Detroit Faces Continuing Deficits Even With High Revenues

A report released by the Citizens Research Council shows that Detroit has managed to overspend its annually incurred revenues every year since 2003. The amount of revenue Detroit takes in is greater than most of its counterparts in total and also per capita. Detroit takes in approximately 60 percent of the state’s revenue sharing while also collecting about $1,200 per resident in various taxes. The closest per capita tax collections among cities with greater than 50,000 residents are $750 for Ann Arbor and Dearborn. Additionally, Detroit has lost both state revenue sharing and income tax revenue every year since 2002; with total revenues over that period declining 21.8 percent.

At the same time, Fitch Ratings downgraded two bond issues for the city’s water and sewerage department. The agency had previously rated a $1.9 billion bond issue as an A rating but have now revised it to a BBB+. Also, a $1.1 billion bond issue previously was rated as A- but was dropped to BBB.

Possible solutions to the problem will not consist of increasing tax rates or expanding the tax base because there is little political backing for either action. However, the state could help play a role by drafting legislation to require businesses outside of the city limits to withhold income taxes from city residents. The role Detroit’s emergency manager will play in all of this is unclear as well as his ability to correct the city’s finances without a bankruptcy.

posted by PAA Online , Friday, April 5, 2013 9:31 AM
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