How broke is Detroit? A few charts illustrate...

[Novine]

""Good grief. I've written no fewer than a dozen columns this year calling out the mayor for his shortcomings. Not least of which was a very big take out on failings in the police department. "

Unfortunately, it's been too late in the process to have any impact. Fairness dictated giving Bing a year to get a handle on City government and to allow his people to assess how bad the problems were and then start making changes. But it was clear after the first year that Bing and Co. wasn't making progress and he wasn't addressing the financial problems that are going to take down the city. That's when the institutions and power brokers in this town should have turned up the heat and started making noise about making things happen. It's like everyone knew the guy wasn't cut out for the job but no one wanted to say so.

It's clear at this point that Bing simply doesn't have what it takes to save the city. Bankruptcy or an EFM is all but assured of happening at this point. Maybe no one could have saved the city but with Bing in charge, the city doesn't even have a fighting chance. It's too bad that you and the Freep bought into the delusion that Bing the Businessman would save the city. Would Ken Cockrel Jr. been a better choice? Who can say. But at least he wouldn't have had the gloss of the businessman savior attached to him. I doubt the powers-that-be would have given him the kind of pass that they gave and give Bing. He likely would have been forced to step up sooner instead of dithering away 2+ years as Bing has done. It won't matter soon. Detroit's future isn't going to be decided by Dave Bing or the Detroit Free Press. It will be coldly dissected by an EFM or Bankruptcy Judge who may "solve" the city's fiscal problems but will leave a hollow shell of a government with no future worth considering.

[sehender1]

""Good grief. I've written no fewer than a dozen columns this year calling out the mayor for his shortcomings. Not least of which was a very big take out on failings in the police department. "

Unfortunately, it's been too late in the process to have any impact. Fairness dictated giving Bing a year to get a handle on City government and to allow his people to assess how bad the problems were and then start making changes. But it was clear after the first year that Bing and Co. wasn't making progress and he wasn't addressing the financial problems that are going to take down the city. That's when the institutions and power brokers in this town should have turned up the heat and started making noise about making things happen. It's like everyone knew the guy wasn't cut out for the job but no one wanted to say so.

It's clear at this point that Bing simply doesn't have what it takes to save the city. Bankruptcy or an EFM is all but assured of happening at this point. Maybe no one could have saved the city but with Bing in charge, the city doesn't even have a fighting chance. It's too bad that you and the Freep bought into the delusion that Bing the Businessman would save the city. Would Ken Cockrel Jr. been a better choice? Who can say. But at least he wouldn't have had the gloss of the businessman savior attached to him. I doubt the powers-that-be would have given him the kind of pass that they gave and give Bing. He likely would have been forced to step up sooner instead of dithering away 2+ years as Bing has done. It won't matter soon. Detroit's future isn't going to be decided by Dave Bing or the Detroit Free Press. It will be coldly dissected by an EFM or Bankruptcy Judge who may "solve" the city's fiscal problems but will leave a hollow shell of a government with no future worth considering.

Monday morning quarterbacking. Sorry, but that's what you're indulging.

No one knew the size or scope of the problems two years ago; and early on, Bing made some important moves to deal with some of the city's most significant issues [[at the time) but then he pulled the plug on them. We criticized him for that, and have kept up the drum beat consistently.
I appreciate your faith in our power at the paper, but seriously, we don't run the show. ;-)

I agree that now an EFM will decide what happens in the short term. At the Freep, we will continue to argue for changes that make the city work better for those of us who live here, and the entire region. OUr record on that is pretty damned strong. An EFM might even be more receptive to some of the ideas we've floated. [[like, say, my income tax idea.. right, Novine??? ;-))

I totally appreciate your comments and willingness to debate and criticize. Frankly, I wish there were more of this kind of discussion around town..

[Wesley Mouch]

...like, say, my income tax idea.. ...

reference please

[Novine]

"Monday morning quarterbacking. Sorry, but that's what you're indulging. "

I wasn't going to say "I told you so" but since you made the claim, I'll let my words say the rest.

