How Detroit went broke - TAXES

How Detroit went broke - TAXES

Posted in the Minneapolis Forum

LIbEralS

Minneapolis, MN

#2 Sep 17, 2013
18 BILLION dollars in debt

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one word

Minneapolis, MN

#3 Sep 17, 2013
LIbEralS wrote:
18 BILLION dollars in debt
UNIONS

killed Detroit.

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Since: Jul 10

Minneapolis, MN

#4 Sep 17, 2013
Both killed Detroit. Both strangled the life out of the city.
.
And now the Libtards want to do the same here in Minnesota.
.
Both taxation and unions like many other things started out with as good intentions. But along the way, they became just as bad as the rest of the stuff that strangled the livlihood out of the population that uses them.

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Stud

Minneapolis, MN

#6 Sep 17, 2013
Bush did it!!

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liberal blame game

Minneapolis, MN

#11 Sep 18, 2013
Stud wrote:
Bush did it!!
exactly, blame President Bush for all the socialist moves this muslim dictator has pushed on America.

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more cities to fall

Minneapolis, MN

#12 Sep 19, 2013
liberal blame game wrote:
<quoted text>
exactly, blame President Bush for all the socialist moves this muslim dictator has pushed on America.
This is a WAKE up call for cities/states like CA - look in what happens when you spend more than you TAKE in.

The word TAKE has meaning.

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LIbEralS

Saint Paul, MN

#13 Sep 19, 2013
more cities to fall wrote:
<quoted text>
This is a WAKE up call for cities/states like CA - look in what happens when you spend more than you TAKE in.
The word TAKE has meaning.
Actually, it SHOULD be a wake up call for the entire country!

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LIbEralS

Saint Paul, MN

#28 Sep 25, 2013
Utter Tooth wrote:
Actually, when Mittiots raid the city & close plants, this is the result.
Too bad, the Mittiot kids split $100 million, WITHOUT earning a DIME !!!
Gee, as I recall, the GM of GM was fired, was that in recognition of fine "work"???
SMIRK !!!! LMAOROTFU~!
As I recall, the big 3 aren't even mentioned in the article...

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LIbEralS

Saint Paul, MN

#34 Sep 27, 2013
Detroit is broke, but it didn’t have to be. An in-depth Free Press analysis of the city’s financial history back to the 1950s shows that its elected officials and others charged with managing its finances repeatedly failed — or refused — to make the tough economic and political decisions that might have saved the city from financial ruin.

Instead, amid a huge exodus of residents, plummeting tax revenues and skyrocketing home abandonment, Detroit’s leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits — saddling the city with staggering costs that today threaten the safety and quality of life of people who live here.

The numbers, most from records deeply buried in the public library, lay waste to misconceptions about the roots of Detroit’s economic crisis. For critics who want to blame Mayor Coleman Young for starting this mess, think again. The mayor’s sometimes fiery rhetoric may have contributed to metro Detroit’s racial divide, but he was an astute money manager who recognized, early on, the challenges the city faced and began slashing staff and spending to address them.

And Wall Street types who applauded Mayor Kwame Kilpatrick’s financial acumen following his 2005 deal to restructure city pension debt should consider this: The numbers prove that his plan devastated the city’s finances and was a key factor that drove Detroit to file for Chapter 9 bankruptcy in July.

The State of Michigan also bears some blame. Lansing politicians reduced Detroit’s state-shared revenue by 48% from 1998 to 2012, withholding $172 million from the city, according to state records.

Decades of mismanagement added to Detroit’s fiscal woes. The city notoriously bungled multiple federal aid programs and overpaid outrageously to incentivize projects such as the Chrysler Jefferson North plant. Bureaucracy bogged down even the simplest deals and contracts. In a city that needed urgency, major city functions often seemed rudderless.

When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy.

If Mayors Jerome Cavanagh and Roman Gribbs had cut the workforce in the 1960s and early 1970s as the population and property values dropped. If Mayor Dennis Archer hadn’t added more than 1,100 employees in the 1990s when the city was flush but still losing population. If Kilpatrick had shown more fiscal discipline and not launched a borrowing spree to cover operating expenses that continued into Mayor Dave Bing’s tenure. Over five decades, there were many ‘if only’ moments.

“Detroit got into a trap of doing a lot of borrowing for cash flow purposes and then trying to figure out how to push costs (out) as much as possible,” said Bettie Buss, a former city budget staffer who spent years analyzing city finances for the nonpartisan Citizens Research Council of Michigan.“That was the whole culture — how do we get what we want and not pay for it until tomorrow and tomorrow and tomorrow?”

