Desperate for revenues, Detroit ponders fast-food tax

Desperate for revenues, Detroit ponders fast-food tax 5/8/2005, 9:15 a.m. ET
By SARAH KARUSH
The Associated Press

DETROIT (AP) — Would you like fries with that? Either way, the Detroit city treasury would like a bite.

Faced with a $300 million budget hole, and with traditional revenue-raising options largely exhausted, Mayor Kwame Kilpatrick is hoping people won't mind forking over a few extra cents for their Big Macs and Whoppers.

Kilpatrick is preparing to ask Detroit voters to approve a 2 percent fast-food tax — on top of the 6 percent state sales tax already applied to restaurant meals. The mayor says consumers will barely notice the slight increase at the cash register, but critics say the tax would unfairly burden the poor and hamper economic development in the city.

Other cities and states have special taxes on prepared food, and some have tried "snack taxes" on foods such as cookies and chips. In New York, Assemblyman Felix Ortiz has proposed a 1 percent tax on junk food, video games and TV commercials to fund anti-obesity programs. But the Detroit assessment would be the country's first tax specifically targeting fast-food establishments if approved, the National Restaurant Association said.

Opponents of the Detroit idea have been quick to call it a "fat tax" — a penalty on unhealthy foods. Men's Health Magazine dubbed Detroit the nation's fattest city in 2004, though it slid to No. 3 in the 2005 rankings.

However, the tax would apply not only to fat-laden burgers, fries and desserts, but to anything sold at a fast-food establishment, even salads. City officials say the proposal, part of the draft budget Kilpatrick presented to the City Council last month, is more about Detroit's financial health than anything else.

Although the tax would not come close to fixing Detroit's financial problems — officials predict it would bring in $17 million in the next fiscal year — every dollar counts in a city already bracing for mass layoffs and service cuts.

Enacting the tax would likely require a change in state law. That could be a tough sell in the Republican-controlled Legislature, though city officials say they're confident they'll win the battle.

Kilpatrick's next hurdle would be convincing Detroit voters to give the necessary approval.

"Just tell him we're going to go to Bloomfield Hills to McDonald's if he puts a tax on it," said Ebony Ellis, 18, referring to the affluent Detroit suburb, as she and four friends ate at a Golden Arches in Detroit. The high school classmates eat at McDonald's every day after school because their schedule doesn't leave them time for lunch.

Young people and senior citizens are big consumers of fast food and would bear an unfair share of the tax's burden, some critics contend.

"It's really going to fall upon poor people harder," said Robert Wassmer, a professor of public policy and economics at California State University, Sacramento. Not only would the tax be regressive, but a lack of transportation could make it harder for some low-income residents to cross city boundaries to escape the tax, he said.

"We think it's extremely counterproductive to say to those people who have provided jobs, who have provided growth, `We're going to levy on you a special tax that we don't levy on anyone else,'" said Andy Deloney, public affairs director of the Michigan Restaurant Association.

But Kilpatrick insists an additional 2 percent — or a nickel on a $2.50 Big Mac — would have little effect on the pocketbooks of the average resident or the competitiveness of Detroit eateries.

"With Detroit, you're kind of grasping at straws because the tax base is so tapped into," Wassmer said.

The city currently has five major revenue streams: state revenue sharing, an income tax, property taxes, a tax on its three casinos and a utility tax.

Michigan law limits Detroit's ability to raise income and property taxes. Few argue that such increases would help anyway: High taxes are frequently cited as a major reason residents and businesses have fled the city, further depleting the tax base.

In a study by the District of Columbia comparing Washington and the biggest cities in each state, Detroit in 2003 had the 10th-highest tax burden for a family of four with an income of $75,000. The total burden of state and local taxes combined equaled 11 percent, according to the study.

In addition to the fast-food tax, Kilpatrick also plans to ask voters to approve a property transfer tax, a flat $250 to $500 fee that would be split by the buyer and seller.

Other options, such as a municipal sales tax, might damage Detroit's efforts to revitalize itself after decades of population decline and business flight, Kilpatrick said.

The same goes for an overall meals tax not limited to fast food, Deputy Mayor Anthony Adams said. The mayor likes to boast that 22 new restaurants have opened downtown in the last three years. A tax on all restaurants might hamper this fledgling development, while the city's fast-food market is "pretty mature," Adams said.

Just how does one define the fast-food market? Besides the obvious chains like Wendy's and White Castle, officials have mentioned takeout pizza places and Detroit's ubiquitous chili dog restaurants known as Coney Islands.

But what about American Coney Island, a downtown establishment that has table service despite its simple and speedy fare? What about Starbucks or the corner deli? The administration says it is still working on a definition.

LOCALLY SPEAKING: Detroit's mayor vs. Oakland Co.'s exec
For the past three years, Detroit Mayor Kwame Kilpatrick and Oakland County Executive L. Brooks Patterson have shared a cordial relationship.

But the cordiality turned to at least momentary hostility Wednesday when Kilpatrick appeared on the Frank Beckmann show on WJR-AM (760) and said that Patterson was an impediment to regional cooperation, especially on the issue of an expanded Cobo Hall.

