Consent and dissent
The short-term fix — and the long-term gorilla in the room
Published: April 18, 2012
There are lots of daunting numbers swirling around Detroit's financial crisis, but none of them is more devastating than this one: 237,493.
That figure represents the decline in the city's population between 2000 and 2010.
Let that sink in for a moment.
At the start of this new century, Detroit had more than 950,000 residents. That number has been reduced by more than 25 percent, according to census numbers released last year. Nearly one-quarter of a million people. Gone. And as they fled, or were driven away, hundreds of millions of tax dollars went with them. Property taxes. Income taxes. Business taxes.
From 2002 to 2011, the city's annual revenues decreased by more than $250 million.
Two weeks ago, with Gov. Rick Snyder wielding the threat of an emergency manager like a loaded pistol, the City Council, on a bitterly contentious 5-4 vote, joined Mayor Dave Bing in signing off on a consent agreement that's intended to help stanch the flow of red ink.
Those city officials who signed off on the deal say they had no real choice. Had they not agreed, then the governor stood ready to pull that trigger and appoint an emergency manager with the power to, among other things, remove elected officials from office and sell off city assets.
However, the law creating the emergency manager position is being challenged on two fronts. A lawsuit filed in state court claims it is unconstitutional. In addition to that, a union-backed drive appears to have collected enough signatures to allow the state's voters a chance to give thumbs up or down on the emergency manager law, known officially as Public Act 4. If the state confirms that the requisite number of signatures have been collected, then the law gets put on hold until voters have their say.
Given that, say opponents of the consent agreement, the city should have held firm and fought to maintain complete sovereignty.
It's a contentious issue with valid points on either side.
On the one hand is the fact that Detroit's leaders have long failed to make the far-reaching and difficult structural changes necessary to ensure the city remains financially solvent. There have been warnings for years that a crisis would occur if action wasn't taken. But, as more than one person has observed, officials in many ways opted to "kick the can down the road," continuing to borrow massive amounts of money to pay the city's bills, and merely forestalling the day of reckoning that has finally come.
Even so, this is supposed to be a democracy. For many in Detroit, having the state usurp the power of duly elected local officials strikes to core principles. The often violent struggles that preceded the Voting Rights Act of 1965 are still a fresh and painful memory for some, and the importance of that cannot be dismissed.
There is, though, an equally important aspect to this whole debate that has been largely absent from the discussion so far.
Though officially called a "Financial Stability Agreement," even the most austere measures being forced by the state are not going to provide Detroit with economic stability as long as the city continues losing people at a rate of more than 20,000 residents a year.
Mayor Dave Bing has repeatedly stated that Detroit's downward spiral can't be reversed by austerity alone; there's no cutting our way out of the problem.
The city is far from alone in facing daunting deficits. Places as far-flung as Harrisburg, Pa., Jefferson County, Ala., and Stockton, Calif., are wrestling with insolvency.
It is even bigger than that. Consider the financial upheaval in European countries like Greece, or even the fierce debate under way over America's national debt and the fallout that continues from the financial meltdown that began in 2007, and it becomes apparent that at the heart of all this are profound questions about capitalism itself.
Although there are aspects that are unique to Detroit, the case can be made that the city that once occupied the cutting edge of modern industrialism is again at the forefront of change, only now it is leading the way in trying to figure out how to survive in a world economy that is awash in debt.
And debt is certainly something Detroit knows about.
How we got here
In April of 2005, as he was leaving his appointed job as Detroit's auditor general, Joe Harris issued a searing indictment of Detroit officials.
In a presentation to the Detroit City Council, Harris pointed out that former Mayor Dennis Archer, in 2000, warned that the city would be overwhelmed by debt within a decade without drastic measures to reduce the size and costs of city government.
Throughout his 10-year term, Harris continued to issue similar warnings, but they went largely unheeded by the council and Mayor Kwame Kilpatrick. A pattern emerged: Budgets with unattainable revenue projections would be submitted and approved. When the resulting deficits would inevitably arise, the city would borrow money to cover the shortfall, creating long-term debt to address immediate spending needs.
As the financial review team appointed by the state reported last month, city officials repeatedly adopted budgets that "knowingly overestimated revenues."
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