What is the Solution for Detroit- Opinion by Ravi Yalamanchi

Detroit is in news every day for crime, Kwame Kilpatrick or financial challenges. Ironically all three are connected in some respect. Detroit financial challenges started in early 70’s as more people and businesses started to move out into the suburbs. In the past four decades there has never been responsible management of the city. One thing stayed constant in the past four decades is poor, failed and corrupt leadership and bloated for decades with high costs to the tax payer. While revenue continued to drop the expenses continued to increase and there was never a business approach to the financial operations of either the School District or the city. It is a shame that more elected leaders abused and were part of the corrupt system and only a few that really cared about the city, such as Mayor Bing. The Unions contributed to the failed status as much as the politicians.

During 2008 – 2011 Detroit received over $1.2 billion in federal funds for Housing, Transportation, Head Start, Work Force Investment, community policing, weatherization and other programs. Businesses and foundations have invested $100’s of millions in Detroit with more commitments for the future. With so much funding coming into the city besides to its own revenue from property taxes and income taxes why does the city continue to fail year after year? If you take a drive through Detroit much part of the city you see deteriorated neighborhoods, abandoned buildings, crumpling roads and infrastructure

. Homeownership has dropped to historic lows 53.8% with more properties under rental. A high percent of landlords live outside of Detroit. Detroit has high property tax rates of $68.19 for every $1,000. For home assessed at $50,000 taxes will be $3,410 and for a similar home in Rochester Hills taxes are $1,667.

According to Detroit Financial Review Team…Detroit faces more than $14 billion in liability. No amount of taxation can cover such liability. The Economic Characteristics of Detroit, per the American Community Survey of the U.S. Census Bureau:
• The labor force is 54.2% and 45.7% are not in labor force;
• 45.5% of the households have income below $25,000;
• 31.5% receive social security;
• 34.5% depend on food stamps;
• Mean Social Security Income is $14,096 and mean retirement income is $18.535;
• Per capita income is $15,261;
• 31.1% of the families live below the poverty level.
With low house values, low income households, low employment labor force and high property
taxes….such staggering data clearly indicate the economic challenges of the city.

Detroit’s audit reports have consistently reported significant deficiencies in internal control and material weaknesses and ran huge deficits year after year. The cleanup of the city should not be just at the periphery but an overhaul of the entire city government. The financial review by the Governor’s team has been dragged on for more than two years. It is politics that keeps dragging the issue and making it much worse every month. Detroit should stop and the Governor should not allow more borrowing.

It is imperative Detroit become a viable city. Detroit has lot of community assets, such as non-profits, health and educational institutions, foundations, businesses that are committed, and residents who believe in their city. But none of this will matter if the city’s financial condition is not cleaned up. No Emergency Manager can fix Detroit without making radical changes to every part and function of the City Government. Because every decision by the Emergency Manager will be blocked and politicized by the city council the Governor should put the city into a structured bankruptcy. Bankruptcy will help to re-structure and re-organize the city

 government, eliminate waste, close out departments that are not of value add, privatize management of grants thru non-profits, and re-structure the pensions and health liabilities. The bankruptcy should not be forced for a short duration. It should be given at least three to five years or until Detroit can be financially viable for the long duration.

This is the only option if we want to see Detroit become viable and preserve the urban fabric.

Ravi Yalamanchi
Rochester Hills