Monday, December 12, 2011

Detroit's Long, Deep Revenue Decline

Stephen Henderson, editorial page editor at the Detroit Free Press, posted a series of charts on his blog this morning to illustrate the long, deep revenue decline that the City of Detroit has experienced over the past several years. The fact that the City has experienced such a long and deep decline in revenue isn't a secret.

Each step in our decline - as well as the corresponding cuts in services and the various "one-time fixes - have been documented extensively in the new media. Regardless, it is nice to see someone in the mainstream media looking at the complete picture instead of simply focusing on whatever the current crisis is.

The one area where I disagree with Mr. Henderson is his assertion that this steady decline in revenue is that something that "neither Detroit Mayor Dave Bing, city council, an emergency manager or even a bankruptcy can really address." This part is simply wrong. Each of those individuals could address the City's persistent decline in revenue. They simply lack the political will to do so.

It's clearly evident that there is a long track record of declining tax revenue in Detroit as more and more residents and businesses flee the city. One has to ask: why is Detroit's population continuing to decline when every other city is seeing population growth?

It's not just that more than half of Detroit's population has fled the city over the past 50 years, why does Detroit's population continue to decline?

Quite frankly, as I looks at the continuing exodus of businesses and residents from Detroit, I cannot help but recall the works of Professor Charles Tiebot.

For those who aren't familiar with Professor Tiebot, he was an economist and geographer (educated at the University of Michigan, incidentally) who spent most of his career looking at why people chose to live where they do. He eventually introduced what has been come to be known as the Tiebot model, which holds that people will generally choose to live where they find the mix of tax rates and public services that is preferable to them. More over, they will leave communities that don't offer their preferred mix and establish residences where they do find such things.

The Tiebot model is more commonly known as "voting with one's feet."

As I've pointed out several time in this blog, residents of Detroit pay approximately double the national average in taxes. In return for this, we receive some of the worst public services in the nation.
  • The response time for the Detroit Police Department is the worst in the nation, in spite of the fact that the department has the largest budget in the nation on a per resident basis;
  • The Detroit Police Department also has one of the worst rates in the nation for closing cases, again in spite of the fact that it has one of the largest budgets in the nation;
  • Mass transit is problematic at best;
  • Libraries and parks - which are consistently ranked as two of the most important amenities for attracting residents - have been cut repeatedly and almost closed entirely in recent years;
  • Street lights, which make residents and shoppers alike feel safer, have long-standing problems;
  • Road maintenance is below par.
The list of challenges simply goes on and on from there.

Of course, there are still some advantages to living in Detroit. However, in the opinion of ever-increasing number of people, the advantages to living in Detroit are not enough to compensate them for the numerous drawbacks. Therefore, Detroit has - and will likely continue to have - a continuing decline in its revenue.

The current financial crisis for the City of Detroit will likely be resolved somehow. However, resolving this one will only allow us to stay alive long enough to face the next one. At some point in time, either the City of Detroit or the State of Michigan, will have to deal with the issue of why people continue to flee Detroit in search of a better life elsewhere.

I have made a series of recommendations on how the City of Detroit could change things.

Others have made recommendations.

The most common response to such recommendations, unfortunately, is to either ignore them or to attack those who make them. If the political leadership in Detroit (and I use the term "leadership" very loosely here) were inclined to make changes, we could begin to address the root causes for residents and businesses fleeing Detroit.

It's unfortunate that Mayor Bing has chosen to ignore those who could help him solve this problem. Governor Snyder seems to understand that he will be dragged into this matter in one way or another. However, it's still not clear whether he will address the issue of high-taxes and almost non-existent services or if he'll simply be content with resolving the latest crisis.

That question remains unresolved. However, the one thing that should not be disputed is that we as a community can solve the problem of Detroit's long-term decline in tax revenue. We simply need the political will to do so.


Robert Linn said...

Great post, Frank! I love your reference to the Tiebut model.

Frank Nemecek said...

I figured you would appreciate that one.