you so much for the presentation.

I know we'll continue to uh be in conversation with our retirees.

Um I'm uh honored to be on the task force with um member waters as well.

So with that, I would entertain a motion to receive and follow this report.

So move without any objections.

The uh fiscal year 2025 local government retirement system annual report would be uh received and filed.

Thank you so much.

We'll move on to the next uh agenda item 6.2.

Uh uh neighborhood enterprise zone certificate application for the rehabilitation of a building at 9301 Oakland Avenue, creating 10 rental units on the second floor in the Stafford House Neighborhood Enterprise Zone Area.

With that, I'll entertain a motion to discuss line item 6.2.

Motion to discuss.

Right.

And here we have what do we have on the screen?

My apologies.

Mr.

Gulak.

Mr.

Gulach, welcome.

Good afternoon.

Good afternoon, Mr.

Chair and Committee.

Chris Gulag, uh LPD CPC staff.

Thank you, Mr.

Gulak.

And I believe you have um you just want to do a quick overview of the NUZ and then go into 6.2.

Mr.

Chair, if the committee would like uh these certificates will be coming to your committee once, twice, sometimes three times a month.

And I don't know if you since it's a new year, I didn't know if you wanted me to give up an overview of the NEZs and the certificates for your information.

I have about 15 slides.

I could try to go through it quickly, it's up to you.

If you have a quick if you have if you do, I know I we had uh quite a long presentation before.

If you have a quick overview, just for um especially myself by the general public and members on the committee, that'd be great.

Okay, thank you, Mr.

Chair.

Can you see my slides, Mr.

Chair?

Yes, we can.

Thank you.

So I'll try to get I'll try to give a quick overview and we can dive deeper into this as the year unfolds if if you would like more information.

Um I'm not an expert on this, but I I know something about it, and uh, I guess if we want to dig deeper, we could always bring in the assessors or um Mr.

Corley.

Um but thank you, Mr.

Chair.

Uh yeah, today at the uh budget finance and audit committee, you receive NEZ certificate applications from from petitioners.

And um the background is these are allowed by state law, which is it's called the NEZ Act 147.

It's way it's goes way back to 1992.

It's been amended over the years, but folks can find that online.

Um can you still hear me okay?

Yes, we can.

Thank you.

Okay.

So this state law allows cities to create NEZ districts.

Um, and then once a district is created, then the city can grant certificates.

So since 1992, the city has approved about 200 NEZ districts zones and granted hundreds of certificates, maybe possibly thousands.

Um the districts are really reviewed at the planning and economic development development committee on Thursdays, but the certificates are reviewed by your committee on Wednesdays.

Um I just given this background so the left hand knows what the right hand's doing.

Um the NEZs differ from homestead NEZs, those were created more recently.

Um I'll talk a little bit a little bit about that.

But the homestead NEZs, I think were added to the city in 2012, but the NEZs go back to 1992.

Um so the homestead NEZs differ totally different, and that doesn't come to your committee.

Um those have already been approved.

The city has reached its max of homestead NEZs.

Um so folk households are allowed to apply for that, you know, today.

And the city has a website on homestead NEZs.

Um but for those homeowners, they pay about half the millage rate for for houses in the homesteads.

But today we're mostly talking about NEZs.

Um so if there's a map online if folk if folks Google uh Detroit NEZ map, this map will come up.

Uh the blue shows the homesteads, but the yellow shows the I mean the uh orange-ish color is the NEZs.

It doesn't look like a lot, but um it is once we zoom in, it's a little bit uh more expansive.

But but it mostly covers the downtown, um midtown, far east side, but they are scattered throughout the city.

Um if you zoom in closer, this is you know the the river on the bottom here, Woodward Avenue, um down the middle here.

So you see different zones have been created since 1992.

A lot of times to encourage new development where there was a lot of vacant land.

You can see you know, poor city neighborhood over here and and up along the Woodward corridor in the north end.

Um here's another part of the map.

The the Lower East Side has a lot of NEZ areas.

Uh the Lower East Side is the biggest one, I think about 400 acres.

Um Jefferson Chalmers is a big area.

Sometimes the homestead and the NEZs overlap, and you can do one or the other.

Um so a lot of times I think in the last 30 years, the city has sometimes picked an area and made it an NEZ and tried to encourage new housing development.

Sometimes it's just one small parcel of land where there's a building that's been vacant and the city wants that to have an NEZ.

So it can be a big area or a small area.

And then um, so in general, the NEZ is is really a tax exemption to encourage housing development in distressed cities.

And Detroit has uh applied for this, and you know, is implemented this NEZ to encourage you know new housing and old housing stock to be rehabbed.

Um and the units can really the state law doesn't dictate the type of units.

They can really range from real affordable units, you know, um uh housing build out of shipping containers, or it can be for million-dollar mansions.

