Regional Economic Development: Downriver as a Case Study

The seventeen communities of the Downriver Detroit area have traditionally been economically vibrant. Their decline in recent years is due in great measure to excessive tax burdens and the politicization of community services. The authors explain how this area can revive by rolling back property taxes, privatizing a number of municipal functions, avoiding government-directed economic development schemes, and making certain improvements to the transportation infrastructure. The many lessons from the Downriver experience are applicable to communities all across Michigan. 32 pages.

I. Introduction

The purpose of this study is to examine economic development in the Downriver Detroit area. While most recent attention on economic development has focused on Oakland County and western Michigan, an important part of the state's economy has been and will continue to be the Downriver area.

Several critical factors have contributed to the long-term feasability of economic development in the area. First, Downriver is economically and geographically tied to Detroit, one of the nation's 10 largest metropolitan areas; and the Detroit-based automobile industry.

Second, Downriver offers industry access to the Detroit River, the Great Lakes and ultimately the St. Lawrence Seaway, one of the world's major international waterways. Water access has been a major factor behind industry's decision to locate in the area.

Third, Detroit Metropolitan Airport, a major transportation center for southeastern Michigan and the state's largest airport, is located Downriver in Romulus.

Fourth, major surface routes such as interstate-75, I-94 and I-275 traverse Downriver. Access to transportation centers and routes has been a key factor behind existing economic development in the area.

Finally, Ontario, Canada is accessible from Downriver from the Ambassador Bridge and Detroit-Windsor Tunnel, a factor which could take an added significance given the 1988 Free Trade Agreement between the United States and Canada. The agreement, signed by U.S. President Ronald Reagan and Canadian Prime Minister Brian Mulroney, raises the prospect of Downriver emerging as an international trade center.

The Downriver Community. Seventeen communities south of Detroit in Wayne County encompass the Downriver area: Allen Park, Brownstown Township, Ecorse, Flat Rock, Gibraltar, Grosse. Ile Township, Lincoln Park, Melvindale, River Rouge, Riverview, Romulus, Southgate, Taylor, Trenton, Woodhaven and Wyandotte.

Township governments exist in Brownstown and Grosse Ile. The other 15 communities are governed by a mayor-city council system, although Ecorse is in receivership under court-appointed Receiver Louis Schimmel.

Income. U.S. Census Bureau statistics show the 1980 Downriver median family income was $26,717. [1] The highest median family income was in Grosse Ile Township ($40,620); the lowest in River Rouge ($18,922). Other median family incomes were: Allen Park ($29,370); Brownstown Township ($29,370); Ecorse ($20,552); Flat Rock ($25,875); Gibraltar ($27,530); Lincoln Park ($24,385); Melvindale ($23,695); Southgate ($27,440); Riverview ($30,600); Rockwood ($25,955); Romulus ($22,887); Taylor ($24,097); Trenton ($30,235); Woodhaven ($29,455); and Wyandotte ($23,195).

Unemployment. Michigan Employment Security Commission statistics show that Downriver unemployment was 7.3 percent in August 1988. [2] The lowest unemployment rate was in Grosse Ile Township (2.8%) ; the highest in Ecorse (12.2%). It is worth noting that Ecorse's high unemployment preceded Schimmel's receivership, and has been more than 10 percent for most of the decade. other unemployment figures by community were: Allen Park (5.0%); Brownstown Township (6.8%); Flat Rock (6.5%); Gibraltar (8.2%); Lincoln Park (7.7%); Melvindale (8.5%); River Rouge (12.0%); Riverview (4.9%); Rockwood (6.5%); Romulus (10.6%); Southgate (5.9%); Taylor, (8.3%) ; Trenton, Woodhaven (7.0%) and Wyandotte (6.9%).

Industry. Downriver is one of the most heavily industrialized regions in the nation. The automobile and steel industries are major employers. The impact of the two industries on the area cannot be underestimated. Auto and steel companies are major taxpayers in Brownstown Township, Ecorse, Flat Rock, Gibraltar, Riverview, Trenton and Woodhaven, and residents in surrounding communities are heavily dependent on the industries for income. Downriver's economic well-being is heavily dependent on the auto and steel industries, which dominate the area:

• Auto. The Ford Motor Co. operates a stamping plant in Woodhaven. Chrysler Corp. maintains one of the largest engine production facilities in the world in Trenton. Chrysler also operates chemical and research plants in Trenton, and a storage facility in Brownstown Township. Mazda Corp. maintains a major automobile production facility in Flat Rock.

• Steel. Great Lakes Steel Co. operates a steel production plant in Ecorse, and McLouth Steel Products Corp. maintains steel production facilities in Gibraltar, Riverview and Trenton.

Introductory Observations. Auto and steel have impacted Downriver in two other ways. First, failure to diversify has left the area vulnerable during periods of economic downturn. Downriver suffered a severe economic depression during the late 1970s-early 1980s while the rest of Michigan experienced a recession. Spurred by the inability of domestic auto and steel manufacturers to compete in world economic markets, this event should have served as a warning to community leaders about the merits of diversification and streamlined public services.

Second, there exists in some Downriver communities a troubling unwillingness to deal boldly or creatively with these new economic realities. Diversification has not been aggressively pursued, and local public officials continue to provide questionable services, and other services in a questionable manner, in some instances competing directly with entrepreneurs attempting to carve out a niche in the marketplace.

Furthermore, it is apparent that there is a need for a better grasp of basic economic principles by a number of Downriver public officials. In some communities, this unfilled need has acted to deter a spirit of entrepreneurship. An attitude more supportive of the private sector and the American free enterprise system would be good for' not only area residents, but also for those local officials who are already genuinely sincere about economic development and need such encouragement.

Downriver business leaders paint a generally positive, although perhaps over-optimistic picture of the current economic climate in the area. Most surprising were the sentiments expressed by several business elites that Downriver should not attempt to create the same kind of economic climate that has led to record development in Oakland County. In the words of one business leader, a former public official, "Downriver is moving at a nice, steady pace, and that's the way we want it. We don't want to repeat the Oakland County situation. That's not applicable here." Or, "All this progress. Too much progress would be bad. We want open spaces. A lot of people live down here because of that." [3] Downriver will be hard-pressed to compete with high-growth areas like Oakland County given such defeatist attitudes.

Finally, the preponderance of heavy, so-called "smokestack" industries Downriver has resulted in a negative image for the area, locally and elsewhere. Community leaders frequently cite image as a major problem. The News-Herald newspaper has editorialized, "One of the most discussed problems Downriver involves an identity crisis .... Locals like Downriver and most of what comes with it. What they don't like is the perception that many others have of the Downriver area: smoke-filled skies, factory rats and corner bars." [4]

Indeed, Downriver is suffering an identity crisis, but of a different sort. Are discredited, worn-out solutions that promote more public-sector spending or involvement, as some suggest, the answer to the area's problems? Or will Downriver face the 21st Century guided by an entrepreneurial spirit that seeks to unleash the creative energy of individuals?

II. Basic Economic Development Theory

Economic development for an area consists of increasing economic activity, improving employment prospects and increasing the standard of living. There is no consensus among economists on how these goals are accomplished, but the goal of economic development strategy should be creation of economic incentives and the reduction of economic disincentives.

