Fiscal Distress in Metro Detroit Part II

On this chart, and throughout these posts, the higher the score a jurisdiction receives the more fiscally distressed it is, and this chart compares the City of Detroit’s fiscal distress scores to the average fiscal distress scores of the “first ring” and “outer suburb” jurisdictions for the period 2006-2009. By examining a jurisdiction in relation to an area’s urban core, one creates the distinction between first ring jurisdictions and their outer suburb counterparts.  Metro Detroit’s first ring jurisdictions are those that are geographically adjacent to the City of Detroit and are generally within five miles of the city. Such examples of first ring jurisdictions are Allen Park, Ferndale, and Warren and examples of outer suburbs are Belleville, Clinton Township, and Birmingham. First ring jurisdictions tend to have older housing stock, more demographic volatility, and relatively little room to grow.  In general, these municipalities face a statistically significant greater level of fiscal distress relative to their outer suburb counterparts; this significance has been demonstrated above 5 percent. For the period 2006-2009, Detroit’s fiscal distress score was at least 2 points higher than the average score of the first ring jurisdictions, and more than double the average score of the outer suburbs.

Although “first ring” jurisdictions tend to fare worse fiscally than their “outer suburb” counterparts, the discrepancy is more pronounced for particular indicators.  This chart reveals population loss (Indicator 1*)  to be the apparent primary driver of this discrepancy, and that nearly all first ring jurisdictions are afflicted by it. According to the information, 97.3 percent of first ring jurisdictions are affected by population loss while 39.8 percent of outer suburbs experience it. Another discrepancy is visible for Indicator 4, which focuses on the increase in general fund expenditures as a percentage of taxable valuation. In this case, 16.2 percent of first ring jurisdictions have seen an increase in this indicator while only 2.3 percent of outer suburbs have.

*The fiscal distress indicators are the following:

•Indicator 1: Population Growth

•Indicator 2: Real Taxable Value Growth

•Indicator 3: Large Real Taxable Value Decrease

•Indicator 4: General Fund Expenditures as a Percent of Taxable Value

•Indicator 5: General Fund Operating Deficits

•Indicator 6: Prior General Fund Operating Deficits

•Indicator 7: Size of General Fund Balance

•Indicator 8: Fund Deficits in Current or Previous Years

•Indicator 9: General Long-term Debt as a Percent of Taxable Value

This above chart reveals that nearly all of Metro Detroit’s “first ring” jurisdictions experienced a flat, but high, rate of population decline between 2006 and 2009. During this same time period the outer suburbs saw an increasing percentage in population loss from 2006 to 2008; that number dropped though from 2008 to 2009. This chart also suggests that Wayne County’s relatively poor performance on this indicator (Indicator 1) is due to its relatively high percentage of first ring jurisdictions compared to Oakland and Macomb counties.  Wayne County is made up of about 43 percent of first ring communities while Macomb County is made up of about 19 percent and Oakland County has about 23 percent. Therefore, Wayne County is made up of about 57 percent of outer suburb jurisdictions, Macomb County has about 81 percent and Oakland County has about 77 percent.

Declines in property value and other losses have affected jurisdictions’ real taxable valuation (Indicator 2*). But, unlike population loss, this problem deeply afflicts both “first ring” and “outer suburb” jurisdictions.  The chart above illustrates this parity, and its endurance from 2006-2009.