Guest commentary: Detroit needs new tools for future finances

Detroit 's financial situation is a mess that has been in the making for decades. We can't blame one event or one mayoral or gubernatorial administration for the shameful fiscal situation of Michigan's largest city.

At this point, the main questions dominating the discussion are: Will Gov. Rick Snyder appoint an emergency manager and does Detroit really need one? I am opposed to an emergency manager being imposed on my city. However, I also realize that no matter the outcome, the problems that have caused this crisis will remain.

Detroit will still have a gaping revenue hole and will quickly be in a deficit once again after the administration, an emergency manager or bankruptcy judge balances the city's books. The more important question that needs to be answered is how Detroit will change its revenue stream to successfully avoid future budget deficits.

In the past 40 years, Detroit lost more than half of its businesses, and therefore lost more than half of its job providers and a significant tax base. The old model of doing business in the city will not bring in new businesses.

Furthermore, the value of Detroit's homes has dropped by 87% in the past decade, according to figures by the consulting firm McKinsey & Co. Along with reduced revenue sharing from the state, these two hard factors have crippled the city's budget.

While all communities have seen a loss in property value, and many have predicted that we have hit bottom on home values, it will take Detroit longer than most other cities to see home values rebound. And due to such factors as the high cost of auto insurance, there is less incentive for working families to move back into Detroit.

Detroit can no longer depend on the old model of property taxes, income taxes and revenue sharing to succeed. The city needs a new revenue solution. Whether that new revenue is a sales tax on services, a city sales tax or a different tax, Detroiters need new tools to succeed in a new and globally competitive economic environment.

I know some critics will say higher taxes will only drive away residents and businesses. But consider cities such as Boston, Chicago, Denver, Los Angeles, New York, San Francisco and Seattle. We don't immediately associate them with being high-tax cities, even though they are. We think of them as destination cities that people want to move to. And they are also urban areas that are able to provide city services while attracting tourists, new businesses and growing their population base.

Snyder and many of our suburban neighbors have said Detroit needs to be successful for Michigan to thrive. If they really believe that, then we need to make sure Detroit has the tools not only to dig itself out of its fiscal hole, but to turn itself into a destination city.

A financially stable city is a powerful asset in making metro Detroit the great community we all know it has the capacity to become.

Virgil Smith, a Democrat from Detroit, represents the 4th District in the Michigan Senate.

Share with Facebook | Share with Twitter