Detroit Mayor Dave Bing spent a large majority of his ‘State of the City’ declaration optimistically outlining all of the city’s cost-cutting and revenue-boosting ventures.
But despite these measures, decisions of previous administrations may come back to haunt the municipality. Bettie Buss, a senior researcher on the Citizens Research Council (CRC), shed some light on the issue: “Past leaders have entered into a lot of agreements; have made a lot of decisions that cost huge amounts of money. But, at the same time that its developed huge debts that go out to 2036 and beyond, revenues have been shrinking.” And shrink they have. The city reports to have slashed spending by 300 million dollars since 2009 but city revenues have decreased by close to a billion dollars during that same time period. In these 3 years, Detroit has become increasingly reliant on money flowing in from ‘Sales and Charges for Services’ which made up 46 percent of the city’s major revenue sources in 2012, up from 29.2 percent in 2009.
When Bing did directly address the looming financial crisis that Detroit faces he was quick to place blame on the State Department, saying that: “Since 2001, State revenue sharing to Detroit has been consistently reduced. Last year, we received $93 million less than in 2009, when I took office … The total amount of cutbacks in State revenue sharing to Detroit over the past eleven years is more than $700 million.” If you keep in mind that Detroit’s general fund deficit is 327 million the State cutbacks seem significant. However, Mayor Bing took over the self-admitted financial emergency that was the City of Detroit in 2009 and the city continued to steadily lose money.
In fact, a recent report by the CRC places Detroit’s total debt at over 14 billion dollars. And that’s before interest. A state financial report estimated payments on the debt alone cost the city 597 million last year. The numbers are so bleak that some councilors are calling for the immediate negotiation of a consent agreement so that the State department can take over the city’s books. Governor Rick Snyder has already created a short list of candidates to be named as emergency financial managers should such an agreement go through.
In 2000 Detroit was the 9th largest urban center in the U.S. with a population of over 1.1 million. Since then, unemployment rates between 7.5 and 10 percent have driven people away and peaked at a staggering 18.2 percent in August 2009. The city’s current unemployment rate of 11.4 percent is a heavy juxtaposition to Mayor Bing’s optimism about the future. If Detroit does eventually begin bankruptcy proceedings, as the 18th largest city currently in the U.S.(with a population of now only 700 000) it will mark the largest municipal collapse in American history. Detroit may run out of money by April, and given their multibillion dollar debt it won’t even be their money they’re running out of.