A Twenty-year Review of Flint’s Financial Condition
Over the past twenty years, few cities have experienced as much fiscal stress as Flint, Michigan. After decades of economic decline, two periods of state receivership, the water crisis, and the COVID-19 pandemic, the City of Flint is trying to shore up its finances and provide services to citizens. To do so, it will need to carefully monitor its fiscal health. Much as doctors use vital signs and test results to track their patients’ health, we can use financial and economic indicators to track the fiscal health of cities.
This report illustrates how data found in basic financial statements may be used to understand how Flint’s financial condition has changed over time. We draw on data from Flint’s Annual Comprehensive Financial Reports from FY 2000 to today (FY 2021) to calculate indicators that illustrate how different aspects of Flint’s finances have responded to changing internal and external circumstances. Taking this long-term perspective on Flint’s finances helps us see how fiscal stress manifests in different ways and helps us understand the effects of policy and management decisions.
- Flint’s financial challenges are long-term and structural. Flint is a city built for 200,000 mostly middleclass auto workers, but the decline of the auto industry and white flight have left Flint with a population just over 80,000, significantly poorer and blacker than the rest of the state, to pay the bills. Running a city that is over half empty is unsustainable without structural changes.
- State-appointed receivers made temporary improvements to balance budgets and improve short-term liquidity, but failed or were simply unable to address the structural causes of Flint’s fiscal distress. The focus of Michigan’s takeover policy has been eliminating deficits, which has been primarily achieved through spending cuts. Other than cutting retiree benefits, policies imposed under receivership largely failed to have any measurable effect on Flint’s long-term solvency. In fact, it is likely that some problems like deferred infrastructure maintenance, which does not show up on basic financial statements, worsened as a result of budget cuts.
- Absent state-level policy changes, particularly around revenue sharing, Flint will likely continue to struggle. Over the past several decades, Flint’s tax base has been hollowed out, as most of its wealth fled to surrounding suburbs, while its debt remained in place. But as a result of restrictive state policies, the City has very little autonomy to adjust its tax policies and is dependent on an underfunded State revenue sharing program. While the State could use the statutory portion of its revenue sharing program to recognize and remedy historical inequities, the program is chronically underfunded.