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Tom Ivacko

Tom Ivacko

Michigan Cities Suffer
Declining Health (Part 1)

October 28, 2011

There seems to be a growing consensus that healthy Michigan cities are vital to our common welfare as Michiganians. We largely understand now that successful cities and their metropolitan areas are where talent and innovation concentrate, where capital and productivity converge, fueling growth in this new economy.

We — Yoopers and Trolls, Eagles and Broncos, even Spartans and Wolverines — now agree that Michigan cannot prosper again until Detroit does, too. A 2011 EPIC-MRA poll found 72 percent of us (including 67 percent of Republicans and 82 percent of Democrats) share that common view.

Wait, what? We agree?

We do. On a big idea.

But the reality in 2011 is that many of our cities and their local governments are in a period of retrenchment and declining health. This column — the first in a two-part series — focuses on that decline.

Urban challenges abound, from persistent unemployment and homelessness to crime, pollution, inadequate public transit, and so much more. Residents depart, draining the lifeblood and slowing the urban heartbeat, while blight and failing infrastructure deposit scar tissue. Meanwhile, years of falling revenues coupled inversely to rising service demands and costs for service provision have taken their toll, widening the gap between needs and abilities.

This flagging urban health, though due to numerous factors, is worsened by disinvestment. Generally, to get more of a thing — such as healthier, more vibrant cities to boost our general welfare — one invests in it. But collectively we’ve spent a decade disinvesting from our cities, particularly in the form of revenue-sharing cuts from the state.

The Michigan Public Policy Survey (MPPS) at the Gerald R. Ford School of Public Policy has surveyed Michigan’s local government leaders for the last three years, tracking what happens in the wake of disinvestment amid these kinds of problems. No great surprise here: what happens is retrenchment and failing health. But other things happen, too, including adaptation at the local level — the focus of my next column.

The retrenchment shows up in survey findings of ongoing reductions in staffing levels, service levels, and the overall capacity of our cities to meet their local needs. The spring 2011 MPPS found that about two-thirds of city leaders say they are less able to meet their fiscal needs this year compared to last year. And 71 percent predict they’ll be even less able to meet their needs next year. This atrophy is reported by majorities of cities of every size, in every region of Michigan.

In terms of revenue problems, 88 percent of Michigan’s city leaders say they collected less property tax revenue this year compared to last year. Every single one of Michigan’s largest cities report this problem, including 57 percent who say these revenues decreased “greatly.”

Eighty-seven percent also report decreased aid from the state in 2011. Again, this includes huge majorities of cities from the smallest to the largest, in every corner of the state. And, of course, these newly decreased revenue levels are below and beyond previous cuts absorbed in recent years. In fact, the state’s statutory revenue sharing to local governments (mostly cities) has been cut by more than $600 million over the last decade. Six hundred million dollars. Almost 10 straight years of cuts. That’s a long, steep slide. It’s also a lot of potholes not filled and a lot of human service needs not met. It is a lot of disinvestment.

On the cost side, employee health care is a major burden with cost increases affecting over three-quarters of Michigan’s cities this year. And those continuing cost increases are above and beyond earlier increases reported by 78 percent of cities last year, and 80 percent the year before that. Health care costs are eating cities alive, and have been for a while.

Increasing costs for employee pensions are another major source of fiscal stress, reported this year by two-thirds of Michigan’s biggest cities. These rising health care and pension costs may have been manageable when revenues were rising, but today is different. In the zero-sum world of 2011 they come at the price of lost investment opportunities in things such as infrastructure, public services, or economic development, all areas of great need.

And the needs are growing ever greater. About two-thirds of all Michigan city leaders, including three-fourths of those from our biggest cities, say their jurisdictions’ infrastructure needs increased this year. Half say human service needs increased this year, too, again including nearly 75 percent among the state’s largest cities. In the now familiar pattern, this year’s increased needs come on top of similar increases experienced in 2010, which in turn came on top of earlier increases in 2009. Things are piling up.

Of course, our cities’ declining health results not just from macro-economic trends that have decimated their manufacturing jobs and housing markets. Nor just from state policymakers slashing aid to local governments. Flush times in the past certainly led to local government spending decisions that are no longer sustainable today. In particular, generous employee and retiree benefits awarded by local policymakers during better times are now coming back to haunt cities, like a slow-growing disease that strikes abruptly after years of quietly festering.

The bad news is abundant. Our cities are suffering, and we need them to thrive. Thankfully, there is good news, too. Michigan’s cities are also adapting to these challenges in important ways. Next time we’ll look at that hopeful side of the story.

