United States. Congress. Senate. Special Committee.

Post-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic (unit 6) online

. (page 35 of 49)
Online LibraryUnited States. Congress. Senate. Special CommitteePost-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic (unit 6) → online text (page 35 of 49)
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Howard E. Wilder, city attorney of Battle Creek, was contacted.
Battle Creek, population 43,453, has applied for State planning aid
for postwar public works estimated to cost $2,887,171. Mr. Wilder
made the following observation to be included in this statement :

The city of Battle Creek can by issuing revenue bonds finance a portion of the
cost of the addition of a water-conditioning system to our municipal water plant.
This project is expected to cost $101,000. Aside from this possibility, we can
furnish no other public-works projects if we must finance any part of the cost
from present sources of revenue. The small amount of sanitary sewer and other
special assessment projects that we would be able to finance for the period neces-
sary to collect the special assessments would be too small to classify as a postwar
employment project. We can offer nothing further in the way of construction
for this area. It is not that there is no need for construction, but rather a total
inability to finance any part of the cost of planning or construction other than
the small amount which can be done by the city engineer's office. Twice we have
attempted a referendum to vote additional millage to create a postwar public
improvement fund, but the vote was unfavorable despite our best efforts. It is
apparent some source of revenue other than the real-estate tax must be found.

Leonard Howell, city manager of Port Huron, was contacted. Port
Huron, population 32,759, has applied for State planning aid for
postwar public works estimated to cost $2,615,065. Mr. Howell made
the following observation to be included in this statement:

The city of Port Huron has developed a postwar-construction program esti-
mated to cost between 3 and 4 million dollars. This is a large program for a city


of 33,000 population. We are in a position to finance this program ourselves,
possibly, over a period of from 2 to 3 years whicli would not begin to provide
enough jobs to meet a serious postwar employment crisis.

Ed Shafter, city manager of Royal Oak, was contacted. Royal
Oak, population 25,089, has applied for State planning aid for post-
war public works estimated to cost $3,609,236. Mr. Shafter made
the following observation to be included in this statement:

Fortunately we are in a position to finance our share of the cost of plans for
our $3,000,000 postwar construction program. However, there are other projects
in this area of major importance to our community which have not been sub-
mitted ; for example, the $2,000,000 outlet drain in southern Oakland County.
Neither we nor the Oakland County Drain Commission are in position to finance
the preparation of plans for this project.

Insofar as the construction of the program for which we are preparing plans,
we are in position to go ahead with only a small percentage of the work within
the next year or two with available funds. By the time we are ready to let a
contract for our first project, a $125,000 job, we expect we will have the funds
available, but would have very little additional to proceed with other projects.
AVe could provide very little employment unless funds are made available for our
street, sewer, and other projects for which we are preparing plans. The plans
will be ready, but construction must of necessity be spread over a number of
years if financed by the city of Royal Oak.

Arthur Jennings, city superintendent of Monroe, was contacted.
Monroe, population 18,478, has applied for State planning aid for post-
war public works estimated to cost $981,900. Mr. Jennings made the
following observation to be included in this statement :

We have a total postwar public-works program of about $1,200,000. We have
funds available to finance only a small amount of these improvements and our
tax rate at present is at the legal limit. It will be impossible for the city of Monroe
to finance these improvements without Federal aid or general obligation bond
issues and we have tried twice to vote additional millage.

Roy Miles, city manager of Muskegon Heights, was contacted. Mus-
kegon Heights, population 16,047, has applied for State planning aid
for postwar public works estimated to cost $700,409. Mr. Miles made
the following observation to be included in this statement :

We must have help from somewhere, both for the preparation of plans and for
construction. I think the job should be done on a local level and the State of
Mic'f igan should recognize that and broaden the tax base to enable us to do it.
We may be able to finance our sewage-treatment plant with revenue bonds, but
have no funds available for street projects which constitutes the bulk of our

C. A. Miller, city manager of Traverse City, was contacted. Tra-
verse City, population 14,455, has applied for State planning aid for
postwar public works estimated to cost $745,500. Mr. Miller made
the following observation to be included, in this statement :

We can handle the preparation of plans for our program and some construc-
tion ; but if there is no Federal aid, our available funds will be exhausted very
shortly. We could finance 50 percent of an $80,000 water-supply program and,
$100,000 lighting and power expansion, and would have some additional funds
available for streets and sewers. We are willing to spend all the money we
have, but are against the made-work type of program. The type of program
we prefer would provide for grants-in-aid, with local control of construction by
either force account or contract method.