You know, so a lot of those big mansions on the river and Grey Haven, they have NEZs because the city wanted a diverse tax base, uh of diverse supply of housing.

So over the years the city has um really encouraged them for affordable housing, but also for a million-dollar units.

Um the tax breaks have a a limit though, they they they can be from six to fifteen years.

And um usually the city always grants the 15 years, and that makes the developers happy.

It gives more stability to the program.

Uh but the city could reduce the number of years and in the certificate if it wants to.

If it's in a historic district, the group I think can go from 11 to 17 years.

So if you're in Brush Park or Boston Edison or something like that, you could get a longer NEZ discount.

So these are some projects over the last few years that councils approved.

I think most are familiar with those Great Water homes or new housing uh just east of Indian Village.

Um so they're building new housing, and those homeowners are up.

The council, this was already an NEZ area, and then the council in the last three years have been has been approving the certificates for these new homeowners.

Um here's a house, you know, it's a dilapidated house in Woodbridge, and they applied recently for an NEZ certificate.

So the certificate can be for new housing or for rehabbed housing, it does both.

Um I'll talk about how that works a little bit later.

Um then here's an example, and it can also be used to rehab apartment buildings where you have renters.

Um so the um the renters don't receive the NEZ tax break directly, but the the developer receives them as part of their tax bill.

Um it's also allowed for new rental apartments, but that's more limited.

It has to be in a I think a downtown district, it has to be mixed use.

So this is a new one that was just built in the north end.

Um so that's less common to have uh rental new rental apartments, but it is allowed.

Um the NEZ is mostly for homeowners, new house, new homeowners, and persons.

So if this building on the right here was a condo, each condo owner could get an NEZ break because they pay property taxes for their unit.

So that's more common.

Like the new Hudson's Tower, they recently applied for you know 60 NEZ certificates for each of the new condos in the Hudson's Tower.

So those are some examples.

Um so, like I said, the NEZs, the districts can range from really small to big.

Um right now the city has about 200 NEZ districts, and we keep a spreadsheet in our office of all the all of the districts.

Um, and we add to them each year.

I think usually the c lately the council's been adding about two to four dis you know, maybe five districts each year, and a lot of it's developer-driven, but sometimes the city can say, you know, we want this area needs, we want to encourage development.

Um, so we're gonna make it an NEZ, and they can draw the boundaries around it.

Um, and like I said, the new districts are submitted to the plan and economic development standing committee.

They have to have a public hearing, and then that goes to the whole council for a vote, and that's uh um we have a listing of all those districts.

Um but the state law does cap how much land you can make in NEZ.

You can't make the whole city an NEZ.

Um, so the whole city is about so no more than 15% of the city could be an NEZ.

I think the whole city has 80 88,000 acres.

The NEZ Act allows 15%, which is about 13,000 acres.

To date, we've designated about 5600 acres.

So we we still have quite a bit of room land available for um adding new districts, about 7500.

And every time you add a new district on Thursday and Tuesday, we list we adjust these numbers.

Um so we're not in any uh danger right now of running out of room.

Now the homestead NDZs I think is maxed out right now 15 percent.

The state law allows 15 percent, and and we've covered the whole city.

Um I mean, we've covered what we uh want to a lot for 15 percent.

Um the next question here is so there's two main NEZs, one is for rehabbing a house, like I showed, and one is for building a new house.

Those are the main ones.

When you rehab a house, the NEZ allows you to freeze the taxes to what it was before you started the renovation.

So we saw that house in Woodbridge, you know, some of these houses have a real low taxable value.

So if you had a low taxable value, say of 50,000, and then you make all these improvements and you spend 100,000 to fix it up, and then it's worth 200 or 400,000.

The taxes you pay for 15 years are what it are frozen at what it was before you started the rehab.

So it encourages developers to rehab dilapidated buildings.

Uh the next the next major one is for new housing.

Um for new housing, like those ones we saw on in East Village there.

Um it it freezes your mills, it makes your mills be one half the state average.

So right now, the city, um, I can go through this here.

Um right now, this as most of us know the Detroit residential millage is high, it's 65 mils.

Um the state averages is only 35 mills.

Um, and so this NEZ allows you to be half of the state average.

So on one hand, the city's millage rate is high.

On the other hand, this NEZ is a very generous uh rate to encourage new housing.

But it's it's much lower, you know, it's seven, so right now it's about 17.8 mils, which really gives a good a good deal.

Um so but once you get close to the 15-year um deadline, it starts to ramp up.

So in year 13, it so this is so a homeowner doesn't kind of hit this wall of one year their taxes are low and the next year they're really high.

So it's step it's stepped up year 13 if it would go to 41 mils, and then um the next the the next year it goes to 49 mils, and then the last year goes to 57 mils to kind of help someone to adjust to the to the increase.

Um so I'm almost done.

