The political economy of capital borrowing in the city of Detroit
This study investigated the extent to which the City of Detroit uses capital borrowing from the municipal bond market to improve its public infrastructure and the economic and political dimensions of such borrowing. Despite the economic and political constraints confronting capital borrowing in the City of Detroit, borrowing has significantly contributed to the improvements of various public infrastructure facilities. The City of Detroit issues two main types of bonds to finance its public infrastructure, general obligation bonds (both limited-tax and unlimited-tax), and revenue bonds. The unlimited-tax general obligation bonds require voter-approval. It is found that the City of Detroit always has a long-term systematic capital budget plan based on citywide priorities for all its capital investments. The City's capital budgeting and its decisions follow the classic model of incrementalist type decision-making, implying that each period's capital budget is gradually based on the previous one. All capital spending decisions are approved by the city council. It is noted that the city council has much more capital spending decision authority than the executive, bureaucrats, and interest groups. As part of the City's local economic development strategy, Detroit-based firms have preferential treatment over non-Detroit-based firms, in terms of contract awards. Legislatively, the executive does not have much decision-making authority over capital spending decisions, however, it is found that its recommended priority of capital projects are duly recognized by both the council and the bureaucrats. Since capital projects tend to have clear visible results, the stakes for elected representatives are very high. This study concluded that capital borrowing has greatly contributed to the City's public infrastructure which serves as a catalyst for economic growth and development. In addition, capital borrowing serves as a platform for bringing together the City's various political agents outside the political domain.
|Year of publication:||
|Authors:||Tenkorang, Joseph Obeng|
Wayne State University
|Type of publication:||Other|
ETD Collection for Wayne State University
Persistent link: https://www.econbiz.de/10009431722
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