New Study Analyzes Fiscal Health of Six Major U.S. Urban Centers

Posted: September 20, 2013 at 9:00 am, Last Updated: September 23, 2013 at 7:02 am

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By Buzz McClain

Is Detroit contagious? Is the bankruptcy of what was once the third-largest city in America a disastrous anomaly or the beginning of a trend that could spread throughout the country?

An unprecedented data study of six American cities to be released September 20 by George Mason University’s State and Local Government Leadership Center (SLGLC) and supported by the John D. and Catherine T. MacArthur Foundation takes an in-depth look at the fiscal health of a half-dozen major urban centers to see if the crisis in Detroit is contained — or spreading.

The Great Challenge Facing America’s Cities, which includes reports on Detroit, Chicago, San Bernardino (California), Pittsburgh, Providence (Rhode Island) and Baltimore, will be released at the Michigan Municipal League Convention in Detroit.

Mason public and international affairs professor Frank Shafroth is the principal investigator on the project. Shafroth is director of the SLGLC and an expert on municipal bankruptcies.

citiesHighlights from the reports follow.

Detroit: “Detroit cannot stay on its current path and survive, and now its fate will be determined in a federal court, where the city’s financing and operations must be completely restructured. Indeed, its fiscal plight is so perilous that one expert asks: ‘How could such an economic powerhouse, a uniquely American city, so utterly collapse?’ The task for the new leaders who will replace the old is to heed the lessons of the past and break the cycle of self-deception and inaction — or risk living the municipal nightmare all over again.”

Chicago: “Chicago is fortunate. It has demonstrated recovery from the first decade of the new century. There appears to be a strong consensus that Mayor [Rahm] Emanuel understands the shape of the fiscal challenge and that he has assembled and leads an exceptionally competent team. It is clear that the city, not just with the Civic Federation, but with other fiscal experts, benefits from wide and deep support in the business community. It has a strong hand at the helm, although with apprehensions as to the duration of commitment. Now the city awaits more recent budget and fiscal reports — or, as one friend of the city noted: ‘The liquidity position will be a precursor, a better guide than the fund balance….’”

San Bernardino: In short, the California town was “the perfect storm” of a fiscal crisis. But overcoming its problems will be difficult, as little has changed since bankruptcy proceedings began. “The fact then remains that decisions necessary to put the city on a sustainable financial path rest with the same elected officials, the same institutional structures and the same political culture that made decision-making so difficult in the recent past.”

Pittsburgh: “While the city continues to find its fiscal footing, the problems it once faced have rippled out to the suburbs, part of a broader suburbanization of poverty detailed in a national study by the Brookings Institution. Looking even more broadly, the struggles of smaller communities in southwestern Pennsylvania raise serious questions about their long-term viability, with few opportunities for economic rejuvenation given limited access to transit and no resources for investment. On the other hand, there is the Pittsburgh that remains an admirable example of deindustrialization, a city whose civic leaders were successful in cleaning up its smoke-filled skies and polluted rivers, and pivoting the economy away from dying blue-collar industries towards tech, research and healthcare.”

Providence: A developer offered to renovate a public landmark building—which looks like the Daily Planet from the vintage Superman television show—but with major financial considerations and tax relief. “In many ways, the Superman Building illustrates the crossroads at which Providence finds itself: a major private-sector employer leaves, a downtown building empty, a choice between the present and the future. While city residents did not see services interrupted over the past years, the crisis has been felt in other ways. Roads are in dire need of deferred maintenance—a $140 million need, according to the city. A fall 2012 poll found that voters gave fairly high marks to city services through the recession, but nearly 60 percent were dissatisfied with the upkeep of roads and 38 percent were dissatisfied with the quality of public schools (voters were split there). Meanwhile, despite the landmark pension victories won by the [Mayor] Taveras administration, the funding level is still below 40 percent. The city will have to devote 15 percent of its general fund to retirement-related programs going forward through 2016 (the latest year which has been projected). This leaves a shrinking share of money in the budget for the current generation of taxpayers.”

Baltimore: “A confluence of a number of factors that work in concert with each other have contributed to Baltimore’s fiscal resiliency. These include the primary role that counties play in the structure of local government in Maryland, the state assumption of the financing and operation of key functions, and the equalizing impact of state aid. Of course, local institutions also play at least an equally important role—in particular, the responsibility and authority granted to the Board of Estimates by the city charter to streamline decision-making. Lastly, a decades-long tradition of competent and trusted professionals in budgeting and financial administration combined with a political culture where mayors and other elected officials make budgetary and policy choices based on the advice and guidance of those professionals contributes significantly to Baltimore’s fiscal resiliency.”

For more information, contact Shafroth at fshafrot@gmu.edu.

Write to Buzz McClain at bmcclai2@gmu.edu

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