April-20-09 01:06 AM

#19

Novine

Join DateMar 2009Posts1,250

The Free Press blew it again. They've bought into the myth of the savior businessman who will swoop into City Hall and set everything right. Flint gave this a try with Don Williamson who made the same kind of promises.

http://en.wikipedia.org/wiki/Don_Williamson

I get tired of the cry of "government should be run like a business". The only thing that tells me is that the person making the statement doesn't have a clue about how either government or business works. The Free Press bought Bing's claim that his "connections" will bring in private investors to invest in Detroit. What is Dave Bing going to be able to offer them that no other Mayor in Detroit could? If private investors perceive Detroit as a bad place to invest today, that's not going to change under Dave Bing unless his plan includes generous helpings of "friends and family" sweetheart deals and preferences.

....

The rest is here.
http://www.detroityes.com/mb/showthread.php?482-Free-Press-Endorses-Bing&p=9705#post9705

[sehender1]

reference please

here: http://www.freep.com/article/2011010...ing-tax-scheme

[sehender1]

"Monday morning quarterbacking. Sorry, but that's what you're indulging. "

I wasn't going to say "I told you so" but since you made the claim, I'll let my words say the rest.

April-20-09 01:06 AM

#19

Novine

Join DateMar 2009Posts1,250

The Free Press blew it again. They've bought into the myth of the savior businessman who will swoop into City Hall and set everything right. Flint gave this a try with Don Williamson who made the same kind of promises.

http://en.wikipedia.org/wiki/Don_Williamson

I get tired of the cry of "government should be run like a business". The only thing that tells me is that the person making the statement doesn't have a clue about how either government or business works. The Free Press bought Bing's claim that his "connections" will bring in private investors to invest in Detroit. What is Dave Bing going to be able to offer them that no other Mayor in Detroit could? If private investors perceive Detroit as a bad place to invest today, that's not going to change under Dave Bing unless his plan includes generous helpings of "friends and family" sweetheart deals and preferences.

....

The rest is here.
http://www.detroityes.com/mb/showthread.php?482-Free-Press-Endorses-Bing&p=9705#post9705

For starters, much of what we anticipated Bing would do has happened. PRivate investment has taken off in the city's core; far more than when Kilpatrick was here..
But your disdain for Bing was based on your philosophical opposition to him... our obligation is always to pick the best candidate OF THE CHOICES OFFERED...

Again, if you want to make the case for someone else, make it. I'm all ears.
But given the same set of choices over again, I'd make the same call.
Bing has been disappointing, but no one else in the race would have been better; that's still my opinion..

[Novine]

You want to give Dave Bing credit for that private investment? Based on what?

[sehender1]

You want to give Dave Bing credit for that private investment? Based on what?

Based on what the investors themselves say.
Climate has been much better, more organized, etc. Kilpatrick was no slouch when it came to private investment, but it has really caught fire with Bing..

Listen: I'm not defending the job Bing has done managing city government or, more importantly, reforming it. We're in real trouble, and much of the recent responsibility is his. [[he didn't create any of the problems, though; they all date back several decades.)
I'm disappointed. And it definitely makes me resent some of the effort we put into endorsing him and supporting his administration.

But indulging extreme characterizations is dangerous. No one is a good or bad mayor, across the board. They're all wonderful and flawed and complex and difficult to figure out.
Bing has done some very important things for a city that was reeling after Kilpatrick's craziness. He is a decent and hard-working man. Private investment has taken off, and is now operating largely independent of the city's frustrating dysfunctions.. And he remains the best choice we had in 2009.

I try pretty consistently to present things in that kind of context..

[Novine]

Quoting from that column:


"The chamber's work should be the catalyst for a discussion of how to remove the city's tax barriers to residency and economic activity. It's a complicated issue, but one whose resolution is crucial, and achievable."


But you never explain how that's going to be achieved. As I've said over and over again, the problem with Detroit is that it has incredibly low property values coupled with a population who has an average income far below what you find in the suburbs. For example, the median income in Detroit is around $25,000 while in Novi, it's over $70,000. At the same time, Detroit requires services at levels that far exceed what any suburban community needs. Try policing the streets of Detroit with the number of cops that suburban communities put on the street at night and see how that works. What magical fairy wand is going to be waved over the city that turns almost worthless property into gold or low income workers into high-income professionals? Or turns a population that desperately needs help in all kinds of ways into people who don't require the government to assist with the most basic of daily services? No amount of restructuring of city government is going to change those basic facts of life in Detroit.