Frequently, community leaders attempt to achieve economic development without a coherent grasp of what it is they are trying to accomplish. This is a serious mistake. Actions taken by officials can have positive or negative results. Frequently, local economic development strategy results in ad hoc attempts to entice firms to locate in communities through special incentives, such as property tax abatements. While short-term gains are sometimes apparent using this approach, areas utilizing such measures frequently do not make long-term progress in increasing economic activity or improving employment prospects.

One can view economic development theory as part of "location theory," a subset of urban economics. Location theory examines why firms and other economic agents locate in specific geographic areas. The basic assumption is that firms maximize profits, and in order to do so, minimize the cost of any given level of output. Individuals maximize their utility, and in doing so, minimize costs associated with residing in an area. The simplest models assume that all costs of production other than transportation costs are equal every-where. Other costs are not always equal everywhere, but such models are important because they show that firms will choose to locate where total production costs are minimized for any given level of output. [5]

Land, labor and capital are the primary factors of production. Variations in cost affect the mix of factors in the production process. For example, if the cost of labor increases relative to the cost of land and capital, those two factors will be substituted for labor. More labor will be utilized if the price of labor falls relative to the cost of land and capital. Economic development activities undertaken by communities can be seen to increase or decrease the cost of utilizing these factors.

Government actions can influence economic development in a positive manner to the extent that they lower the cost of any production factor. Communities can influence the industry they attract through positive actions that reduce production costs. Positive actions create economic incentives.

When community leaders take positive action to reduce production costs they create an economic incentive. Production costs for manufacturers in the community will decline relative to competing areas and the likelihood of related industries locating there will increase. Other industries will be encouraged to locate in the community if reduced production costs are an important economic factor.

Conversely, government actions can influence economic development in a negative manner to the extent that they increase the cost of any production factor. Communities can influence the type of industry they attract through negative actions that increase production factors. Negative actions create economic disincentives.

When community leaders take negative actions to increase production costs they create an economic disincentive. Production costs for manufacturers will increase relative to competing communities and the likelihood of related industries locating there will decrease. Other industries will be discouraged from locating in the community if increased production costs are an important economic factor.

An example of an economic disincentive was action taken by public officials in Woodhaven, where an indoor public golf dome was built in 1988.

Woodhaven officials describe the golf dome, more than 100 feet high and illuminated at night, as a positive contribution to the community. Overlooked, however, is the private outdoor golf range less than one mile away on West Road in Brownstown Township, which now faces competition from a taxpayer-subsidized, public enterprise.

It is crucial for Downriver leaders to understand that actions generally not thought to be part of economic development strategy affect production factors. When Woodhaven officials built the golf dome they provided direct competition to a small business, which now faces the difficult prospect of competing with a well-funded public enterprise. This is not the message that Downriver communities should be sending to potential entrepreneurs, whether large or small.

To summarize, community leaders should understand the full implications of economic development before pursuing a strategy. Firms will act to maximize profits and minimize costs. Land, labor and capital are the primary production factors. Government actions can influence economic development in a positive or negative manner to the extent that they lower or increase the cost of any production factor. Actions not thought to be part of economic development affect production factors.

Linkage Between State and Local Economic Development

Government actions taken at the state level also affect production factors. Reduction in state general fund revenues earmarked for education has led to greater reliance on local property taxes for school expenditures. The result? Michigan has one of the highest property tax burdens in the nation.

Firms considering Downriver will necessarily take Michigan's overall business climate into consideration before formulating a decision. This also holds for firms already based in the area. Downriver is hurt overall by a poor state business climate and helped by improvements in the economy.

This study's purpose is not to analyze state economic policies which would improve Michigan's economic climate. That has been done elsewhere. But it is worth noting that the Grant-Thornton Annual Study of General Manufacturing Climates of the Forty-Eight Contiguous States of America has consistently ranked Michigan at or near the bottom of state listings nationwide. The study is based on factors such as consistent fiscal policies; employment costs; and the availability and productivity of resources. [6]

Studies like Grant-Thornton which underscore the unhealthy Michigan business climate likewise have negative implications for Downriver.

It is in the self-interest of Downriver community leaders to support efforts aimed at improving Michigan's economy. Despite six years of sustained nationwide economic growth, the state's economy remains one of the worst in the nation. Michigan's unemployment rate remains high, consistently near the top of the largest industrial states. The state's public education system placed 48th in one recent nationwide survey. Clearly, there is room for improvement. A stronger Michigan economy means greater possibilities for economic development Downriver.

III. Detroit, Downriver and Oakland County

Economic development Downriver is linked to Detroit's economy, which has declined while growth has increased in Oakland County. Historically, Downriver has benefitted from Detroit's position as an economic activity center. The decision of the Big Three auto manufacturers (General Motors, Ford and Chrysler) to base their operations in Detroit spurred economic development Downriver. The auto industry led to creation of the steel industry, which has been important Downriver.

Today, total production costs for many firms can be minimized by locating Downriver if Detroit is an economic center. Firms will generally find that transportation costs to the center of economic activity are relatively low, as they can locate Downriver along the I-75 north-south and I-94 east-west corridors. Firms near major economic centers can take advantage of this relationship by locating near transportation corridors. [7]

There has been a loss of this relationship Downriver as Detroit's economy has faltered. Former Detroit-based firms like AAA Michigan or K-Mart/Kresge are today based in northwestern Wayne or Oakland counties, further from Downriver than when they were located in Detroit. Transportation costs Downriver have increased in some instances as economic activity has moved north into Oakland County.

In many ways, Detroit is being replaced by Southfield, Troy and Auburn Hills as an economic center. Transportation and other economic advantages have been increasing for northwestern Wayne and Oakland counties while declining in the Downriver area.

Consider the example of a Southfield or Troy-based firm. Other companies doing business with the firm would find it to their advantage to be located close to Southfield or Troy to minimize transportation and production costs. Other firms then begin to locate in Southfield or Troy to take advantage of the business climate and other economic advantages.

The economic trend toward Oakland County has benefitted firms in communities like Auburn Hills, Farmington Hills, Novi, Rochester Hills, Southfield and Troy. At the same time, Downriver communities have been disadvantaged because they are two or three times as far from the center of economic activity.

Today, exploring the I-75 and I-96 Oakland County transportation corridors is a vastly different experience than travelling along Fort Street, I-75, Telegraph Road or West Jefferson Avenue in the Downriver area. [8] It is clear that Detroit's economic decline and the commercial rise of Oakland County has affected the Downriver area in a negative manner.

Property Tax Abatements

It is interesting to note that Oakland County economic growth has occurred largely without reliance on property tax abatements, the economic development strategy that is most discussed Downriver.

Oakland County communities have generally used property tax abatements as a strategy for pursuing economic development. For example, Rochester Hills, the community experiencing the greatest economic growth in Oakland County, does not grant property tax abatements. Troy, which symbolizes high growth, is another example. Of course, there have been exceptions. Auburn Hills was created through the establishment of a Tax Increment Finance Authority (TIFA) at the state level. But overall, property tax abatements have not been critical to Oakland County economic development.

