Mayor's last-ditch effort to save Detroit would privatize 88,000 streetlights

Since assuming office as mayor of Detroit two years ago, Dave Bing has challenged the city council and union leadership, saying the city is broke and needs sacrifice on all levels of the private and public sectors to prevent insolvency.

Mayor Bing is now bringing the message to the people. He appeared on local television Wednesday to announce several ways the city can plug the $45 million cash shortfall anticipated next year. If left unresolved, the financial crisis could result in a state-ordered emergency takeover.

Among Bing’s proposals:

• Concessions by the city’s 48 unions for 10 percent pay cuts and reductions in health-care and pension benefits, as well as overtime. Police and firefighters will also face similar pay cuts.
• Concessions by city retirees to voluntarily reduce medical and pension benefits.
• Layoffs affecting 1,000 city employees.
• Recouping the $220 million the state owes Detroit after failing to keep a 1998 promise that guaranteed Detroit revenue sharing in exchange for lowering the income tax rate.
• Raising corporate taxes by less than 1 percent.
• Lowering city contractor pay by 10 percent.

“Detroit has had, for a long time, some pretty severe economic difficulties and Mayor Bing recognizes that those have to be fixed somehow. The politics of it, of course, are the real trick,” says Charles Ballard, an economist at Michigan State University in East Lansing.

Bing did not give specifics about how to make any of his proposals a reality. Making them happen would involve more negotiations with the city council and unions, both of which have shared a contentious history with the mayor’s office. Unions say they’ve sacrificed enough and the city is not doing enough to cut back redundancy in its own ranks.

Perhaps the two most drastic steps in Bing’s plan, however, are part of a controversial plan to outsource management of the city bus operation and lighting system. Both services have struggled for decades and suffer from aging infrastructure and maintenance costs the city no can longer afford, Bing said.

“Like a car or a house, if you don’t pay to maintain it, eventually it breaks down and falls apart,” he said of the city’s beleaguered lighting system.

Almost 20 percent of Detroit’s 88,000 lights do not work; in some neighborhoods 50 percent of the lights are broken. Lighting costs the city nearly $11 million each year. About $300 million in new infrastructure and maintenance is needed to overhaul the lights.

Then there are the buses, which Bing said cost taxpayers almost $100 million each year. Outsourcing management of the city’s transportation department requires city council approval by Dec. 1.

Bing’s plan to outsource the services is the equivalent of a “Hail Mary” pass in football, says Mark Skidmore, another economist at Michigan State University. But privatization could potentially “get some efficiencies for the city and offload the expense.”

A more reliable approach to generating money would be to get foreclosed property back in private hands. “Because of abatement and tax foreclosures, there are vast chunks of the city that just aren’t making the same level of tax contribution,” he says.

Privatization is a murky option because city councils can be pressured to sign deals that prove detrimental in the long run, says Evan McKenzie, a political scientist at the University of Illinois at Chicago.

“Inevitably the details are buried, and the details are everything,” Professor McKenzie says.

He points to the deal former Chicago Mayor Richard M. Daley made with Morgan Stanley to sell off the city’s 36,000 parking meters. The city council was given little time to review the contract, which promised the city an immediate payment of $1.15 billion in exchange for owning and operating the parking meters until 2083.

It was only in the deal’s wake that the public learned the meters were grossly undervalued. Today, the city does not benefit from or control the continued rate hikes imposed by Morgan Stanley, and the situation is considered one of the greatest blunders of Mr. Daley’s legacy.

McKenzie warns that Detroit should learn the lesson from Chicago and “not grasp at straws.” “The history of these short-term fixes is very dismal,” he says. “If you privatize a previous public function, people no longer have political control over it. Then you have a monopoly.”