MACKINAC ISLAND — Despite generally strong economic activity and considerable private sector investment, even cities like Grand Rapids struggle to keep up with increased demands for public services.
Grand Rapids Mayor Rosalynn Bliss, for instance, recently spoke about the city’s ongoing challenge to hire around a dozen new police officers to further bolster community policing initiatives.
Speaking as part of a panel discussion at the Grand Hotel during the Detroit Regional Chamber’s annual Mackinac Policy Conference, Bliss said that hiring new officers requires a long-term fiscal solution. The city will likely need to tap into reserve funds to pay for the officers’ salaries and benefits, which would run more than $500,000 if the city secures partial grant funding.
“That’s in Grand Rapids where we have a lot of great things happening and we have access to resources,” Bliss said. “But at the local level, we’re still wrestling with these core issues because the revenue piece continues to be a concern.”
For Bliss and other municipal leaders, the concerns stem from the state’s ongoing disinvestment in revenue sharing, a key way that local units of government in Michigan have funded public services in a state that gives them few options to boost revenue.
Grand Rapids alone has lost $92 million in operating revenue over the last 15 years as the legislature diverted funds away from municipal revenue sharing, according to Bliss, who argues that money could have been used for programs that help with crime prevention.
“I’ve always been one to have a holistic approach and recognize that all of these issues are interconnected,” Bliss told MiBiz following the panel discussion. “So making sure you have the infrastructure like street lighting — we know that streetlights are key to crime prevention. It’s investing in neighborhoods, making sure there’s capacity in neighborhoods. That helps with crime prevention.”
A HISTORIC PROBLEM
State revenue sharing with local units of government dates back to the 1930s, as MiBiz previously reported. Cuts to that funding began in the late 1990s, although it has been interspersed with some periods of minor funding increases.
For proponents of increasing revenue sharing, the issue boils down to municipalities not enjoying the same windfall as the state government in the economic recovery coming out of the Great Recession.
“Our system here for funding local government, it doesn’t track with the economy,” said Anthony Minghine, associate executive director and COO of the Michigan Municipal League (MML), an Ann Arbor-based organization that advocates on behalf of Michigan municipalities. “We have unlimited downward mobility and we saw that during the recession with dramatic declines in property values.”
Indeed, MML data show that from 2002 through 2012, state revenues increased 29 percent, while local government revenue shrank 56 percent. During that same period, Michigan experienced the slowest growth in the country in terms of growth of municipal revenue, according to a presentation during the panel discussion.
Historically speaking, about 60 percent of revenue raised by the state was distributed to local units of governments, according to a 2012 study by Citizens Research Council of Michigan, a Lansing-based nonpartisan research group.
Decreased revenue sharing — and more broadly speaking, the lack of a clear, national urban agenda — has also caught the attention of federal policymakers.
U.S. Rep. Dan Kildee, D-Flint, in recent days has touted a “Marshall Plan for cities,” referencing the large amount of money the U.S. government gave to Western Europe in the wake of World War II.
In a recent appearance on MSNBC’s “Morning Joe” talk show, Kildee said that if President Donald Trump introduces an infrastructure bill, he’d want it to include some support for Rust Belt cities. Kildee also would want assurances that the federal investment wouldn’t act to displace existing residents, such as what happened during the development of the Interstate Highway System.
“We would have to make sure that those 40 or 50 really distressed, older, industrial cities got some additional support,” Kildee said. “(A) big infusion of capital moving into infrastructure could, inadvertently, have the effect of more efficiently emptying out these older cities by creating magnets for development. I’m really fearful that places like Flint, or Buffalo, or Cleveland, or Youngstown, while they would seem to be the beneficiaries of this, could really lose. … A lot of money going into much easier to develop places could just exacerbate the problem.”
While Kildee looks at the issue of supporting cities through a federal lens, local stakeholders are also considering a wide variety of solutions.
“More bureaucracy, that’s what we need,” Dr. Joshua Sapotichne, an associate professor focused on urban policy at Michigan State University, said during a panel discussion at the Mackinac conference. “There’s almost no awareness of how … other states take this on. It’s pretty incredible. My argument for creating this awareness is a state agency or department, a cabinet-level agency that has a seat at the table when these decisions are being made.”
Sapotichne said that other states such as New York emphasise a “carrot approach” to municipal revenue sharing, while Michigan takes more of a stick.
Panelists at the Mackinac Policy Conference noted that most other states have some kind of revenue sharing system in place between state and local units of government. However, the systems vary widely from state to state.
Economist Eric Scorsone, an associate professor and founding director of the MSU Extension Center for Local Government Finance and Policy, told MiBiz in 2016 that he believes it’s extremely unlikely that revenue sharing in Michigan will return to historical highs.
“It’s not going to happen,” Scorsone said for a previous report, adding that funds were diverted to take care of crises like Flint’s water and the Detroit Public Schools. “(Full revenue sharing is) not feasible.”
EQUIPPING CITIES FOR GROWTH
Nonetheless, municipal stakeholders view other policies at the state level as contributing to the problem of decreasing local revenues.
“Term limits are a major issue,” Bliss said in the panel discussion, receiving a round of applause from business and political leaders. “I’m a big believer that if you get great people around the table that care about the same things, you can come up with solutions to problems. The problem with term limits is you don’t have time to build those relationships that are absolutely key to solving problems. We’ve got to be talking about the negative impact term limits have had on our state and on local units of government.”
Bliss herself is restricted to a maximum of two terms as mayor of Grand Rapids after residents in 2014 narrowly approved term limits for the office and the city commission.
While stakeholders such as Bliss and Sapotichne say a variety of policy fixes could alleviate some of the concerns held by local government officials, other experts see the problem as more structural in nature.
To Minghine with the MML, Michigan’s cities aren’t properly equipped to attract more people.
“What we haven’t had is true growth in this state. We’ve added a few jobs here and there, but if you compare us on a relative base across the whole country, we’re losing ground,” Minghine said, adding as proof that Michigan’s congressional delegation continues to shrink. “We won’t be competitive until we’re attracting people back to Michigan, and we’re not going to be able to do that until we have strong, vibrant communities.”