Ultimately, Detroit ended up with $18 billion to $20 billion in debt and unfunded pension and health care liabilities. Gov. Rick Snyder appointed bankruptcy attorney Kevyn Orr as the city’s emergency manager, and Orr filed for Chapter 9 on July 18.

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LIbEralS

Saint Paul, MN

#35 Sep 27, 2013
For this report, the Free Press examined about 10,000 pages of documents gathering dust in the public library’s archives. Since most of those documents have never been digitized, the Free Press created its own database of 50 years of Detroit’s financial history. Reporters also conducted dozens of interviews with participants from the last six mayoral administrations as well as city bureaucrats and outside experts. Among the highlights from the review:
&#9632; Taxing higher and higher: City leaders tried repeatedly to reverse sliding revenue through new taxes. Despite a new income tax in 1962, a new utility tax in 1971 and a new casino revenue tax in 1999 — not to mention several tax increases along the way — revenue in today’s dollars fell 40% from 1962 to 2012. Higher taxes helped drive residents to the suburbs and drove away business. Today, Detroit still doesn’t take in as much tax revenue as it did just from property taxes in 1963.
&#9632; Reconsidering Coleman Young: Serving from 1974-1994, Young was the most austere Detroit mayor since World War II, reducing the workforce, department budgets and debt during a particularly nasty national recession in the early 1980s. Young was the only Detroit mayor since 1950 to preside over a city with more income than debt, although he relied heavily on tax increases to pay for services.
&#9632; Downsizing — too little, too late: The total assessed value of Detroit property — a good gauge of the city’s tax base and its ability to pay bills — fell a staggering 77% over the past 50 years in today’s dollars. But through 2004, the city cut only 28% of its workers, even though the money to pay them was drying up. Not until the last decade did Detroit, in desperation, cut half its workforce. The city also failed to take advantage of efficiencies, such as new technology, that enabled enormous productivity gains in the broader economy.
&#9632; Skyrocketing employee benefits: City leaders allowed legacy costs — the tab for retiree pensions and health care — to spiral out of control even as the State of Michigan and private industry were pushing workers into less costly plans. That placed major stress on the budget and diverted money from services such as streetlights and public safety. Detroit’s spending on retiree health care soared 46% from 2000 to 2012, even as its general fund revenue fell 20%.

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LIbEralS

Saint Paul, MN

#36 Sep 27, 2013
Gifting a billion in bonuses: Pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money — mostly in the form of so-called 13th checks — could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.

&#9632; Missing chance after chance: Contrary to myth, the city has not been in free fall since the 1960s. There have been periods of economic growth and hope, such as in the 1990s when the population decline slowed, income-tax revenue increased and city leaders balanced the budget. But leaders failed to take advantage of those moments of calm to reform city government, reduce expenses and protect the city and its residents from another downturn.

&#9632; Borrowing more and more: Detroit went on a binge starting around 2000 to close budget holes and to build infrastructure, more than doubling debt to $8 billion by 2012. Under Archer, Detroit sold water and sewer bonds. Kilpatrick, who took office in 2002, used borrowing as his stock answer to budget issues, and Bing borrowed more than $250 million.

&#9632; Adding the last straw — Kilpatrick’s gamble: He’s best known around the globe for a sex and perjury scandal that sent him to jail and massive corruption that threatens to send him to prison next month for more than 20 years. The corruption cases further eroded Detroit’s image and distracted the city from its fiscal storm. But perhaps the greatest damage Kilpatrick did to the city’s long-term stability was with Wall Street’s help when he borrowed $1.44 billion in a flashy high-finance deal to restructure pension fund debt. That deal, which could cost $2.8 billion over the next 22 years, now represents nearly one-fifth of the city’s debt.

With all the lost opportunities over decades, with Detroit’s debt mounting, with the housing crash and Great Recession just over the horizon, 2005 turned out to be the watershed year.

Although no one could see it at the time, Detroit’s insolvency was guaranteed.

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LIbEralS

Saint Paul, MN

#37 Sep 27, 2013
But the 1950s brought the first sobering inklings of crisis, and Detroit mayors for two decades made halting attempts to get ahead of it. Albert Cobo (1950-1957) formed the Dodge Committee to recommend diversifying the city’s tax base as wartime contracts dried up. Jerome Cavanagh (1962-1970) responded to falling revenue by instituting Detroit’s first income tax. Roman Gribbs (1970-1974) spearheaded an effort to revitalize downtown and Detroit’s tax base.

But two trends were undermining Detroit and the nation’s industrial centers like no foreign enemy had been able to do.