Don Oakes, city manager of Alpena, was contacted. Alpena, popu-
lation 12,808, has applied for State planning aid for postwar public

99579 — 45 — pt. 6 18


works estimated to cost $823,574, Mr. Oakes made the following
observation, to be included in this statement:

I don't see a thing that we could start building immediately if the war would
end tomorrow unless we get additional funds from some source. We are in good
shape financially in that we are able to operate within our income, but we have
no reserves available and have a rather large bunded indebtedness. If additional
funds do not become available, it may take 20 years to replace our leaky wooden
watermains. I do not know when we would be able to construct our sewage-
disposal plant.

Harold Corson, city manager of Birmingham, was contacted.
Birmingham, jwpidation 11,196, has applied for State planning aid
for postwar public works estimated to cost $464,350. Mr. Corson
made the following observation, to be included in this statement:

The city of Birmingham has filed with the State planning commission a total
of 27 projects for assistance in cost of preparing plans, with a total construction
cost of $404,350.

Were the city of Blrmingliam to be called upon to start construction of any con-
siderable portion of this program on short notice, I doubt if we could find finances
enough to construct more than 15 percent of our entire program without outside
ielp in the financing thereof. About 75 percent of the total shown above repre-
sents costs of projects tliat would not necessarily have to be delayed by the
formation of special assessment districts, but could go into the construction
stage as soon as the city commission so desired once they were assured that the
money would be available to pay the cost of construction.

Should Federal assistance be available to cities in the future in lieu of work
relief, should such be required, some arrangements similar to the PWA or
matching of municipal funds would, in my estimation, be nmch more desirable
than the work relief as prosecuted under WPA or CWA, as the value obtained
per dollar expended was much greater in the first case than under the latter.

The county problem

At the county level of government population density in metropoli-
tan counties like Wayne, Oakland, and Macomb create problems of
health, sanitation, and police protection entirely different from the
problems of rich agricultural counties in the middle of the State or
the forest and tourist counties of the north. Likewise, a comparison
oi townships shows that wide differences exist between the large group
of sparsely populated rural agricultural townships — many of which
levied no property taxes in 1943 — and the relatively small number of
densely populated townships in the industrial areas of the State where
township officials are attempting to furnish the kind of police* and fire
protection, water and sanitation facilities, and other municipal serv-
ices ordinarily found within the corporate limits of cities and villages.

Sixty-four counties have submitted a total construction program of
$26,000,000. This is in addition to 777 applications, with a total con-
struction cost of $04,850,000, submitted by county road commissions;
$16,000,000 of the county program consists of drains of which approxi-
mately $10,000,000 can be financed and constructed during the imme-
diate postwar period. The balance consists of the Saginaw Valley
flood-control and drainage project and the Red Run storm-sewer proj-
ect in ]\Iacomb County. It is doubtful if eitlier project can be con-
structed for several years without Federal assistance.

The balance of the county program consists chiefly of courthouses,
hospitals, and infirmaries. Many of the counties have postwar re-
serves built up and the prospects are excellent that the majority of
them will be constructed witliin the next 5 years, although probably
-very few during the immediate postwar period.



The milage and towTiship 'problem

Villages and townships submitted applications with a total con-
struction cost of approximately $57,373,000. Approximately GO per-
cent of this total was submitted by villages of the Detroit metropolitan
area and semiurban townships. No definite information is available
regarding the ability of these units of government to finance their
construction program. However, we estimate a majority of the total
can be constructed within the next 3- to 5-year period. Should an
unemployment problem develop, these semiurban townships and vil-
lages in the Detroit metropolitan area particularly will require some
additional source of revenue.

P'uhlic-school problem

In the field of education many striking differences are found which
makes it especially difficult to draw any conclusions regarding the over-
all ability of school districts to finance their postwar construction
programs. The following discussion taken from the Michigan Public
Education Study Commission report completed a few month ago may
be helpful to a better understanding of the financing problems of school
districts :

There are 6,298 school districts in Michigan, although 753 of this total do not
operate schools but transport their pupils to neighboring school districts. Oae-
fourth of the total school membership in Michigan is accounted for by the Detroit
city school district. An additional 24.8 percent are accounted for by the 40 largest
city and urban districts, exclusive of Detroit. Another 16 percent attend schools
in improved rural agricultural and large suburban districts. There are 4,604
school districts in Michigan whicii have populations of less than l,OfK) and only
123.000 children out of the total of approximately 1,000,000 school children in the
State attend these 4,694 districts. The Michigan Public Education Study Com-
mission reports that of the 6,294 school districts in IMichigan, 6,021, or fJS.T p3rcent,
are classified as submarginal or incapable of providing at the local level at least
50 percent of the educational services.

A special study of school debt was also made by the Michigan Public
Education Study Commission in 1943. That study clearly indicates
the effect of debt, the burden it imposes, and the difference which debt
has made on postwar problems of 1945, as contrasted with the postwar
l^roblems of World War No. 1. Selected figures from the school study
are reported below.

