​Flint's Water Crisis is Also a De-industrialization Story

Alan Tonelson |

When I began reading about the water crisis in Flint, Michigan, my first thoughts were of the Mexican factory towns near the U.S. border, where rapid and unregulated industrialization driven by manufacturing for the American market has produced pollution nightmares – including dangerously poisoned drinking water.

The shameful situation in Flint has many causes, but one that’s been neglected has been a development that makes the city a depressing mirror image of much of northern Mexico – rapid de-industrialization, stemming from the plight of the U.S. automobile industry, that has robbed Flint of the ability to pay for the kinds of public services Americans for decades have come to expect in a financially sustainable way.

According to Flint’s auditors, the city has long provided its citizens with “ a full range of services, including police and fire protection, the construction and maintenance of streets and other infrastructures, recreational activities and cultural events, water and sewer services, and sanitation/garbage pickup services.” The water crisis has made sadly clear that this standard agenda was in fact unaffordable for Flint. But the gap between the city’s first-world ambitions and resources that are markedly below that level has been evident for years from its chronic budget deficits and its heavy reliance on state and federal aid.

The earliest Flint budget figures on-line are from 2002, and show a $7.4 million deficit on $457.7 million in expenses and $445.3 million in receipts. Only 10.13 percent of those receipts came from combined income and property taxes. More than three fourths of the city’s take was generated by the Hurley Medical Center’s revenues. Last year’s figures make the city’s finances and tax base look stronger. The city ran a $568 million surplus on spending of $147.3 million and revenues of $147.9 million. And taxes represented 22.85 percent of those total receipts.

Those overall numbers, however, should tell you that something’s a little fishy. In fact, in 2011, the hospital was in effect taken off the municipal budget – despite its profitability. For that last year it was on those books, Flint’s government spent $567.3 million and took in $523.2 million, for a $44.1 million shortfall that was much larger proportionately than 2002’s. And taxes were a mere 6.15 percent of city revenue.

Even more disturbing, that 2015 Flint budget also removed all of 2014’s $24 million worth of sewer expenses and some $23 million of that year’s $44.2 million in water expenses. So even these necessities had revealed themselves as completely beyond Flint’s means.

Why is Flint is such a fix? Bad government is surely a big part of the answer. But so is dramatic economic deterioration. As has been widely noted, the city’s population is disproportionately poor and African American. But it’s also crucial to understand that over the last decade alone, Flint has steadily lost much of the material wherewithal that any municipality needs to be functional by recent American standards. Let’s start with the broadest economic indicators and then examine the trends in greater detail.

It’s tough for any country or community to succeed without economic growth, and Flint is a long-time laggard. According to Commerce Department figures (available at this interactive data base), from 2001 (the year before those earliest on-line financial reports date from) through 2014, Flint’s economy actually shrank in inflation-adjusted terms – by 8.67 percent. By contrast, America’s urban areas as a whole grew by 24.30 percent.

Census Bureau data show that the city’s population actually dropped more steeply from – 124,943 in 2000 to just over 99,000 in 2014. So in theory, there was more wealth to share in Flint. But in practice, it hasn’t worked out that way. Between 2000 and the Census Bureau’s estimated 2010-2014 average, median household income in the city fell by nearly 12 percent – and that’s before adjusting for inflation. No doubt a veritable and ongoing employment depression deserves much blame. During this period, the number of employed Flint residents cratered by 37.63 percent – from 45,885 to 28,618. And the poverty rate surged from 26.4 percent to 41.6 percent. That’s nearly triple the national rate in 2014 (14.8 percent).

Leading the way down in Flint has been manufacturing. Its real output (as also shown in that Commerce data base) plunged by 29.10 percent during this period, compared with 26.67 percent real manufacturing growth for all of the nation’s metropolitan economies. As a result, this sector shrank from more than 22 percent of the city’s economy after inflation to just over 17 percent. In U.S. metro areas as a whole, manufacturing stayed at somewhat over 11 percent of real gross product.

Flint’s manufacturing’s woes, in turn, overwhelmingly stem from the troubles of the American automobile industry. Flint is nothing less than the birthplace of General Motors, and has long been known as “Vehicle City.” Back in 1978, GM employed more than 80,000 Flint-area residents. Production figures are harder to come by – the Commerce Department doesn’t break out automotive output for Flint for most years precisely because it has been so GM-dominated, and therefore publishing the numbers would release proprietary data. But as of 2013, the automotive sector is recorded as representing nearly 71 percent of the Flint metropolitan area’s inflation-adjusted manufacturing production.

The GM employment footprint, however, had shrunk to some 8,000 by 2006, and as this time-line makes clear, the company has closed down many more and larger facilities in the area since the 1980s than its opened or expanded. Just as important, the rest of Flint’s economy didn’t fill in nearly enough of the resulting gap.

The entire private sector service providing complex in the city grew in real terms by only 5.71 percent – versus 30.31 percent for American metro areas as a whole. Flint’s hospital apparently couldn’t the city’s economy, either. In Flint, health care services expanded their output by only 16.76 percent after inflation between 2001 and 2014 – much less than half the nation-wide rate in cities (42 percent). And where services growth in Flint was strong – as in the information sector – it remained far too small to make a major difference.

Flint’s de-industrialization of course changed the city’s job mix, too – and not for the better. In 2000, according Census figures, manufacturing accounted for 23.2 percent of the jobs held by city residents. During the 2010-2014 period, this share sank to 14.1 percent. The rest of Flint’s major employing sectors fared much better relatively speaking – especially, it seems, the healthcare industry. Its supersector – what I’ve called the government-subsidized private sector – boosted its share of Flint employment from 23.5 percent to 27.9 percent during this period. But Flint’s biggest job loser – manufacturing – pays better than average wages. Except for that subsidized private sector, most of Flint’s biggest job winners pay below average wages.

As a result of the growth and job-related setbacks, Flint’s tax base shriveled. And the damage was hardly limited to individual taxpayers. According to the city’s 2015 financial report, “Property values within the City are believed to have hit the bottom, declining from $1.804 billion in 2002 to $1.192 in 2011 and further declining to $969.13 million in 2012.” Only “slight increases are projected over the next few years.”

Because de-industrialization isn’t responsible for all of Flint’s predicament, it’s way too early to say that the city is doomed to third world status. Other so-called Rust Belt municipalities have fared considerably better, no doubt in part because they weren’t so heavily invested in a single industry like Flint – and its much larger, also wheezing neighbor, Detroit. But because of manufacturing’s matchless record of creating middle class jobs for working class Americans, and because so many former manufacturing centers continue to struggle, expect de-industrialization’s impact to keep threatening Flint’s ability to deliver first world-level services, and its claim to first world status, for years to come.

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