Thundering Tour Times

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Renegade Economists Show 410

As broadcast on the 3CR airwaves 5.30 – 6pm Wednesdays.
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Thundering Tour Times by Renegade Economists on Mixcloud

Show Notes
Karl runs through the US tour in detail, with more time on economic pressures through LA, SF, Detroit and almost …..NY, hoping that the story helps spell out the purpose of this reform for one of our favourite listeners. He finishes off the show late at night ….

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In the show There Goes the Neighbourhood we heard of concerns over rapid gentrification with Cooba & Andy Blue
– similar themes came thru in NY where I stayed on Ninth St in the meatpackers district, now a trendy club, bar zone, formerly a gay neighbourhood.

Flavian Gonzalez from the Strategy for a Just Economy (SAJE) organised the interview with Esperanza in South Central LA. SAJE are a switched on NGO within a network of housing rights organisations featuring Rights to the City (NY) and Justa Causa (SF).

San Francisco – nobody has a living room!
Supply side constraints vs international capital
Pointy side of globalisation

Detroit – McDougall St, Detroit – check the google map for sprawl effect.

Mike Illich – public subsidy for sports arena announced just after Detroit bankruptcy.
stadium economics fails community

Matty Maroun – the bridge baron, as featured in this Renegade Economists show.

Story: America’s Broken Bridges

…. giving Moroun’s family business, the Detroit International Bridge Co., a rough daily take of $156,000. Through an accident of history and bad planning, every single truck and car has to pass through residential neighborhoods in southwest Detroit to reach the highway. Eight years ago the Michigan Department of Transportation worked out an agreement with the Morouns to share the costs of building new access roads and ramps to its bridge. The Gateway Project, as it is called, is essentially a $230 million driveway to the Ambassador Bridge. It was supposed to be finished by 2008.

But the Morouns and transportation officials tangled over some details. The Morouns built a road that didn’t go where the officials thought it should. Instead it went right past the Morouns’ new and very profitable duty-free shop and gas station. They constructed a pier that could support a second, unapproved, span. In 2009, Michigan accused the company of breach of contract, and Judge Prentis Edwards of the Wayne County Circuit Court agreed. He gave the company until the beginning of 2012 to properly finish its part of the project.

Detroit – thousands evicted for property tax evasion – on improvements with inaccurate valuations.
water crisis

Detroit Property taxes – why so many facing eviction?

Josh Vincent writes via email:

This foreclosure crisis was different from what happened in the rest of the USA, in the world. The evidence is that there was very little in the way of “liar mortgages” for the simple reason that no one really wanted to buy homes in Detroit even during the bubble. Most of the people facing foreclosure had no way to escape and run for the hills. They were retired, and had very little equity to sell, even if there were willing buyers.

Remember, you can buy a usable house for $500, and rent it out until the roof falls in.

Ted may know more, and probably does, these foreclosures are driven by 2 basic issues, I think:
1. Assessed values has been gamed by the state in proposal a which was passed by referendum in 1994. It was a cap on assessment growth, maintaining values so that it would not increase and therefore lead to higher tax bills. I don’t think anybody foresaw – although they should have – that Detroit’s residential base would shrink tax base constantly from almost that year forward. The unintended consequence is that home values in Detroit are frozen in history. So tax values and tax bills are based on a fiction.

2. The City made a decision to not pursue back taxes as the crisis deepened. Much like the water bill crisis, people were convinced that nobody would ask them to pay the back taxes. The city’s financial recovery plan all of a sudden called in the chips on back property taxes as well as water and other utilities. The city also had a penalty of 18% interest on back taxes. Recently, the state pulled that back to 6%, but 6% of nothing is nothing of course.

Bottom line, banks, lenders, and uneducated mortgage seekers played a role. But I believe it’s safe to say this one is nearly entirely on the state of Michigan and the city of Detroit. The only way out for the vast majority of homeowners is a total forgiveness of back taxes and interest. Now, does the city WANT these people to keep their homes? I think it’s a very open question.

Of the 50 largest U.S. cities, Detroit has the highest property-tax burden for a $150,000 home, at $4,988 on average in 2013, according to a study by the Minnesota Center for Fiscal Excellence. The taxes in New York for a house with the same value was $1,087.

This a byproduct of population exodus. Detroit needs a tax advantage to attract business back to the city.

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