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Detroit bankruptcy and beyond

Michigan Radio: Being broke makes Detroit get creative

(photo by Lester Graham)

(photo by Lester Graham)

Detroit’s municipal bankruptcy has made the world aware of what Michigan already knew. Detroit is broke. No matter how it turns out, bankruptcy is not going to change things very quickly. Detroit will still be broke. That’s going to force the city to get creative.

Let’s get one thing out of the way: the state of Michigan is not going to bail out Detroit.

And the state of Michigan is not going fully restore revenue sharing from the sales tax with cities such as Detroit.

“The state was taking money that was supposed to go to local units of governments and they were using that to fill their own budget holes. And so, we went from revenue sharing to revenue stealing, essentially,” explained Samantha Harkins, Director of State Affairs with the Michigan Municipal League.

Detroit experienced a one-two punch to its state revenue sharing payments. First, like all cities, the legislature cut it. Second, part of revenue sharing is based on population and Detroit’s been losing people like crazy. About a quarter of its population has left in the last ten years.

(The state also reneged on a promise to Detroit as explained in an article in the online magazine Bridge, Handshake Deal with State Haunts Detroit, written by David Ashenfelter last year.)

The state did increase the local governments’ share a little last year. The governor has suggested a further increase. But, it will be a long time before the state shares as much as it has in the past — if it ever does.

So, local governments are forced to cut budgets and try to find new ways to serve their residents.

“We’re going to have to be more creative. And I think that’s really the bigger answer. Obviously we need more money and we need to be funding the revenue sharing formula at a more significant way. But, in addition to that, I think we’re going to need to be creative about how services are being provided,” Harkins said.

A Detroit observer agrees.

“Well, I think we definitely need to be more creative in how we run and deliver government services,” said Detroit Free Press reporter John Gallagher.

“In Detroit we’re there by absolute necessity because the city is so broken, so broke financially, so dysfunctional, so understaffed that it can’t deliver the services. So, we have been trying and succeeding, I think, in coming up with a lot of innovative solutions,” Gallagher added.

Those innovative solutions include all kinds of public-private partnerships and authorities that manage city assets instead of the city trying to do it.

“They include Eastern Market, Cobo Center, the River Walk and Campus Martius were built that way, Detroit Workforce Development Agency, public lighting, the Historical Society, and really on and on. And we’re talking about doing some more of this with the water authority, for example,” Gallagher said.

We visited the first one on Gallagher’s list: Eastern Market. We wanted to see if letting someone else manage a city asset works. In 2006 the Eastern Market Corporation took over the operation.

Evelyn Tolson has been buying food at the farmers market for years. She says a renovation of the buildings since the change in management helped a lot.

“Well, there was a time when it was really, really raggedy and it’s been much nicer since. I don’t know who took over, but I can tell the difference,” she said while buying apples.

And most of the vendors I talked with agree. Don Everett with Appleview Orchard has been selling fruit at the Eastern Market for 47 years. He says getting the city out of day-to-day management made things better.

“Oh, there’s a world of difference. Five years ago or so I figured this market about now might even not exist. It was going downhill, operated terrible. There’s a big difference.”

And there are good reviews of some of the other Detroit City assets that are now being run by non-profits or in public-private partnerships.

Detroit citizens sometimes worry the best of Detroit is being given away to others. That was a loud complaint when Detroit’s Belle Isle Park was signed over to the State of Michigan in a 30-year lease agreement.

But, both the new mayor, Mike Duggan, and the state-appointed emergency manager, Kevyn Orr, are thinking about doing even more deals like these. Bill Nowling is the emergency manager’s spokesman.

“We should always ask, ‘Is there a better way to do it that provides better service.’ But, sometimes the answer is, ‘No. We’re doing it the best way possible by keeping it inside city government,’” Nowling said.

The free-market, conservative think tank Mackinac Center for Public Policy is urging the city of Detroit to privatize as much as possible. But, Nowling says certain services will always be city-run.

“Certainly those essential services, police, fire services, EMS, trash – even though we’re outsourcing that to private contractors – that’s still a service that the city must provide. It has to mow the lawns in its parks, has to keep the streets clean. It has to respond to crime when citizens call. So, we’re prioritizing those things that really kind of have greatest impact on quality of life,” said Nowling.

As broke as the city is, even some of those jobs are not going to get done.

In his State of the City address, Mayor Mike Duggan asked churches and other groups to adopt some of the city parks, cutting the grass and picking up the trash at the parks.

If the state gives back a little more of that revenue sharing that it took from the cities, Detroit might be able to start taking care of its own parks and the other city services its citizens need.

Eric Scorsone is an economist at Michigan State University. He says that’s not going to happen soon.

“Revenue sharing, statutory revenue sharing, the EVIP (incentive) program now, is going to be very dependent upon what the legislature is willing to do on a year-by-year basis. And, given that we don’t know where the state budget will go, I mean, if it continues to kind of creep up at this point, then I would expect the moneys to go up a bit. But, they’re not going to recover from where they were, say, ten years ago for quite a while yet,” Scorsone predicted.

Scorsone says not only should Detroit not bank on big increases in revenue sharing from the state, but it should not count on its own tax revenue increasing any time soon, if at all. Property taxes, income taxes, casino revenues all will likely be stagnant.

So, the city needs to find other ways of being creative. It could privatize more services. Detroit could collaborate with the surrounding counties and cities. And there could be more public-private deals made as bankruptcy forces the city to do business differently.

Support for the Detroit Journalism Cooperative on Michigan Radio comes from the John S. and James L. Knight Foundation, Renaissance Journalism’s Michigan Reporting Initiative, and the Ford Foundation.

2 comments from Bridge readers.Add mine!

  1. Duane

    The innovation Detroit needs along with State and other government organizations is accountability.

    The Eastern Market sounds like the private administrater is out if the vendors or the public don’t like what is being done there. That sounds like accountability.

    The privatization of other services are primarily a drive to establish accountability. The City and others need to innovate by creating accountability in what they do.

    accountability isestablishing specfiic expectations with perfomrance measusres that anyone can understand and that are reported regularly. If the expectations aren’t met the service/program are changed or are end by being transferred to others that are succeeding or privatized.

    1. Rich

      Accountability is a huge part of what is needed, but some of the workers must also realize that they are there to provide a service, not just to collect a paycheck. The “I’ll get back to you when I feel like it” has to end.

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