Report outlines path to prosperity for Flint and other Michigan cities
posted on October 4, 2011 8:14am
EAST LANSING, Mich. – Many cities in Michigan and throughout the United States are facing severe fiscal stress. Before any city can navigate itself out of tough financial times, officials must know the full extent of the crisis facing its residents.
Michigan State University (MSU) Extension has published an in-depth financial analysis of the economic problems facing Flint, one of Michigan’s and the nation’s most storied industrial cities. Flint is used as a case study to explore how cities find themselves in financial trouble and what they can do to get out of it.
The report, “Long-Term Crisis and Systemic Failure: Taking the Fiscal Stress of America’s Older Cities Seriously,” was authored by Eric Scorsone and Nicolette Bateson, both MSU Extension specialists in state and local government.
The 95-page report explores the myriad factors that have brought Flint to the situation it faces today and explores possible solutions that could aid the city’s recovery.
“For policymakers and the public, this is vital information needed to make informed decisions. Communities are a partnership,” said Scorsone. “And this research outlines the problems so that now all sides can work together on innovative solutions. While a spotlight has been placed on city finances since the recession of 2008, many of the fiscal problems cities face have been developing for decades.”
Tom Coon, director of MSU Extension, said the report exemplifies the work Extension does throughout the state.
“This report is another excellent example of how Extension serves Michigan by helping communities to help themselves,” he said. “Dr. Scorsone and his team used Flint as the backbone of this report, but we hope we can translate this experience to communities throughout Michigan and continue to help them make sound decisions based on clear economic and social principles.”
The report involved an analysis of hundreds of financial documents and dozens of interviews with experts inside and outside of Flint. It was conducted with the full cooperation of Flint city officials, and Scorsone said the city provided nearly unlimited access to financial information and expertise within the administration.
Flint Mayor Dayne Walling said the report will be a useful resource for the city.
"The process and report have been valuable contributions to the city of Flint’s financial management and strategic reform efforts. The in-depth analysis and relevant benchmarks show a way forward for the city of Flint despite our unprecedented challenges," Walling said.
The detailed report is broken down into several sections, including examinations of the city’s current finances, its debt situation, the services it provides to the community and all the personnel costs the city faces – from wages and health care to retirement benefits and pensions.
Cities such as Flint face both short- and long-term fiscal challenges. The Great Recession, the housing crisis and state policy have severely reduced revenues. At the same time, long-term costs due to pensions and health care commitments continue to rise. This squeeze is throwing the fiscal stability of these cities into question.
“Over time, the tax base has fallen with population loss, alterations in state policy and other factors,” said Scorsone. “It is becoming clear that cities such as Flint face a significant challenge in meeting long-term promises and have few avenues to find solutions.
“Flint now faces a large accumulated deficit situation,” said Scorsone. “Some of Flint’s financial challenges date back to decisions made many years in the past when times were better. Those decisions were made without the knowledge of what Flint, or the state and national economies would look like today.”
In just a few years, Flint has gone from a surplus in the general fund to a deficit of more than $14 million. In that same time period, the city has had its biggest sources of revenue – property tax, income tax and state shared revenue – decrease by 46 percent. Flint also has the second-highest unfunded retiree benefit liability in the state at $774,606,738.
The report explores solutions as well, examining Flint’s long-term solvency and setting realistic expectations about the future of revenues, deficits, growth and more.
“The fiscal problems facing Michigan cities are not new, nor are they completely unexpected. It is going to require a cooperative and sustained effort among citizens, elected officials and employees to put them back on track,” said Scorsone.
Another key piece of the report is its extensive use of benchmarking, comparing Flint to similar cities throughout Michigan – particularly Warren, Sterling Heights, Ann Arbor, Lansing and Livonia. Benchmarking allowed the authors to identify areas where Flint has struggled most and find approaches other cities have adopted that could possibly be utilized by Flint. The benchmarking analysis focuses on expenses in several areas, compares cost growth, retirement benefit costs, crime statistics, assets and more.
“Data-informed decision making and benchmarking is critical if we are going to be able to clearly see the source of our problems and identify the best solutions,” Scorsone said.
While the benchmark comparison offers a helpful look at what similar communities are doing differently, the report also takes a look at more general solutions that Flint and other cities can use to help manage fiscal stress.
“The problems facing Flint are similar to problems facing cities throughout Michigan and the country. This also means that innovative, informed solutions can be utilized in many places facing financial difficulties,” Scorsone said.
While this report concerns Flint, with information that could be helpful to other industrial cities, future reports will offer an expanded, diverse view of fiscal challenges communities throughout the U.S. are facing.
“Cities are crucial to the economic future of any state, “Scorsone said. “Long-term fiscal challenges will continue to burden these cities and threaten their long-term viability unless everyone takes a hard look at the problems and are willing to find solutions.”
Michigan State University Extension helps people improve their lives by bringing the vast knowledge of Extension educators and specialists directly to individuals, communities and businesses. For more than 100 years, MSU Extension has worked to enhance the quality of life in Michigan, improve the health of its people and places, and create and retain jobs throughout the state.
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