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The Shawnee News-Star
  • Cards N Time: Detroit, sequel

  • Earlier columns described Detroit before and after its fall with references to how the city serves as a portent of our nation’s likely future. Here we look at the aftermath of the city — leaving its application and implication for our nation up to the reader.
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  • Earlier columns described Detroit before and after its fall with references to how the city serves as a portent of our nation’s likely future. Here we look at the aftermath of the city — leaving its application and implication for our nation up to the reader.
     
    Elected Officials
     
    Former Mayor Kwame M. Kilpatrick was convicted March 11 of 24 of 30 numerous charges of corruption including racketeering, fraud, and extortion following a five-month trial. He was mayor 2002-2008, resigning when emails were publicized implicating him in an affair with his female chief of staff. He was elected at 31 — the youngest ever who raised the hopes of residents of a new day for Detroit. It turned out that rather than being the first of a new day for Detroit government, he was the last of a string of inept, often corrupt regimes.
    Current Mayor, Democrat Dave Bing (2008-), is an NBA Hall of Famer who founded and ran a successful local steel company, has done well but is hamstrung in his efforts to resurrect the city by uncontrollable demographics, economic trends, entrenched unions, and overwhelming legacy costs.
     
    Accounting and Accountability
     
    Because states are sovereign entities under the U.S. Constitution, the Federal government cannot intervene in municipal affairs to bring about fiscal integrity. Fifteen states have laws establishing methods of detecting and managing fiscal stress at the local level, and seven of those states, including Michigan, can assume fiscal management of local government using a financial control board and/or manager. [1]
     
    State Takeover
     
    In 2012, Republican Governor Rick Snyder ordered step one of state intervention, which is an outside review of Detroit’s finances. Step two was a legal agreement that laid out measures to save money. March 14 veteran municipal bankruptcy lawyer Kevyn Orr was appointed emergency manager to oversee Detroit’s fiscal operations. As such, he may do just about whatever he needs to do to correct the situation — including filing what would be the largest municipal bankruptcy in U.S. history.
     
    Pontiac, 30 miles north, has been under state control since 2009. Within two months they hope their annual budget will be almost halved and long-term debt under control. They have done this by privatizing parking meters, merging police and fire services with nearby townships, and outsourcing miscellaneous offices. After the Detroit Lions moved to their new Ford Field in Detroit, Pontiac sold its $22 million Silverdome for only $583,000. Since 1988, Michigan has assigned 21 emergency managers who can act in opposition to partisan and vested interests. Observers consider the job like a “double root-canal.” [2]
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    Roots of Problem
     
    When any political dynasty gains a long-term franchise in government at any level, corruption ensues. Political parties are not in our constitution and were intensely disliked by Founding Fathers such as Washington and Jefferson. They are, however, necessary to empower policy preferences and oppose incumbents. The first temptation facing Jesus was to accept the devil’s offer of running world governments — implying the devil owned them! (This is a good example of the Bible’s veracity.) Those who govern need opposition.
     
    We are the second problem. We want more from government than we are willing to either admit or pay for. So, one party favors what we get and the other what we pay for, and they settle their differences by shifting the resulting deficit to their descendents. Cutting expenses to generate surpluses can never generate surpluses adequate to retire $14 billion in long-term debt. Their impasse provides no benefit except an excuse for all involved.
     
    Detroit’s Situation
     
    More than half the citizens have moved out and those that remain are the least able to pay. Property numbers and values have plummeted. Fewer and fewer owe more and more, and only an estimated one-half pay their property taxes. They have reached their legal limit of indebtedness. They cannot pay their current budget leaving nothing to pay on their long-term debt. Reducing costs, the so-called “austerity” model some European countries are enduring, is mathematically impossible. Growth through lowering taxes to attract business won’t attract businesses who would then be assessed their share of the city’s long-term debt.
     
    The Outlook
     
    The fact that the new boss is a veteran bankruptcy attorney telegraphs Governor Rick Snyder’s intentions to ultimately have the city declare bankruptcy leaving bondholders to take the hit. (This is not an option the U.S. government has.)
     
    Here are thoughts about reviving Detroit. First, consolidate all the governments of southeastern Michigan into a single regional government backed by state bonding authority. Detroit has good water, transportation, access to Canada, surplus human, health, education, and manufacturing assets that can’t be moved out, so remove the boundaries for others to come in. Detroit needs municipal emancipation. Two, create a regional public transportation system. Three, give Detroit favored tax treatment that would attract industry. Fourth, research the possible use of abandoned salt mines under Detroit for space-age industries needing such a rarified, protected environment. (If you think this is nuts, check out Hutchison, Kan.)
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    Recommendation
     
    Re-read the above substituting “USA” for “Detroit” and “city.”
     
    [1] Coe, Charles, ‘Preventing Local Gov’t. Fiscal Crises,” PAR.,68:4,[2008, p762].
     
    [2] NYT, March 12, 14, 15, 2013.
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