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TOM WALSH: Spendthrift Detroit may follow China

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  • Charles C. Primas
    TOM WALSH: Spendthrift Detroit may follow China January 28, 2005 BY TOM WALSH FREE PRESS COLUMNIST http://www.freep.com/money/business/walsh28e_20050128.htm
    Message 1 of 1 , Jan 28, 2005
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      TOM WALSH: Spendthrift Detroit may follow China


      January 28, 2005

      BY TOM WALSH
      FREE PRESS COLUMNIST

      http://www.freep.com/money/business/walsh28e_20050128.htm

      When I visited China 15 years ago, I snapped a picture at the Beijing
      Jeep plant of a sign with one of those perplexing slogans at Chinese
      workplaces: "Time Is Money; Efficiency Is Life."

      Problem was, there was nothing remotely efficient then about Beijing
      Jeep, the government-controlled joint venture with Chrysler Corp.
      Thousands of employees sat around with little or no work to do.

      China's economy was in a slump a year after the Tiananmen Square
      crackdown on dissidents crippled its tourism industry and crimped
      foreign investment. The communist government gave millions of citizens
      make-work jobs to keep them off the streets.

      It's eerie, but looking at Detroit's growing fiscal crisis reminds me of
      the old Soviet Union and pre-boom China.


      City keeps bloated payroll


      Government institutions are by far the city's largest employers, led by
      Detroit Public Schools with 23,000 employees and the City of Detroit
      with about 18,000. Three of the top 10 employers are big nonprofit
      health systems -- Detroit Medical Center, Henry Ford and St. John --
      that derive much of their revenues from federal Medicare and Medicaid
      payments. Three more are other public entities: the U.S. government,
      Wayne State University and the State of Michigan.

      Only two private-sector companies, DaimlerChrysler AG's Chrysler Group
      and General Motors Corp., are among the city's top 10 employers: Nos. 5
      and 7, respectively, with slightly more than 10,000 and 6,000 workers in
      Detroit.

      While many of Detroit's public servants are undoubtedly good workers,
      data gathered for the recent Detroit Economic Forum show the city's
      payrolls are wildly bloated in several areas compared with other major
      U.S. cities.

      Sean Werdlow, Detroit's chief financial officer, and Mayor Kwame
      Kilpatrick presented these sobering facts Wednesday to the Detroit
      Renaissance group of corporate CEOs.

      Detroit's annual spending for police, about $377 per capita, is double
      the amount spent per citizen in Dallas, Indianapolis, Houston or San
      Jose, Calif., and about 50 percent more than the $259 per capita in Los
      Angeles.


      Administrative costs are tops


      What's utterly unfathomable is why the administrative costs of running
      Detroit's government are the highest in the nation -- by a long shot.

      Detroit's annual administrative costs are $223 per capita compared with
      $128 for New York, $55 for Chicago, $79 for Phoenix and $48 for Houston.

      Even more mind-boggling, given Detroit's looming $230-million budget
      deficit, was Thursday's report in the Free Press that the City Council
      is seeking a 4-percent increase in its $17-million budget.

      City Council members have jacked up their own budget by 48 percent since
      2000 and boosted the size of their full-time staff from 92 to 108.

      No wonder Detroit's administrative costs have ballooned when the
      administrators in charge of the purse strings pad their own payroll.

      City Council members aren't the only ones who need to wake up and smell
      the impending disaster. Kilpatrick, too, must lead by showing that the
      mayor's office is shrinking its staff, not just trimming the pay of
      appointees by 10 percent.

      To return to the communist country analogy, it seems Detroit leaders
      have two options:

      They can go the route of the old Soviet empire, plodding along as if the
      world hasn't changed, and watch their world implode. Or they can take
      heart from China's approach in the last decade, partnering with private
      companies to become more efficient and adopting policies to spur
      economic growth.

      Contact TOM WALSH at 313-223-4430 or twalsh@....



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