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How can a bustling suburb be broke?

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How can a bustling suburb be broke?

With its walkable downtown, Royal Oak is a big draw. But many wonder how a town so rich in development can face a $6.4 million tax deficit, a proposed tax increase and perhaps fewer services.

from the Detroit News- Sept 29, 2005

ROYAL OAK -- Cranes dot downtown Royal Oak's skyline as a piece of big-city living makes its way to one Motor City suburb.

As many as 13 loft and condo projects, boasting swanky kitchens, high ceilings and exposed brick, are planned or under construction in Royal Oak. Concentrated downtown, they'll eventually add as many as 900 housing units to the tax rolls and up to $1.2 million in revenue.

But the building explosion transforming the town once known as "Royal Joke" is likewise confounding residents and onlookers. They wonder how a town rich in development can face a $6.4 million tax deficit, a proposed tax increase and potentially fewer city services.

In a region where many suburbs are hurting because of a lack of economic activity, Royal Oak stands apart as one that is building -- and going broke.

"Just look at all those high rises. The city of Royal Oak is booming," said Ted Kenyon, an eight-year resident. "For us to have a budget crisis is ridiculous."

....

After checking out the different lofts, they decided on Metro Lofts, a development slightly off the beaten path with 30 units ranging in price from $300,000 to $800,000.

"We just loved them," DeLosier said. But even with hundreds of lofts on their way to the city's tax rolls, city officials say only 21 percent of the property taxes will go to Royal Oak. The biggest share -- 39 percent -- will go to Royal Oak schools and the state for education, according to the city.

And with Proposal A and the Headlee amendment, which requires municipalities to roll back their millage rates when growth on existing property exceeds the inflation rate, Royal Oak's local millage has dropped from 8.09 mills in 2000 to 7.48 mills in 2005.

.....

Two factors already working against Royal Oak are its retirement fund and health care costs.

....

"Royal Oak is a great place to be, but the financial woes they're experiencing are not unlike any other municipality in the area," Gosselin said.

Read the entire article here

Just goes to shows you that every city is having financial problems, all of which seam to be greatly effected by retirement funds and health care costs, not just Detroit. If a city like Royal Oak which is growing it's tax base is having problems, it makes you wonder how a city like Detroit can get out of the red.

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Did they even do a little research to see that Royal Oak's population is declining on a rate almost similar to that of Detroit's? lol Less people, mean less money.

It always gets me how you see people say "our city can't be losing population, just look at downtown." If I had a nickle for everytime I heard that.

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Last time I checked, Ann Arbor was either going broke, or already broke. What cities aren't approaching financial crisis. And I'm not talking about small towns with more manageable budgets, I'm talking cities.

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Cities are really losing their tax bases, and losing them out of the country or to suburbs. The truth is, even if a city is growing in population, it is commercial enterprises that bring in the mega tax dollars. Residential tax accounts for a smaller part of a cities income than many think.

But, there is definitely a correlation between a shrinking tax base, and a shrinking city here in the state of Michigan.

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