Can city government be streamlined so it works with the citizens and businesses and not against them? Absolutely. Can the cost of government be reduced so that taxpayers see a reduction in their burden? No doubt although Detroit has so many holes that need to be plugged that dollars saved in one area are probably badly needed elsewhere. But the idea that Detroit can achieve massive savings in city government reminds me of the attacks on "waste, fraud and abuse" you hear from Lansing and Washington DC. It's the smokescreen of people who don't really understand the costs related to providing government services or the needs of the people in their community. When you're relying on ideas from Newt Gingrich, you've left the land of serious discussion and have moved into the realm of gimmickry and sound bites.


There was a recent thread where someone asked for cities similar in size in area and population to Detroit. There are a handful out there. I picked Denver as one example. I'll copy here what I posted there. What you can see from Denver's numbers, which is by all accounts a healthy urban city which is well-run, is that it's expensive to run a city the size of Detroit/Denver and with Detroit/Denver's population. It requires a lot of people to provide city services. It requires a lot of money to pay those people and to pay for everything that goes with running a city. As you can see, Denver doesn't have a lot fewer people than Detroit and it's not a lot less expensive. Denver also has a median income of around $45,000. The only big differences in numbers is between the two cities water and sewer systems with Detroit's being a lot larger, which makes Detroit's bottom line numbers proportionally larger.


I don't have the answer to how to address Detroit's tax structure. But I think your focus on it is misplaced. Detroit needs most, if not all, of the dollars that it takes in today. Could those be spent better? Yes but I don't believe that even an efficiently run Detroit could get by with a lot less.



Here's a list of US cities by land area:


http://en.wikipedia.org/wiki/List_of...cities_by_area


It's difficult to do comparisons because cities don't always provide the same kinds of services, don't budget for it the same way and don't have the same tax structure.


Detroit:
Population: 717,000
Area: 139 sq. miles
General Fund employees: 7,800
Total employees: 12,600
General Fund budget: $1.6 billion
Total budget: $3.1 billion


http://www.detroitmi.gov/Portals/0/d...011-12.b_1.pdf


For comparison:


Denver, Colorado
Population: 600,000
Area: 153 sq, miles
General Fund employees: 7,100
Total employees: 10,300
General Fund budget: $945 million
Total budget: $1.4 billion


http://www.denvergov.org/Portals/9/d...%20Summary.pdf


One area where you see a big difference is between the water and sewer service. Denver's system services 1.3 million people. Detroit's serves 4 million people. That accounts for some of the difference between the budgets of the two cities.

[corktownyuppie]

The analysis below is good. The one thing it doesn't answer for me is "How much of the budget is spent on present-day services vs. legacy costs such as pensions and health care?"

Two cities can both have $3B budgets. But if one of them spending $2B on pensions and retiree health care costs, then there's obviously significantly fewer funds going to providing services in the here and now. I'm not advocating that we pull pensions away, I'm just saying that if we're going to compare cities, it would help if we could have that data.

And while I agree, in general, that City of Detroit will likely need more police per capita than, say, Lake Orion...I still very much believe that the need can be lessened somewhat by population density. It's gotta be much easier to patrol one apartment building for 40 people, rather than 8 blocks of 10 houses that are each 50% vacant.

http://en.wikipedia.org/wiki/List_of...cities_by_area


It's difficult to do comparisons because cities don't always provide the same kinds of services, don't budget for it the same way and don't have the same tax structure.


Detroit:
Population: 717,000
Area: 139 sq. miles
General Fund employees: 7,800
Total employees: 12,600
General Fund budget: $1.6 billion
Total budget: $3.1 billion


http://www.detroitmi.gov/Portals/0/d...011-12.b_1.pdf


For comparison:


Denver, Colorado
Population: 600,000
Area: 153 sq, miles
General Fund employees: 7,100
Total employees: 10,300
General Fund budget: $945 million
Total budget: $1.4 billion


http://www.denvergov.org/Portals/9/d... Summary.pdf


One area where you see a big difference is between the water and sewer service. Denver's system services 1.3 million people. Detroit's serves 4 million people. That accounts for some of the difference between the budgets of the two cities.

[mwilbert]

The analysis below is good. The one thing it doesn't answer for me is "How much of the budget is spent on present-day services vs. legacy costs such as pensions and health care?"

For Novine's purposes, that isn't important unless you think that Denver's legacy costs are higher than Detroit's, as he is merely pointing out that a city the size of Detroit is going to need a pretty good chunk of revenue, even if it were run more efficiently, as is claimed for Denver.

