Service Solvency: Ability of Michigan Cities to Provide an Adequate Level of Public ServicesDOWNLOAD FILE
June 19, 2017 - Author: Robert Kleine and Mary Schulz, MSU Extension Center for Local Government Finance and Policy
Using audit reports and F-65 reports from the Department of Treasury, this report identifies Michigan cities that may be service insolvent, or on the verge of service insolvency. The analysis is divided into five population groups and the City of Detroit. If a city’s general fund spending is 75 percent or less than the average city in their population group, has a fund balance equal to less than 2 months’ expenditures (Government Financial Officers Association (GFOA) recommendation), has per capita Taxable Value of less than $20,000, and levys 20 mills or more the city may be service insolvent.
Without changes to state policy, many of our cities will continue to struggle financially and could face bankruptcy in the next economic downturn. There are several policy changes that could provide long-term fiscal stability for our cities including increased revenue, a change to the revenue sharing formula to guarantee cities a minimum taxable value per capita, elimination of the Headlee millage rollback provision, and state bonding to retire the unfunded pension liability of local governments.