Town Hall Examines MI Local Governments' Budget Scramble

The economic “crisis” facing Michigan’s local governments was the subject of a town hall meeting organized by state Rep. Timothy Bledsoe (1st District) at the Grosse Pointe War Memorial this evening.

At Bledsoe’s invitation, Eric Lupher, director of local affairs for the nonprofit Citizens Research Council of Michigan, spoke to an audience of roughly 40 people about the reasons the state’s municipalities are in dire financial straights and what can be done to start helping them.

“Don’t let a good crisis go to waste,” was Lupher’s takeaway message, touching on the idea that the recession that was triggered in 2007 when property values began to plummet has presented an opportunity to undertake long-overdue reforms.

Although cities such as Detroit had been struggling for decades, the shock to Michigan’s overall system was delivered in 2007 when the property tax base floundered due to a confluence of factors, Lupher said. These included a decline in the manufacturing and automotive sector employment, the bursting of the housing bubble nationwide, the real estate collapse, a surge in foreclosures—particularly in Southeast Michigan—and a decrease in demand for second homes, particularly in northern Michigan.

This was devastating to local governments statewide, Lupher said, because with relatively few options for raising revenue they rely heavily on property tax, which typically increases by 7% annually and suffers little year-to-year fluctuation.

Unfortunately, Lupher said, as the nation pulls out of the recession, local governments are only in the early to mid stages of it. They will face a few more years of declining property tax revenue. “Property tax bases recover at a snail’s pace when real estate markets recover," he said.

There is little prospect that revenue sharing with the state, which has decreased over the past decade, will return to traditional levels. Residents of towns and cities should expect local governments to continue to downsize to deal with the budget shortfalls, he said.

According to Bledsoe, property value in Grosse Pointe has dropped 47% since 2007. Despite this, the Michigan Department of Treasury still places the five Grosse Pointes in the highest category of economic health. The department ranks local governments from 0-10 in terms of fiscal health, with 0-4 indicating those cities that are fiscally sound. All the Grosse Pointes have a score of 4 or better. Meanwhile, there are 115 local governments in the state with a score of 5 or worse, he said.

Tax bases in Michigan are not expected to return to 2007 levels until 2023 at the earliest, Lupher said. A series of reforms proposed by Gov. Rick Snyder are “helpful but not helpful enough,” he opined, noting that, in particular, “consolidation of governments and service providers can achieve economies of scale, but the result is only marginal savings.”

Lupher suggested a number of steps the state should pursue to alleviate the stress on local governments. He called for a blue-ribbon task force to address the specific level of government that should be responsible for the delivery of specific services; reforms to the governance of counties to give them more power; and a reorganization of regional planning partnerships, such as the Southeast Michigan Council of Governments, to better align with geography, travel patterns and other factors that influence the economy.

Margaret Beck, a retired teacher who lives in Grosse Pointe Farms, said she came because of her concern for plummeting property values and for the ways education could be impacted by budgetary problems. Beck spoke out at the meeting against charter schools, saying their elimination would help local government budgets by reducing the need for expensive student transportation and other related costs.

John Brennan, a resident of Detroit who practices law in St. Clair Shores, said he is concerned that the government is trying to tweak a system that, in fact, needs reform.

“The entire state of Michigan needs to make itself an attractive and competitive place to do business,” Brennan said. “When that happens and the population increases, all these other problems will go away.”

Brennan said his solution is to privatize as many public services as possible in order to maximize efficiency and taxpayer value. “No good and no service provided by the government was not first provided by private enterprise,” he said.

Bledsoe said his next town hall meeting, dedicated to Gov. Snyder’s proposed open-enrollment policy and what it will mean for Grosse Pointe schools, will be held at on July 13.