I'm sorry.

Um so the qu one of the questions can the certificate be denied by council?

The law department well the answer is yes, if it's an incomplete application, you know, the applications for certificates have to be submitted to so first the zone is created that has to be created, and then groups apply for a certificate.

If if information they apply to city clerk's office, it's routed to assessors and it's given to our office, then we send it to city council.

Uh if the certificate meets all the application requirements, law department's advice is that this council cannot deny a certificate.

That's been kind a little bit controversial in the past.

So the law department, I think, is saying uh see if the if the zone is created, if it meets all the requirements, uh council does not have legal authority to deny a certificate unless it's incomplete.

Now the city in the past they could you know ask for more information, like if they think there's a parking problem or they don't like the handicap accessibility, they could delay the approval and you know ask the developer to respond to their concerns.

Uh, but in the end, I think if council ever tried to turn down a certificate and the developer was not happy, they could try to sue the city, you know.

I think, but that hasn't really happened.

But in the past, uh people council members have asked, can I deny a certificate?

Now the council does have a right to adjust the years of a certificate.

So the range is six to fifteen years, and and in my working on these, they haven't gone to a lower number of years.

I think that would make some developers you know very concerned as well.

But we bring them each week to council, and council we have to let council know is it in a zone?

Yes or no?

We talk about the project just so council's familiar with it.

Council can ask questions, you know, about parking and design and other issues.

Um but in the end, the committee has to make a recommendation to the entire body.

And so just to give a few examples, you know, for those houses, you know, with with inflation now and and um um other things, you know, building a new house in Detroit is expensive.

So those new ones we just saw on um on the Great Water Homes and East Village, they cost about 400,000.

It's hard to build a new house for under 400,000.

It's possible, but those ones um with the um any without with the NEZs, you know, they pay about like I said, 18 mils.

And so their annual taxes for a homeowner, a new homeowner that would be 35, 3,560 versus 13,000 if they didn't have an NEZ.

So you can see it's uh the current taxes in the city are high.

The NEZ is a very generous um uh tax break.

Uh whether there's a you know, whether the state law should be amended, um, you know, that's maybe a working group would have to study that, but this is what we're stuck with for now.

It's a very generous tax break, and that helps those new homeowners um, you know, want to uh you know either get a new house uh move from one part of the city to a new house or or um come from the outside and want to buy a house.

So um and for those dilapidated houses, you know, um, like I said, if that if that the taxable value was 30,000, then the taxes would be frozen at about 1,950.

When the house is rehabbed, the new taxable value uh um instead they instead of paying sixty sixty five hundred, yeah, they would pay about nineteen fifty.

So you know on Woodbridge, you they might fix up a house and then Woodbridge is going is really expensive right now.

You know, once they finish rehabbing, it might be worth 400,000, but their tax would be frozen at the pre um you know, the pre-rehab value.

Um so that that includes my overview.

I can try to answer any questions.

Um thank you, Mr.

Gulak.

Uh members, do you have any?

Yeah, just some quick questions.

Um, so how much would the rent increase after the say the 15 year uh with the NEZ?

If you could just kind of give me a certain percentage.

Because if they if they come back again and they don't get approved if they're if they're denied after 15 years, what happens with the renters at that point?

How much will their rent uh increase?

I've often wondered about these these NEZs.

Can't council cannot deny it, but why so why bring them to us?

Through the share, yeah, through the chair.

Well, uh the council is supposed to uh approve a resolution uh approving the certificate, and like I said, you could try to work with the developers and try to um influence the development.

Um I I wasn't I didn't mean for you to respond to that one.

I would just be sure just popping off.

But but I just about the rent.

What happens if they do not receive a new uh certificate after the 15 years for the renters that are there who are enjoying the amount of rent that they pay, what happens then?

Sure.

Well, I'll give you an example.

For example, say you have an old apartment building that's is falling apart um on the west side, and then the developer comes and buys it and and and wants to rehab it and then you know have 50 new units.

Um the city could give an NEZ certificate, and then because but the renter the 50 renters wouldn't get a direct NEZ.

The developer would get an NEZ on the taxes for the building, and hopefully he would pass those, he or she would pass that on to the renters.

Well, that's kind of the idea, but if they're not if they if their NEZ expires after the 15 years, and so they said, Well, you know, we don't have any more of those tax breaks.

How much are they going to increase the cost of their rent?

That's all I'm I'm saying.

Do you have any examples of that?

To the chair, uh no, I don't have any examples.

Um, for me, one of the best things um that happened with these NEZs is something that we did uh during my tenure in Lansing to allow uh homeowners to take advantage of these NEZs.

It's a really big deal because it gives them a tax break.

Now it it depends on the year that you purchase your home.

Not everybody uh qualifies for it in order to to change those kinds of things, of course, it would have to go back to Lansing.

