Any day now Michigan Gov. Rick Snyder will appoint an emergency financial manager whose charge will be to rescue Detroit from its devastating fiscal condition.
For many years, the city has been running annual deficits and selling bonds to finance current obligations. Its labor contracts are a messy tangle involving dozens of unions and preventing needed flexibility. Its unfunded liabilities in pensions and health insurance for city workers and retirees total upwards of $14 billion.
There's no way I could cover all of the factors contributing to the dysfunction in the Motor City in one blog posting. Today, I am just going to focus on unpaid property taxes. In the near future, I'll take a stab at primitive record-keeping (pencils and paper ledgers; junky 1970s monitors tied into creaky mainframes); the corrosiveness of nepotism and cronyism; and the massive corruption that has led to federal oversight of the Detroit Water Department and Detroit Police Department.
For now, let me relate an incredible front-page story in the Feb. 21 issue of The Detroit News. The headline reads: "Half of Detroit property owners don't pay taxes." The reporters combed through thousands of pages of tax documents and found that 47 percent of the city's taxable parcels are delinquent on their 2011 tax bills, and the city failed to collect more than $246.5 million in 2011 property tax revenues.
There were 77 city blocks on which only one property owner paid taxes in 2011. A common complaint among property owners is, why should I pay property taxes when services are abysmal? I am not getting my money's worth.
Detroit has the highest property taxes among large cities nationwide and relies on assessments that are grossly inflated. Indeed, in some cases houses are assessed at more than 10 times their market price, according to research by two college professors.
The city relies disproportionately on major employers such as GM, DTE Energy, Chrysler Group, LLC, Marathon Petroleum Corp. and three casinos to pay the bulk of the property taxes. Many who remain in neighborhoods either can't pay (they're unemployed and broke) or won't pay (they are beyond cynical and disillusioned about city government).
Typically, county governments work with municipalities to collect property taxes. Wayne County, where Detroit lies, is so swamped with foreclosures, it's treasury department ignored over 40,000 delinquent properties in 2011. This is a stunning catastrophe in the making.
Rubbing salt in the Motor City's wounds, many owners of delinquent properties allow their parcels to be seized, then re-buy them at pennies on the dollar in foreclosure auctions. By doing so, they legally erase their debts.
Professors Mark Skidmore of Michigan State University and Gary Sands of Wayne State University found a few examples of homes selling for $100 that were valued at nearly $46,000.
The situation is so dire in the Motor City, it reminds me of the basket case Afghanistan. In that godforsaken nation, you can bring sophisticated technology to bear, tap the finest military minds in the world, employ top-notch intelligence, deploy the best trained and equipped soldiers in world history, and still fail. Why? because it's like nailing Jello to the wall. When you are dealing with an entity that is inherently, utterly dysfunctional (illiteracy, drug abuse, corruption, tribal warfare, miserable infrastructure, daily brutality, rampant mistrust and fear), it is damned tough to restore order, train locals to take over security, and trust that they will do the job right.
The same maladies exist in Detroit. Voter apathy, rampant illiteracy, drugs, unemployment, violent crime, apocolyptic blight, hidebound labor unions, ubiquitous corruption and an insular culture among the self-serving politicians make for a nasty, toxic stew.
Some people wonder why Snyder is taking so long to appoint an emergency manager. It's not that he doesn't appreciate the urgency or have people in mind he believes can do the job. It's that he may be having a difficult time finding someone who wants the job.
Whoever is selected, he'd better have a thick skin, the patience of Job and the wisdom of Solomon. Oh, and he'd do well to always wear a flack jacket, too.