Looking to Pontiac for Detroit Solutions

Reason Foundation roundtable discussion

(Editor’s note: The following are prepared remarks by Michael LaFaive, director of the Morey Fiscal Policy Initiative, presented at the Reason Foundation’s “Revitalizing Detroit After Bankruptcy” roundtable discussion held at the Crowne Plaza Pontchartrain in Detroit on Feb. 20, 2014.)

Thank you and good morning. Professor Savas has mentioned a number of cities that have reformed themselves with bold public-private partnerships, asset sales and competitive contracting. The city he did not mention, however, may be the best example: Pontiac. Five years ago today a financial emergency was declared by the state and the first of three emergency managers was appointed to remake the city’s finances.

Today the city’s general fund budget is 43.5 percent smaller than it was in 2009. Since fiscal 2009 city employment has fallen from 495 to a proposed 20, excluding court employees. In other words, the three EMs have effectively turned Pontiac into a “contract city,” whereby valuable services are performed by contractors and not more expensive city employees.

For example, police and fire services are now provided by Oakland County and Waterford Township, respectively, and together save the city $5.8 million per year. These savings were accomplished while services appear to have improved.

There are now 25 more officers patrolling Pontiac streets than at the low point of the city’s staffing in the past five years. Response times have dropped from over 76 minutes in 2010 to 6 minutes, 22 seconds in 2013. The Oakland Press reports that since the county took over, homicides are down 22 percent, robberies are down 25 percent and assaults have dropped 38 percent.

In Waterford Township, fire response times have actually fallen (by 15 seconds or about 3.3 percent) despite very public fears that the opposite might occur, according to Fire Chief Ron Spears. The township has also invested in Pontiac’s fire-fighting infrastructure and increased fire prevention and investigation visits to local businesses.

The city golf course was sold for $700,000 last year and the new owner is working hard to upgrade it, investing his own money to improve the clubhouse and purchase better grass maintenance equipment along with 65 brand new golf carts for patrons. As a bonus the property is now on the city’s tax rolls. The city also sold off more than six of its parking facilities and one of them — Lot 9 — has already seen about $250,000 in new investment for resurfacing, according to the city administrator. Again, all of these are now tax paying as opposed to tax taking properties.

Emergency Manager Lou Schimmel monetized the city’s water and sewer system by selling excess capacity. The initial transaction was worth about $55 million. The money was used to pay off bonds that will save $2 million in interest payments from the city’s GF annually. It allowed them to deposit $4.2 million in the city’s police and fire health retirement fund that had been neglected in previous years and avoid a court-ordered property tax increase. Lastly, the sale of the excess capacity will allow the city to avoid rate increases to make necessary capital improvements.

If Detroit truly wants its long awaited Renaissance, it needs to adopt a game changing policy strategy moving forward. The city can start by looking north to Pontiac.