Policy Research

Long Term Stress and Systematic Failure: Taking Seriously the Fiscal Crisis of Americas Older Cities

Alan Mallach, Eric Scorsone

Summary

The authors examines American ‘legacy cities’, defined as “historically industrial cities, including cities like Detroit and Pittsburgh that become synonymous for automobiles and steelmaking respectively”. The authors describe the unique financial challenges facing these cities, not only as a result of the 2008 financial crisis, but also long term economic and external constraints that face these cities. The authors also portray the importance of these legacy cities to state economies. Population loss, combined with increase poverty, declining property tax bases, and reduction in state revenue sharing have all contributed to these cities struggling to find revenue. As a result, city services have fallen, further incubating the above mentioned issues. Many cities find themselves in these cycles which only feed into each other over long periods of time.

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Policy Implications

Cities and States must consider the economic conditions of cities, and how these external constraints lend themselves to financial distress. The authors also clarify that for many municipalities, financial distress is resolved relatively easily and is a short term condition, which is not the case for these legacy cities. It is important for states to realize the importance of these cities, for example, Detroit, and their economic effects on an entire state. The authors recommend approaches which take a long term approach to solving financial distress in cities, and emphasize long term financial goals over short term budgetary fixes.