On Detroit and HRM – some comparative figures

Reading about Detroit declaring bankruptcy tonight is fascinating and sad. Its also interesting to me (and to all of us, I hope) to see how bad it can get for a municipality that doesn’t stay on top of talent attraction, retention, and reinvestment in capital infrastructure and quality of life.

Hard to come by accurate figures because apparently, well, there aren’t any.  Detroit was running about $300 million in the hole a year, give or take, on a budget of $2.5 billion, or so they say.  The city may owe between $15 and 20 billion, though the most commonly reported figure is $18.5 billion.

When you read the actual summary of the proposed budget for Detroit 2013-14, the government was saying that revenue and expenses were balanced.  The Toronto Star reports that Detroit has had annual deficits in the city’s operating budget since 2008.  Something was really wrong, obviously.  Having an Auditor General and good honest financial reporting is very important.

Let’s compare by the numbers:

Detroit HRM
Population  701,475 413,710
Operating Budget  $2,564,480,780.00  $825,900,000.00
Budget Per person  $3,655.84  $1,996.33
Debt  $18,500,000,000.00  $265,200,000.00
Debt per person  $26,373.00  $641.03
Debt to revenue ratio  $7.21  $0.32

Amazing.  Detroit has the public school system and other stuff in budget that we don’t have to do that way in Canada.  Keeping in mind Detroit used to have double the population it has now, and has all that crazy massive highway system they can’t afford to tear down, and that they have to keep maintaining despite not needing it.

This debt does not include the Halifax Water debt, which is on the rise as the system is refit, but HW rates are tied to covering the debt.  HRM has seen tax supported debt drop from $347.5 million in 1998 to $265 million now, despite a bump in 2008 to accommodate participating in the stimulus/recession Federal spending projects.

EDIT:

John Wesley pointed out that given accounting differences and other issues with different structures of government that  “the more instructive comparison (though all this is just spit-balling given the accounting vagaries) would be to add the provincial and municipal finances together and then compare.”  It would be good to do a full comparison (GDP per cap, revenue, spend, etc) but this morning I just threw together total debt.

Detroit per capita debts
City Debt – $23573
State Debt – $2420
Federal Debt – $44900
DETROIT TOTAL – $73693

HRM per capita debts
Regional Debt – $641
Provincial Debt – $14008
Federal Debt – $17523
HRM total – $32172

I mean this is all in fun.  I am no economist, but knowing the HRM figures as I now do, as I was reading the Detroit stories last night I thought – holy crap.  What a difference, on a high level.

Again, I left out HW rates are high because UARB requires rates set to support the debt of the capital spend they are undertaking, and there are things (Detroit public schools) which are not in this either.

US and Canada do have different accounting practices.  I suspect that the booked liabilities, or debts, in Canada are larger in part that we started booking future liabilities in the 1990s and the US did/does not.  Federally the US Social Security is a huge unfunded liability (there is no money in the bank for future payments) where CPP is an almost fully funded pool (it is set up more like a pension plan has a pool of money).

The fundamentals are far better here.