Has Detroit FINALLY Hit Bottom?

detroit-bankruptcyWould the non-urban folk of America PLEASE quit comparing every other city in the country to Detroit now?

Hard to believe that it hasn’t happened yet, but the City of Detroit’s declaration of bankruptcy – and a federal judge declaring that they can’t do that – may just be the very last of the major American cities to hit the rim of the pit of despair, and one of the few to actually tumble all the way in.  (The rest of us looked over the edge of the abyss and somehow escaped the worst.  Even New York in the 70’s.)

Currently in Detroit:Detroit-house

  • 40% of the city’s street lamps don’t work
  • Emergency services takes an hour to respond
  • Basic city services are not delivered
  • A large percentage of the population did not pay their municipal taxes in 2011
  • There are tens of thousands of stray dogs roaming in packs
  • Two thirds of the public parks are permanently closed
  • A third of the city has been abandoned
  • Vacant properties of all sorts are being systematically stripped of all possible scrap materials

It’s like East St. Louis on steroids. Even the pictures being circulated look like East St. Louis.   So many of the structures which are literally falling down must have been quite beautiful in their day.

Even at the worst here in the Lion of the Valley, the street lamps worked, the stray dog packs were caught and euthanized, the parks stayed open, crimes were solved, and emergency response times were respectable.  Can’t say the same for the Cardinals’ batting averages at the time, but they were in Busch II which had dead air. And we were also invaded by Canada geese, which resulted in rounding them up and a mass slaughter after they destroyed the landscaping on a VERY public golf course that had just been renovated in the crown jewel of the city parks.

To put it mildly, Detroit is a mess.  Okay, let’s admit it, it’s a freaking disaster area.  Being hit by a tornado would be an improvement (and a legitimate excuse to get federal help for some clean-up.  Otherwise, uh, no).

Unfortunately, unlike other American cities which have organically used a variety of renewal techniques for the last 40 years to turn things around (to mixed success), Detroit and the State of Michigan’s strategic efforts to use best practices from around the country for waterfront development, new and unique sports venues, innovation and entrepreneurship hubs, neighborhood anchoring, downtown partnerships and more, just are not going to be enough to pull Detroit out of debt that cannot be repaid when the population does not have the capacity to pay taxes.  (2.5% earnings tax?  Are they kidding?)  Even trying to consolidate the population into smaller areas isn’t going to work.

It’s about 20 years too late.  Probably closer to 40.

detroit-bankruptcy-impendingNor are dirt cheap property prices going to attract new residents and developers when there are no reliable city services, among other pertinent issues.  No matter how graceful and elegant historic architecture is, no one is going to put up the money to renovate it if insurance rates due to crime make doing a project far more trouble and expense than it is worth.  Historic value only goes so far.

Frankly, they’re stuck.  And it’s not simply because of democratic rule and union pensions.  I live in a metro region that has had democratic rule for longer than Detroit and still has more than respectable bond ratings for both the city and the county with pension systems that have been restructured.  When needed, the state has stepped in, although, we do better without a lot of interference from Jeff City.  (More often than not, we go it alone.)  Some municipalities have been taken over by the county and the city schools REALLY need work, but other than the recent spike in crime, democratic rule has not been the end of the world.  Trash is still picked up, snow is still plowed, the lights are on, our water is clean, and all that.  The corruption isn’t overtly destructive,  (the worst of it had to do with a towing company), and the unions actually do see reason.  In fact, they work together to keep the peace.  (Although, few of the city politicians have any aspirations past city hall.  They do try.  And a lot of them are nice guys, despite the monthly poker game.)  That isn’t the way it is everywhere, admittedly.

I wrote about the material damage done to US cities in February, which honestly stems from a number of BAD social engineering and interstate building moves under Presidents Truman and Eisenhower.  Just like everywhere else, Detroit suffered, but it was masked far longer due to the industry that built the city, until that industry did not adjust to new realities and went bankrupt itself.  (Except for Ford, which was the black sheep for 20 years after downsizing its workforce to something fiscally manageable.  Now, they are the only American auto manufacturer not to need a bailout.)

That’s where so many other cities had and still have an advantage – workforce diversity.  Other than automaking and some shipping, what MAJOR industry that employs a whole lot of people does Detroit have?  And even when it comes to shipping, Port of Detroit ranks 41st in tonnage handled in the United States without a big rail hub.  Health care seems to be a big industry there (no ObamaCare jokes.  The businesses predate it and are probably going to go broke after its implementation), otherwise there’s the same group we see everywhere else, and mostly professional industries.  That doesn’t help people who work on their feet.

detroit-protests-bankruptcy-620xaDetroit is stuck with nowhere to go without some sort of debt relief or protected restructuring.  A bailout plain and simply should not be – not even of the pension system – but, at the same time, why should bondholders and retirees suffer for really poor decision making at City Hall.  Oh, that’s right, the people probably voted for the leadership and were stupid enough to buy bonds at junk rates.

This should be a lesson learned for the rest of us.

And, BTW, America, contrary to popular belief, Chicago is NOT one step behind Detroit.  People are moving INTO Chicago, and they can pay their bills despite the machine corruption.  Their industry is incredibly diverse.  Plus, Chicago IS the main hub for all transportation except water freight in the interior of the country.  Look for one of the other biggies to go broke before Chicago.  Too much business is done there.  The Cubs…yeah, that’s another post.

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  1. City of Detroit Files for Chapter 9 Bankruptcy « Bankruptcy, Foreclosure, & Family Law Attorneys

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