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Detroit: Running Out Of Money

Detroit: Running Out Of Money image Detroit: Running Out Of Money image Detroit: Running Out Of Money image Detroit: Running Out Of Money image
Parent Issue
Day
17
Month
December
Year
1975
OCR Text

As staggering a prospect as the bankruptcy of New York City appears to be, the default of cities is not a new phenomenon to the American economy. It happened to several in the Great Depression, including Jackson, Grand Rapids, and Detroit. One of the classic cases is Fall River, Massachusetts, which went bust after losing too many of its textile mills to the South and spent the next 20 years in court receivership before its elected government resumed control of the city's affairs - that is, what was left of them after paying back the banks.

Like Fall River, on a much grander scale, Detroit was, and still is, a one-industry town; and, as in the '30's, that industry is once again in bad shape. Unemployment in October stood officially around 18 percent, and any figure representing the actual number of people out of work would have to be higher. The city has had a freeze on hiring since last December. Some 2,000 employees, 18 per cent of the total city force, were laid off this year. and as many as 3,000 more may have to go next year. The city's departments have been ordered to absorb an expected 2% inflation rate next year without increased funds, which means laying off one out of every eight or nine employees. The Budget Department has started to talk about making major service cuts in such areas as museums, parks and recreation, and even health, consumer affairs, and sanitation. Whole departments may even have to go.

The city's hopes for coming up with the $50 million, which by Charter must be paid back this year, are pinned on two possibilities: increased state or federal aid, or an increase in the city income tax. At this point, both appear unlikely. Federal revenue sharing, which brought the city $40 million last year, expires after another year and is in serious trouble as a continuing federal program. The proposed increase in the income tax, from one-half per cent to one and a half per cent for non-residents and from two to three per cent for residents, may be bogged down in Lansing by resistance from such powerful suburban legislators as Roseville's John Bowman.

Meanwhile, the city's property tax is at its upper legal limit already. Detroit, which has been issuing municipal bonds right up to its constitutional limit, is paying nearly 10 per cent interest currently, feeling the effects of New York's fiscal crisis, and Budget Director Walt Stecher isn't sure the city could sell them at any lower rate.

If New York at some point goes over the hump into full default, as seems highly probable, other older cities like Detroit wll be in big trouble. The inability to float new bond issues for capital projects, combined with the possible loss of federal revenue sharing money, could shoot the city's deficit up intolerable levels. Increasing taxes or creating new ones would run the risk of making the city even more unattractive to business, industry, and residents than it is now, aggravating the white-flight syndrome which has already moved large portions of Detroit's tax base to the suburbs. Under these conditions, even though the Motor City, over the years, has followed a far more conservative fiscal policy than New York and has assumed a more normal service burden, a second default could not be ruled out for Detroit, as well as other cities in similar circumstances - including Buffalo, Newark, Cleveland, and Philadelphia.

Here's what happened the first time; Between 1930 and 1931, Detroit's relief expenditures shot up from $4.7 million to $13.2 million. In the same year, tax delinquency went up 25 per cent, resulting in $19 million of lost revenue. Even though the city ordered a job freeze, laid off thousands of employees, and cut back salaries of the rest up to 50% at a whack, the city finally defaulted on February 14, 1933. Only the auto industry's newfound prosperity in the wartime economy brought the city back from the abyss. Even so, Detroit eventually paid out some $125 million in added interest charges to the banks - half the amount the city owed in 1930, and an amount that might have gone far toward revitalizing the local economy.

Among the major items in the city's current record deficit, the highest since 1962, are $14 million formerly expected from the 'non-resident income tax increase; a $7.5 million shortage in revenue sharing funds expected from the state; a $5 million drop in expected revenues from the city income tax; a $4.6 million shortage in federal revenue sharing money; and $3.8 million to cover the latest Blue Cross-Blue Shield rate hike.