But but that that is critical um for uh Detroiters and various pockets of the city to be able to take advantage um of these NEZs, and many of them have.

So let me get to the total project costs is what 3.2 uh million dollars or roughly 200,000 dollars per unit.

So can you explain the major cost drivers and why the level of subsidy is needed?

Yes, to the chair.

Um Consumer Waters, can you can you repeat the question?

Well, you're talking about a specific project I was interested in.

Well, um I'm talking about the total cost of your project at first mentioned that, right?

It's about 300 three uh 3.2 million, right?

All right, so or roughly 200,000 dollars per unit.

Oh, yes, isn't that yeah, all right, according to this sheet.

Yes, and just to sorry uh member watch, don't mean to interrupt you.

Just for folks or who are following along, we are now we're beyond the intro the overview of NEZs.

We are on the actual application under 6.2, just for folks.

I guess I went there.

I want to get the question in.

Sorry.

Oh, am I not a you don't want me to go there?

Oh, you continue on with your question.

All right.

Um, yeah, I just I went past the NEZs.

I made my point about the homeowners.

Um can you explain the major cost drivers and why this level of subsidy is needing?

I want to hear about why we need that.

And so there are no elevators uh that are included.

What about tenants who have mobility needs?

That's another question.

And then I'm gonna ask you a question about the the parking.

You says ten dollars per month for residents and a certain number of residents can that can receive the parking, but then you have you say that visitors can have um some parking uh spaces.

Uh does that mean you're not gonna have enough parking for the residents?

I don't understand why we're taking care of the visitors if they're all the residents don't have the parking.

I just want to know how how those spaces will be managed and enforced.

Through the chair, um Mr.

Chair, uh if you want to start on 6.2, I do have a five slides that per present the council with an overview, and then we're joined by the petitioner on the screen, Patricia Dockery, who can also answer questions.

But usually with these NEZs, I give a brief uh overview and then turn it over to the petitioner if you'd like, and then we can answer better answer any questions.

Yep, so you can um bring up the slides for 6.2 specifically, and then we will um make sure we get your questions answered.

Remember what is from the folks.

So this is thank you, Mr.

Chair.

I can see okay.

Okay.

Mr.

Chair, can you see my screen okay?

Yes, yep.

Okay, so uh before the committee today, it's it's two different um requests.

One is on Oakland, the other's on Bagley.

So 6.2 is on Oakland, and I'll talk about that now.

Um this is in the north end.

It's on you can you see my screen okay?

Yes.

On the west side of Oakland and North End, just south of Kenilworth.

It's an old an older building.

Um the group applied for an NEZ district, which the uh council granted.

So this shows a closer zoom in of the um uh building.

The Oakland Avenue Farmers Market is across the street to the east.

Um this shows the building.

It's it's an old storefront.

Um and they're they're beginning to rehab the building.

Um so Stafford House is the NEZ is the name of it, and council approved that in March of 2025.

The petitioner is Stafford House, and we're joined by um Patricia Dockery and also possibly Lyndon Crosby, who might be online raising their hand.

Um but they represent Stafford House and Stafford House is a nonprofit, they've been in the north end about 15 years, and they work to provide affordable housing, community outreach, and technical job training.

Um so they did provide us a list of the different units.

So here they're proposing to renovate the second floor for residential, and the first floor would be office space for Stafford House, and possibly other commercial spaces, but the second floor is what they want to do for residential, and they want to I believe create 10 units, and they're shown here, and they give this gives the square footage of each.

They're about 500 square feet.

They would be studios or one bedrooms.

They have an architect, you know, drew up plans.

Um, but they estimate there'd be about 200,000 to renovate each unit.

Um, and then these are their estimated rents on the far right of the table.

And this is in the report we submitted to the committee.

Um so the petitioner indicates that the rents will be about 60 to 80 percent of area median income.

So about about 1,200 a month.

Um so they're asking for the NEZ, and as we said, the uh the NEZ will go on the uh be frozen at the pre-tax value before the rehab is is is done.

Um and they do indicate they have 17 parking spaces behind the building, and they want to designate 10 of those for tenants for a fee of ten dollars a month, and they're proposing seven spaces would be for the public at no charge, and I assume that's for folks visiting the Stafford house on the first floor.

So there'd be a part of the parking lot set aside for tenants and part of it for the public at large.

Um regarding accessibility, it's an older building, so it doesn't unfortunately doesn't have elevators, and I think they indicated it would come cost prohibitive to put install elevators.

Um they do you know they do propose the doors on the first floor for their offices would be you know ADA accessible, but unfortunately the second floor would not be.

Um here's a site plan.

So on your on your right is Oakland Avenue, and then this shows the footprint of the building, and then the back would be this parking lot with 17 spaces.

Um and some would be like as noted would be set aside for tenants.