The use of property tax abatements has been analyzed elsewhere. [9] One of the best analyses of the use of abatements in Michigan was conducted by the Citizens Research Council. [10] The results of the study were that communities are better served by reducing property tax burdens than by concentrating on abatements. Communities are better served in the long run by reducing the overall property tax burden than by viewing existing firms as captive taxpayers and providing only tax reductions to new firms.

The climate in Oakland County is radically different than Downriver, or even Detroit, where the use of property tax abatements is a key ingredient of prevailing economic development strategy. This approach can be summarized by the following example.

The Downriver Community Conference (DCC), the major public sector economic development entity in the area, learned earlier this decade that Mazda was considering Downriver for an auto production facility. The DCC courted Mazda officials, recruiting the firm to Flat Rock, partially with a 12-year, 50 percent tax abatement. Downriver gained Mazda, a major employer, and DCC leaders proclaimed the wisdom of property tax abatements as an economic development strategy.

Undoubtedly, Mazda's decision was the most significant economic gain for Downriver this decade. Proponents of property tax abatements as an economic development strategy are certainly within their right to claim that the Mazda abatement created upwards of 3,500 new jobs for the Downriver area. [11]

Still, the episode raises important questions for Downriver's economic future. Why was it necessary for the DCC to offer an abatement in the first place? More importantly, was the abatement further evidence that property taxes are too high in the Downriver area? What factors led the Ford Motor Company to close the factory formerly on the Mazda site?

Furthermore, is it fair to offer abatements to a large corporation when lower property taxes are not being offered to smaller firms? Is it fair that small firms and residents inFlat Rock are now paying for the abatement during the 12-year period, while property taxes remain above the state average in their community?

There is disagreement on the answers to these questions, but they should be asked because the use of property tax abatements appears to have been accepted uncritically by some Downriver community leaders.

This is troubling, for overall, abatements have generally not delivered what their proponents promised: the General Motors Poletown plant in Detroit being the classic example. General Motors was granted an abatement amidst promises by proponents that "thousands of jobs" would be created. Despite widespread controversy, an entire neighborhood was levelled through eminent domain and an automobile factory erected in its place. The Poletown plant has never delivered the number of jobs promised by proponents. Today, Poletown stands as a national symbol of the failure of a tax abatement strategy for economic development.

Recommendations

Downriver benefits when Detroit is the economic center of southeastern Michigan. It is important that Downriver community leaders realize this correlation, and show interest in Detroit's economic revitalization. To the extent that Downriver officials can, they should support actions which would improve Detroit's economic climate.

How can Detroit improve its economic climate? First, Detroit must lower its property tax burden, the highest in the state and the fifth highest nationwide among the largest cities in each state. The 1987 Detroit property tax rate was 82.08 mills, an amount equal to an annual 4.1 percent tax on the market value of property. [12] In contrast, the average property tax rate for cities statewide was 63.44 mills. Detroit property taxes exceed the statewide average by 46.6 percent. [13]

Economist Patrick Anderson, a member of the Mackinac Center's Advisory Board, has noted that "Detroit has become caught in a destructive cycle where rising taxes shrink the tax base, and the response of the government to the shrinking tax base is to further raise taxes. Unless this cycle is broken, the city will continue to lose jobs and residents." [14] To reemphasize, high property taxes in Detroit are a disincentive to economic development and must be reduced.

Second, Detroit should utilize an enterprise zone approach, rather than property tax abatements, as an economic development strategy. An enterprise zone approach would reduce taxes, regulations and other government burdens on economic development in one of the nation's most economically distressed areas. This would create the open, free-market climate most conducive to entrepreneurship investment, job creation and economic growth.

Abatements favor large corporations at the expense of smaller firms, and impose a disproportionate tax burden on residents and other property owners. If abatements are utilized in Detroit, it should only be as an economic strategy of last resort.

IV. Downriver's Property Tax Burden

Property taxes are also too high in the Downriver area, where the millage rate average is more than 22 percent higher than for 13 competitor communities in northwestern Wayne and Oakland counties.

The competitor communities have benefitted from Detroit's economic decline, and economic development which has proceeded north into Oakland County, away from Downriver. These are communities that Downriver must compete with if it is to remain viable for economic development: Birmingham, Canton Township, Farmington, Farmington Hills, Northville, Northville Township, Novi, Plymouth, Plymouth Township, Redford Township, Royal Oak, Southfield and Troy.

In 1987, the average millage rate for the 17 Downriver communities was 72.11 mills. [15] The average rate for the 13 competitor communities was 58.94 mills. [16]

The Downriver average is also higher than the statewide average of 63.44 mills for cities and 47.27 mills for townships Incredibly, not a single Downriver community has a millage rate lower than the statewide average. [17] The rates in Riverview (64.80 mills) and Trenton (65.69 mills) were the lowest Downriver in 1987, although both exceed the state average. Both Downriver townships also exceed the average millage rate in their category.

The Melvindale millage rate (85.05 mills) actually exceeds Detroit's rate (82.08 mills, while Lincoln Park's rate (81.12 mills) is comparable. [18]

Table 1 compares the property tax burden of the 17 Downriver communities with the 13 competitor communities in northwestern Wayne and Oakland counties.

TABLE I

Total Property Tax Millage in 1987 by Communities

Downriver communities	Millage
Allen Park	70.99
Brownstown Township	69.02
Ecorse	76.72
Flat Rock	69.44
Gibraltar	70.60
Grosse Ile Township	68.66
Lincoln Park	81.12
Melvindale	85.05
River Rouge	73.19
Riverview	64.80
Rockwood	71.10
Romulus	69.77
Southgate	69.00
Taylor	76.43
Trenton	65.69
Woodhaven	73.03
Wyandotte	71.28
Other communities
Birmingham	54.47
Canton Township	57.40
Farmington	53.60
Farmington Hills	51.49
Northville	67.91
Northville Township	55.72
Novi	58.25
Plymouth	68.92
Plymouth Township	55.81
Redford Township	51.12
Royal Oak	69.37
Southfield	60.55
Troy	61.56

Data are from the Michigan State Tax Commission, 1987 Ad Valorem Property Tax Levy Report

Recommendation

Downriver, like Detroit, could improve its economic climate by reducing its property tax burden which acts as a disincentive to economic development. Local property taxes must be reduced if Downriver is to compete with areas like northwestern Wayne and Oakland counties. Firms are discouraged from locating Downriver because they must pay as much as 4.2 percent of their property value annually in taxes. This situation must be reversed.

V. Privatization Downriver

Privatization is rooted in the free-enterprise economic system, and the efficiencies produced by competition. The concept describes the process whereby the private sector performs functions previously provided by a public sector, government unit.

Privatization already exists to a limited degree Downriver, although original research into this area of economic development did not exist until this study.

Several variations of privatization are: [19]

Contracting Out – a private sector unit provides a product or service for compensation. Private garbage collection is one of the most best examples of contracting out in the Downriver area.

Franchising – a private sector unit is given a specific territory or marketplace. Franchising can also be related to shedding, as in the example of privatized hospitals.

