Struggling Cities and the Legacy Costs of the Past

When people leave a struggling city for its suburbs, they leave behind the costs of public services that were delivered in the past. Regional solutions are needed.
by | June 6, 2013

Why can't cities solve their own financial problems? As mayor of Flint, Mich., I am used to a look of mild astonishment when I describe the city's challenges as regional. After all, it's Flint, not its region, that lost half of its population in the last half-century. Why would the city's eroding tax base and rising expenses be a county or regional problem?

"Somebody needs to get their act together." That's what that near-smirk I see on the faces of suburban residents really means. We do need to be more efficient in Flint, of course, but there is much more to the story of how our annual retiree-related costs, across all funds, have come to total nearly the same size as the city's general fund--an unaffordable yet required expense that results in reduced city services and the resulting decline in quality of life.

These legacy costs are fundamentally the result of services provided in the past that were not fully paid for at the time of delivery. Public employees benefited from this work and the often-generous benefits that accompanied it, but there is the commonly overlooked issue of who received those services.

While Flint's population has dropped, Genesee County's population has stayed at the same level throughout the past half-century. As with many struggling cities, Flint's population hasn't moved away as much as it has spread out into the county, but the legacy costs were left behind.

Take a family that lived in in Flint 20 years ago. Weekly trash service was provided by city workers, but the full retirement costs for those employees were not paid at the time. The family enjoyed the full benefit of the service without paying the bill. Then 10 years ago, let's say, the family moved a few miles down the road, across the city line into the township of Grand Blanc.

Today Flint has to account for all of the pension and health-care costs of 2,000 retirees despite now having only 500 city workers and a fraction of its former tax base. That family that moved to Grand Blanc is enjoying township services that can be provided without the costs of the past being tacked on because 30 years ago there wasn't much of anyone to serve in that jurisdiction.

Meanwhile, today's Governmental Accounting Standards Board pension-funding requirements mean that Flint must set aside funds for retiree benefits based on their true actuarial value. Many government entities did account for these future costs in the past and should be applauded for doing so, but the local jurisdictions that didn't have more than themselves to blame.

It is unfair to ask my family and my neighbors to pay the full costs of city services being delivered today and also to make up the costs of services that were delivered in the past to today's suburban residents. Cities do need to manage their resources efficiently and in an accountable manner, but these legacy costs need a collective, regional solution.

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