February 01, 2005

Keith Thomas

Part Two

    Detroit’s past two mayors have made questionable decisions on the city’s revenue generating departments. Seemingly giving money away, or poring money down the drain, these actions might have gone un-noticed if a deficit which threatens hundreds of city jobs and rising taxes was not a current reality. But instead of looking to reverse bad decision making, the policy has been to continue the hurtful programs or actions. But there is always a limit to what can be cut, eliminated or transferred to eliminate debt.

    Detroit wasted allot of money on a new computer system. DREAMS was the acronym named for the new system installed by IBM partially using software from Oracle. On the surface it looked like it would save the city millions of dollars. Instead it has cost the city tens of millions of dollars in cost over runs. Money that was never planned for the system and that was taken from other parts of the city’s budget. The often-heard complaint was that the system did not run. But some city employees who worked with the system during its implementation stated that it was mismanagement by the administration that led to the higher costs. During the implementation process as the city sat down with the computer companies who were contracted to install and setup the system, the criteria for the initial deployment was discussed. This is what was used to set the initial price. But after the process was formalized, city administration officials continued to request changes that required the computer vendor to go back and incorporate those changes into the system. This meant a higher cost per change because it was not pre-planned. Thus the administration ran up the costs of this system not because it did not work but because the mayor’s office didn’t know what it wanted or what it wanted to implement. The constant changes to the contract forced higher costs to the system. The changes were then presented to city council as required when it was simply requests from the mayor’s office. If the mayor’s office had stuck to the original contract the system would have been installed on time and within budget.

    As Dennis Archer left office during his lame duck term, he negotiated a sale of land commonly known as DEHOCO. It was land in the suburbs, which housed an unused city facility and was therefore no longer needed. Archer wanted to use this sale to balance his budget. As consideration to the then incoming mayor Kwame Kilpatrick, the city council with acceptance from Dennis Archer delayed the sale so that the new mayor could give the sale a stamp of approval. Mayor Kilpatrick did not approve the sale in time to balance the budget. The deficit had to be filled in other ways and when the land was finally sold it was for a fraction of the price. The new mayor hurt the city in his handling of the land sale. Dennis Archer hurt the city in trying to use this land sale to balance his budget. These types of transactions should be used for extra income not required income. It’s a one time sale and therefore made Kwame’s next budget appear as if the deficit was larger than the previous because Archer and then Kwame failed to make changes to the budget or city government to alleviate the problems.

    Other ways used to balance the budget consisted of using the rainy day fund. This was a fund that the city used to cover short-term expenses which could not be covered under the current budget. But this fund was depleted and it can no longer offer Detroit the savings that would offset years with a deficit or emergency financial needs. This was political slight of hand and it worked for the short term but it did not solve the problem that has now grown far bigger than it should have under Dennis Archer. But some of this is because the city at that time did not have an ethics board. While this cannot prevent discrepancies it can help to keep government honest. The city council at the time didn’t feel the need for tighter scrutiny on budgetary matters.

    The Detroit Casinos were supposed to be a windfall for the city. Originally conceived by Coleman Young, casinos were rejected four times by Detroiters at the polls until Dennis Archer became mayor and was faced with voter approval for casinos. The problem was that Archer had opposed casinos in his political career. With his new marching orders, as he put them, he designed the process to fabricate three permanent casinos for Detroit. Nearly ten years after the casino issue was passed, ground has yet to be broken on the homes for the permanent casinos. Temporary casinos are making billions in Detroit while the process drags on. Archer and the then city council crafted the process, which a judge later found to be unconstitutional. This would not have been a problem but a would be casino owner sued and lengthy litigation proceeded. The courts have yet to fully settle the matter. Prior to the suit, Archer made rash decisions to ignore his hand picked casino team and instead craft his own casino development plan. He pushed to have casinos on the riverfront. This idea proved to be costly and troublesome for the city. After lawsuits and millions of dollars the riverfront became a non-option. The casinos were left in limbo as Dennis Archer exited the process deciding not to run again as mayor. The current mayor, Kwame Kilpatrick, picked up the process and signed a permanent agreement with the three casinos for their permanent plans. But the plan calls for terms that seem unfavorable to the city. There is less money for Detroit and a longer time before a renegotiation. Archer interfered in the process and the resulting delay cost the city millions. Kilpatrick structured a deal, which hurts the city and negates any future casino benefits. What was considered a financial win for Detroit is now predicted to have indelible effect on city revenue.

    Lastly the city under the past tow mayors have been very favorable to awarding tax breaks to big business. Tax breaks in this form are a favorite by the Republicans. But all of Detroit’s recent mayors have been Democrats. In any case the two mayors had decided to award tax breaks to big corporations with the belief that only through tax breaks would it be possible to convince a company to locate in Detroit. Compuware, GM, EDS and others were awarded tax breaks which totaled hundred of millions of dollars. Additionally large scale projects like the planned renovation of the Book Cadillac Hotel was subsidized through special programs and other tax incentives. The arguments in favor of these were that the jobs moving to or created in the city would more than offset the pain caused by the tax breaks. But the jobs never materialized and in the case of the Book Hotel development has still not begun. The city has paid or is paying for services for these entities but is not getting fairly compensated in return. These types of special programs cost the city money and/ or jobs. But it would seem that after the programs the past mayors have proposed and the city council have not opposed the millions in money headed to city revenue will never materialize.

    These are just part of the financial problems Detroit is now facing. Record deficits have in part been created by the above decisions. Because of mayoral decisions Detroit did not benefit when the country expanded in the last decade. Now Detroit must look to hold onto revenue when all governments from local cities to states are experiencing deficits of their own. This year is a city election year. A mayor will be elected from a growing list of candidates. These questions must be put to the candidates in order to fix Detroit’s problems.

END of Part 2
Tomorrow Part 3, Gentrification As A Means To Destroy Viable Neighborhoods