Shedding – a public sector, government unit sells off its assets or services which are then either undertaken by a private firm or discontinued. Most international examples of privatization fit into the category of shedding, such as when a national government sells a public airport, as the Thatcher government in Great Britain has on several occasions. Ecorse Receiver Louis Schimmel has used shedding as a strategy to sell the Department of Public Works Building and city ice arena.

User Fees – a public sector, government unit applies the cost of a service to the consumers of the service. The user fee introduces a pricing mechanism into the delivery of a government service, imposing a cost only on those who choose to use it, while giving others the option not to purchase the service. The user fee allocates the cost of public services more equitably, and reduces government control to a minimum. Admission fees to Downriver public ice arenas and other recreational facilities fit the definition of user fees.

Vouchers – a public sector, government unit provides a benefit or service, but gives the user maximum flexibility to select from competing private vendors. Some suggest that education be considered a voucher candidate.

For Downriver community leaders, it is extremely important to realize that business firms "vote with their feet," so to speak, in the economic marketplace. An important aspect of economic development is not just tax burden, but the mix of taxes and services. [20] The high and increasing tax burdens of the Downriver area can only be offset by extraordinary public services. Otherwise, they become economic disincentives. Unfortunately, this has not been generally viewed as the case in the Downriver area.

Downriver has generally been perceived as an area of inefficient municipal government. Two communities in particular have contributed to this perception – Ecorse and River Rouge although other Downriver communities are providing questionable services, and other services in a questionable manner.

Privatization has played a role in improving economic development possibilities in Ecorse, while the concept is being considered in River Rouge.

In Ecorse, privatization of public services has successfully been implemented to reduce a $6 million budget deficit. [21] Contracting out and shedding have both been utilized. In River Rouge, privatization is an option for reducing the existing $4.4 million budget deficit.

Ecorse

Ecorse provides empirical evidence of the potential benefits of privatization in the Downriver region.

Three years ago, Ecorse teetered on the brink of economic bankruptcy, the result of a $6 million budget deficit incurred by local elected officials. Today, Ecorse's budget deficit has been reduced to $1 million largely through privatization. The city appears to be headed toward full fiscal restoration, but the defeat April 18 of a new city charter designed to prevent financial abuse means the outcome has by no means been decided.

Ecorse public services that have been privatized include:

• Department of Public Works. Debris removal; park and sign maintenance; street, sidewalk and alley maintenance; street sweeping; snow removal; tree cutting; water meter reading; water and sewer system maintenance; weed cutting; and vehicle maintenance have been contracted out. The DPW Building and all equipment have been sold, and the proceeds used to reduce the budget deficit. [22]

  DPW privatization has saved Ecorse $35,000 monthly, an annual savings of $420,000. The city pays $75,000 monthly, or $900,000 annually, for DPW services, according to Schimmel. [23]

• Administrative expenses. Contracted out.

• Ambulance billing. Contracted out.

• Animal control has been contracted to the neighboring City of River Rouge for $20,000 – nearly half the $45,000 that Ecorse once paid for one animal control officer.

• Boat launching facility. Contracted out.

• City Hall maintenance. Contracted out.

• Equipment maintenance. Contracted out.

• Equipment purchases. Contracted out.

• Labor contract negotiating costs and other legal expense. Contracted out.

Surplus city buildings and land have been sold, including the ice arena, named after still-living former Mayor Richard Manning. The ice arena was sold for $185,000, and now houses a successful business operated by a private entrepreneur. The community center, health center and rowing club have been leased out, producing a savings on insurance and utility costs. [24]

Garbage collection had already been privatized, but the contract was renegotiated to save taxpayers $120,000. [25]

Few, if any communities nationwide have experienced privatization to such a degree as in Ecorse. Indeed, Ecorse is evidence of a private sector economic experiment unique in recent American history. "We have created a model city that nobody else in the country has," explains Schimmel. "Some communities have privatized certain functions. I've privatized just about everything. Everything that I could legally."

The outside observer may ask, "How did such a degree of privatization occur in Ecorse?" After all, privatization is frequently characterized as a "Sunbelt idea," while Downriver is synonymous with the so-called "Rust Belt." It is clear that fiscal mismanagement by Ecorse officials led to privatization. A review of the salient historical facts establishes that point.

Wayne County Circuit Court Judge Richard Dunn appointed Schimmel as receiver for Ecorse on Dec. 3, 1985, after local officials created a budget deficit of $6 million through fiscal mismanagement. [26] The city's problems can be traced to the late 1970s when Great Lakes Steel Corp., the major taxpayer, found itself weakened by recession and an inability to compete in world economic markets.

Elected officials in nearby Gibraltar (McLouth Steel) and Trenton (Chrysler) faced a similar economic crunch, but raised taxes or reduced expenditures to offset declining revenues. Ecorse officials did not follow course and the city was millions of dollars in debt by the early 1980s. Creditors like Detroit Edison filed suit against Ecorse and the cases were consolidated in Wayne County Circuit Court before Judge Dunn. [27]

Schimmel implemented privatization as a solution after repeated efforts by Dunn to force officials to address the $5 million budget deficit which had driven the community to the verge of economic bankruptcy. For example, in June 1985, Judge Dunn ordered officials to adopt a balanced budget and instructed the city "to operate each quarter within its revenues for such quarter as budgeted." [28]

In March 1986, Dunn ordered city officials to show cause why they "should not either immediately reduce spending or increase revenues to achieve compliance" with his earlier order. In June 1986, Dunn ordered Ecorse officials to "pass on and adopt a balanced budget for the 1986-87 fiscal year or. or before July 1, 1986," and submit the document by that date. [29]

Local 1008 of the Michigan Association of Federal, State and Municipal Employees petitioned to intervene in the case, along with Ecorse through its attorneys. Dunn granted the petitions. Shortly thereafter, it was revealed that the city's projected operating deficit for FY 1985-86 "might exceed $750,000." On July 8, Dunn urged city officials at a conference to "conduct negotiations with its unions in an effort to formulate a balanced budget for" FY 1986-87. [30]

On July 19, 1986, an Ecorse official reported to Dunn that a balanced budget had not been adopted. On July 22, Dunn granted the city's request for a two-month grace period to compile a budget. Between July 22 and Sept. 23, 1986, meetings were held between Ecorse officials and union representatives. On Sept. 23, a city official reported to Dunn that a balanced budget had not been adopted. Dunn found Ecorse in non-compliance with previous court orders, and appointed Schimmel receiver for the city. [31]

Thus, Ecorse became the first city in Michigan history to be placed in receivership. Dunn ruled the receivership was necessary "because other less drastic measures have failed to work in the past or have merely resulted in impasse." [32] Schimmel accepted the position after receiving a guarantee from Dunn that he would have complete freedom to implement measures necessary to put the city's financial house in order.

"I told Judge Dunn I didn't want the (receiver's) job if I had to do what the typical politician has to do, which is make promises and then chase the taxpayers' money to keep them. That's how Ecorse got in the mess that it is in today in the first place," Schimmel said. [33]

First, Schimmel discharged 40 paid political employees. "Cost was not important in Ecorse even though they were near-bankrupt. Having their political buddies, cronies, relatives and friends on the city payroll had become more important than the taxpayer," he said. [34] Ecorse had 140 public employees when Schimmel was appointed receiver. By early 1989, he had reduced the public workforce more than 60 percent through privatization.

