Leaving Cash on the Table

When you think about the budget meltdown taking place in Detroit, you would assume that the problem is spending that’s out of control. Particularly measured against how little value that spending delivers (either through incompetence, corruption or inefficiency), there’s a lot that we could do differently.  But a substantial portion of the problem is that Detroit has lost both the willpower and the ability to collect money owed it by citizens.

Last year, the city was owed $131 million dollars in unpaid property taxes. The 36th District Court in Detroit is owed $294 million in judgements.  Together, that totals $425 million.  The city’s annual budget deficit is $324 million.  Pause, for a moment, and consider the colossal stupidity of this.  Detroit, despite having a structural deficit that’s been around for decades, can’t be troubled to make sure that the way that the city takes in revenue is functioning.  Along with police and fire protection (other public services that seem to be in a slow-motion state of implosion) I can’t think of a more basic and fundamental role of what local government should do.

Property taxes are unreasonably high in Detroit.  There are three municipalities in Michigan that have the highest legally acceptable property tax rates in the state.  The first two are Ann Arbor and East Lansing, which have some of the best public schools in the nation and first rate city services.  The other is Detroit, where there is very little, if any, value for the taxes paid.  The schools are a disaster and city services are nearly non-existent (and likely to get worse before they get better).  While I recognize that the rates in Detroit should come down substantially, regardless of where they are, they need to be collected.  It’s not feasible that the city is going to be able to collect the total amount owed it in property taxes at the maximum legally allowable rates, but it can get a lot more of the cash than it’s getting now by switching to lower rates.  This seems counterintuitive, but lower rates spread across a broader tax base would actually yield more revenue.

As with property taxes, so too with the court: while it’s unrealistic to think that the court is going to be able to squeeze the full amount owed it out of the debtors, the court owes it, both to the city and to those who manage to pay their bills to the court, to go after those who owe it money in a far more aggressive manner, including garnishing wages, taking out liens on personal property and obtaining more judgements against those that are able to, but refuse to pay.

I am not one of those delusional Detroiters (like resident lunatic Joann Watson) that claim the state owes us money to the tune of nearly a billion dollars because of a long-ago abrogated revenue sharing agreement.  But to think that we have to solve this crisis through cuts, and cuts alone, is patently absurd. Imagine, an adequately funded city government that can also deliver core services in a cost-efficient manner.  The difference would be staggering, and we owe it to everyone in this city to aim precisely for that.

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