Um this shows you know a conceptual rehab of the building with new glass and new brickwork.

Um and then um I believe that to get access to the units, they because the building because of the type of building, uh, they would have to install this stairway system to access the units in the back.

But the developers might be able to provide more, be able to answer more of those questions.

Uh so in our report we confirmed it's in an NEZ created by the city, staff was recommended approval, and the resolution is included for your consideration.

Uh thank you, Mr.

Chair.

That that concludes my overview of this one, and uh it's up to you if you want to ask uh Ms.

Dockery if she has any any additional information that I may have missed.

Thank you.

Thank you, Mr.

Gulag.

If could we could elevate um the developers to in the room?

And Mr.

Chair, I see Patricia Dockery on the screen, but she hasn't turned on her video yet.

And then the other person was possibly London Crosby, C R O S B Y, but I'm not sure if they're available.

Hello.

Uh I'm Patricia Patricia Dockery.

Is it okay to speak?

Yes, ma'am.

Good afternoon, Miss Dockery.

Um, yes, it is okay to speak if you just want to give a uh very brief overview, but I know members on the committee have a few questions.

Okay.

All right.

I just want to thank everybody for the support.

Uh we are at the completion stage of this project.

The construction is completed.

We are in the final stretch of this great journey that we've had.

So um, I'm not sure what the questions are.

You're free to answer, but this north end uh Oakland Avenue project has been uh a great advantage for the neighborhood.

There's nothing up and down Oakland Avenue.

Our building has been under construction for two years.

We've got everything in, we've completed the parking lots, and it is absolutely beautiful.

And so we are the the neighborhood, it's actually drawing and attracting other developers to the North End and to Oakland Avenue, which at one time was one of the greatest commercial corridors in the city of Detroit with a great history.

So we are bringing back the glory days of Oakland Avenue.

We have eliminated lots of blight around in the neighborhood.

And you know, we've been awarded a certificate, but we we deserve it.

Our rents are going to be super low, they're gonna be below the uh neighborhood averages.

And you know, we're here to serve the people, but we want to thank the council for all of your support.

But we are in the last steps of this journey.

Thank you, Miss Dockery.

I appreciate you and your work.

Um, Vice Chair Johnson, do you have any questions?

Uh thank you, Mr.

Chair.

No questions.

Um, but as a member of the Planning and Economic Development Committee last term, um, we did have the opportunity to get a lot of details about this particular project.

Um it had glowing um comments from the community.

I know uh the the council members that were on the planning and economic development committee last year uh was extremely supportive, as were the residents.

And so I'm just really excited to hear that you are at the end of the project.

I would love to come by and see it.

I know it was in an older building that had sat vacant for uh decades.

Um, and so just really really ecstatic that you you all decided to take on uh this building to rehabilitate it, to bring it back uh to life, uh, and to be able to provide the rents at the rate that you are providing them.

So, certainly thank you so very much for doing that for um holding on to a building in the city of Detroit and going through this process.

I know it is not an easy um task to take on these projects to redevelop them.

Uh, and so just want to give you kudos for doing so and and being at the completion stage.

Uh, certainly do appreciate it and hope that you have the ability and opportunities to do others in the area.

Um, I do know when we were on PED last year, we talked about an outside elevator as you know, that was a concern that gets raised in PED quite frequently, just to make sure everyone has access um to the units, especially when we have units at that are at um 60 to 80 percent AMI.

Um and so if you can just maybe rehash that, I know it was costly to be able to do that.

Um, and I'm not sure if Member Waters is coming back to ask her additional questions, but perhaps if you can start there and um hopefully she will will have returned uh to be able to ask the additional questions that she had relative to the project.

But again, just wanted to give you all kudos for taking on the project and being at the final stage.

Thank you, Mr.

Chair.

Thank you, Vice Chair Johnson.

Ms.

Dockery, if you want to respond.

Well, yes, I just like to say uh initially the the elevators have always been under consideration, but because the cost of this project and the overruns, the construction overruns have been really crazy and and expenses and unexpected costs.

And you probably already know that financing for small developers in the city of Detroit is almost non-existent.

And so it was difficult just to raise enough money, especially covering costs to complete this project.

You know, there's money that came from the city to about 10 different projects like ours under the same funding.

We're the only one out of the 10 that finished the project.

So that just tells you how difficult this process is.

We are going to put an elevator on the building, but it'll have tenants in the building, and we're going to use some of the money to continue to add amenities.

And the elevator is definitely at the top of the list.

We're gonna have tenants in there by March.

Awesome.

Congratulations.

Thank you.

Thank you, Mr.

Chair.

Thank you, Vice Chair Johnson.

Ms.

Dockery, I I echo the vice chair's comment.

I appreciate your work on this project and um seeing the rental prices and your commitment to affordable um units and affordable housing.