What I would like to see is an estimate of what a credible source [[preferably more than one) thinks is the budget that would be required to provide a minimum acceptable level of services in the city, post-EFM slash-and-burn. From there, we could look at whether revenue available to the city is even sufficient to manage that. If not, the next step would be to see if it were possible post-bankruptcy. If there would still not be enough money, the next step would be to look at actual shrinkage to an urban core--not the still-nebulous Detroit Works, but actual deannexation of large parts of the city. If a city can't provide proper services to its people, it shouldn't exist, but I'm reasonably sure a sufficiently tightly defined area could be viable, once the legacy costs were shed.

[corktownyuppie]

If there would still not be enough money, the next step would be to look at actual shrinkage to an urban core--not the still-nebulous Detroit Works, but actual deannexation of large parts of the city. If a city can't provide proper services to its people, it shouldn't exist, but I'm reasonably sure a sufficiently tightly defined area could be viable, once the legacy costs were shed.

I agree with this. Though I think it's worth investigation as to whether Detroit legacy costs are higher or lower than Denver's. Truth is that I don't know. But I think it's important in examining that in Novine's numbers simply because presenting the budget numbers simply as a general fund summary makes it hard to compare two municipalities.

With Detroit at BB-rated debt and Denver at AA+ debt, at the very minimum you're gonna have vastly different amounts of each city's budget just being used to pay down interest on the debt.

[beachboy]

Also, in respect to the drop in real estate values, this can be mostly attributed to a national decline in home values due to the mortgage market crash. Average home prices nationwide fell by almost 34% from 2006 to 2009. Factor in the Michigan economy and the situation the city is in, and a more dramatic decline is expected. However, the city has recently seen a rise in home prices, early signs of the stabilization of the housing market.
http://www.altosresearch.com/researc...-estate-market

Based on how many home sales? Are these "fire sales" or substantial improvement in the sale of new homes?

From: http://mjperry.blogspot.com/2011_09_11_archive.html









:

And the trend seems to be downward nationally [[from http://www.numbernomics.com/nomicsnotes/?p=2064):



And here's the Case-Shiller data, from: http://www.housingviews.com/wp-conte...Release-21.pdf

Fortunately, employment seems to be growing in "clobbered metros" such as Detroit:
from: http://insights.truliablog.com/



How much of the uptick in Detroit home prices is due to "fire sale" activity, versus more fundamental support from increased employment? Or some other cause?

[Novine]

"For Novine's purposes, that isn't important unless you think that Denver's legacy costs are higher than Detroit's, as he is merely pointing out that a city the size of Detroit is going to need a pretty good chunk of revenue, even if it were run more efficiently, as is claimed for Denver."

Right. If I have time, I'll go through Denver's numbers. I would be shocked if the debt or legacy costs were anywhere near as high as Detroit's. Detroit's costs are a function of its age, the strong union influences in the city, and in more recent times, the fiscal weakness of the city forcing it into even more costly debt financing schemes. But mwilbert understood my point that even if Detroit's costs were more in line with a Denver, it's still way more expensive on a per-resident basis to provide services to Detroit than it is to provide services to residents of suburban communities.

[Dexlin]

Out of curiosity, I've seen you compare Detroit to Denver, twice, and have wondered why? Is it the relative size of the population or the land area or both? I ask, because I think it'd make more sense to compare Detroit of cities with generally the same size, land-wise, as Detroit, and of relatively closer age, and even more important cities with metropolitan areas close to the same size.

Atlanta and Philly both make more sense, to me. Population rise, Philly is twice as populous, and Atlanta is quite a bit smaller, but they both cover very closely the same area, their histories and demographics are closer, and their metropolitan populations are closer to Detroit than Philly's I think. Denver is the most isolated major metropolitan area in the Lower 48 with a pretty wildly different demographic make-up, a shorter and more recent history, a differently developed political culture, etc...

[Novine]

In both examples, I was trying to answer the question of "How much should it cost to run a city the size, in area and population, of Detroit". You're right about many of Denver's characteristics. But it's close in size to Detroit in area and population, it has a downtown and it has suburbs. Using Philly as a comparison won't work because it has twice the population. Atlanta has a much lower population and Las Vegas and Portland, which are similar in size and population to Detroit, are such unique cases that they don't seem a good match. You can see from the list of Detroit's closest population peers that they are either sprawling giants or compact. In that list, Denver is the closest fit.

http://en.wikipedia.org/wiki/List_of..._by_population

It's also helpful to use Denver because it's a successful urban area. It provides some numbers of what it would take to run a city that size that works.

