Kevyn Orr, Detroit's emergency financial manager, will have complete control over the city's spending for 18 months. He can write the city's budget by himself. He can cut the pay of elected officials and rip up union contracts, forcing cops and firefighters to pay more for their health insurance.
But Orr can't do the only thing that will save Detroit: bring back the 1.1 million residents it has lost in the last 60 years.
As Michigan's treasurer from 2006 to 2010, I oversaw the state's emergency manager program. Emergency managers restored several small towns to solvency, but we never seriously considered placing one in Detroit, for several reasons. First of all, we only appointed emergency managers in cities where a local official requested one. Second of all, we wanted to avoid the political controversy Gov. Rick Snyder has stepped into, now that over 80 percent of Michigan's African-Americans live in cities run by an emergency manager. And finally, we didn't think an emergency manager could solve Detroit's problems, which are more a consequence of shrinking revenues than financial mismanagement.
Detroit began running budget deficits in 2004-05, and is now $326 million in the red. Partly, this is because the city's tax base is dwindling faster than its financial responsibilities. From its all-time high of 1.8 million in the 1950s, Detroit's population is down to 714,000. But the city is still the same size it was in the '50s. So the police still need to patrol 140 square miles of streets, the public works department needs to pave those streets, and the water system still needs to maintain the network of pipes underneath. To make matters worse, the Detroiters who remain are largely poor: Detroit has half the median income and more than triple the poverty rate of the nation at large. As a result, Detroit's per capita property tax value is $11,965. In suburban Oakland County, on the other side of 8 Mile Road, it's $40,690.
Detroit also got stiffed by the state, which promised revenue sharing if the city would cut its income tax from 3 percent to 2 percent. While Detroit kept up its end of the deal, the economic troubles of the 2000s, when Michigan was mired in a decade-long recession, prevented the state from making all of its agreed-on payments. Detroit has missed out on $200 million a year in state money and about $50 million a year in income taxes.
As treasurer, I encouraged mayors Kwame Kilpatrick and Dave Bing to submit realistic deficit-cutting plans. When the city didn't file quarterly reports on time, which was often, we withheld its revenue sharing money. When it did file reports, they contained plans for reducing salaries and laying off employees which the city never carried out. Both Kilpatrick and Bing were trying to avoid budget cuts that would have damaged the city's ability to provide public services.
An emergency manager can make those tough decisions, since he answers to the governor, not the local population. Flint's emergency manager fired 150 workers, cut wages by 20 percent for those who remained, and eliminated retiree health coverage. He also imposed a $143 annual fee for trash collection, a $62 special assessment for street lights and doubled water rates. The police force has been cut in half since 2008, which is a big reason Flint has the highest murder rate in the nation. Flint is closer to a balanced budget, but it's becoming so overtaxed and unlivable that anyone who can afford it will move to the suburbs, further reducing the tax base and requiring more cuts.
"Does anybody want to live there with service levels that are adjusted to the revenue levels?" former state budget director Bob Emerson told Bloomberg News. "Without sufficient revenue, it doesn't matter who's in charge."
Orr can reduce wages, force city workers to pay more for health care and pensions, and arrange for public-private partnerships, such as businesses adopting neglected parks. But he can't do anything to change the fact that Detroit is a city no longer capable of supporting itself.