Uh, in the meantime, as you and and I appreciate your commitment on as you get folks into the building and get uh money to the door, um, having an elevator at the top of your list.

In the meantime, are there plans to uh make sure or give preference or make sure that the uh units on the bottom floor are available to folks with um accessibility needs?

Uh they certainly are, but on the uh first level on the ground level, it's actually four commercial spaces.

Okay, so we'll have commercial tenants, but it they will be handicapped accessible for sure because the businesses we want perfect access for people who are supporting those businesses on the on the ground level.

And also, what's really great about Oakland, because there's nothing over there, everything is free parking.

Okay, we've got plenty of parking in our lots behind the building, but the whole street of Oakland is free, licensors free, candle workers.

There is parking everywhere around the building, and it's all free.

You don't have to pay a dime.

Okay.

Thank you.

Uh no member Wards was gonna join us, but um I know you covered her question.

She had a question on parking and the free parking um and then the accessibility.

Um definitely looking forward to the opening of the building and and um the elevator as well.

And with that, I will move for a uh I would entertain a motion to center formal with a recommendation to approve.

So move.

Without any objections, um, six point item 6.2, the NEZ certificate for 9301 Oakland Avenue will be central formal with a recommendation to approve.

Thank you so much.

Thank you.

Next, we'll move on to item number 6.3, which is another NEZ certificate application for the existing duplex at 1257 Bagley in the Corktown neighborhood enterprise zone area.

Uh, Mr.

Gulak.

Thank you, Mr.

Chair.

Chris Gulag, CPC LPD staff.

And with your permission, I have a brief slideshow on this one as well.

All right, go ahead.

The developer for this one is um Matt Cathy.

Um may be in the Zoom audience raising their hand.

Matt Cassidy.

Yeah, I see him there.

Um, Mr.

Chair.

Um can you see my slides okay?

Yes.

And this one is uh address of one two five seven Bagley.

And this is um shown in the red dot.

It's on the south side of Bagley.

Um in the Corktown area, south of Michigan Avenue, west of the lodge.

Um this zooms in closer.

It's a it's uh it's a big old house.

Uh I think it was built in the 1880s, so it's an older structure.

This shows a view from the street.

And I believe it's it's been divided into two rental units, and the developer is requested an NEZ certificate.

Um so the Cork Down NEZ is one of the older ones.

It was established back in 1994.

Uh the petitioner is Matt Cassidy, who's online today.

Um Mr.

K Cassidy indicates he's a long-term resident and investor in Corktown.

He's working to preserve and rehab the historic structures.

So this one is eligible for that 17 year, uh, I believe 17 year uh pennies certificate because it is a historic area.

As I stated, it's a duplex that was built way back in 1880.

So the petitioner is proposing to spend about 30,000 per unit.

And this includes a variety of things, improvements.

Electrical repairs, siding restoration, bathroom and kitchen improvements.

And then the petitioner did submit um information about the units.

So one is about 1,000 1,082 square feet, two bedrooms.

Per unit.

And the other one is a 12 1,232 square feet, two bedrooms.

The rents here are gonna be about 20 2300 or $2200 per month.

Regarding parking, they do indicate there is a uh one parking space off the rear alley.

Um there's also on street parking and no fees are charged to the renters.

Um similar to the other one, because this is an older building, um, it'd be difficult to make um accessible.

So they have no plans to um to uh make it handicapped accessible at this time.

Um so in our report we confirm it's in the cork down and easy stabs recommended approval and a resolution is submitted for your consideration.

Thank you, Mr.

Chair.

Thank you, Mr.

Gulak.

I will um can we elevate the representative or they're here?

Yes, uh, through the chair, they should be a panelist, they just have to come off mute.

Yes, I'm here.

Matt Cassidy.

Hi, Mr.

Cassidy.

Um, thank you for being here today.

Uh I will open it up for questions on this application.

Uh start with Vice Chair Johnson.

Thank you, Mr.

Chair.

I'm wondering if Mr.

Cassidy can turn his camera on.

Um, the question that I have is how long have you owned the property?

Uh so I purchased the property in June of last year.

Okay.

Um, and and I will say I'm quite impressed with the low amount that you are spending for rehabilitation, especially considering everything that Mr.

Gulag indicated was going to be improved.

Are you doing some of the rehab work yourself?

Yeah, so most of the work is completed at this point.

Um a lot of the work was done might well as a combination of both.

So a lot of work is done, it's been over 70,000 uh of cost, total costs for the two units.

Um the house was not in habitable condition when I first purchased it.

It was vacant for multiple months.

Um even when I bought it, the water bill was over $5,000 from the previous owner not paying the water over a certain amount of time.

So they didn't have tenants for multiple months, and it was in a state of disrepair.

Um for the improvements, it was to make it habitable to fix the a lot.

I guess some of the biggest issues were there was a hole in the fascia of the house.