[iheartthed]

Right. If I have time, I'll go through Denver's numbers. I would be shocked if the debt or legacy costs were anywhere near as high as Detroit's. Detroit's costs are a function of its age, the strong union influences in the city, and in more recent times, the fiscal weakness of the city forcing it into even more costly debt financing schemes

I would add that Detroit's legacy costs are also tied to its former size. For instance, Detroit and Philadelphia might have similar legacy costs because they peaked in population around the same size and about the same time, even if Philly is larger than Detroit today.

[sehender1]

I agree with this. Though I think it's worth investigation as to whether Detroit legacy costs are higher or lower than Denver's. Truth is that I don't know. But I think it's important in examining that in Novine's numbers simply because presenting the budget numbers simply as a general fund summary makes it hard to compare two municipalities.

With Detroit at BB-rated debt and Denver at AA+ debt, at the very minimum you're gonna have vastly different amounts of each city's budget just being used to pay down interest on the debt.

I've actually been toying with some analysis of Detroit's debt and legacy burdens..
IT's not pretty.
By the most conservative estimates, the city is obligated to spend about 42 cents of every dollar on debt or legacy costs.
More aggressive analysis would place it at closer to 56 cents..
That includes not only what the city pays, but what it SHOULD be paying into retiree health care, which has been under-funded for years, resulting in a $5 billion unfunded liability.

Some of this will be discussed in my Sunday column... which isn't explicitly about debt, but is about service delivery...

[corktownyuppie]

For Novine's purposes, that isn't important unless you think that Denver's legacy costs are higher than Detroit's, as he is merely pointing out that a city the size of Detroit is going to need a pretty good chunk of revenue, even if it were run more efficiently, as is claimed for Denver.

What I would like to see is an estimate of what a credible source [[preferably more than one) thinks is the budget that would be required to provide a minimum acceptable level of services in the city, post-EFM slash-and-burn. From there, we could look at whether revenue available to the city is even sufficient to manage that. If not, the next step would be to see if it were possible post-bankruptcy. If there would still not be enough money, the next step would be to look at actual shrinkage to an urban core--not the still-nebulous Detroit Works, but actual deannexation of large parts of the city. If a city can't provide proper services to its people, it shouldn't exist, but I'm reasonably sure a sufficiently tightly defined area could be viable, once the legacy costs were shed.

Well, it looks like we're getting closer to some answers.

From Stephen Henderson's column in the Freep Press...

Status quo won't cut it

The governor will need big wins early on the public-service fronts to show that there's a positive purpose to the state's involvement.The city on its own has made a fine mess of basic services. We don't need state government coming in to maintain the status quo -- or even worse, speed the deterioration.Getting things going won't be easy. So much of the city's money is sucked up in debt service and legacy costs [[pensions and retiree health care) that there just isn't much left over to provide services.A conservative estimate shows that nearly 42 cents of every dollar in city revenue is going to those fixed costs. More aggressive analysis places it as high as 56 cents. Without grants and casino tax revenues, the city would barely be able to provide any services at all. We essentially pay taxes in Detroit to cover the city's debt and legacy obligations, with the leftovers going to the services we need.I asked Marcus Hudson, a municipal finance expert, whether I might find other governments operating under such burdens."Yeah," he said. "They're called Greece and Portugal and other European countries that are on the brink of collapse."

I don't know what a reasonable budget is for Detroit, and I think that question is still worth pursuing. What I do know is that no household budget can function with only 60% of its income available for current expenses.

[Dexlin]

I've actually been toying with some analysis of Detroit's debt and legacy burdens..
IT's not pretty.
By the most conservative estimates, the city is obligated to spend about 42 cents of every dollar on debt or legacy costs.
More aggressive analysis would place it at closer to 56 cents..
That includes not only what the city pays, but what it SHOULD be paying into retiree health care, which has been under-funded for years, resulting in a $5 billion unfunded liability.

Steve, are you calculating into the obligations the regionally-funded DWSD? If so, you probably need to seperate that out, or at least make note of it.