Stressed cities hear little sympathy from State Capitol

DISCUSSION CLOSED: Republican leaders who run the State Capitol have rebuffed appeals from local governments to boost the flow of tax dollars from the state. Will last week’s announcement of nearly $500 million in “new” revenue change the debate? (Bridge archive photo)

Michigan cities expecting a helping hand from Lansing as they dig out of years of fiscal turmoil might want to look elsewhere.

Republican Gov. Rick Snyder stated as much last month at a Michigan Municipal League conference, when he said, “We all have this problem.”

His point: Just as the state must get its own fiscal house in order in tough times, so, too, must local units of government. Any expectation the state will open up major new sources of funds for cash-strapped cities seems doomed to disappointment in the current political environment.

Jeff Holyfield, communications director for the Snyder administration, said the governor “is willing to look at any funding proposal developed by local leaders and the Legislature.”

But he added that Snyder “and his administration are focused on encouraging innovation and collaboration among local governments to serve residents and control costs.”

Last week's announcement that state coffers will have nearly $500 million than expected for the coming year brought a quick call to action from MML.

“The state Senate has proposed a 4.8-percent increase in local revenue sharing for the 2014 state budget. Given the anticipated state budget surplus, anything less than that is unacceptable and unconscionable,” MML President Dan Gilmartin stated on the group's website.

“There is a concern over the health of our cities,” said Ari Adler, spokesman for House Republican Caucus. “But the question that will be asked first is what have those cities done to reduce their costs and become more efficient. They don't necessarily need to prove that to the Legislature. They need to prove that to the residents of the cities.”

Anthony Minghine, chief operations officer of MML, considers that a copout.

“The state has been crowing about all the wonderful things they have done to balance the budget. They did it largely on the backs of local government. To take $6 billion from the local government and transfer it to the state is at the heart of it.”

He refers to a study released earlier this year by accounting firm Plante Moran that found state revenue cuts to local government totaled $6 billion since 2001.

Minghine asserts that those cuts, combined with plunging property values, backed some cities into a corner they cannot readily escape. State and local governments collected $1.2 billion less in property taxes in 2011 than they did in 2007 because of declining property values and exemptions from the tax, according to a Treasury Department estimate.

The drop has been especially acute in Southeast Michigan. The Southeast Michigan Council of Governments – representing Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw, and Wayne counties – projects that taxable property values for the region will decline from a peak of $180 billion in 2007 to $120 billion by 2015.

As for the assertion that cities can solve their problems with greater efficiency, Minghine isn't buying it.

“That might be 10 percent of the problem, but it's not 100 percent of the problem. After 10 years of declining revenue, I'm not sure it's any percent.”

Former Lansing Mayor David Hollister advocates revamping revenue sharing to reflect the needs of urban areas hit hard by costs of an aging infrastructure, population loss and dwindling tax base.

Wayne County Executive Robert Ficano has proposed a state sales tax dedicated to local governments. Others have pushed a constitutional amendment to allow local sales taxes.

“We need to figure out a stable funding source,” Hollister said.

The Republican legislative majority, however, has shown no inclination to further any of those proposals.

“That is the problem of any proposal that comes forward,” Adler said. “The state doesn't have any more money. That comes from the taxpayers. It's difficult right now because of the situation of individual taxpayers in Michigan to ask them for more.”

But in Minghine's view, Michigan prosperity is inextricably tied to its urban areas. He believes it folly to expect statewide economic growth without healthy cities.

“Not to invest in local communities is to the total detriment of the state. We need to rethink what drives the economy,” Minghine said.

He noted that research indicates that young, mobile workers prized as key to the new economy are increasingly swayed by urban quality of life when deciding where to locate. A survey by CEO for Cities, a nonprofit, urban advocacy organization, found that two-thirds of 25- to-34-year-olds with college degrees say they will choose first where to live, then seek a job.

There are signs of life in downtown Detroit, sparked by the move in 2010 by Quicken Loans from the suburbs to the heart of city. Retail and residential development followed, spurred by employer  cash incentives to workers who locate downtown.

Still, census figures found that the Detroit metropolitan area was among the biggest losers of young residents between 2008 and 2010. It lost 7,500 residents in the 25- to-34-year-old group in that period, third-largest loss among metro areas in the country.

“We need places that people want to live in,” Minghine said.