News Story

Nine Years After Promising, Detroit City Officials May Get Rational Payroll System

City now says completion expected by end of 2020

When the city of Detroit went through bankruptcy in 2013, a review found that it cost the city $62 to process every payroll check, which was, in the words of the review, “almost 3.5 times more costly than other public sector organizations.” Detroit had 149 full-time employees involved in payroll at that time, which was the primary reason cited for the bloated costs, according to the review.

Two years before that, city officials promised to create a centralized payroll system as part of the Detroit Operational Reform Program, a financing deal they made with the state. In that deal, the state covered the city’s deficit spending. And now, nine years after that, payroll processing for one-third of Detroit employees has yet to be turned over to the new cloud-based platform.

Michigan Capitol Confidential has reported on some of the city of Detroit’s payroll problems in the past. For example, the city had issues properly documenting the amount of overtime its police officers were working in 2015. At that time, Detroit Sgt. Michael Woody called the department’s payroll system an antiquated one.

In 2016 and 2017, an employee of the city’s audit and payroll department named Masharn Franklin embezzled $265,573. City officials said in March 2019 that switching from a manual garnishment process to a fully automated system would prevent such occurrences from happening again.

When the city government filed for Chapter 9 reorganization in federal bankruptcy court on July 18, 2013, its bankruptcy consent agreement addressed the payroll issues. It stated that the city’s payroll “uses multiple, non-integrated payroll systems. A majority of the City’s employees are on an archaic payroll system that has limited reporting capabilities and no way to clearly track, monitor or report expenditures by category.”

In 2020, the city is still grappling with the issue.

“During bankruptcy, the City attempted to implement an [automatic data processing] payroll system,” said Detroit Human Resources Director Denise Starr. “That attempt was halted when, it was discovered, that ADP could not handle the complexities of the City’s 45+ union contracts, and the way in which employees needed to be paid.”

The city’s finance, human resources and information technology departments began documenting the hundreds of provisions in those union contracts during the last part of 2015.

“The legacy systems (PDS and Oracle) did not have documentation that could be converted and the main legacy system (PDS) was over 40 years old,” Starr said. “Once the pay requirements were documented, the system needed to be configured, tested and rolled out to the employees.”

Training for management, supervisors, and workers was also a large part of the rollout process. The last major portion of the city workforce to undergo the rollout is the Detroit Police Department, with configuration, testing and training to be completed by the end of this year.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.