Why isn't Cleveland going bankrupt? (Akron, Forest: sale, insurance, credit)

[cle2sf]

With all of the media coverage of Detroit's bankruptcy and abysmal financial picture, it's worth discussing how similar cities have avoided the same fate. Cleveland's population was decimated just as badly as Detroit's was, and both cities had their dominant industries obliterated. With the Clinic, UH, Case, and CSU as some of the Cleveland's largest employers, doesn't their tax-exempt status lead to a property tax shortfall?

Did teetering on the edge during the Kucinich administration inject some fiscal responsibility into the city? Are pensions funded differently in Michigan and Ohio? Does Detroit have a municipal income tax? Has Cleveland retained a significant proportion of jobs in its CBD while Detroit's corporate base decamped for Oakland County?

[SquareBetterThanAll]

Property tax largely goes to entities other than the city, so that doesn't have as much of an impact as you would think. Local payroll taxes on the other hand go directly to the city, and those aren't exempt.

Detroit was grossly mismanaged repeatedly and continually and that is at the top of the reasons for its bankruptcy. I'm sure someone will come along and question Cleveland's leadership as well, but I think Detroit takes the cake for just about anything you could come up with. I lay a good portion of the blame there.

Really, many other post-industrial cities are dealing with the same issues without filing for bankruptcy. It is more of the exception than the rule. So far.

[Cleverfield]

I'll add that Cleveland did not rely solely on one industry the way Detroit did/does. Our economy has always been more diversified, with a large financial sector (National City, Ameritrust - later Society and Key), various manufacturing areas (Paint: Sherwin Williams & Glidden, Parker Hannifin, GE, plastics, in addition to steel and automotive), Lincoln Electric, Standard Oil Headquarters (later BP). Some of the industry died down or pulled out, but others remained, and there were new industries that came into play like healthcare, Progressive Insurance, Forest City, biomedical companies, Quicken Loans, The Jacob's Group, as well as smaller but growing companies like Pierre's Ice Cream, Great Lakes Brewery, and Micelli's. This diversity allowed the city to hang on during the industrial and population decline, while Detroit's strong dependence on the automotive industry cast its fate when it started pulling out.

[creepy]

Interesting topic. My whole family is from there and 98% of them stayed them while my Dad moved us out in 1971 for a job.

I don't know much about it-but the theory that Detroit had really one industry seems to fit.

Also was Cleveland's population decline more gradual?

I just read for Detroit "Between 2000 and 2010 the city's population fell by 25 percent".

[bjimmy24]

Detroit's decline was much more extreme than Cleveland's.

[Townes Van Zandt]

Originally Posted by creepy

I just read for Detroit "Between 2000 and 2010 the city's population fell by 25 percent".

Between 2000 and 2010 Cleveland's population fell by 17%. That isn't as bad as Detroit, but it's still pretty bad.

Per Wikipedia, some of the reasons cited for Detroits bankruptcy were:

shrinking tax base caused by declining population, program costs for retiree health care and pension, borrowing to cover budget deficits (since 2008),[22] poor record keeping and antiquated computer systems,[1] that 47% of owners had not paid their 2011 property taxes,[23] and government corruption.[24]

Sound familiar? It should.

[Cleveland_Collector]

Originally Posted by cle2sf

With all of the media coverage of Detroit's bankruptcy and abysmal financial picture, it's worth discussing how similar cities have avoided the same fate. Cleveland's population was decimated just as badly as Detroit's was, and both cities had their dominant industries obliterated. With the Clinic, UH, Case, and CSU as some of the Cleveland's largest employers, doesn't their tax-exempt status lead to a property tax shortfall?

What the loss of the non-profits' property tax hurts the most is school funding as that is the majority source of revenue for the local schools in most districts. Property tax based funding is simply a terrible way to fund education in the modern age, but that's a different discussion. The non-profits do bring in a lot of payroll tax (especially the hospitals and the universities) due to the sheer number of people they employ along with the fact that medical professionals, professors, physicists, engineers, etc. have much higher than average salaries.

Did teetering on the edge during the Kucinich administration inject some fiscal responsibility into the city?

