DETROIT (Reuters) - The city of Detroit has a huge budget deficit, soaring unemployment and its financial heart — the U.S. auto industry — is fighting to survive. Who would want to run a place with this many problems?
The answer is a crowded field of 15 candidates who will compete in a special election on Tuesday for mayor of America’s 11th largest city where beleaguered U.S. carmakers are the biggest employers and source of tax revenue.
The top two candidates will face off in a runoff election on May 5.
“You almost have to be out of your mind to do this,” said Nicholas Hood III, a local pastor and a candidate currently trailing in opinion polls. “Do we have huge problems? Yes. But are they insurmountable? No.”
According to some observers, however, Detroit’s problems may indeed be insurmountable without U.S. government aid.
“Rebuilding Detroit’s economic base will require money, decisive action and strong leadership,” said John Mogk, a professor at Detroit’s Wayne State University Law School. “The city lacks money and will need outside help.”
The Big Three automakers — the reason for Detroit’s “Motor City” nickname — are stuck in a horrible slump.
U.S. auto sales fell to a 27-year low in January and Detroit’s Big Three — General Motors Corp, Ford Motor Co and privately held Chrysler LLC — are closing plants and shedding workers to weather the downturn.
So the next mayor may be forced to seek aid from the U.S. government, channeled through Michigan’s state government.
“The federal government is going to have to realize that there are some cities in this country that will need more intensive intervention to survive,” said Lyke Thompson, director of Wayne State’s Center for Urban Studies. “We need that and a mayor with a lot of stamina to get through this.”
SCANDAL-PLAGUED FORMER MAYOR
The winner of the May 5 contest will serve through November to complete the term of Kwame Kilpatrick, the city’s scandal-plagued former mayor who pleaded guilty last September in a corruption probe, resigned and served jail time.
Opinion polls put the leaders as interim mayor Ken Cockrel and former Detroit Pistons star Dave Bing, a National Basketball Association Hall of Famer who owns an auto supply business in the city.
“No one wants to let this city die. We all want to save it,” Bing said.
The downfall of Kilpatrick — once seen as a rising star in the Democratic Party — was a blow to confidence in Detroit, where the population is 80 percent black.
“After what happened last year, what Detroit needs now more than anything is integrity,” said the Rev. Charles Ellis of the Greater Grace Temple, one of Detroit’s largest churches. “The people here need something to believe in.”
Finding that reason to believe is, at the moment, tough.
Unemployment in the city reached 18.6 percent in December, up from 14.7 percent in December 2007, according to the U.S. Bureau of Labor Statistics. The national rate was 7.1 percent.
“Unemployment here is approaching dangerous levels,” said Wayne State’s Thompson. “This could get ugly.”
The city’s population fell nearly 11 percent from 1990 and 2007 to around 916,000, according to the U.S. Census Bureau.
The 2007 median household income was $29,109, versus the national average of $50,007, according to bureau data.
But the most immediate problem for city services is a $300 million budget deficit that amounts to about 10 percent of the city’s annual budget.
Detroit’s financial woes worsened in January as rating agency Standard & Poor’s downgraded its bonds to junk status. This will make it even more expensive for Detroit to issue debt as investors demand higher premiums for higher risk.
Analysts see little doubt that balancing the budget will require wage cuts or layoffs among the city’s 14,000 workers.
In his “state of the city” speech on February 10, Cockrel said he would cut his office’s budget by $2 million, cut his own pay 20 percent and ask appointees to take a 10-percent pay cut.
“If our employee unions are willing to follow suit we can limit the number of layoffs,” he said. “We fight for nothing less than our financial survival as a city.”
Editing by Peter Bohan and Vicki Allen