by Scott McClallen
Nine years after declaring bankruptcy, the city of Detroit received more than $826.7 million in one-time federal stimulus money but still projects a deficit in fiscal year 2027.
A Citizen’s Research Council of Michigan (CRCM) report says the city’s plan to spend one-time dollars on recurring programs is unsustainable.
The Detroit City Council divided that $826.7 million into 15 categories, including:
- City services and infrastructure: $250 million.
- Jobs and education $105 million.
- Blight remediation: $95 million.
- Public safety: $50 million.
- Digital divide: $45 million.
- Parks and recreation: $41 million.
Other spending includes small businesses ($40 million), community services ($35 million), home repairs ($30 million), homelessness prevention ($30 million), expanded recreational centers ($30 million), neighborhood enhancement ($23 million), and affordable housing ($7 million),
Detroit’s fiscal year 2023 budget of $2.5 billion is balanced and a nearly 5% increase from its last budget. However, the MCRC says the city needs to expand its tax base to maintain new infrastructure, jobs, and services.
“Structurally, this creates a potential problem for the city’s future because one-time contributions do not account for service needs that will need to continue to be funded once those one-time expenditures are exhausted,” Esmat Ishag-Osman wrote. “The city’s revenue baseline will have a hard time sustaining expenditures in the future that will require more government spending to maintain new infrastructure, personnel and services.”
After Detroit’s 2013 bankruptcy, an agreement allowed private parties and the state of Michigan to pay much of the city’s pension-related debt. The city plans to resume annual contributions to its two pension funds, the General Retirement System and the Police and Fire Retirement System, in fiscal year 2024.
“While this spending has been important and necessary for the city’s growth it may prove to be unsustainable in the long run because the city will not have the revenue baseline to support the additional infrastructure, services, and personnel,” the report noted.
Detroit’s fiscal year 2023 budget aims to deposit $50 million into the city’s Rainy Day Fund.
The CRCM says Detroit must grow its tax base to increase city revenue to prepare for when one-time stimulus money is exhausted.
– – –
Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.
Photo “Detroit” by William Duggan.
