The people of Flint voted to end the decade-long tenure of Mayor Woodrow Stanley Tuesday after a special recall campaign that drew national press attention and visits from activists such as Al Sharpton. The city is facing a $30-million deficit, high unemployment, and a crumbling infrastructure, and recall supporters blamed Stanley.
No mayor can escape at least some responsibility for his city's financial plight, but it is important to remember that Woodrow Stanley was not the sole actor in this particular drama. For instance, the Flint City Council blocked his attempts at privatizing refuse collection and from deploying a portion of the city pension fund surplus to pay other obligations. Exacerbating the problems faced by Flint are sky-high taxes, militant labor unions, and a city council that refuses to entertain the notion of privatization.
In addition, Moody's Investors Service, a bond rating firm, downgraded the city's debt rating to below investment grade. According to Bill Johnson of The Detroit News, that makes Flint only one of 16 cities in America with ratings below investment grade. Also, General Motors shut the doors on several plants in "Buick City," significantly reducing its work force. The auto manufacturer once employed 80,000 workers in Flint. It now employs 19,000. Some analysts have suggested that this downsizing is due in part to the hostile labor climate in Flint. These two events alone will strain the city budget because it will cost more to borrow and because there will be fewer taxes flowing into the treasury.
Under such circumstances, what is a leader to do? Mayor Stanley may have been guilty of taking tepid steps toward real financial reform, but he did attempt some reforms of city practices and spending and was soundly trounced by the city council.
In the fall of 2001, Mayor Stanley sought and received bids from private contractors to provide refuse collection and disposal in the city. He invited the city employees who collected refuse for Flint to competitively bid for the contract and even provided them with some built-in advantages to help them win the contract. Despite this edge, the bid submitted by the city employees was the third highest of the four submitted.
Armed with this information, Stanley recommended privatization of refuse collection to the Flint city council. Seeing the obvious cost disparities between public and private provision of refuse collection, the city council made a poor choice: It voted 8-0 against privatizing the services. Council members, in effect, put the interests of a few (the unionized and overstaffed city work force) ahead of the interests of the public at large who pay the bills.
The fact is, Mayor Stanley showed real courage to even attempt this privatization effort, and it was not the first time he had done so. In 1994 Stanley sought and received bids for garbage collection, and the information he received indicated that he could shave $2 million from the $6 million cost of collecting refuse though privatization. Stanley avoided privatization but used the threat of it to demand concessions from the city employees' union totaling $1.4 million. The employees even agreed to work a full eight-hour day, for which they had been getting paid, instead of going home early as they had often done in the past. Note: For more on this subject, see "Is There Gold In Garbage" in the summer 1999 edition of Michigan Privatization Report.
In addition, Stanley helped Flint avoid receivership last summer and worked out a plan with the state of Michigan for reducing the city's deficit. He even openly discussed privatization of such things as the city golf courses, building inspections, and the demolition of derelict housing.
Now that the mayor has been removed from his position, what might alternative leadership propose for solving the city's problems? This author's hunch is simple: more taxes. Flint's new mayor will take over with clear knowledge of what happened to Stanley and his efforts to shrink the size of municipal government. Since higher taxes are often the path of least resistance, they will probably be offered as the short-term solution to Flint's woes. Unfortunately, this will only make matters worse in the long run as talented people-entrepreneurs, for instance-continue to flee the city.
In a free country people easily vote with their feet, by moving to more attractive areas-areas that offer better economic opportunities, schooling, and other amenities. For two decades now, Flint has been bleeding people. From 1980 to 1990 the city lost 11.8 percent of its population, which was second only to Detroit. From 1990 to 2000 Flint lost another 11.2 percent.
One of the most basic principles of economics is incentives: If you want more of something you encourage it, if you want less of something you discourage it. Taxes are probably the number-one incentive (or disincentive) at a municipality's disposal. By increasing the tax burden of Flint residents, the city will simply make alternatives (other cities) more attractive. More people will leave, and the city will face higher deficits and debts. It's a vicious cycle in which Flint appears to be trapped.
Flint's elected officials will not be capable of making the hard choices. This is why state appointment of an Emergency Financial Manager (EFM) is likely. An EFM is typically a fiscal policy expert who is given fairly broad powers to renegotiate city union contracts, hire and fire, and even suspend certain taxes. The state can make such appointments based on criteria in Public Act 72 of 1990, otherwise known as the "Local Government Fiscal Responsibility Act." Note: For more on this act, see "Detroit Violates Uniform Budget and Accounting Act" in the summer 2001 edition of Michigan Privatization Report.
Currently, the act has been used with respect to the cities of Hamtramck and Highland Park, though Highland Park is now teetering on the edge of formal bankruptcy. A bankruptcy would allow an EFM to simply set aside current union contracts and privatize without having to negotiate with municipal employee unions. Note: For more on Hamtramck's experience with its EFM, see "When Privatization Comes to Town: What's New In Hamtramck?" in the winter 2002 edition of Michigan Privatization Report.
Flint's bottom line is anything but solid and mayoral recalls and higher taxes are not going to fix what ails the city. What is needed is leadership that can successfully negotiate spending cuts, as opposed to tax increases, and more competitive delivery of high-quality services without being removed from office. Unfortunately, it is improbable that that any of this will occur without state involvement-that is, without direct oversight in the form of an EFM. With Mayor Stanley out, this might be the perfect time for Lansing to step in.