PuMic school honded indebtedness


Gross debt

Per capita

Per pupil

Per capita

Per pupU



1930 - - -

$39, 234, 780
174, 885, 257
132, 872, 516


$4, 551

$10. 70

135. 04

1936 -

125. 13



The 1942 debt is 238.66 percent higher than 1920. The per capita
property valuation figures are almost identical for 1920 and 1942, the
latter being only 1.32 percent less. The per pupil wealth is up slight-
ly, 5.12 percent, but the 1942 per caj^ita debt is 124.21 percent and the
per pupil debt 138.97 j^ercent higher than in 1920. Irrespective of
further debt reduction between 1942 and the close of the war, it is ob-
vious that the unpaid debt burden with which schools will start the
postwar period will be roughly double the amount outstanding in


The school districts in Michigan have submitted projects totaling
$91,816,000, Based on our experience in administering the Michigan
Public Improvement Program and the report of the Michigan Public
Education Study Commission, we estimate that an additional $10,-
000,000 of construction is needed to bring our school plants up to
reasonable standards. The financing of these projects was determined
by local boards of education to be so doubtful that applications were
either not filed or liave been withdrawn.

Wilfred F. Clapp, chief of the school plant division of the Michi-
gan Department of Public Instruction, stated recently :

It is our opinion that unless some additional means of financing the public
school construction projects submitted to the Michigan Planning Commission
are obtained over and above those now existing in Michigan, only a compara-
tively few of these projects will actually result in construction. Michigan is
not meeting the problem and probably will not be in shape to meet the problem
when postwar unemployment makes public works desirable. I cannot say hon-
estly that Michigan is unable to finance its school-building program. I believe
that the wealth is here, but under our existing tax laws which prevent financing
school projects for a period longer than 5 years, it is almost impossible ta
finance new construction.

Regarding the administration of any Federal-aid program whick
might materialize, Mr. Clapp made the following observation :

Any Federal program to supply aid for the construction of schools should be
tied in with the regularly established education agencies. Projects should be
approved only after surveys have been made by educational agencies to deter-
mine the need both as to the size of building, placement of building, and kind of
program to be offered. Federal aid for school construction can be a stimulation
toward more effective school district organization. On the other hand, if direct
contacts are made between Federal public-works agencies and the applicant,
it will result in many districts building overambitiously the kind of schools
which they cannot operate and should not try to operate.

The Upper Peninsula problem

The problem in the Upper Peninsula differs from that of the in-
dustrial areas in that it depends mainly on the production of raw
materials — timber, copper, and iron ore. The postwar employment
prospects of the area are therefore difficult to measure. There is at
present no great shortage of labor despite the fact that the population
in some counties has decreased as much as 31 percent since 1910 with
an average decrease of approximately 19 percent. Should a majority
of its migrants to the Lower Peninsula industrial areas return along
with its returning war veterans, a serious unemployment situation
would quickly develop.

A survey of 12 communities in the Upper Peninsula whose public-
works programs aggregate $7,900,000 out of a total of $12,000,000 for
the entire Upper Peninsula, was made recently. This represents 03 per-
cent coverage of the planned construction in the Upper Peninsula.
The results of the survey indicate local financing is possible for $2,-
100,000 of the $7,900,000,' or about 27 percent, and this over a period of

Fiscal capacity

The success of any program of public works ultimately depends
upon whether it can be financed. The question at once arises whether
a unit of government which is to have further capital improvements
has sufficient fiscal capacity to complete its proposed projects. Al-
though it is very difficult to measure fiscal capacity, its general meaning
is fairly well understood. To most persons, it means simply the-


amount of funds a governmental unit can provide to finance its ex-
penditures. There are thousands of different tax-raising and tax-
spending units of government in Michigan. In addition to the State,
there are 83 counties, 173 cities, 305 incorporated villages, 1,2G5 town-
ships, and some G,274 school districts, a total of 8,100. In addition,
there are an unknown number of special districts.

In Michigan local units of government are restricted to the degree
to which they may utilize their primary source of revenue, the prop-
erty tax. In 193^2 the people of this State placed in the constitution
the so-called 15-mill property tax limitation amendment, article X,
section 21. This provides that, with certain exceptions, the total of
the combined taxes levied for all purposes shall- not exceed an over-all
rate of 15 mills per dollar of the assessed valuation of the property.
By virtue of a State supreme court decision in 1933, School Distnct
of Pontiac v. City of Pontiac (262 Michigan 338) the 15-mill limita-
tion does not apply to taxes levied for municipal purposes by cities and
incorporated villages unless the latter vote specifically to be included
within the 15-miH maximum. There are 11 cities which have voted to
come under the constitutional limitation and are referred to as the 15-
mill cities. In these, the total taxes levied for county, school district,
and city purposes must, with exception, be confined within the 15-mill
total rate. In all other cities and incorporated villages, the county
and school taxes, but not the municipal tax, are subject to the 15-mill
limit. The charters of these cities and villages, however, limit the rate
which may be levied for municipal purposes. In the townships, the
15-mill limit includes county, school district, and township taxes. _

Tlie constitution provides that property taxes levied for debt service
on debt contracted prior to December 8, 1932, shall not be included
within the 15-mill limitation. It also provides that the electors of any
taxing unit may vote to levy taxes in excess of the 15-mill over-all
maximum, but it requires a favorable vote by a two-thirds majority to
authorize such additional taxes. Furthermore, taxes to be levied in
excess of the 15-mill limit can be authorized for a period of not more
than 5 years at any one election.

