Thursday, July 10, 2014

New Emergency Manager Doesn't Understand Municipal Finance

I hate to say someone making $150,000/year in taxpayer money does not understand a key part of his job, especially when Lincoln Park residents are affected by his decisions, but it's true here.

New Emergency Manager Alan Coulter gave an interview to the News Herald on his second day on the job.   Among his observations was that he did not know how much more cost-cutting could be done, but that he thought a key was to bring crime under control and grow property values.  He reasons that the increased property values will raise the tax base and catch up to costs as time goes on.

The problem with that reasoning is the peculiar (in Michigan) cross-effects of Proposal A and the Headlee Amendment, both products of the 1990s.  Regular readers of this blog will remember this discussion from previous posts.  The point is, property tax revenues can go up by inflation or five per cent, whichever is less.  And, as property values go up, the overall tax rate goes down a fraction.  So, while property values can go up and up, tax revenues from them in Lincoln Park (and everywhere else in Michigan) are going to creep slightly higher falling further and further behind inflation each year.  This is only counteracted if you have a lot of undeveloped land, which Lincoln Park does not.

But Coulter does not understand this.  Or at least he did not on his second day on the job.  You can't blame the guy, but it is an issue that other qualified people who were not appointed would know.  Betcha this was not in his EM orientation packet from the Governor's office.  He's probably a smart guy and will learn it soon, though.  Then it will be on to Plan B.

On the other hand, Coulter should be commended for saying he was going to work with the elected mayor and council rather than just make all of the decisions himself (which he is allowed to do under the law).  Even if the advisory-committee training wheels (like in Ecorse today) are put on Lincoln Park when he leaves in 18 months or so, these are the people who will eventually have to assume responsibility for keeping the city out of further trouble down the road.

BTW, he is an appointee of the state who are paying his salary.