So it would let in moisture, somewhat moisture, but majority of the issue was letting in rodents and animals.

So that needed to be fixed.

The entire exterior needed had peeling paint and rotted wood on the side.

Uh so it the entire property had an entire new uh siding paint job type of work.

Um then along the inside was updating the house to make it more habitable, make it so that like in terms of they didn't have appliances that were working, so adding new appliances, things like that to get the structure to be um habitable.

Another issue was the side porch to not have any stairs.

Uh so it's just a door leading to a drop-off.

Uh the drop-off is maybe two, three feet high, but um adding railings and stairs for the exterior uh was also uh an item, a line item on the report.

Thank you.

Can you share how you came up with the estimated um rent that will be charged for the units?

Yeah, so that was created looking at comparable sales in the neighborhood uh based on the square footage of the house and the number of bedrooms, number of bathrooms.

Um the most comparable house was also on Bagley Street that I found.

Um they had it listed for 2200.

Um, so right around that is what probably the market rate for these units.

All right, thank you.

And um is how how is the NEZ helping you to reduce the cost of rent?

So I understand that the market rate um is a certain amount.

Um, but the NEZ is really here to help reduce uh the tax bill on the property, and if it is a property that is being rented, at least I would like to see that some of those savings are provided to the tenants.

Can you say to that?

Yeah, 100%.

Well, like the NEZ program is gonna go a long way in making it well, we'll go a long way in making it financially feasible to even renovate this house.

Um because the like the increase in taxes and the added costs make it so it's like you would have to charge way higher rents to even make it financially feasible.

So with this NEZ program, it's making it financially feasible to actually have it even be fixed up to even have renters in the first place.

Um I think like bringing the property back to life in livable livable condition, the NEZ program does a takes it a long way in terms of making this happen and making the neighborhood more you know suitable and not have to deal with a house that's vacant and that's blight and that is letting in rodents and animals and things like that.

Like it's just improving the neighborhood.

So, in terms of having so the add the cost of reduction from the taxes makes it more financially feasible to take on the rehabilitation to fix the house to have it have renters.

Thank you for that.

So I just Googled the address, and I don't know for certain how much you paid for the house, but I'm thinking you paid a considerable amount for the house, which means your property taxes are already high just because of when you purchase the property, how much you purchase the property for.

I'm just wondering, and um I'll ask the assessor's office what the reduction or the savings as a result of this NEZ is for this particular property.

I was just curious because I still think that's not a lot of money to rehab the um the house to make it habitable, especially with how the the areas that you have addressed or that you've articulated um addressing for this particular property.

So uh that is all that I have, but I will have a conversation with the assessor's office to get a better understanding of the the property taxes after they were uncapped when you purchase them in comparison to what they would have been with just the 70,000 dollar uh investment into the property.

But thank you so much.

Thank you, Mr.

Chair.

Thank you, Vice Chair Johnson.

Um member waters.

They respond to my questions when I left.

Oh, so this is the second application.

Yeah, but the um the first application, yes, they did respond to it.

Yes.

So okay, no question.

All right.

Um, I do have a I do have a few questions on the line, and Mr.

Gulag or um Mr.

Cassie, if you have those numbers of what so this will freeze the tax, the property tax rate right now.

Is that correct, Mr.

Gullock?

If this application was to be approved.

So I think it's frozen to the year.

So say he this gentleman, this if council approves it, it has to go to the state tax commission and they have to sign off, and I think it's tax will be frozen to I think the year before the approval, so it'll be 2025.

Okay.

And 2025, yeah.

And do we have the okay?

I know uh Vice Chair Johnson was gonna get those numbers from the assessors.

I I I also share the concern about one is as we're looking at the uh uh understand the the benefit of having this home being occupied and understanding um the need to have um as less amount of vacancies as possible and and houses up to adequate conditions.

But when you when I look at the rent and especially if this is not uh property of being having to have more affordable rates, but when I look at the rent and the money spent on renovations, um those renovations will be covered within uh less than two years.

So I but I know the constraints that we have with uh applications.

I would love to get a view of those numbers if possible, um, before there is final action.

So I actually, if folks will, if there is, I will entertain a motion to bring this back in two weeks after we get the more information on the uh amounts for an assessor's office or on this project.

Motion without any objections, uh 6.3.

We'll bring back 6.3 in two weeks on uh January 28th with the additional information from the assessor office.

It's pretty expensive.

Okay.

Um with that we'll move on to uh 6.4 from council member uh vice chair Johnson a memo rather to to the request of the assessor's office to present the property tax assessment data at a upcoming BFA, budget finance, and all the standard committee session.

Um Vice Chair Johnson.

Thank you, Mr.

Chair.

Um essentially, this is a request to you as the chair um asking for the assessor's office to do the presentation um before this body um that is relative to the property tax assessment data for the I guess current um assessing year.

