TARP funds should be used to bail out Detroit

[PurpleHeart]

Detroit faced major challenges even before the Great Recession, with the loss of manufacturing jobs in the auto industry and the hollowing out of the urban core [[“white flight” into the ring suburbs robbed Detroit of its tax base going back several decades).

The financial crisis and subsequent economic crash sent these problems into overdrive. But lately a new meme has arisen from supporters of the emergency manager ruling: Scapegoating the citizens of Detroit by characterizing them as a bunch of tax cheats.

A report in the Detroit News asserted that only half of city property owners pay their property taxes, leaving $246.5 million uncollected annually. This figure represents the highest rate of unpaid property tax among major U.S. cities.

Rather than demonizing “deadbeat” homeowners, however, we should examine who actually evades responsibility for paying taxes on those properties. Detroit has been ravaged by an unending foreclosure crisis. Predatory loans trapped borrowers into monthly mortgage rates they couldn’t pay, with lenders particularly targeting lower-income minority areas like Detroit.

Many of those homeowners are gone now, evicted from their properties. It is a pattern that has sunk property values, making the high property tax rates in Detroit even more unsustainable. But it also has turned banks into the real deadbeats, depriving the city of revenue.

In a foreclosure, the property reverts back to the bank, which then becomes responsible for all maintenance and upkeep, as well as any taxes and fees. Some banks simply ignore these responsibilities and refuse to pay taxes or keep the vacant property in good order. The more clever banks stick evicted homeowners with the bill.

Across the country and particularly in Detroit, banks have engaged in “walkaways,” where they start foreclosure proceedings but then find them too costly to complete. They choose not to finish the legal steps to foreclosure, leaving the properties vacant. Banks that walk away from homes do not have to notify the city, or even the borrower, that they have abandoned the foreclosure process. Borrowers kicked out of their homes then find themselves still responsible for property tax payments.

We know this kind of behavior has occurred all over the country, leaving foreclosure victims stuck with the “zombie title” to an old property for years. And Detroit is ground zero for the phenomenon. A 2010 report of the Government Accountability Office found 500 bank walkaways in just four Detroit zip codes.
It’s impossible to know the real number of bank walkaways in Detroit without a house-to-house study. Nevertheless, we know of the staggering number of vacant homes in Detroit, particularly in the neighborhoods ringing downtown. Someone is responsible for those properties, and it’s probably the bank. And we know that banks have a financial incentive to cut and run from cities like Detroit, starving their budgets and creating a cascade of blighted properties in their wake.
So while it’s easy to blame Detroit’s financial troubles on deadbeat homeowners, the more appropriate parties to blame may well be with the deadbeat banks. TARP funds should be used to pay Detroit taxes that are long over-due.

[Bham1982]

TARP funds were already used to bail out Detroit.

You weren't aware that Ford and Chrysler [[and a number of suppliers) were saved using TARP funds?

[313WX]

TARP funds were already used to bail out Detroit.

You weren't aware that Ford and Chrysler [[and a number of suppliers) were saved using TARP funds?

Ford wasn't saved using TARP.

[Bham1982]

Sorry, I meant GM. GM & Chrysler [[and suppliers).

[313WX]

Ford did receive a $6 Billion Dollar government loan though [[apart from TARP).

[leapfrog]

Ford did receive a $6 Billion Dollar government loan though [[apart from TARP).

If we bail out Detroit, what incentive do they have to get their financial house in order? Detroit needs to partner with the EFM and deal with the pain. The city will emerge stronger for it afterward.

[Blueidone]

Until the underlying problems of poor government, bad accounting systems and corruption are handled, there is no point in "throwing good money after bad", as my dear mother used to say. No kind of bailout will cure the ills of Detroit until Detroit is able to better handle its finances.

[Hamtragedy]

TARP funds were used to install ADA curb cut-outs in neighborhoods long abandoned. Mismanagement at its best.

[DetroitPlanner]

TARP funds were used to install ADA curb cut-outs in neighborhoods long abandoned. Mismanagement at its best.

Those were not TARP funds. Those were STP and were due to a court order. Please take it up with those that sued the City in order for those ramps to be installed. What p!$$e$ me off most about those is that my father was instrumental in the program in the 1970's that started to put in those ramps. ADA comes along later and suddenly the improvements made were not good enough, though they were invaluable to those that needed them. Those dollars could have been better used resurfacing roads, buying buses or putting in bicycle infrastructure.

end rant.

[tkelly1986]

One quick note; could we try to avoid using the term "white flight", its not completely accurate, as black middle class Detroiters have left too..so, middle class flight may be more appropriate.

[GPCharles]

Banks that walk away from homes do not have to notify the city, or even the borrower, that they have abandoned the foreclosure process. Borrowers kicked out of their homes then find themselves still responsible for property tax payments.

Borrowers are not evicted until after the 6 month redemption period has run. They have no personal liability for property tax payments.

[Zacha341]

Yes, I agree.

One quick note; could we try to avoid using the term "white flight", its not completely accurate, as black middle class Detroiters have left too..so, middle class flight may be more appropriate.

[Honky Tonk]

Ford wasn't saved using TARP.

That's right. Ford had a better idea.

[Wesley Mouch]

If the administration and council were to implement true reforms, its a fine idea -- but unfortunately, no one will suppose funding a mess.

