It seemed a reasonable deal when Gov. John Engler and Detroit Mayor Dennis Archer shook hands on it in 1998.
As David Ashenfelter writes in Bridge Magazine, the state of Michigan would give Detroit $333.9 million annually for nine years in revenue sharing funds — if the city would ratchet down its highest-in-the-state city income tax rates.
All was going well, until the economy tanked, dragging the state’s tax collections and budget down with it. Detroit wound up getting far, far less than it was promised.
By one calculation, the city could have gained $700 million in additional funds in the period – for a city that has run repeated deficits (about $400 million this year alone) and piled up billions in debt to compensate.
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Bridge Magazine
