Thursday, March 20, 2014

How Michigan Lawmakers Bankrupted Their Own Cities

by JM Ashby/Bob Cesca /The Daily Banter

Cities in the state of Michigan, especially likes of Detroit and Flint, are typically held up as beacons of mismanagement or corruption, but they didn’t arrive at their current predicament on their own according to a new report from the Michigan Municipal League.
According to the Municipal League, cities in the state have been denied $6.2 billion in revenue sharing over the past decade which state lawmakers used to plug holes in the state budget. And, in some cases, the money that has been withheld would have made up for current shortfalls had it not been withheld.
Detroit, the state’s largest city, lost out on $732 million in revenue sharing between 2003 and 2013, according to the report. Twenty two other cities — from Grand Rapids to Wyandotte — saw the state divert at least $10 million in sales tax revenue that local leaders believe they should have been entitled to. [...]
“You can look at pretty much any Michigan community and see where they might be today if the statutory revenue sharing had been fully funded,” Samantha Harkins of the Municipal League said in a statement.
“For example, look at Flint, which is now under an emergency manager. Flint will have lost $54.9 million dollars by the end of 2014. The deficit in its 2012 financial statements is $19.2 million. Flint could eliminate the deficit and pay off all $30 million of bonded indebtedness and still have over $5 million in surplus. In Detroit, a city facing the largest municipal bankruptcy in history, the state took over $700 million to balance the state’s books.”
The Michigan Constitution apparently requires that a portion of sales tax be redistributed to cities based on a standard formula, but according to the Municipal League state lawmakers have not done so.
This may not come as a shock to locals in Michigan or the above mentioned cities, but as an outside I was certainly shocked when I read it.
The idea that this emergency manager business could have been avoided if state lawmakers weren’t effectively looting their own cities to make their own jobs easier in the state capital is gobsmacking.
How many special tax breaks have been funded by looting cities that are now under the rule of an emergency manager?
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