Tom Ivacko is administrator and project manager of the Center for Local, State and Urban Policy at the University of Michigan Gerald R. Ford School of Public Policy.

October 28, 2011 · Filed under Ivacko Tags: , ,

36 responses so far ↓

  • 1 Jackie D // Oct 28, 2011 at 7:27 am

    You believe that city government is the source of city vitality. You believe the State owes failing cities money. You call it “investment.” You are mistaken.

    The city survives and grows when the citizenry have jobs that pay a wage adequate to cover their needs. Workers pay a percentage of their wage as a tax to support the government that provides them with services. Government does not have a first call on people’s money to use as they please. People come first, not the government. Government must get over their ridiculous belief that they should get all the money they want for whatever they want it for.

    Raising taxes is not a solution, it is the foundation of the problem. As working people have had to make do with less, so should government. Raising corporate and business taxes is political smoke intended to deepen class warfare. Businesses treat taxes as a business expense; if the tax expense goes up, the price of goods and services goes up. If there is not adequate demand to cover the higher cost, the business fails or moves to a state with lower taxes.

    What Michigan needs is jobs–not government shovel ready notions or government-picked gotta-be-winners. Michigan needs private sector jobs offered by businesses that want to grow in Michigan. We need business not government tinkering.

    Public transportation is not the basis of job creation.

    Public pensions and public employee health care costs are not the engine that drives higher employment.

    When people are out of work and the housing collapse has erased billions of dollars of personal worth, governments should not be surprised that their revenues are down. Raising taxes and increasing spending will not ease anyone’s financial burdens.

    City governments have been drifting, steering, and running away from providing basic services for decades. Corruption in Detroit city politics makes national news and it is not new news.

    The answer is not to pour tax money into Detroit—unless and until Detroit cleans up Detroit politics, Detroit policing, Detroit schools, and Detroit’s agenda to hide behind political correctness and pretend the problems are in the suburbs and in Lansing.

    Michigan itself, not just “our cities and their local governments,” is failing to thrive.” The only reliable way to increase tax revenues is to increase the number of jobs and thereby increase the number of taxpayers. No one can spend their way to prosperity.

  • 2 Andy // Oct 28, 2011 at 9:36 am

    While I’m glad you’re tackling this subject, it’s important to point out it’s been far more than a decade. Post-1945 federal, state and local policy has been more or less engineered to destroy cities, particularly large industrial cities whose economies revolve around manufacturing like those that predominate in Michigan. Our housing, transportation, planning & zoning, racial, and education policy frameworks have been systematically undermining cities nationwide. It is not just a Michigan problem, either.

    To say that “we’ve spent a decade disinvesting from our cities” ignores the fifty years of history prior to 2000.

  • 3 David Waymire // Oct 28, 2011 at 3:27 pm

    Jackie D: You are wrong.
    You say “Government does not have a first call on people’s money to use as they please. People come first, not the government. ”
    That’s exactly what they say in Somalia. Without a government — without a social structure — prosperity is impossible. The states in the U.S. who have the highest per capita income — who are the most successful, I would argue, since creating minimum wage jobs a la Texas is not all that hard — tend to be those who have a strong government infrastructure. You simply cannot have a prosperous economy today without good schools, roads, cops, fire departments, justice systems — all are precursors to prosperity, not add ons afterwards. Now, you may be able to have all of that vital infrastructure without high taxes, but you certainly cannot have it with no taxes, as you seem to be advocating.

  • 4 Dan Wholihan // Oct 28, 2011 at 7:32 pm

    If cities want to come back it takes four things. The rest is fluff and should be secondary priorities at best. Municipalities need to toss out the Richard Florida fluff playbooks and go back to the meat and potatoes basics first and foremost.

    Cities thrive when families move and stay there. Families stay in cities or suburbs or country areas when those needs are met. Crime. Jobs. Schools. Costs.

    Crime. I’m not living in place where the odds are high that my property will be stolen, and home invaded.

    Jobs. That is stating the obvious.

    Schools. Detroit will not come back unless the school system comes back. Period. Can it come back? Yes, but only if Detroiters want it to come back and if they choose to put the effort into doing so. That starts with taking ownership in their schools.

    Costs. Between property taxes, income taxes, insurance costs, and other factors, the cost of living is higher in Detroit than in suburbs. Why if I was a city person, would I live in Detroit when it is cheaper to live in Redford, or even Grosse Pointe in some circumstances. Some of that is controllable. Get rid of the 62mills and foster a climate of ownership.

    Casinoes and Stadiums are good for visitors. Visitors who drive there, spend some money, and go home. However, downtowns are only one portion of a city.

    Crime, Jobs, Schools, and costs.

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