Next, Schimmel privatized the 34-member Ecorse Department of Public Works. He considered privatization of the police department but he found that state law prevented him. [35] Schimmel attempted to contract out police protection to the City of Detroit and the Wayne County Sheriff's Department, but political opposition prevented the action. Detroit Mayor Coleman Young supported the move, but was opposed by city council members. Wayne County Sheriff Robert Ficano's supported contracting-out but was opposed by Wayne County Executive Edward McNamara. However, Schimmel privatized the Ecorse police pension fund, restoring sanity to a system once underfunded by $15 million.

Through attrition, the fire department has been reduced more than 25 percent. The current full-time force will eventually be entirely part-time or volunteer under the fire union contract that Schimmel was able to renegotiate. "We have a long list of applicants for the new positions. They don't seem to mind that it's not full-time. They just want to work," Schimmel said. [36]

Two points emerge when examining Ecorse privatization. First, the Ecorse example offers empirical evidence that privatization is practical in the real world including the Downriver area. Socialist academic critics once objected to privatization on the grounds that public services were "natural monopolies." That theory was discarded long ago. Today, socialists argue that privatization is "impractical," i.e., it cannot guarantee sufficient suppliers to permit competition. That argument and other socialist objections do not hold up under scrutiny in Ecorse.

Second, it is clear that Ecorse represents a major, although tentative victory for market forces. Fiscal mismanagement has been stopped, an out-of-control bureaucracy has been reduced, and the same general level of services has been maintained. But property tax rates remain too high (76.72 mills) [37] and should be reduced as soon as possible to encourage economic development in a community plagued by double-digit unemployment.

Other Prospects and Recommendations

It is important that Downriver alter its image of inefficient government. The best ways to do this would be to privatize as many public services as possible. Privatization of services Downriver has already led to increased efficiency and lower tax burdens.

Evidence suggests that Downriver residents already identify one existing service that has been privatized in the area – garbage collection – with efficiency.

Two public opinion polls conducted by CRW Associates, Inc. of Detroit by phone for the DCC in 1984 found that 87 percent of residents said garbage collection was being provided at a "very high or high level." [38]

Garbage collection was incorrectly identified by DeVries & Associates, Inc., of Wrightsville Beach, N.C., as a government service when in fact, sixteen of the 17 Downriver communities have privatized garbage collection.

Ninety percent of residents surveyed in the polls said garbage collection was "no problem at all," while 10 percent described it as a "major or minor problem." [39]

Further steps to privatize Downriver would show that the area was in the forefront of providing services and not stuck in quagmire of inefficiency.

A first step should be the establishment of privatization commissions in all 17 communities to review the prospects for transferring services from the public to private sectors. Each commission should include a mix of residents, business and community leaders and elected officials, and should meet at least once publicly for public input.

Each privatization commission should examine why services performed by the private sector elsewhere are provided by the public sector in their own community.

For example, a Trenton privatization commission should review the historical circumstances that have left the city the only one Downriver providing all facets of garbage collection. A Wyandotte privatization commission should examine why the city provides public cable TV service when it is provided by private firms in other communities. Likewise, privatization commissions in River-view and Southgate should review why those communities operate municipal golf courses that compete with private courses in the area.

Following review, each privatization commission should report its findings. In the meantime, consideration should be given to to privatizing the following public services:

Fire Protection.

Allen Park, Lincoln Park Melvindale, River Rouge,,. Southgate, Taylor, Trenton and Wyandotte should replace their full-time fire departments with part-time forces as an interim step.

Part-time fire departments already exist in nine Downriver communities – Brownstown Township, Flat Rock, Gibraltar, Grosse Ile Riverview Rockwood Romulus and Woodhaven. There has been no decline in fire protection in those communities, and residents have not expressed displeasure with the level of service.

Furthermore, consideration should be given to privatizing fire protection Downriver.

Nationally, fire service privatization emerged directly through private-sector fire departments, and indirectly with the shifting emphasis from fire suppression to fire prevention. Standards imposed by private insurance companies accelerated a trend already underway to use fire-detection systems, and sprinkler and other suppression devices. [40]

Reduced manpower demand should have reduced public sector fire protection budgets. However, public officials have sometimes interfered with this natural economic process through patronage and other political maneuvers.

Scottsdale, Arizona, remains the best example of fire service privatization. Since 1948, Scottsdale has been served by Rural-Metro, an employee-owned private company. The average annual per-capita firefighting costs for cities between 50,000 and 100,000 in population amounts to $50, contrasted with only $25.68 in Scottsdale, according to National Fire Protection Association statistics. [41]

The Institute for Local Self Government, in a separate study, compared the dollar loss from fires, response times, and firefighter salary ranges for Scottsdale and the nearby cities of Glendale, Mesa and Tempe, Az.; all of which have public fire departments and similar residential patterns. Scottsdale had the fastest fire-response times and the lowest dollar loss per capita from fires – $5.74 compared to $7.60 on average for the other three communities, which, however, paid higher salaries, on average $1,500 more to starting firefighters. [42]

Today, Rural-Metro has expanded into a $25 million private firm, with 400 vehicles, 1,600 employees and contracts with 16 communities in five states providing ambulance, code enforcement and standard fire protection services.

One anti-market criticism is that while part-time or private fire protection may work in small areas, larger communities make the concept impractical. But three of the four largest Downriver communities, size-wise – Romulus Brownstown Township and Grosse Ile – are served by part-time departments.

Conversely, five of the eight smallest Downriver communities – Ecorse, River Rouge, Melvindale, Wyandotte and Lincoln Park – are served by part-time departments, although Ecorse is in transition to a part-time department under Schimmel's direction.

Melvindale, Lincoln Park, Ecorse and River Rouge have the highest property tax millages Downriver, in that order. Taylor, another community with a full-time force ranked fifth in 1987, while Wyandotte had the seventh highest millage rate.

Finally, it is worth noting that Troy, a community of more than 80,000 experiencing record economic growth, is served by a part-time fire department.

Garbage Collection.

Trenton should privatize garbage collection. Trenton is the only community Downriver that provides garbage collection for its residents. Private firms collect refuse in every other Downriver community. A private firm even collects garbage in Wyandotte, otherwise noteworthy for its unusually large public sector.

A frequent criticism of private garbage collection is that there exists a shortage of private firms to bid for the service. However, an examination of garbage collection Downriver reveals that no less than nine private firms collect refuse in the area. They are: Abcor (Brownstown Township); Area Disposal (River Rouge, Riverview, Rockwood, Southgate, Woodhaven and Wyandotte); Browning Ferris Industries (Brownstown Township and Gibraltar); Canejo (Flat Rock); Canton Recycling (Romulus); Laidlaw (Lincoln Park); Midwest Residential (Taylor); Painter & Ruthenberg (Allen Park); and Waste Management (Melvindale). [43]

Garbage collection should be more competitive. Private firms awarded monopoly contracts have less incentive to be accountable than those which must compete on the open market for a consumer's business.