[Honky Tonk]

One quick note; could we try to avoid using the term "white flight", its not completely accurate, as black middle class Detroiters have left too..so, middle class flight may be more appropriate.

Point well taken. I would go even further and call it monetary flight. ANYBODY that gets enough money and inkling, seems to be on the move out.

[DetroitPlanner]

The term 'White Flight' was not brought up by the poster, but rather part of the original article that was liberally posted to the original thread. I think everyone around here knows that this is truly an archaic term.

[Not In MI]

The citizens of Detroit voted in the same bunch of union loving, business hating, tax raising, pension giving, beaucratic coddling, race bating democrats year after year. You made you bed, now lay in it.

[Mikeg]

Point well taken. I would go even further and call it monetary flight. ANYBODY that gets enough money and inkling, seems to be on the move out.

I would simply call it what it is - the natural reaction of free and informed citizens who see their elected leaders continually issuing new bonds to cover annual budget deficits, pension shortfalls and payments on existing debt, while continuing to spend at unsustainable levels.

This kind of fiscal irresponsibility is based on the mistaken assumption that someone in the future will always be there to pick up the tab and clean up the mess. However, once the perceived benefits of living in Detroit are eclipsed by one's tax bill, the natural human response to this kind of municipal mismanagement is to either move or stop paying their tax bill.

How someone can characterize that kind of a reaction as "monetary flight" is beyond me. When they sell, their tax obligation is paid-up, their capital asset [[house) remains behind and their savings remain in their banking account - which is most likely already with an out-of-state bank and is being used to make loans available to others around the country. So with the words "monetary flight", is it implying that the city of Detroit has some kind of right to dictate how and where their residents spend their disposable income - or worse yet, they have some kind of moral authority they can exercise which allows them to characterize someone moving out of the city as a pariah? And if instead they just decide to stop paying their taxes, where exactly is the "monetary flight"?

I maintain that much of the city's current predicament can be traced back 50+ years to when the bond was broken between city elected officials and their residents as city leaders increasingly looked to Washington DC and Lansing for funding, grants, special legislation, etc. for urban renewal, model cities, economic/industrial development and assorted other big-ticket projects. Meanwhile, the city leaders seemed to assume that the Detroit residents who paid their own share of property taxes while supporting local businesses and providing the labor pool would always be there to pick up the tab if they spent more than they could afford.

[michimoby]

That's right. Ford had a better idea.

Agreed: bring in an outsider to make sure the ship is secured before the storm hits [[Mulally).

[PurpleHeart]

As for the term "White Flight" it is a proper sociological term to the exodus of white folks in this city post 1970's [author, BA Sociology - UC Berkeley] that I personally witnessed, born and raised on the Eastside of Detroit [[Greiner and Hoover.) You can call it what YOU may, this is what I call it!

I didn't mean to prescribe all that ails Detroit, but rather bring into a discussion about taxes and how unfair a view, the nation has taken, with regard to the good folks who pay taxes and live in Detroit. Lately the national media has said that it was Detroit and her citizens who DON'T pay taxes, I have just supplied the guilty party who fails to pay taxes and a remedy, that's all. Where this discussion ended up nobody knows... probably why I don't make comments here that often.

[Honky Tonk]

How someone can characterize that kind of a reaction as "monetary flight" is beyond me. When they sell, their tax obligation is paid-up, their capital asset [[house) remains behind and their savings remain in their banking account - which is most likely already with an out-of-state bank and is being used to make loans available to others around the country. So with the words "monetary flight", is it implying that the city of Detroit has some kind of right to dictate how and where their residents spend their disposable income - or worse yet, they have some kind of moral authority they can exercise which allows them to characterize someone moving out of the city as a pariah? And if instead they just decide to stop paying their taxes, where exactly is the "monetary flight"?

Good Morning, Your answer is in my original, one line post.

"ANYBODY that gets enough money and inkling, seems to be on the move out."

Working in the 'burbs, I'm already seeing, what I would call Native Detroiters, no cars or seemingly an abundance of cash, settled in to some of the neighborhoods. That is what I meant by "monetary flight".

[PurpleHeart]

Bloomberg picked up on this story and has made some interesting revelations about how the "The only winners in the financial crisis that brought Detroit to the brink of state takeover are Wall Street bankers who reaped more than $474 million from a city too poor to keep street lights working. "

http://www.bloomberg.com/news/2013-0...llion-fee.html

Folks this is the reason why our city is being sold out by the Gover-nerd, all the rest of their puffery is a ploy to bring down "What Detroit Stands for" as a symbol to their conservative philosophy. They can't bring down other major cities in the USA [[Chicago, New York, LA, San Francisco) and have chosen Detroit as the Liberal Scape Goat with their anti-union message.

[PurpleHeart]

Here's another more colorful explanation, beware of the word choices

http://www.thereformedbroker.com/201...raped-detroit/

[Honky Tonk]

Here's another more colorful explanation, beware of the word choices

http://www.thereformedbroker.com/201...raped-detroit/

Huh, I wonder which City official approved all these transactions?

[DetroitPlanner]

Huh, I wonder which City official approved all these transactions?

I wonder what the total tally is for the area? How many others were fleeced? Detroit is only one of many govts servicing the populace. Schools, Counties, suburbs, districts... It could be a staggering number.