The constitution is often a formidable barrier to the financing of
capital improvements. It is difficult, if not impossible, to sell bonds
when the taxes to provide the debt service on the bonds can be author-
ized for a period of not more than 5 years. Prospective purchasers of
such bonds realize the high degree of uncertainty as to whether the
necessary two-thirds majority vote can be obtained again periodically
to enable the borrowing unit to continue payments for debt service.
School districts and the 15-mill cities, particularly, have been handi-
capped in financing the cost of new buildings and other capital im-
provements. With this situation in mind, the recent report of the
Michigan Tax Study Advisory Committee recommended that the con-
stitution should be amended to provide that to finance capital improve-
ments, additional taxes above the 15-mill maximum may be authorized
by a simple majority vote and may be voted for a period as long as 15

At the election on April 2, 1945, the people of Michigan voted upon
a proposed amendment to the constitution which would permit some
degree of liberalization in the 15-mill limitation so far as concerns
taxes specially voted for capital improvements. The maximum
period for which such taxes may be voted would be extended to 15
years, but the privilege of voting such additional taxes would be



limited to persons, and tlieir wives or husbands, owning property in
the taxing district. This proposed change in the 15-mill limitation
of the constitution was defeated.

As tliere is so much empliasis upon the tax rate, particularly since
the adoption of the 15-mill amendment, it is only natural to think
of the property tax rate as indicating the existing tax burden when
considering the fiscal capacity of local units. Tax rates per $1,000 of
assessed valuation can be seriously misleading, however, because of
the high degree of variability in the level of assessments in different
taxing jurisdictions. For this reason, it is unsafe to draw conclusions
concering the burden of taxation by comparing the actual tax rates
on ]:!roperty in the various local units.

This may be illustrated by a table presented herewith showing for
the 20 largest Michigan cities (a) their actual over-all tax rates per
$1,000 of assessed valuation in 1944; (b) the ratio of the assessed value
to the full value of property, and (c) the equivalent tax rate or what
the rate would be upon a uniform basis using the full value of property.
During the last year, the State tax commission has made a compre-
hensive investigation in which the assessed values of thousands of
pieces of real estate were compared with the prices received when
the property was sold. In the accompanying table it may be observed
that although Royal Oak has a tax rate of $40.33, the level of assess-
ment is so low that this is equal to a tax rate of only $20.29 upon full
value. On the other hand, the level of assessment in Detroit is high and
the equivalent tax rate on full value would be $29.80, on which the
actual tax rate is $33.11 per $1,000 assessed valuation. The tax rate
of Jackson, a 15-mill city, is $21.70, while that of Kalamazoo, which is
not a 15-mill city, is $25.18. When the comparison is made upon the
basis of full value, however, we find that the equivalent rate in Jackson
would be $18.94, while the equivalent rate in Kalamazoo would be only
$17.52. The table follows :

Property tax rates in Michigan's 20 largest cities, 19Jt4

Over-all tax rate per

$1,000 valuation



Actual rate

lent rate on
full value

on assessed



1, 623, 452






63, 684










35. 73


47. 956

37. 03


32, 759



30, 618





14. 33

25, 087









164, 292



151, 543



82, 794


14. 34

66, 626






47, 697



43, 453



Ratio of
assessed to
full value

of prop-





Highland Park


Bay City

Port Huron


Ann Arbor

Eoyal Oak



15-mill cities:

Grand Rapids






Battle Creek..



> Assessment ratios estimated by the Michigan State Tax Commission upon basis of sales data.


In addition to the restrictions in the constitution and in city charters
with respect to tax rates, there are certain potent economic limitations
as to the amount of taxes that can be collected on real property. Al-
though the tax is levied upon the valuation of the property, the tax
usually is paid out of somebody's income, either the income from the
property itself or income from some other source. During- the great
depression of the 1930's, property tax collections as well as the income
of property owners shrank heavily. In many communities, less than
half of the current levy was collected. Tax delinquencies mounted
to an alarming degree and thousands of parcels of real estate reverted

Online LibraryUnited States. Congress. Senate. Special CommitteePost-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic (unit 6) → online text (page 35 of 49)