Uh my understanding is a presentation will be provided to the administration, and I'm just asking if we can put the request in for the assessor to do a presentation before this body as well.

Thank you, Mr.

Chair.

Thank you, Vice Johnson, and apologies.

I believe I was supposed to entertain the motion to discuss line item 6.4.

And without that, and we'll have that.

Okay.

Um any other further discussion on 6.4.

All right.

Uh entertain a motion to approve item 6.4.

Mr.

Chair, I'm thinking we can receive and file this item.

Um, and I will just make sure that my team is working with your team to uh put the request in to the assessor's office and get them on a future agenda.

Absolutely.

Thank you for that.

So uh with that, I'll entertain the motion to receive and ref uh receive and file this request.

So move.

Without any objection, 6.4 will be received and filed.

And that'll move us on to 6.5 for member waters.

Submit a memo request the information on the C of Detroit's long-term financial obligation.

And with that, I'll entertain a motion to discuss line number 6.5.

Oh, all right.

Well, discussion.

Um, Mr.

Chairman, to my knowledge, we don't have the information as yet.

Okay.

All right.

Um, so with that, we will uh entertain a motion to receive and file this uh memo memo.

Motion without any of discussion of discussion, sorry.

Thank you, Mr.

Chair.

Member Waters, did you want to bring it back until you have received the response from the can we ask LPD how long it would take?

How long's how much time do they need?

Mr.

Gordon.

Should have been uh Mr.

Chair, I would say about three weeks.

I wouldn't really haggle on it.

All right, motion to bring back in three weeks.

Thank you, Member Johnson.

Thank you, Vice Chair Johnson.

Thank you, Member Waters.

And with that out uh without any objections, we will bring back line item 6.5 in three weeks.

All right, we'll move on to let me make sure I did not miss anything.

We'll move on to member reports.

And we'll start with Vice Chair Johnson.

Uh thank you, Mr.

Chair.

Just want to remind District 4 and I'll say District 5 residents, um, that we are hosting our first coffee hour of the year.

In District 5 across the street from District 4 at the Commons on Mac and Van Dyck.

The coffee hour is going to take place this Friday at 8 a.m.

Um, and I have invited my colleague member Miller to join us because it is at the boundary of our new district um and technically in district five, just across the street from our new boundary.

Uh so I just anticipate district five residents may show up.

Uh, and so just wanted to invite Member Miller and her team to join us.

Um looking forward to that meeting new residents in the new part of the district, and just looking forward to additional um conversations that will happen with them.

And I'd like to invite my at-large colleagues as well, Member Waters and Pro Tim Young.

Uh, we can have just a nice little fest, a nice little discussion with the residents on the east side, just so they know what's happening within City Council and can raise any questions or concerns that they have.

We also are hosting our monthly community meeting on Monday, January 26th at Hope Community Church, located at 14456 East Jefferson, uh Monday at 530 p.m.

That is January 26th.

We will have a discussion with the Department of Public Works to talk about complete streets and what complete streets is and how the department has been working to implement complete streets, as well as we've invited the assessor's office to join us to address um concerns that we've heard about the uh removal of their principal residence exemption from their property tax assessment uh and their tax bill, which has caused drastic increases in tax bills, and so we want to make sure that the assessor's office addresses those concerns and works with residents to ensure that our residents are being properly assessed and taxed.

Um that concludes my memory ports.

Thank you.

Thank you, Mr.

Chair.

Thank you, Vice Chair Johnson.

Member Waters.

Thank you, uh, Mr.

Chairman.

You know, I gotta tell you so many issues with housing that we're all working on.

And so we're holding a um town hall meeting on on deed fraud protection, and that's gonna be January 31st uh from 4 to 6 p.m.

at the Northwest Activity Center.

Uh we do plan to hold these uh throughout the city, uh, Mr.

Chairman, and so um if people can't make it to the Northwest Activity Center on January 31st, we'll be coming to your neighborhood soon.

But that's January 31st, 4 to 6 p.m.

at the Northwest Activity Center, which is at 1810 Meyer.

Thank you so much.

Thank you, Member Waters.

And just uh a quick report for me.

I know I should have said this in chair remarks.

Um, we will be having our district seven um ceremonial swearing in and visioning uh event as we look to create a vision together with residents on what we want to see in district seven.

That will be uh Wednesday, January 28th at 5:30 at the Cody Rouge uh Community Resource Center at St.

Suzanne's.

So that will be January 28th.

And then uh District 7 has the pleasure of having the first evening council meeting um on February 17th on Tuesday evening.

So as we get that location selected, we will share that with folks.

So welcome everyone to come out to the bus district, district seven.

Uh so we'll we'll have folks there.

Um and with that, uh if there is no further business before the committee, uh this budget finance audit committee stands adjourned.

Thank you.