Yesterday, Dave Bing, NBA legend and very successful businessman announced he's not seeking a second term as mayor of Detroit. The Bing news is not necessarily shocking but points to what has become, in the eyes of many, a hopeless situation. The state has taken over the city and the guy combing the books says it looks dismal.
Migration Series Jacob Lawrence
At this point it would seem some kind of bankruptcy is in the offing. But problems don't go away with such a decision. And while there will be debates over where money comes from and who pays for a bailout, the bigger tougher question is how this once great city truly recovers.
The story of Detroit must be followed closely because of its economic and moral implications. The economic part is not just what's happening at this very moment but policies and ideas that brought the former Paris of the West to the point of state takeover. The city is spending money it doesn't have and now must figure out how to live within its means even as it now must also find ways to pay its massive deficit.
$326.6 million unrestricted deficit
+$60.0 million added at end of fiscal year (June 30)
$386.0 million
In a town where citizens feel services are poor to non-existent, officials will actually have to do even less. This adds to the serious death spiral of pessimism and defiance. It's estimated that $247 million in property taxes and fees went uncollected in 2012 from more than 150,000 (47%) of owners, mostly out of defiance. There were at least 77 blocks were only a single homeowner paid their property taxes. They say "why" taxes go to pay for service that stopped a long time ago.
Then there's word city officials severely inflated property tax rates. In fact, one report says officials are leveling taxes at 10 times the selling price of properties by discarding 94% of sales made last year.
Talk about highway robbery. But this is what happens when lavish promises are made while a city, state, or country bites the hand that feeds it. Government "revenue" is mostly the function of taxes. When politicians promise money they have to know where that money is coming from. Unlike the cyclicality of the economy those promises are never adjusted lower- there is never a recession in government promises.
Almost all municipalities now facing difficulties are in trouble from promises made to government workers and are hiking taxes in order to pay them. Coupled with promises to those with lower incomes, it means higher taxes on successful people and businesses have to be levied. But higher taxes ultimately means lower return - it'
Source: http://townhall.com/columnists/charlespayne/2013/05/16/migration-from-paris-n1597931
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