With the state struggling with its own $300 million deficit, Stecher and Mayor Young can only pray to Washington for a revision in the revenue -sharing formula, should the program survive; new "counter-cyclical" anti-recession aid to the cities based on the level of unemployment; ,or, in the long run, a new President in 1976 who will institute a serious program to commit federal resources to rebuild the cities. If Detroit gets none of these, the future is undoubtedly going to make some severe demands on its people.

And it could look like the 1930's all over again.

 

 

 

 

with Coleman Young, part III: OF THE CITIES VanPelt elections would range in importance with the presidential elections of "1860, in terms of determining a basic direction for the nation. I think it's just that damn critical. You have some pretty direct confrontations of philosophy emerging- the conservatism, the rugged individualistic-type theory that the cities should stand on their own. The V people in the rest of the world look at us'aghast. A hrenchman could not conceive the United States ing New York to go down the k drain; certainly , they wouldn't allow it to hapfev pen to Paris. So that's what I mean. That is why the v election .of '76 means a lot. It will determine a basic direction for American policy. We could take a long step forward or a long step backward. SUN: Do you expect to be very active in influendng that in your position as a member of the Democratie National Committee? YOUNG: Well, certainly I intend to continue my activities in the Democratie National Committee in terms of a platform and candidate. How active I can be will depend upon what the problems are in the city of Detroit. My primary responsibility is here. But I intend to be heard. SUN: Do y ou see any Democratie candidates, out of the number that are interested, that you feel might be able to meet the challenge of the cities? YOUNG: Well, at this point it's too early to say. I don't think I want to go or. the record publicly on that. The paign has hardly begun-you'd have to define an issue that luis not . even heen ioined. But as far as I've indicated to you, I think tha.; ". the principal issues are the crisis ot the citv ies, and related to tlús crisis, V of course, is an injierent racism- because this crisis of the cities appeals to the worst instincts of bigotry, etc. among so-called great "Middle America." The big question in my mind is whether this so-called "Middle America" can recognize that it can't exist.youjcnow, if the cities go down. That's why 1 raise 1860, when the question was: Could the natiori exist with the black people enslaved? Can it now exist if they are cordoned off in cities, from which suburbanites walk away, and left to fester in their own poverty- the black, the aged, the poor? SUN: Detroit is almost alone among major cities in its lack of a mass rapid transportaron system. What are the major remaining obstacles at tlüs time to the building of the proposed system deseribed in the "Moving Detroit FonvarJ" plan? COLEMAN: Well, fwould Say that there are two major obstacles. First is the problem of achieving a unifïed position. Here in the Detroit área, we thought we had achieved that, and that the arguments had been settled on rapid transit, heavy rail, as a part of an integrated mass transit system- as against express bus or commuter rail, light rail, etc. As you know, this plan was incorporated in "Moving De'Sv troit Forward." But as has happened before, as we. begin to approach the v federal government, that's where the second probk lem lies. We find that a división has brow ken out in the rear. Some of those who Nv we re part of the original unanimous commitment to heavy rail as a part of a mass transit system are now raising the question as to whether or not we couldn't do better with express buses or light rail (which is little more than street cars, and we got rid of them twenty years ago). So one of the prerequisites for our being able to get a commitment from the federal government is having unity here at home. And then precisely that lack of unity over the years is responsible for the fact that Detroit, among all the major cities, with the type of deTTsIty we have at over a million, is the only city without rapid, or heavy rail transportation. Now 1 put it that way because Los Angeles is a larger city than Detroit, but it's much more sparsely populated, scattered al] around the Pacific. But our density of population in Detroit is fourth or fifth in the nation. The two initial rapid transit lines, heavy rail lines, that we propose under Phase I- one of them will go out Gratiot all the way to Eight Mile Road, and the other would go out Woodward all the way to Eiglit Mile Road. That'sjust Phase I. It would have a potential ridership second only to thf New York Subway Historically, the major opposition in Detroit, as you know, has come from the misguided belief by the automobile interests that the development of subway systems would in some way inhibit their ability to sel) automobiles. That's not true. I thought that that had been demonstrated. Now I think another part of the problem that we