Squandered opportunities leave Detroit isolated

Tax-base sharing

Orfield has studied the relationship between central cities and their suburbs and documented the problems associated with fragmentation, segregation, and sprawl. In Minnesota, he was instrumental in designing a system of tax-base sharing in the Twin Cities in the early 1970s.

Tax-base sharing has long been thought of as a way to reduce the disparities between a city and its suburbs. It can take several forms, but the Twin Cities system is often held up as a model. In Minneapolis-St. Paul, the 188 municipalities in the seven counties that make up the Twin Cities region pool 40 percent of the growth in revenue in its commercial-industrial tax base and redistribute the revenue based on population and property values.

According to Orfield, this has allowed the Twin Cities to avoid many of the problems that plague Detroit and other industrial cities, because new growth in one part of the region can subsidize other parts, depending on need.

Detroit’s tax-base had already fallen significantly by 1970, while the suburbs were experiencing strong growth. In his 1976 State of the State address, then-Governor Milliken proposed that the Detroit area adopt a similar model. “There was a recognition that the unequal patterns of growth were going to continue unless something was changed,” said Robert Kleine, who served as the director of the Office of Revenue and Tax Analysis for the State of Michigan under Milliken.

But Milliken’s plan was never even taken up in the state legislature. According to Kleine, suburban municipalities were deeply resistant to the idea. He acknowledged, too, that no one advocated strongly on behalf of the proposal from the city, and that Milliken did not press the issue in the face of that resistance and apathy.

“A more vibrant, vital city”

Had such a system been adopted, however, “What would have happened of course is that all the growth in the region, which was mainly in [neighboring] Oakland and Macomb Counties, would have been shared with the City of Detroit,” Kleine said. “That would have meant somewhat less revenue for some of the suburbs, but they would have done just fine. But Detroit would have had a substantial amount of additional revenue.”

As Remapping Debate has reported, the decline in Detroit’s tax base represents the greatest challenge to the city’s ability to sustain itself. It has responded to the loss in revenue by cutting services down to bare-bones and by raising taxes to the highest levels in the state. Kleine said that a regional tax-base sharing system would have mitigated the problem’s Detroit has faced with revenue.

Additionally, Orfield added, a fragmented system of taxation encourages individual municipalities to compete with one another by lowering taxes. “That competition has been very destructive in Detroit, because the city has had to keep its tax rates high to maintain services, while the suburbs have been able to draw people and investment out of the city by lowering taxes,” a process that encourages sprawl.

“If everyone knew that some of their new revenue was going to go back into Detroit,” Orfield said, “there would not have been the same incentive to compete with one another.” Instead, “the incentive would have been to compete together, as a region.”

“If we had gotten this done, Detroit would have been able to maintain adequate services and lower tax rates,” Kleine said. “It would have mitigated sprawl and flight. Detroit would almost certainly be a more vital, vibrant city than it is today.”

Re-imagining Detroit

While it is difficult to determine exactly how Detroit would look today had these measures been implemented, experts agree that the city’s financial and social problems would likely be much less severe.

“Right now, everybody is talking about how to stop the bleeding,” said Wayne State’s John Mogk. “That would be so much easier if regionalism had been adopted and followed in the ’70s. The patient would not be nearly as sick as it is today.”

It’s possible that, even if the missed opportunities of the 1970s had been taken advantage of, policy makers would not have implemented them in such a way as to be fully effective. And some of the processes that helped shape Detroit’s current plight may have continued. The movement of Detroit’s industrial base to other parts of the country, for example, would have been largely immune to regional solutions.

Still, Mogk said, if a combination of regional governance, tax-base sharing, and desegregation had been pursued by city, state, and suburban officials, it’s possible that Detroit could have decreased its reliance on the auto industry, which would have been beneficial not only for the city but for the suburbs and the state as a whole.

If the outward sprawl of the metro area had been reduced, “You probably wouldn’t have a thirty percent vacancy rate in the city. A lot of the neighborhoods that were stable then might still be there today,” Mogk said.

“There would probably be much less racial inequality today,” said Joe Darden of Michigan State. “You might not think of this huge racial distinction between the city and the suburbs.”

And, had it been able to maintain a steady revenue base, services in the city might not have decreased to their current, largely inadequate level, Kleine said. “The city would have had a much easier time attracting new investment and new residents because it would be able to provide them with a much higher quality of life than Detroiters have now.”

“I can’t think of a problem that Detroit is currently facing that would not have been solved, or at least very reduced, by these regional proposals,” Darden said. “The taxes, the segregation, the poverty, the school system — all of it.”

“When we talk about Detroit, we could be talking about a success story, a city that experienced all of these challenges and came out of them intact,” he went on. “Instead, we talk about an absolute failure of public policy.”