The 3.0 agenda: Detroit

I want to apply the Friedman and Mandelbaum standard I wrote about in my last post to Detroit. They insightfully  assert that “the purpose of the exercise: It is not simply to reduce the deficit but to insure prosperity. Solvency is vital, but it is not enough.” Insuring prosperity, not balancing the budget should be the outcome we want from what will have to be a restart of Detroit.

As we have written frequently, Governor Snyder deserves enormous credit for his courage in asserting – we believe correctly –  that Michigan cannot succeed unless Detroit succeeds. The evidence from across the country is clear: with few exceptions prosperous states are anchored by even more prosperous big metropolitan areas anchored by a vibrant central city. (In the Great Lakes think Chicago and Minneapolis.) So it is not just Detroit’s prosperity that is at stake, it is all of ours.

The path we are headed on now is one where balancing the city government’s budget is the goal. What I call managing decline. Not smart! Rather the goal should be growing the city. Does the city need a long-term structurally balanced budget? Absolutely. The city’s finances have been mismanaged for decades. The fact that elected officials in Lansing – from both parties – have not done anything about it before has been irresponsible. Insisting that it be fixed now is without question the right course.

But just getting to a structurally balanced budget should not be the end game. What is needed is a structurally balanced budget that allows the city to provide the necessary quality services so the city can retain and attract residents and businesses. And the reality is the city no longer has the tax base to do that even with a structurally balanced budget that substantially lowers the cost of delivering services. The notion that Detroit can provide the quantity and quality of public services needed to attract new residents and businesses simply by lowering labor and retiree costs, contracting out more services and eliminating departments and functions – all of which needs to be done – is a fantasy.

So is the widespread belief that this is all the fault of irresponsible and/or corrupt city officials. Certainly that is a big part of the problem. But so is the state’s disinvestment in the city over the past decade. The Michigan Municipal League estimates state revenue sharing cuts cost Detroit more than $450 million over the past decade. The League writes: “People often assume that these state cuts are due to declining state revenue. But the state’s sales tax revenue, the funding source of revenue sharing, has only dropped by 4 percent from 2001 through 2010. By comparison, revenue sharing payments to Detroit have fallen by 28 percent.”

What is needed is both a structurally balanced budget and strategic regional and state investments in the revitalization of  Detroit. That means some combination of a resumption of state revenue sharing to provide quality basic services starting with public safety broadly defined and strategic investments in critical amenities like transit – including light rail on Woodward, ideally into Oakland County – parks/outdoor recreation and the arts.

And the fact that the city government cannot be trusted to deliver those services with quality cannot be an excuse. Fixing that needs to be part of the agenda. Either by building the city’s capacity to deliver quality services or by providing the services through other public bodies. Across the country essential services are delivered through a variety of  special purpose districts and authorities. The same can and should be done in Detroit. The Milliken Administration put state police on Detroit’s freeways when the city could not ensure public safety. The Snyder Administration created a brand new state wide school district without legislation. That same creativity can and should be used to insure that those who live in Detroit  get the kind of services that are essential to retaining and attracting residents and businesses.

It is the combination of lowering labor and retiree costs, contracting out more services and eliminating departments and functions that result in a structurally balanced budget combined with strategic state and regional investments and new and or improved service delivery systems that will create a vibrant Detroit. Which will then be an essential asset, rather than huge liability, in recreating a prosperous city, region and state.

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