have here in Detroit is critical- and it's the relationship between Detroit, which has the only transportation system in the whole southeast Michigan área, and SEMTA [Southeastern Michigan Transportation Authority] . We're the only city that has a bus system, so SEMTA then is a pretty artificial creature. v It has no buses without continuad on page 29 "Great crises produce leaders. We have more and more young people today who do not slink f rom radical change, which I feel is necessary. We have a great er potential of young leadership today than we 've had at any time in the past. " Coleman Vbung continued J'roin page 5 Detroit. We have to establish a relationship with SEMTA that will allow us to protect our interests, while at the same time not seek to domínate the organization. We've run into opposition f rom some suburbanites, many of whom have run from the city, who again, from that position beyond Eiglit Mile Road, want to literally rip off our bus system and control it. So that's a political considcration. We need to consolídate and reaffirm our unity here at home. Once we do that, I think we're in a veiy good position to get the money we need from Washington that is now included in a pot at UMTA [Urban Mass Transportation Authority] on a first come first serve basis. As I understand it, there are four metropolitan areas with applications in right now to UMTA. Those include. outside of Detroit, Miami, Buffalo, and Cincinnati. Los Angeles is not together yet. But there's no question that the Detroit metropolita!! área is as big as all three of them put together practically, and should very logically, based on its size and density, be the number one choice. But we have UMTA drawing back from heavy rail systems because of the prohibitive and increasing costs. So of the two obstacles, one is our own seeming lack of unity here. In other words, to reach an agreement and then begin to argue among ourselves-now there's no question the feds would look upon any argument and rehashing of express buses vs. subways as an excuse to give us nothing. Now there's some here who criticize my position by saying that what we ouglit to do is move in and immediately take federal monies for express buses, for some system Of commuter rails and perhaps for a people mover, and then get the expressway or rapid rail money later. But that's a misrepresentation of the federal position. They're telling us "eitheror." They say. "You take the money for express buses, for maybe a commuter rail, they probably would even give us a people mover, and postpone indefinitely your application for heavy rails- or give us an alternative study that will justify your request for heavy rail. Now this is precisely where we've been for the past fifty years. When San Francisco was building BART [Bay Area Rapid Transit] , we passed here in the city of Detroit, under the Cavanaugh administra tion, a rapid transportation system. But the arguments ensued, and while we argued, San Francisco built. While we argued, even Atlanta is planning and now has some money. Toronto is another example of how a rapid transportation system, heavy rail, combined with other factors of course, can literally transform a backwards city. SUN: What do you think fouryean in the Mayor's office is worth in the context of the long-range task of turning around the city of Detroit? How much time il you think that you would need in order ! make substantial inroads oñ the city's prohlems.' COLEMAN: Well, I thiak that you could begin the turnaround in four years. übviously, you would need some continuation in that same direction ifit's to be successful. l'd líate to put ir in a time frame. I think that a city could be substantially and concretely turned around in a period of ten years. The basic beginnings should be done, of course, in the first four. But the danger there is that ifthere's a change in direction for any reason, then you start from scratch again. The lead time is such, on any major project, that a major project that is planned today will come into fruition four and five years from now. For instance, we're talking about a rapid transportaron system, assuming that we could overeóme the two obstacles that I mentioned to you earlier, and we get the commitment from the federal government-we wouldn't possibly be able to get any commitment for any substantial money until, well, 1 set July 1 next year as the goal. And then you start engineering and planning, lt'11 be two or three years before there's any substantial construction under way, and probably 1980, or something like that, before the first littes can be drawn on Phase I. Overall, you're talking about 1990 before the whole project can be completed. And so you have to think short range and long range. You have to do enough in the short range to set a direction and give people some hope, but recognize that no basic change will take place if you're not talking about ten, fifteen, or twenty years. SUN: Do you plan on running for another term' COLEMAN: Well, 1 haven't made any plans. At this time I would say that if the climate seems right, if conditions are riglit, if people seem to be receptive to my