Louis Schimmel was able to save Ecorse $120,000 merely by telling the contractor he was considering rebidding the garbage collection contract. It is important that contracts are carefully crafted and monitored on a regular basis by officials.

Another method of ensuring accountability, is to permit competition. It is one thing to privatize garbage collection; it is quite another to establish a free market system. It is instructive to note that a free market system already exists in north Oakland County, where Pontiac is the only city providing garbage collection. Other communities are served by either a single firm with a contract or competing private firms.

In fact, 20 of 30 north Oakland County communities have such a system. These include high-growth communities like Auburn Hills, Rochester Hills and Waterford Township. "You have to be competitive and remain competitive," said former Waterford Supervisor Robert Hoffman, owner of Great American Disposal. "If service is bad in the private sector, the consumer can go elsewhere." Other local officials echo Hoffman's sentiments. [44]

Wyandotte should shed its Public Cable TV Operation. Wyandotte is one, if not the only, community in Michigan that provides cable TV service. The trend nationwide, even statewide, is toward competition, not monopoly. Wyandotte should not be providing cable TV service.

Finally, it should be noted that this study is not meant to be all-inclusive in the area of Downriver privatization. However, it is worth emphasizing again that privatization is one of the best ways Downriver to reduce high property tax rates, and further efforts should be undertaken to explore the concept.

VI. Education Downriver

Economic studies have found that the quality of education has the greatest impact on the decisions of individuals and firms to locate in a given area. [45]

Public education is more responsible for property tax burdens than any other service provided by local government in Michigan. [46] On average, about 70 percent of property taxes statewide are spent on school expenditures. This trend is not apparent Downriver, where only Grosse Ile Township and Romulus spend at least 70 percent. Examining Downriver cities, only 63.9 percent of property taxes are spent on schools. This is because townships do not offer the same range of services as cities. The average township levy is 3.33 mills; the average city millage is 16.69 mills. But only four of the 17 Downriver communities use at least 63.9 percent of their property taxes for school millage:Brownstown Township, Flat Rock, Grosse Ile Township and Romulus. [47]

Table II

School Taxes as a Percentage of Property Taxes, 1987

Downriver community	Percentage
Allen Park	60.5
Brownstown Township	66.7
Ecorse	52.8
Flat Rock	63.9
Gibraltar	62.0
Grosse Ile	70.5
Lincoln Park	59.8
Melvindale	50.8
River Rouge	49.2
Riverview	61.3
Rockwood	61.6
Romulus	73.2
Southgate	58.5
Taylor	61.8
Trenton	59.9
Woodhaven	63.5
Wyandotte	59.1

Data from Michigan State Tax Commission, op. cit.

Downriver has property tax millages for education which are slightly higher than the statewide average but as a percentage of total taxes, school taxes Downriver are lower than average for cities in the state.

One conclusion which can be drawn from this is that the Downriver communities should consider lowering the percentage of property tax burden which is not school-oriented. This would make the area more competitive with the rest of the state for those individuals and firms which value educational services relative to other city services.

Downriver school districts spend substantial amounts of money on education. Table III ranks Downriver school districts by current operating expenditures per pupil among the state's 525 K-12 school districts: [48]

TABLE III

Ranking for Current Operating Expenditures Per Pupil

School District	Rank
Allen Park	61
Ecorse	98
Flat Rock	153
Gibraltar	193
Grosse Ile	41
Lincoln Park	329
Melvindale	39
River Rouge	82
Riverview	134
Romulus	36
Southgate	110
Taylor	79
Trenton	26
Woodhaven	177
Wyandotte	70

Recommendations

The best way to improve the efficiency of Downriver public schools would be to offer parents schools of choice; a choice for their children. Under a schools of choice system, parents choose which school to send their children to, and their public tax dollars follow. The schools of choice concept has been successfully implemented in New York's Spanish Harlem and Minnesota, and has been proposed in Michigan. [49]

The literature explaining the virtues of choice in education is substantial and need not be repeated here. [50] However, a brief summary of the argument may be valuable.

The best reason for allowing schools of choice is that it creates competition among schools for students. Public schools that perform well would attract students and expand, while schools that do not perform well will lose students and shrink, or eventually disappear.

Elimination of the government's monopoly on education would also benefit students, although this development is not likely to occur anytime soon. It is worth noting that a substantial number of private Roman Catholic elementary and high schools continue to thrive Downriver despite this monopoly.

There are substantial restrictions at the state level for offering schools of choice. Parochial schools are prevented from receiving state school aid funds under Article 8, Section 2. of the State Constitution of 1963. The State Aid Act, Public Act 94 of 1979, does not allow non-religious private schools to receive the per pupil state aid which public school districts receive. Private schools, as well as public schools could compete for students if this act were amended at the state level.

The act does not allow state aid to cross public school district lines. However, it is possible for school districts to contract with each other to allow students from any district to attend any other school district. The State Aid Act provides that the accepting school can receive the state for that student, if the district in which the student resides approves. If the 17 Downriver communities agreed to allow students to attend any school district in the area, this would open up the region to a wide range of schools.

At a minimum individual school districts should allow parents and students a choice of schools within the district. Such a move would not be nearly as positive a force in improving the area's educational quality as allowing choice across districts, but the range of choice would be sufficient to improve quality, especially at the K-6 and K-8 levels.

VII. Transportation Downriver

One of Downriver's obvious advantages is the location of Detroit Metropolitan Airport, the nation's eighth largest airport, in Romulus. Access to major surface routes such as I­-75, I-94 and I-275 have also been a key factor behind existing economic development in the area.

Access to Detroit Metro, however, is indirect via freeways from most of Downriver. To reach Metro Airport, one must travel north on I-75 to the Southfield Freeway, and then east on I-94 to the facility. This is a rather circuitous route, and the I-75­ – I-94 link along the Southfield Freeway is old and narrow.

An east-west surface route south of Metro Airport would significantly reduce transportation costs for firms locating in the Downriver area. Completion of I-275 has allowed firms in Canton Township, Northville, Novi, Plymouth to be more competitive than industry located Downriver. The expansion of Metro Airport would provide increased opportunity for Downriver, especially if a southern route into the airport was developed. [51]

Today, firms in northwestern Wayne and Oakland counties are closer time-wise to Metro Airport although their distance is greater than Downriver communities because such a surface route does not exist.

Detroit Metro and surface routes such as I-94 and I-275 would be more accessible to Downriver if an east-west freeway was built along either Eureka, Pennsylvania, Sibley or West roads. In fact, this possibility is already under consideration by the state Department of Transportation.

While it is possible that the Downriver communities, perhaps through the DCC, could attempt to engage in the political appropriation battles necessary to secure federal and state funding for an east-west corridor, serious consideration should be given to construction of a private highway.

