Labeling Detroit or the woes of any municipality on mismanagement alone, is a very incomplete perspective. It’s easy to pass blame or convince yourself that your city is different. However, there are many challenges that most jurisdictions are facing:
– Cities can’t influence their cash flow as much as a business owner can. They can’t control whether businesses succeed or fail or whether an entire industry like the auto or steel industry will suffer.
– Budgetary pain flows downhill. Various state funds are still shrinking and therefore, the municipality share also continues to decline. Detroit mayor Dave Bing and other local government leaders have been expressing concerns for years.
– The recession impacted businesses enough to close them down or make chain stores pull out of some locations. This results in reduced tax incomes for the city.
– Reduced business incomes of the surviving businesses lowers business income taxes.
– Lower wages and/or less employee income means lower personal income taxes for the city.
– Property value declines have resulted in a record number of appeals for revaluations, which adjusts property taxes downward – another hit to city income.
– Lower municipality income usually leads to reduced staffing in order to balance the budget.
– Reducing staff perpetuates the city management problem. How can Detroit or your city continue to maintain 24/7 services, solve difficult problems, and create your best strategic plan during these tough times – when you have fewer and fewer people to make it happen?
Unfortunately, that’s not all. Three front page stories this week in the Dayton Daily News noted:
– “Ohio cities could lose millions on camera ban” (Ohio House Bill 69 moves to ban red light cameras, a source of city revenue)
– “Millions being poured into aging water lines” (highlighting water line capital infrastructure needs, which have been put off in many cases for budget reasons)
– “Money, priorities dictate road repairs” (several jurisdictions are behind on repairs due to budget constraints)
There are other looming income threats at the state level besides House Bill 69. And don’t forget about rising health care costs and inflationary pressures. Ohio reports 24 municipalities are under state supervision to help them avoid the same result as Detroit. The story is similar around the country. If cities can’t depend on their various income sources, how can they hope to balance a budget or keep up with services?
These are challenging times for any organization. Local governments are trying to manage through an unprecedented set of circumstances. It’s harder than it looks.
Edward Livesay