Patterson responded on Beckmann's show Thursday with a tirade that had metro Detroit political activists talking all day.

Can't we all just get along?

The following is an edited transcript of the two interviews.

(snip only, but you will find the whole thing revealing)

"This is an election year, and when it comes down to it and he's falling behind in the polls, he'll start playing the race card. So he's not only going to bait the suburbs against the city. He's going to rally his troops and voters and say 'look at that honky county executive, he won't come to the table.'
"Don't try and tell me we haven't been a good neighbor. We tried to help Detroit. They can't get their act together. For him to say we're a non-player, that we won't come to the table, is wrong.
"Up until that interview. I thought Kwame and I had a working relationship. For him to blame his failures on Oakland County, that's it. I'm so damn angry over this [bleeped]. I'm not going to take it anymore."

http://news.maxisearch.net/20050325_0_11.html

What a guy, this mr kwame, LOL
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Kilpatrick's Cobo plans a pipe dream
Web-posted Jun 6, 2004
By PETE WALDMEIR
Special to The Daily Oakland Press
Let's see if I have this straight._ Detroit Mayor Kwame Kilpatrick thinks both Oakland and Macomb counties ought to continue to tax their visitors and tithe to the big city for the next half-century so he can spend up to $1.3 billion to replace or expand his city's aging and hardly venerable riverfront Cobo Hall and Convention Center.
As for Oakland County Exec L. Brooks Patterson's suggestion that a mysterious private interest "White Knight" might be enticed to take on that massive debt by incorporating it with another midtown casino, Kwame says no dice. The last thing Detroit needs is another casino.
Yet, "It must be a facility that in size, scope and beauty matches any convention center in Europe or Asia," big-thinker Kilpatrick intoned in a speech earlier this year.
Adding, of course, that "it must surpass anything in America," too.
In Detroit. Right.
This would be funny if it weren't so pathetic. I hate to be the guy who breaks the news to the wunderkind mayor, but apparently none of his advisors will do it. That draft you feel, Mr. K, isn't the office air-conditioner. Could you have, ahem, left your trousers on the bedpost when you left home this morning?
Detroit's medical center is broke and three long-planned permanent casinos, each with a 400-room hotel, are tied up in legal wrangles and nowhere near delivery.
A $150 million renovation of the derelict Sheraton Cadillac is stalled, the Kilpatrick administration's grand plan for buying the old Michigan Central railroad depot and converting it into a new $130 million police headquarters is nowhere near reality, and even the nation's first strictly African-American museum has required a $500,000 bailout to keep from going belly up.
Regretfully, the city's youngest chief executive can't even seem to find a way to cash in on free money when it's offered. Encouraged by Kilpatrick's youthful enthusiasm, months ago Plymouth philanthropist Robert Thompson promised to give Detroit $200 million gratis to build 15 charter high schools in the city. When political crunch time came, however, Kwame bailed out and withdrew his support.
Hey, no "White Knight" from the suburbs should be allowed to come into Detroit and throw money around, right? Makes the pols look bad.
Undaunted, the generous Thompson then offered a gift of $10 million to help tear down abandoned buildings. All the Kilpatrick administration had to do was spend the money wisely. Detroit flunked again, demolishing fewer houses on a slower schedule than promised, and Thompson once more slipped his checkbook back into his pocket.
Talk about spinning gold into straw.
The latest Cobo scheme may be Kilpatrick's biggest pipe dream yet. As my sainted mother used to say, this 34-year-old's eyes certainly are bigger than his stomach. Here we have yet another case of a guy who grew up in a political family, accustomed to feeding on tax dollars, developing a filet mignon appetite on a grilled cheese sandwich budget.
The Cobo Hall convention and exhibition complex opened in 1960 and was expanded to 700,000 square feet in 1985. Bonds that were sold to pay for that long-ago expansion still are being paid for by a portion of taxes collected on liquor sales and hotel and motel rooms in Oakland, Macomb and Wayne counties. Those bonds don't expire until 2015.
So where to find fresh funding?
It's a time-honored bureaucrat trick to pile new debt on the old by extending existing taxes instead of trying to pass new ones. So Kilpatrick's grand plan for financing the new Cobo II is to raise the bulk of the $1.3 billion by tacking on an additional 30 years worth of bonds, extending Macomb, Oakland and Wayne counties' indebtedness until 2045.
And get this: Presumably to spread the exposure more "fairly," Washtenaw, Monroe, Livingston and St. Clair counties also would be expected to join in the Cobo hotel-motel-liquor tax contributions.
There is a fat chance, of course, that any of this ever will come to pass. And an even fatter chance that Patterson's mystery investor will materialize.
You can be certain of one thing, however: It's not Robert Thompson.
Read Pete Waldmeir's column every Sunday in The Daily Oakland Press. Send e-mail to Pwaldmeir@aol.com. Call (586) 783-8648.

http://www.theoaklandpress.com/stories/060604/col_20040606049.shtml

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