Detroit — The city's Land Bank Authority, faced with a $5.8 million funding shortfall due to COVID-19, is cutting executive pay, laying off staff and terminating contractors.

The authority said effective Friday about 20% of its full-time workforce will be laid off and half of its contracted personnel will be terminated. In addition, senior executives with annual salaries above $125,000 will see a temporary 5% reduction in pay.

“These cuts are painful. This is not a decision we wanted to make, but we need to protect the viability of the organization to further our mission," Detroit Land Bank Authority Executive Director Saskia Thompson said in a statement. "It’s difficult to have to let anyone go, especially under these circumstances."

The pandemic, the authority noted, has threatened its main revenue sources — a subsidy from the city of Detroit and property sales. The reductions this fiscal quarter and the projections for the new fiscal year beginning July 1 are forcing the sweeping cuts to balance the budget.

The authority first instituted an instant spending freeze on all non-emergency or non-essential purchases. But the projected revenue losses are too great and "make layoffs and contract terminations necessary," the authority said in a Wednesday news release.

The cuts come after Detroit Mayor Mike Duggan this month laid out his own aggressive plan to help offset a more than $348 million hole in the city's budget in the current and next fiscal years.

Under Duggan's plan, the post-bankruptcy city is tapping into its rainy day surplus, doing layoffs of part-time workers and reducing the pay for thousand of others. Executive members of the administration also are taking a voluntary 5% pay reduction.

Duggan, during a virtual town hall this month, said 80% of the deficit can be covered with $151 million in surplus and rainy day funding and $147 million pulled from other sources, including capital improvement funds, blight remediation funds, federal transit funds and cost savings.

The mayor's workforce changes didn't apply to the land bank, Water and Sewerage Department and the city's public lighting and libraries as well as the city council, clerk and auditor and inspector general offices. Those agencies were to determine on their own what cuts may be implemented to curb costs amid revenue losses caused by the virus outbreak.

As part of the city's effort to keep its budget balanced, the land bank expects to see the subsidy from Detroit reduced in the 2020 and 2021 fiscal years, the authority noted.

Salaries and wages of land bank employees are frozen and laid off full-time employees with health insurance coverage through the land bank will retain benefits through April 30.

The authority said Wednesday it will cover the cost of premiums for the continuation of health coverage under COBRA for laid-off full-time employees from May 1 to July 31.

The cuts extend across all levels of the land bank, but are focused most in areas that, while valuable, "do not directly drive revenue or operational support," the authority said.

The land bank further said many Detroiters are losing income due to the hardships caused by the virus. As a result, house sales in the land bank's online Auction and Own It Now programs are down 30% this month. The decline is expected to continue into the next fiscal year.

The authority also projects a 50% decline in sale closings.

The land bank also expects it will close its federally funded demolition work out on Dec. 31, as scheduled, which will trigger planned staff cuts in the demolition department.

The land bank, the release said, is continuing to evaluate other cost-effective ways to retool its operations and programming.

Since 2014, the land bank has sold more than 24,400 properties including 14,300 side lots and 8,900 structures. It has more than 87,600 parcels in its inventory, 76% of which is vacant land.

“We remain committed to our mission of returning blighted and vacant properties to productive use," Thompson added. "We stand ready to help Detroit recover from the COVID-19 crisis."

cferretti@detroitnews.com