A news service for the people of Michigan from the Mackinac Center for Public Policy

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Is the Problem In Detroit Really A Lack Of Revenue?

City receives far more money per person than any other city in the state

One common theme in the media across the state and nationally has been the tale of how the city of Detroit's financial crisis stems from a lack of revenue.

An analysis by Bridge magazine says the city receives less than expected in state-shared revenue, or money the state distributes to all local governments it gets from collecting sales taxes. The Huffington Post cited the main root of Detroit's problems as "the simple lack of revenue."

But a report released this month by the Citizens Research Council of Michigan suggests that Detroit gets more than its fair share of state money when measured per capita and compared to what other cities are receiving. And the city's revenue per person has changed little over the past decade.

"They get a lot of money on a per capita basis. They just can't control their spending," Bettie Buss, the report's author, told Reuters.

The report notes that while the city of Detroit received $161.1 million less in state shared revenue in 2012 than it did in 2002, it gets $335 per person in state-shared revenue – by far the highest in the state. Pontiac was second-highest at $176 per person. 

James Hohman, a fiscal policy analyst for the Mackinac Center for Public Policy, says the city's real issues are administrative and not revenue.

"They are getting more state revenue sharing than anyone else. They've had it cut, but so has everyone else," Hohman said. "Yes the revenue has gone down a bit in the last decade, but so has everything else in the city of Detroit."

Detroit population has dropped 22 percent from 905,996 in 2002 to 706,585 in 2012, according to the U.S. Census Bureau. Meanwhile, Detroit's total revenue dropped from $2.589 billion in 2002 to $2.302 billion in 2012, an 11 percent decline. Governmental activity revenue fell from $1.855 billion in fiscal 2002 to $1.537 billion in fiscal 2012, a 17 percent decline.

"They haven’t adequately planned for a decrease. It’s an administrative issue,” Hohman said.

The CRC report and a review the city's finances shows that Detroit has revenue that is actually higher per capita than it has been in the past. In fact, the city receives about $1,289 per person in total revenue (property taxes, income taxes, other local taxes and revenue sharing) – the highest amount in the nation and 50 percent higher than any other city in Michigan.

Anthony Neely, spokesman for Detroit Mayor Dave Bing, didn't respond to a request for comment.

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See also:

Detroit's Emergency Manager Must Enforce Rules City Officials Ignored

Detroit Police Union Official Says Resource Cuts Make Streets Unsafe, But Police and Fire Salaries Increased

Detroit Exhausts Its Options

Detroit Could Sell Off Assets To Avoid Insolvency

St. Lawrence University economist Steven Horwitz discusses how the minimum wage was used to block immigrants from taking scarce jobs during the depression era. See more at "Raising the Minimum Wage, Lowering Opportunity."


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