Not really. The city wasn't really "teetering" at that time either. If you look back on the history of it, the argument was over CPP (then, Muny Light) at the end of which some of the big banks -- mainly Cleveland Trust -- threatened to call in the loans (i.e., dump their issued bonds and not renew credit). Cleveland Trust and CEI had a mutual interest along with 7-8 common directors among them. Essentially, Cleveland Trust used financial leverage to attempt to force the sale of the public utility. The word 'default' was used by the media, but the city was never actually in technical loan default due to the fact that they couldn't pay the bills. It was a coercive power play by Cleveland Trust/CEI that the city actually wound up winning. CPP is still alive and well today and Kucinich was ultimately vindicated. Detroit's situation was and is much different.

Are pensions funded differently in Michigan and Ohio?

Not especially, no. They appear to be managed quite differently, though.

Does Detroit have a municipal income tax?

Yes, but it doesn't really matter if your tax base can't pay as much as your municipality needs.

Has Cleveland retained a significant proportion of jobs in its CBD while Detroit's corporate base decamped for Oakland County?

There are over 100,000 jobs in Downtown Cleveland alone and more are coming online. The city proper has more than 50% of its total population working in it (from all sources). The vast majority of 'good' jobs in the Cleveland area are also still in Cuyahoga County. Cleveland proper also has the advantage of not being as large in land area as Detroit (roughly half the physical size). So, while the population loss has hurt, the effect was not nearly as dramatic as most of the "loss" was mostly to nearby suburbs in the same county (Cleveland proper takes up roughly 17% of Cuyahoga County). The population density of Cleveland is also still quite high at 5,100/sq mile and Cuyahoga County counters with about 2,400/sq mi. Cuyahoga County is also 'the' county in the area. It hasn't seen nearly as much of a loss to a neighboring county as did Wayne County to Oakland County. Most of the 'loss' in the cleveland area has been largely residential from county to county as Akron (a larger satelite city to Cleveland and the next largest city in NEO) which is in Summit county to the south developed along the same timeline as Cleveland did in the 20th century.

Although there are plenty of area naysayers, many people in the Cleveland area have a positive connection to their nuclear city and are not afraid to go there to catch a game, show, concert, dinner, drinks, etc. One of the smartest things the city/county has done over the past 20 years is concentrate the main, professional entertainment in the downtown area. Detroit has followed suit, to a degree. But the Pistons are still in no-man's land and the Red Wings have an outdated facility in a detached, crappy neighborhood. There is also no theater worth mentioning outside of the Fox Theater (even though there is some revitalization underway) and no universities local to downtown. It's about achieving a critical mass in the downtown area and surrounding neighborhoods. This is something I think Cleveland has been able to more effectively manage than Detroit has.

[SquareBetterThanAll]

Originally Posted by Cleveland_Collector

Cleveland proper also has the advantage of not being as large in land area as Detroit (roughly half the physical size).

That's a bit misleading as Detroit also had and has double the population that Cleveland does (approximately).

Most of the 'loss' in the cleveland area has been largely residential from county to county as Akron (a larger satelite city to Cleveland and the next largest city in NEO) which is in Summit county to the south developed along the same timeline as Cleveland did in the 20th century.

That's also misleading as metro Detroit really hasn't lost much population, it's just been people shuffling over the county line to Oakland, etc. Similar dynamic.

The population density of Cleveland is also still quite high at 5,100/sq mile and Cuyahoga County counters with about 2,400/sq mi.

IIRC Detroit is around the same.

Red Wings have an outdated facility in a detached, crappy neighborhood

The new arena should be an positive addition, I think.

no universities local to downtown

Kind of, Wayne State is in Midtown as opposed to Downtown but that's less than 2 miles. CSU isn't a whole lot closer but the difference is that there is continuous development and activity from CSU to downtown whereas that isn't the case in Detroit.


It's kind of scary how similar Cleveland and Detroit are in many ways. In my opinion, anyway.

[Townes Van Zandt]

Originally Posted by SquareBetterThanAll

It's kind of scary how similar Cleveland and Detroit are in many ways. In my opinion, anyway.

Yes, they are very similar.

[WeSoHood]

You can compare Detroit to Cleveland to an extent, but I don't think you understand the differences between the cities. Detroit is on a completely different planet. Visit Detroit and the differences will be shocking.