Editorial: Detroit merits praise for oversight end
Detroit’s emergence from state oversight last week marked one of the most significant fiscal achievements in the city’s history. For the first time in four decades, Detroit is in full control of its fate.
That’s a remarkable landmark, and one few could foresee in 2013 when the city, under state emergency management, filed for bankruptcy.
Rather than sounding a death knell for Detroit, the Chapter 9 filing triggered the start of a remarkable five-year fiscal turnaround for the city, aided by the washing away of most of its debt.
To end state oversight, the city had to post three years of budget surpluses. It completed its third year on Wednesday, and was released from the day-to-day monitoring of its finances by a state Financial Advisory Board.
Prior to the state takeover, the city’s water and sewer department had been under a federal monitor for environmental violations for more than three decades. And its school system had also had a state financial manager for nearly 20 years.
Now the city is free of outside control. And for the first time in half a century, its books are consistently balanced. Not only did the bankruptcy free up money for improving services, but new development and better tax collection policies have beefed up revenue from taxes — up 15 percent in the past four years.
Credit first the creative bankruptcy management of Gov. Rick Snyder and his emergency manager, Kevyn Orr, and the team they put together. After taking the hand-off, Mayor Mike Duggan and the Detroit City Council have shown a degree of fiscal discipline and responsibility that is all but unprecedented in Detroit’s history.
The city still has many challenges, and much work to do in reducing crime, improving schools and continuing to better the quality of life of residents through better services.
But the post-bankruptcy pattern is encouraging. Good government could actually become a habit in a city that was nearly destroyed by incompetence and corruption.
To sustain the good times, Detroit must commit to aggressive redevelopment. At the same time, it has to be judicious with tax breaks to ensure that the billions of dollars in new projects either underway or on the drawing board contribute more directly to the tax base.
It also must prioritize the attraction of new residents. And it must drive up its tax collection rate, which improved to 80 percent this year from 69 percent in 2019, closer to the mid-90 percent compliance rate common in the suburbs.
A huge oncoming worry is the requirement that Detroit in 2024 renew substantial payments to its employee pension funds. The city is already $200 million short of the $335 million it must put in the funds over the next five years.
Growth is the only way to meet that obligation without slashing services. That’s not an option Detroit can ever employ again if it hopes to continue its revitalization.
Neither is borrowing. Detroit must be very careful about adding to its debt load, which was reduced by more than $7 billion through the bankruptcy. It can’t return to the days when it lived off the credit card.
What Detroit hopefully learned from its financial collapse and rebirth is to be ever vigilant against bad fiscal habits.