Privatization: The Motor City's Renaissance Engine


Antoine de la Mothe Cadillac never could have guessed that the small fort he established in 1701 along the strait between Lake St. Clair and Lake Erie would become home to millions of people — including people like Henry Ford, whose vision transformed the entire world.

Indeed, Detroit has nearly three hundred glorious years of history to look back upon with pride, but it is the city's future that is the focus of this issue of Michigan Privatization Report. And that future is in some doubt.

When Mayor Dennis Archer took office in 1993, public officials and media figures heralded the dawn of a "Detroit renaissance" that would dramatically improve the city and its negative image. Today, while there is some good news to report, crime and tax rates remain high and poor schools and a crumbling infrastructure continue to pose barriers to a full-fledged economic recovery.

What is needed in Detroit is nothing short of a fiscal-policy and public-management revolution; one that cuts wasteful spending and punitive taxes across the board, reduces bureaucratic regulation, and improves services for the city's residents and businesses. In short, Detroit needs a comprehensive privatization program.

Heavy burden of government

Since 1950, Detroit has lost 46 percent of its population to its suburbs, other Michigan communities, and other states. While its tax base has eroded, the size of city government has not decreased correspondingly: The number of city employees has shrunk only 30 percent. Remaining residents are left to shoulder a heavier tax burden.

The city government is in fact the second-largest employer in Detroit, behind only Detroit Public Schools. Of the city's 25 biggest employers, state, county and city governments provide a combined 40 percent of jobs. By contrast, the same government units provide only 30 percent of jobs in Chicago. This top-heavy bureaucracy has placed an enormous burden on city taxpayers.

To reverse the flow of people, jobs, and entrepreneurial talent out of the city, Detroit officials must work to dramatically reduce the crushing tax and regulatory burden on citizens and businesses. If they do not, the next recession could bring financial disaster in the absence of a state or federal bailout.

What can privatization do?

This issue of Michigan Privatization Report is divided into two major sections that detail ways Detroit can set its financial house in order: divestiture (selling city assets outright) and outsourcing (contracting out for particular services). Proposals show how officials could cut spending by more than $207 million, allowing the city to reduce onerous and economically destructive personal and corporate income taxes. The sale of certain city-owned assets also could generate an enormous windfall of $2.4 billion, and annual property tax revenues from the subsequent private ownership of Belle Isle and Cobo Arena alone could total over $15 million.

Critics of many of these proposals likely will argue they are too "radical" or that they will harm city employees.

However, these criticisms are either overblown or unfounded. First, to complain of the boldness of a measure is not to refute its efficacy. And second, while it may be true that some city employees will be adversely affected by change — in the short term, as the city's economy adjusts to better, more efficient ways — in the long term, all Detroit workers will benefit from living and working in a city that promotes and encourages economic prosperity, rather than strangling it.

Detroit has many talented and caring people who are just waiting for the city's mind-boggling maze of tax and regulatory barriers to be removed so that they can unleash their creative powers to build better lives for themselves, their families, and their neighbors.

Michigan Privatization Report is dedicated to a bold vision that will inspire the kind of financial and cultural renaissance that many have long hoped Michigan's largest city would experience. Failure to act can mean only that Detroit's people will continue to depart, taking their money and entrepreneurial and artistic talents with them.

Michael LaFaive is managing editor of Michigan Privatization Report.