NCPA - National Center for Policy Analysis

DETROIT HURTS AS STATE, FEDERAL AID DWINDLES

April 9, 2007

Except for casino taxes, which are on track to hit $200 million a year, receipts from Detroit's taxes aren't growing to make up for smaller state and federal payments, a Detroit News analysis of 11 years of city budgets shows.

Consider:

  • City income taxes paid by residents and commuters, which totaled more than $337 million in 1996, dropped to $270 million in the current fiscal year.
  • Property taxes, while up from $192 million in 1996 to $241 million in the current fiscal year, are actually down when inflation is factored in.
  • Adjusted for inflation, $192 million in 1996 has the same buying power as $246 million in 2006 dollars, according to the Consumer Price Index.

Making matters worse, state and federal subsidies to Detroit are on the decline:

  • Since 1996, federal aid has ebbed and flowed; but in the current budget year, it was 17.6 percent below what Washington sent to Detroit 10 years ago.
  • State aid, likewise, has spiked and dipped -- the peak coming in 2001-02.
  • It now stands at 6.9 percent below 1996-97, but the decline is even greater when inflation is considered.
  • Not included in the calculation are school taxes and education funding.

While most of its taxes are declining, along with federal and state support, the amount the city pays in interest on money it has borrowed is going up: This year, interest due totals $77 million, a boost from $49 million a decade ago.

The one bright side in the revenue stream has been cash from the MGM Grand, MotorCity and Greektown casinos.  Beginning in July 1999, Detroit's casinos have handed the city $953 million in taxes and fees -- the equivalent cost of fire and police service to the city for two years.

Source: David Josar, "City hurts as state, federal aid dwindles," Detroit News, April 7, 2007.

 

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