Guest Blogger: Erik Tungate

Erik Tungate is the city manager of the city of Oak Park, an inner-ring Detroit suburb with approximately 30,000 residents. His major areas of focus include proper financial management, public safety, and economic development. Prior to this, he served as acting city manager for the city of Hamtramck.

He has also served as a development officer for Wayne County’s Economic Development Growth Engine (EDGE) and as the national business project manager at the Michigan Economic Development Corporation (MEDC). Before his career in economic development, he worked in the financial services and automotive industries.

Tungate received a bachelor's degree from Western Michigan University in 1999 and an M.B.A. from Wayne State University in 2001.

He is a vice president and board member of the Michigan Suburbs Alliance, and president and board member of the Hamtramck Economic Development Corporation and the Hamtramck Brownfield Redevelopment Authority. He also sits on the boards of Transportation Riders United (TRU), the Southeast Michigan Council of Governments (SEMCOG), and the Brush Park Citizens' District Council in the Brush Park neighborhood of the city of Detroit, where he resides.

Why Wall Street profits don't trickle down to local government, and what we can do

There is no hiding that over the last several years local government has been under extreme financial stress.  As much as we are told otherwise, it is not due to corruption, poor decisions of local elected officials (though there have been many), or unions, or greed.  Nope, the basic funding structure of local government is broken and while I would welcome the opportunity to point a finger at one culpable, undeniable entity, there are several different players and factors seemingly beyond our control at the root of all of this – most notably the state and federal government.

Taxable value decreases, state revenue sharing reductions, and rising legacy costs are hitting us big, but they are just the most recent parts of a bigger problem ailing our local governments. While we were busy keeping our heads above water, and biting and scratching to provide basic local services, a larger, more definitive economic ideology took hold and brought us down the inevitable path we are now on.  Can anyone say supply-side economics?  Yes, we have preeminently subscribed to the principles of supply-side economics and it's been going strong since 1980. (I was 5 years old.)  Supply-side economics is the school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services.  This is done by lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing regulation.  

The idea is simple; corporations profit and we (local governments included) get the benefit of the trickle down.  Exhibit A – the city of Detroit, a city that I love and where I have resided for the last several years – when contrasted with the record averages on Wall Street, cannot afford to provide the most basic city services when the captains of modern industry are living high on the hog.  There is no doubt that shared corporate responsibility, much like the jobs that used to be available here, has been shifted overseas.  We willingly packed their bags, bought their ticket, hugged them and waved goodbye.  The fact is there is no inter-connectivity between profits on Wall Street and those of us fighting the good fight here at the local government level.  The success and failure of local government is a symptomatic effigy of factors under the control of others with priorities that do not match up.  

Among other things, the fear that companies would move jobs overseas if they did not get subsidies in the United States has caused billions in otherwise guaranteed tax revenues to be depleted.

So, here it is, for better or worse, we are tied to this economic ideology.  That battle was waged and decided long before we entered this modern crisis.

The question is, now what?

For starters, we should move beyond these economic ideological debates and determine how we should solidify our local governments who provide the first-line assistance our residents need.  

How can the most culpable entities like the state and federal governments more directly aid local governments?  The answer is simple: invest in local infrastructure including mass transit, roads and bridges, and greenways.  If done right, certain forms of public infrastructure almost always provides a return on investment – the very thing the supply siders demand of their own "private sector" economic principles.  Take mass transit – the light rail line on Woodward Avenue in downtown and midtown Detroit is slated to generate somewhere in the range of a 5:1 return on investment.  That means for every dollar the public spends, there is five times the amount invested in economic activity and development around it.

If I said you could make that same return for an investment in the private sector, who would not jump at the chance?  You cannot say it is different for public projects because there is more blatant risk and corruption.  That exists everywhere.  So why is there hesitation when it comes to public infrastructure?

It is high time we change our views on public infrastructure investment and embrace a sustainable plan to do so.  Kudos to the state legislature for getting us the Regional Transit Authority we so desperately needed.  It is now time to give it the support it requires to succeed.  Let us consider all options, including raising our own taxes if necessary to put the Metropolitan Detroit region on par with its counterparts in other large metropolitan areas across the country.  

If we are going to sustain the first-line assistance our local units of government provide, we need to make sure they have the allure to attract new business and residents.   If we are successful, we can count on improved taxable values and more stable local budgets.  That is something we can all agree to.
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