Suburbanization: All cities spread out postwar into the farmland at their perimeters. Automakers and road builders eager to sell cars, home builders eager to sell new houses, village mayors eager for new taxes — all promoted suburban growth. So did the federal government with its subsidies and tax incentives. Eager for elbow room, families in crowded cities like Detroit and Cleveland and St. Louis began moving to the new communities. The process of spreading out hasn’t stopped yet.

Discriminatory practices, such as redlining — denying minority buyers mortgages and access to homes in white neighborhoods — made the process in Detroit and many other cities an ugly one. Unscrupulous real estate agents encouraged white flight by stoking some whites’ fears of black people moving in next door. Rancor ran deep. Experts warned of two Americas: one privileged, suburban and white; the other poor, urban and black.

Deindustrialization: Cities like Detroit and Flint that rose to power in the first half of the 20th Century were shocked to find in the second half how many factory jobs would be lost to foreign competition. Detroit auto executive Lee Iacocca once boasted that U.S. carmakers would kick their Japanese competitors back into the Pacific Ocean. He was wrong. American steelmakers learned the same hard lessons.

Even by the late 1950s, the signs of strain were showing in industrial cities. Population and housing values peaked in Detroit in the 1950s and began their long and seemingly unstoppable decline. The urban riots of the 1960s, including Detroit’s, accelerated the process.

By the 1960s, in Detroit as in city after city, the process was well under way. And mayors and civic leaders, here and elsewhere, began their long, anguished battle against decline.

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LIbEralS

Saint Paul, MN

#38 Sep 27, 2013
Cause and effect: People leave,
taxes go up, more people leave

As the post-World War II manufacturing expansion leveled off and Detroit started to lose population and revenue, the city turned for the first time in 1962 to an income tax: 1% for residents, nonresidents and corporations. Only six years later, the rate for residents would double.

In the early 1980s, a nasty national recession pummeled the auto industry, and Detroit’s finances spiraled downward. Mayor Young convened a blue-ribbon panel to recommend action. They said the city would be bankrupt by summer if it did not raise taxes and reduce costs again.

Within months of a heated primary election, Young achieved the politically unthinkable: He persuaded Detroit voters to increase their own income taxes from 2% to 3%. He got Republican Gov. William Milliken to sign off, too. And he coupled it with deals to freeze wages for thousands of workers and lay off several hundred police officers.

“He could pull a lot of this off because he had such political capital in the community that a lot of folks would say,‘If Coleman Young said it, it must be OK,’” said Tim Kiska, a professor at the University of Michigan-Dearborn.

To continue paying for city services and to pay for union benefits awarded by outside arbitrators, the city also instituted a new utility tax in 1971 and a wagering tax when casinos began operating here in 1999. As population declined, the city instituted new taxes or raised existing ones to try and keep up with falling revenues.

The total property tax burden for city homeowners, including county and school taxes, rose from 44.79 mills per thousand dollars of value in the mid-’60s to 88.178 per thousand by 1991.

“It’s almost like every decade we got a new source of income to keep our ass on the ground,” said Ed Rago, Young’s budget director.

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LIbEralS

Saint Paul, MN

#39 Sep 27, 2013
It looks like the link works to me...

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digger

Minneapolis, MN

#41 Sep 27, 2013
Detroit is a DEAD DUCK. The warning signs were posted for YEARS, yet the city did NOTHING meaningful to avoid total disaster. NOW, obama and the dems are throwing hundreds of MILLIONS of taxpayer dollars to try and avoid a TOTAL MELTDOWN of a once great city, without admitting WHY such a once great city spun into total chaos. FEW people went to jail, they can't blame it on the "evil whitey", because no white person has controlled that city for over **50** YEARS.

The Republicans should be "up in arms" over this federal BAILOUT. Make THIS a "2014" campaign issue.

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LIbEralS

Saint Paul, MN

#42 Sep 27, 2013
digger wrote:
Detroit is a DEAD DUCK. The warning signs were posted for YEARS, yet the city did NOTHING meaningful to avoid total disaster. NOW, obama and the dems are throwing hundreds of MILLIONS of taxpayer dollars to try and avoid a TOTAL MELTDOWN of a once great city, without admitting WHY such a once great city spun into total chaos. FEW people went to jail, they can't blame it on the "evil whitey", because no white person has controlled that city for over **50** YEARS.
The Republicans should be "up in arms" over this federal BAILOUT. Make THIS a "2014" campaign issue.
Obama rewards years and years of irresponsible government at our expense. I'm ready for an answer as to how to stop him...

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