The early history of mass transit in America is one of successful private transportation firms. But government treatment of transportation as a regulated monopoly has spelled disaster for many transportation networks. However, an encouraging recent development has been the emergence of private toll roads across the U.S. and elsewhere, including China. [52]

In April 1987, ground was broken for one of the world's most ambitious private highway projects: a 181-mile toll road linking Hong Kong with Canton and Macao in China. The $1 billion venture is being carried out under the build-operate-transfer (B-O-T) concept, in which the private sector finances, builds and operates the project for a specified time period – in this case 30 years – after which time title reverts to the government. Downriver communities should examine the option of private east-west corridor. [53]

A bridge to Ontario, Canada is another important infrastructure improvement that would aid economic development. The U.S.-Canada Free Trade Agreement, signed by leaders of the two countries Jan. 2, 1988, will open up new opportunities for Michigan firms to export to Canada. Some economic estimates indicate that the increase in bilateral trade will be in the hundreds of millions, perhaps billions of dollars. Michigan currently accounts for about one-fifth of total bilateral trade, and it could seize a greater portion of an expanding market. [54]

Improved access to Canada from Downriver would benefit existing firms and attract new ones. A bridge would give Downriver firms direct access to markets in Ontario, Canada's most prosperous province.

The private sector should be given first consideration for construction of such a bridge. Michigan's most recent experience with a government-built bridge, the Zilwaukee across I-75 in Saginaw County, illustrates the dangers of public sector involvement: cost overruns, delays and other problems.

There are no natural impediments to private bridges. Indeed, the existing Ambassador Bridge between Detroit and Windsor was built privately and remains a private-owned firm. A publicly-built bridge from Downriver to Canada would be in a position to compete unfairly with the Ambassador Bridge because it would be taxpayer-subsidized. Such a prospect should be avoided.

The first private U.S. toll bridge in more than 40 years opened for business last year between Fargo, N.D., and Moorhead, Minn. Discussed for more than 30 years, the project is a joint venture of the Fargo-based Bridge Company and New York's Municipal Development Corporation. [55]

Finally, Downriver communities should ensure that developers pay the marginal cost of infrastructure improvements elsewhere. Otherwise, taxpayers will be subsidizing private individuals or corporations.

One has to be very careful of some economist's claims to a "multiplier effect" of government spending on the private sector. Firms subsidizing others face an economic disincentive, and may relocated from the area over time. Each dollar removed from the taxpayer and used to invest in a government project is a dollar which otherwise would have been used by the private sector. In general, private sector allocation of resources is the most efficient. Local government cannot assume that the value of its service equals or exceeds the marginal cost of producing the service. [56]

VIII. Downriver Community Conference

The Downriver Community Conference (DCC) is the most visible example of a public-sector organization attempting to generate economic development in the area.

The DCC is an outgrowth of the Downriver Mutual Aid consortium, founded in 1969 to coordinate public safety activities during emergencies. The organization was founded in 1977 to serve as a common voice for Downriver communities, but has since developed programs in numerous other areas, including "employment and training, economic and community development, substance abuse, weatherization, (and) the arts." [57] The DCC has an annual budget of about $15 million mostly supplied by federal and state funds. In fact, sometimes it appears as though the DCC's major purpose is to lobby for federal and state funds. Dewitt Henry, the DCC's first executive director, described his job as "to go out and get a better share of taxpayer money."

Over the years, the DCC unsuccessfully fought efforts by the Reagan Administration to abolish or cut fraudulent and wasteful federal programs such as revenue sharing, and the U.S. Department of Housing and Urban Development's Urban Development Action Grant (UDAG) and Community Development Block Grant (CDBG) programs. For example, the DCC in 1984 unsuccessfully opposed efforts to abolish the UDAG program. "Our position is that we are adamantly opposed," said Lincoln Park Mayor Frank Sall, author of the resolution. "Those are needed funds because this is the way we are attracting new business to the Downriver area." [58]

Perhaps no statement illustrates more the troubling welfare mentality prevalent among some Downriver economic development officials and community leaders. Economic growth does not result from securing more federal and state funds; it results from decreasing economic disincentives and providing opportunity for entrepreneurship.

It is not this study's purpose to analyze all facets of the DCC. However, it is worth noting that when some facets have been analyzed elsewhere, the results have been less than impressive. For example, a 1984 study for the U.S. Department of Labor by Abt Associates, Inc., of Cambridge, Mass., found that participants in a federally-funded DCC lob retraining program fared no better at finding new jobs than unemployed people who sought work on their own. The study examined 1,800 workers laid off from the Ford Motor Co.'s Flat Rock plant, and a Firestone Tire & Robber Co. plant in Riverview earlier this decade. [59]

More recently, new DCC Executive Director James Jones accused state Department of Labor officials of using "tortured logic and illogical justifications" in determining that the DCC does not have to repay $200,000 in federal and state grants. [60] Jones maintains the money was misspent by Henry's administration.

Melvindale Mayor Thomas Coogan has criticized the DCC's involvement in questionable government programs. Coogan has probably been the DCC's most vocal critic, describing the agency as an out-of-control bureaucracy. Coogan has been especially critical of the DCC's intervention in the venture-capital market through the state Department of Commerce's Michigan Investment Fund "We shouldn't be in capital investment. The original intent is not being carried out," Coogan said. [61]

Private economic development firms are able to bridge political boundaries to focus on regional areas in which economies are highly integrated. Such a development would be especially beneficial Downriver given the DCC's involvement and support of questionable programs. Examples of successful private economic development firms include Pueblo, Colo., where the Pueblo Economic Development Corporation began as two government agencies, but was later privatized. [62]

Summary

Downriver Detroit could best improve its economic climate by reducing its property tax burden, which acts as a disincentive to economic development.

Local property taxes must be reduced if Downriver is to compete with areas like northwestern Wayne and Oakland counties, which have experienced record economic growth this decade.

Downriver benefits when Detroit is the economic center of southeastern Michigan. To the extent that Downriver officials can, they should support actions which would improve Detroit's economic climate, such as lower property taxes and an enterprize zone approach.

Oakland County economic growth has occurred largely without reliance on property tax abatements, the economic development strategy that is most discussed Downriver. Decreasing economic disincentives and providing opportunities for entrepreneurs will prove more beneficial to Downriver economic development in the long term than abatements.

Privatization already exists to a limited degree Downriver, and should be further explored. The high and increasing tax burdens of the Downriver area can only be offset by extraordinary public services. One way to achieve this goal is through privatization. Such action would establish a different picture of Downriver; a picture of an innovative area acting to improve its economic climate.

Privatization commissions should be established in all 17 communities to review the prospects for transferring services from the public to private sectors. Downriver residents already identify one existing service that has been privatized – garbage collection – with efficiency. Consideration should be given to privatizing fire protection Downriver.

Schools of choice would introduce competition into public education, improving the quality for students, parents and qualified teachers alike. Construction of a private east-west expressway connecting I-75 with I-275, and a private bridge to Canada would significantly improve Downriver's attraction as a center for economic development.

Downriver has the potential to become an economic growth area which can lead Michigan. But area communities must act together to create a reputation for efficiently-provided local services at non-burdensome tax rates. Accomplishing this goal will require bold and creative leadership, and above all else, a vision for the future.