administration, I would run. Obviously, this ought to be done, but two years is a long time to look into the future in politics. SUN: Supposing you didn 't run again, do you sec the kind of politica! leadership on the horizon that could continue the tlirust that y mi have initiated in your administration? How would you characterize that kind of leadership'.' COLEMAN: I'm a great believer that people's needs produce leaders- I don't follow the theory that history is a recounting of the deeds of great men. I think great crises produce leaders- and that leaders will emerge from the type of situations. People are perfectly capable of choosing their own leadership. And generally speaking, I think that we have more and more young people today. people who are more and more militant, and who do not slink from radical change- which I feel is necessary. But 1 think that we have developed today a greater potential erop of young leadership than we've had at any time in the past. 1 don't think it'd be a disaster if something happened to me or about a hundred other guys I can think of. It'd be a disaster for me- but that's for history. SUN : Tlicrc are perliaps more problems than niany people realiza in being nol only thefirst black administration in the city of Detroit, hut the Jïrst progressiie one in quite a whole. Your administration constitutes a definite break from the usual orderfy succession from one to another. Since blacks have never been in a position to administer tliis city or fill these mies bef ore, didyou find it difficult to find people with the required skills to assume positivas in City Hall? COLEMAN: No, in fact, I found precisely the opposite, because blacks and women-and 1 think you also know that there's a disproportionate number of women, as compared to the previous administration- because these groups have been so long denied opportunities, there's a greater backlog from which to draw. There was never any shortage of blacks with ability, there was just a shortage of blacks and women who were put in tions of responsibility. So 1 thirik that as a consequence, my administration would compare favorably witli any of the recent past, in terms of its capabilities. I think that with very few exceptions, I have outstanding people in key spots, especially because I was not inhibited by a percentage. For instance, in pólice administration, they liad fïve per cent of blacks in administrative positions-and, of course, that was a large amount- women even less, and so I had a big reservoir from which to draw, and I think I made some good choices. I think we have a very high quality administration. In fact, as we're developing, we'll be able to farm out some very expert people to other cities-and that's also one of our objectives. Most of my appointees are young- I'm by far the oldest person on the 1 lth floor. That's the way it ought to be. I make no apologies about the administration and its ability. SUN: 's very apparent at this point that there 's a renaissance ofniglit Ufe in the city of Detroit. During yow campaign, you talked about the need fora return of night lifc to the city. li'hy do you think that's coming about at this point in time, and what 's the significante of it' COLEMAN: There are a number of indications of Detroiters beginning to have a greater confidence in themselves, of rejecting the negative image with which we've been saddled. You know, all this "Murder City" business. It has been demonstrated that if you give something downtown, like the ethnic festivals, that continued on page 30 Coenian Ybung continued from page 29 deserves support, people will come downtown. And more and more people are beginning to discover that if you offer a good product, whether it's entertainment, food, etc, that attracts people, you get helped by the tact that many people outside Detroit take a much more positive attitude towards Detroit than Detroiters themsetves. Especially during the World Energy Conference, people around the world were literally amazed at the cleanliness of our streets and the safety, the warmth of our people. That begins to feed back. So I think that what we really have is a visible change in people's peroeptions of themselves, and a lot of it is psychological. Either you accept a self-defeaUst or self-hate attitude, or you move forward with some kind of confidence. And 1 believe there has been a change in attitude. There's been some concrete basis, there always is; the fact that the Renaissance is moving forward, the fact that we have been able to reduce crime in spite of the fact that we had to reduce the pólice forcé. There has been an increasing cooperation, and I think less racial friction in the city of Detroit, than there has been in any time in the recent past. All these things, I think, contribute to a better attitude. In case y ou missed the fint two parts of this interview, the SUN sdll has a few back copies available. Part I is included in our special issue on the first two years of black govcrntnent in the Motor City. For both issues, send y our name and address and 50 cents to Coleman, the SUN, P.O. Box 721 7. North End Station, Detroit, AH 48202.