Tax breaks figure in the Detroit deficit discussion

[Charles Brown <cbrown@xxxxxxxxxxxxxxxxx>]

>From the Michigan Citizen

EDITORIAL: Tax breaks figure in the deficit discussion

http://www.michigancitizen.com/


Missing from the discussion of city deficits is the question of tax breaks.
How much money is the city losing in subsidies to corporations?

We hear a lot about proposed city layoffs, a bond issue to replenish the
pension fund, the raise council members gave themselves, payrolls padded
with relatives of the mayor; but nothing is said about the cost to the city
of corporate tax breaks.

Promising to create jobs, major businesses routinely apply for a 12-year, 50
percent reduction of their property taxes on a new plant or new equipment.
We do not know of any situation where the city turned down any company
asking for the break.

In addition, the city lacks any mechanism to track the doings of such
blessed companies. Can anyone at the city provide the actual number of new
jobs created, how many employees are simply relocated from the former
company location or the actual value of the company's investment to the
city.

If a municipality drags its feet on providing tax breaks and subsidies,
corporations pit one city against another, vowing to go where tax breaks and
subsidies will be forthcoming.

We urge council members and the administration to take a long, hard look at
what amount the city is sacrificing in the tax break game. The public is
being asked to bear the burden of drastic cost-cutting measures by the city:
job losses, service reductions and tax increases.

Instead of looking solely at punishing private citizens, we say the city has
an obligation to make the paying of taxes an equal opportunity game. Let's
begin the deficit reduction effort with all of us, corporate and private
citizens, paying our fair share - the going rate



City layoffs coming

Alternate solutions: Cut contractors, Prop A; introduce single-payer health
care

By Diane Bukowski
The Michigan Citizen

DETROIT - As 2005 opens, Mayor Kwame Kilpatrick is squeezing the city
council, threatening the immediate layoffs of 2,000 to 3,000 city workers if
the council does not OK the borrowing of $1.8 billion in pension bonds.

Kilpatrick and Chief Financial Officer Sean Werdlow claim the city is facing
a $214 million deficit next year and must plug an $80 million budget hole
this year with the bonds. They would cover the city's obligations to the
pension funds for the next 14 years.

In his April budget address, however, Kilpatrick asked for only $80 million
in pension bonds as a "one-time deal." Werdlow told the Council in June of
the pending deficit, but said lay-offs would be a "last resort."

Council President Maryann Mahaffey and members Kenneth Cockrel Jr., Barbara
Rose Collins, Sharon McPhail and Joann Watson have requested that the mayor
meet with them to resolve the crisis.

"The city's grave financial position and the increasing challenges posed by
job losses, big population decline and mounting health care costs require a
collaborative, teamwork approach inclusive of the executive and the
legislative branch . . ." reads a letter they sent Dec. 17.

In November, the council deadlocked on ordinances facilitating the $1.8
billion bond issue, expressing doubts about the need to increase the city's
debt, which this year tops $7 billion.

"Werdlow sat at the table and told us they would lay off anyway, bonds or
not," said McPhail, who sits on the police and fire retirement board. "The
bond proposal is a terrible idea. Detroit is better funded than most other
pension systems, 97 percent. The market is very unstable. We could end up
paying double for the bonds and our pension obligations, as has happened in
other cities."

She added, "This bond issue would produce millions in fees for top law firms
and banks, and campaign contributions for Kilpatrick."

Instead, she said, the city should "put a freeze on hiring and purchasing,
lay off people the mayor put on the payroll, stop moving departments outside
of the Coleman Young Municipal Center, and cancel private contracts costing
us more than city workers."

Watson said she met with workers at the American Federation of State, County
and Municipal Employees hall regarding the budget crisis.

"They told me the city has to cut out spending on expensive private
contractors," said Watson. "We've been battling on council all year to stop
many of these contracts."

According to Kilpatrick, the city has reduced contractual services by $20
million, or 9 percent, but city workers said more is needed.

Leamon Wilson is president of AFSCME Local 312, representing workers in the
Detroit Department of Transportation, and chairs the 17 City of Detroit
AFSCME Locals.

"The other day I went to our main shop after the snowstorm and watched a
contractor plowing the lot while our trucks with large snow plows sat idle,"
Wilson said. "Last year, the city paid contractors three times over what
they originally said it would cost to plow the streets."

He added, "It makes me believe that you're not really broke when D-DOT says
they want one foreman for every six workers. Our contract expires in June,
and the city has always said they were broke in a contract year, to pressure
us."

John Riehl, president of AFSCME Local 207, representing water and lighting
workers, said, "The city just wasted $40 million in Sterling Heights because
of water main breaks that happened because the city replaced our inspectors
with private contractors."

Riehl pointed to the half-billion dollar contract given to a private
consortium, Wastewater Partners, and the Infrastructure Management Group
contract, both aimed at replacing city workers with costlier alternatives.

In his budget address, Kilpatrick said another cause of the city's budget
problems is Proposal A, which put a cap on property taxes.

"Since 1994, the value of property in Detroit has more than doubled to over
$12 billion," Kilpatrick said. "But because of Proposal A, the state says
the taxable value is less than $8 billion. If Proposal A was not in effect .
. . we would have an additional $100 million."

School administrators across Michigan have mounted a campaign to revise
Proposal A, which has also drastically reduced state education payments. The
campaign may produce results this year.

An independent city auditor noted last year that a drop in the city's
property tax collections was additionally due to the discontinuance of the
2002 tax amnesty program.

Kilpatrick also cited a 22-percent increase in healthcare and pension
benefit payments for city workers as a primary cause of the crisis.

Marilyn Mullane, head of Michigan Legal Services, which earlier campaigned
for a single-payer health insurance program in Michigan, said her agency is
meeting with city officials to propose such a cost-saving plan for Detroit.

E-mail: dbukowski@xxxxxxxxxxxxxxxxxxx