Endnotes

1. U.S. Bureau of Census.

2. Michigan Employment Security Commission.

3. Greg Kaza and Gary Wolfram, Downriver interviews.

4. Wyandotte News-Herald, Oct. 16, 1985,

5. For an introduction to location theory, see James Heilbrun, Urban Economics and Public Policy, 2nd edition (St. Martins Press: 1981)

6. See The Eighth Annual Study of General Manufacturing Climates of the Forty-Eight Contiguous States of America, June 1987, Grant Thornton Accountants, Chicago, Illinois. The Grant Thornton study includes changes in taxes as well as tax level in the list of items which affect manufacturing location. Other studies which have found changes in tax rates to be a significant factor in economic growth are: L. Jay Helms, "The Effect of State and Local Taxes on Economic Growth: A Time Series-Cross Section Approach," Review of Economics and Statistics, Vol. 68 (November 1985, 574-582; and Michael Wasylenko and Therese McGuire, "Jobs and Taxes: The Effect of Business Climate on States' Employment," National Tax Journal, Vol. 37 (December 1985), 497-512.

7. For a detailed discussion of the economics of agglomeration see Robert Bish and Hugh Nourse, Urban Economics and Policy Analysis, (McGraw-Hill: 1975); and Benjamin Chinitz, "Contrasts in Agglomeration: New York and Pittsburgh," American Economic Review, Vol. 51 (May 1961), 274-289.

8. Greg Kaza and Gary Wolfram, general observations on economic development Downriver and in Oakland County.

9. See, for example, Michael Wolkoff, "Tax Abatement as an Incentive to Industrial Location," in Harvey Brazer and Deborah Laren (ed.), Michigan's Fiscal and Economic Structure (University of Michigan Press: 1981); Richard B. McKenzie, "A Threat of Industrial Blackmail," Heritage Foundation Backgrounder, No, 237, Dec. 30, 1982, Washington D.C.; Public Sector Consultants, Michigan's Property Tax Exemptions and Their Effect, prepared for the Michigan Senate, July 1986; and John H, Beck, "Selective Tax Abatements: Do They Work?", Heartland Policy Study, No. 14, March 16, 1987, Heartland Institute, Chicago, Illinois.

10. Municipal Government Economic Development Incentive Programs in Michigan, Report No. 280, February 1986, Citizens Research Council, Detroit, Mi.

11. Among them former Downriver Community Conference Executive Director Dewitt Henry.

12. Michigan State Tax Commission, 1987 Ad Valorem Property Tax Levy Report.

13. Ibid.

14. See Detroit Economic Development Plan, Dec. 6, 1988, Economic Enterprise Foundation of Detroit, Economic Policy Committee, Patrick L. Anderson, Chairman.

15. Michigan State Tax Commission, ibid.

16. Ibid.

17. Ibid.

18. Ibid.

19. Privatization: A Strategy For Delivering Public Services With Less Government; The Commonwealth Foundation, Harrisburg, Pa.; Bill English, former Chairman of the Municipal Affairs Committee, Philadelphia.

20. See Charles Tiebout, "A Pure Theory of Local Government Expenditures," Journal of Political Economy, Vol. 64, (1956), 416-424; and Wallace Oates, "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, Vol. 77 (November/December 1969), 957-971.

21. Greg Kaza, "A Town That Was Almost Totally Privatized," Cleveland Plain Dealer, May l, 1989.

22. Authors interviews with Louis Schimmel, Receiver for the City of Ecorse.

23. Ibid.

24. Ibid.

25. Ibid.

26. Wayne County Circuit Court public records, Detroit, Mi.

27. Ibid.

28. Ibid.

29. Ibid.

30. Ibid.

31. Ibid.

32. Ibid.

33. Schimmel interviews.

34. Kaza, Plain Dealer, op cit.

35. Schimmel interviews.

36. Ibid.

37. Michigan State Tax Commission.

38. Business and Citizens' Public Opinion Polls of The Downriver Area, DeVries Associates, Inc., March 14, 1985, prepared by the Downriver Community Conference.

39. Ibid.

40. Randall Fitzgerald, When Government Goes Private, New York: University Books, 1987, 75-76.

41. Ibid, at 77.

42. Ibid.

43. Authors survey, Garbage Collection in the Downriver Area.

44. Greg Kaza, Oakland Press, "Garbage Collection Deals are Picking Up," Jan. 9, 1989. Other north Oakland County communities with more than one private firm collecting garbage are Bloomfield Hills and Clarkston; and Addison, Brandon, Commerce, Groveland, Holly, Highland, Independence, Oakland, Orion, Oxford, Rose, Springfield, West Bloomfield and White Lake townships. One private firm collects garbage in Birmingham, Orchard Lake, Rochester, Sylvan Lake, Troy, Walled Lake and Holly, Lake Orion and Oxford villages.

45. Wasylenko and McGuire, op. cit.

46. Data for this section are from the Michigan State Tax Commission, Ad Valorem Property Tax Levy Report, May 1988, Michigan Department of Treasury, Lansing, Mi. School taxes include taxes levied for intermediate school districts and community colleges, as well as K-12 school districts.

47. Michigan State Tax Commission

48. Michigan Department of Education Bulletin 1014 Michigan K-12 School Districts Ranked by Selected Financial Data, 1986-87.

49. Schools by Choice, Manhattan Institute for Policy Research, New York, New York, Feb. 21, 1989.

50. The seminal article on the use of vouchers in providing choice is Milton Friedman, "The Role of Government in Education," in Robert A. Solo (ed.), Economics and the Public Interest (Rutgers University Press: 1955). See also Milton Friedman, Free to Choose (Harcourt, Brace and Jovanovich: 1980), and Choices in School: What's Ahead and What to do, National School Public Relations Association, Arlington, Va.

51. For a detailed discussion of the benefits of privatizing Detroit Metropolitan Airport, see John Kost, Detroit Metropolitan Airport: A Case For Privatization, Mackinac Center for Public Policy Research, Midland, Mi., Oct. 27, 1988.

52. Privatization 1989: Third Annual Report On Privatization, Reason Foundation, Santa Monica, Calif.

53. Ibid.

54. For a discussion of the effect of the Free Trade Agreement on Michigan see Dan Wyant and Bret Brown, "The Canada-U.S. Free Trade Agreement: Provisions, Potential and Proper State Role," Senate Republican Backgrounder, Lansing, Mi., Vol. 2, No. 6, August 1988.

55. Privatization 1989, Reason, op cit.

56. For a fuller discussion see William Hunter, "Economic Impact Studies: Inaccurate, Misleading and Unnecessary," Heartland Policy Study, No. 21, July 1988, The Heartland Institute, Chicago, Illinois.

57. Downriver Community Conference

58. The News-Herald, Dec. 12, 1984.

59. The Downriver Community Conference Economic Readjustment Program, Abt Associates Inc., Cambridge, Mass., May 18, 1984.

60. The News-Herald, Nov. 9, 1988.

61. The Mellus Newspapers, Oct. 31, 1984.

62. Privatization 1989, Reason, op cit.

About the Authors

Greg Kaza is Vice-President for Policy Research at the Mackinac Center for Public Policy.

Gary Wolfram, Ph.D, is a Senior Policy Analyst with the Mackinac Center.