Over at Salon, David Sirota has asked-and-answered a few questions concerning Detroit's bankruptcy proceedings...
1. Why are Detroit officials simultaneously moving to cut municipal workers’ pensions while spending hundreds of millions of dollars on a new professional hockey stadium?
2. Why are municipal employees being blamed for Detroit’s woes when data prove they had little to do with the city’s fiscal problems?
3. If Michigan is so strapped for cash, why is Gov. Snyder almost doubling the salaries of his top officials?
Worthwhile read, to which I'd like to contribute a few thoughts of my own.
Re: question 1. The Joe (Joe Louis Arena, where the Wings play hockey) is an old and deteriorating facility. There's no doubt that a new or refurbished facility is needed...but it's held together for this long, so it could go a few more years. So why the move now?
Wings games do bring in money to the downtown area; But the deal will use tax dollars that would otherwise be taken from other areas:
In December, Michigan’s legislature revived the ability of the development authority to take a portion of school-tax revenue generated by property on 615 downtown acres.
The money otherwise would have reverted to public schools and the state’s school-aid fund, according to a legislative analysis. The state will reimburse the district to make up shortfalls, just as it did before 2011, an authority spokesman said.
However, the state still must take money from programs to make up for cash benefiting the Iliches, said Shikha Dalmia, a senior analyst for the Los Angeles-based Reason Foundation.
“The left should be crying bloody murder,” Dalmia said. “Why are you diverting money that’s meant for Detroit school children to this guy’s pocket? And the right should be crying about crony capitalism.
and
studies show that the deal will likely fail to provide the economic benefits that Snyder and supporters of the new stadium are promising...
(continued below the fold)
But it isn’t just progressives who oppose publicly financed stadiums. “Public funding for sports stadiums has been found, in dozens of studies over several decades, to fall short of its promised benefits and to cost taxpayers more than expected,” Bloomberg’s editors write, noting that a study by Long “found that public subsidies for stadiums are typically 40 percent more expensive for taxpayers than initially advertised.”
The notoriously conservative Heartland Institute, whose mission is to “discover, develop and promote free-market solutions to social and economic problems,” agrees. “Sports stadium subsidies impose a huge cost to society,” writes Heartland’s president Joseph Bast. “Unearned rent being held onto by professional sports franchises, made possible largely by public subsidies for new sports stadiums and arenas, is a huge injustice and deadweight loss to the nation.”
Closer to Detroit, the Midland, Michigan-based Mackinac Center for Public Policy, another self-described free-market think tank, has also repeatedly railed against publicly financed stadium schemes. In blog post, Mackinac research assistant Jarrett Skorup writes:
Despite statements from legislators (‘8,300 construction jobs’), local ‘economic development officers’ (‘makes good business sense’) and business leaders involved in the deal (‘$1.8 billion in economic impact’), it is important to remember that there are almost no economic studies that find that stadium deals via direct subsidies or tax incentives are a good deal for taxpayers.
The reason the new stadium is deal is going forward is that it's a payday for contractors and businesses who would build the new facility and a gift that keeps on giving for various investors, including the Illich family, which owns the Wings and would own part of the new facility. Hell,
even the bankruptcy itself is a nice payday for some:
Even as it wrestles with the $18 billion of debt that has overwhelmed it, Detroit has already been billed more than $19.1 million by firms hired to sort through that debt, search for ways to restructure it, and now guide the city through court. That does not include more costs that the city is expected to bear for the support staff for its state-appointed emergency manager, and for another set of lawyers and consultants to represent city retirees.
Re: question 2. Democratic politicians and 'greedy' pensioners make for a better right-wing narrative than, "once businesses left Detroit, the tax base shrank and the city's financial state made it easy to take advantage of." It's simple and serves a greater purpose...like
the narrative pushed for Greece, except on a smaller scale:
The important thing is not to let the discussion get hijacked, Greek-style. There are influential people out there who would like you to believe that Detroit’s demise is fundamentally a tale of fiscal irresponsibility and/or greedy public employees. It isn’t. For the most part, it’s just one of those things that happens now and then in an ever-changing economy.
As Krugman states, the reality (and broader implications of that reality) are
complex and do not necessarily reflect well on conservative ideology.
Re: question 3. It's bad optics, sure, but the 'greedy government employee' narrative doesn't extend to top aides and officials, usually. Not that there's nothing to see here, move on, but chances are that there's no recourse...or even less opportunity for recourse than before.