Detroit

Detroit, Michigan, one of the great American cities.  One of the few American cities with major teams in all four major team sports: the Tigers, Lions, Pistons, Red Wings.  Celebrated by KISS as ‘rock city.’  By Eminem: 8 Mile. Rodriquez: Inner City Blues.  In fact, the musical legacy of Detroit is so rich, I’m listening to this Motown compilation as I write.  Home of the auto industry, of Elmore Leonard’s best novels, of the Detroit Symphony Orchestra and the Museum of Contemporary Art.  And now, the first major American city to declare bankruptcy.

The Mayor of Detroit is Dave Bing, was elected in 2009.  If this declaration of bankruptcy can be considered a failure, it would be the first thing Bing has ever failed at in his life.  He’s in the basketball Hall of Fame; mostly playing for the Pistons.  The Dave Bing/Jimmy Walker backcourt is one of the greatest of all time.  Upon retiring, Bing started something called Bing Steel, initially with just four employees.  It became a multi-million dollar steel company, and eventually became The Bing Group; one of Detroits most successful businesses.  Learning of his old friend, Jimmy Walker’s out-of-wedlock children, who were struggling, Bing essentially adopted them.  He’s a civic leader, a tremendously successful businessman, and a civil rights pioneer.

Detroit does have serious problems.  It’s lost a quarter of a million residents since 2000.  It has an annual budget deficit of around 380 million, and may be 19 billion in debt altogether.  Obviously, the story of Detroit is also the story of the loss of manufacturing jobs in a cratering economy, and the story of a city that relied too heavily on a single industry, autos.

Detroit’s problems, therefore, are complicated, and symptomatic of our country’s larger economic woes.  A completely corrupt Mayor didn’t help: Kwame Kilpatrick, indicted on 24 federal felony accounts, including racketeering and fraud. (Dave Bing ran for Mayor specifically because of his disgust with Kilpatrick).  And when you read news accounts of it, one theme comes up repeatedly: that Detroit has a huge shortfall in pensions for retired municipal workers. This story is pretty typical: notice how many times, in one story, some variant of the phrase ‘unfunded pension obligations’ shows up.  That’s the problem, obviously.  Municipal workers’ unions negotiated these sweetheart pensions for their employees, and the city is sinking under the weight of those obligations.

Except maybe not.   Try this story instead.  It does point out that municipal workers (cops, firefighters, teachers) receive an average pension of 19,000 annually. That hardly seems excessive.  Meanwhile, it points out that Detroit spent 55 million for a football stadium in 1975, then spent 300 million on another stadium to replace it, selling the old stadium for half a million.  Or that Joe Louis Arena, where the Red Wings play, was taxpayer funded.  Or that the Red Wings lease on Joe Louis requires that the team give the city 25% of cable revenues.  Of which, so far, Detroit has not received a single thin dime.

The Salon article above points out that Michigan gives huge tax breaks to corporations, and that corporate welfare is a far bigger line item in Detroit’s indebtedness than pensions ever could be.  But what Salon does not point out is the incredible double bind Detroit finds itself in.

Detroit is broke.  City services are terrible, and getting worse.  9-1-1 calls take an hour to be answered–police services, EMTs, firefighters have all had their budgets slashed.  And Detroit has closed half its schools.  High school class sizes are now around 60.  Detroit needs local businesses to thrive, and it needs out of state businesses to move in.  But it’s not an attractive place for businesses.  Why would you move your company to a place where the cops don’t answer emergency calls and where the schools are crumbling and desperately over-crowded?  So the governor negotiates huge tax abatements for companies want to move in.  Which means that even when new businesses do move in, it doesn’t help the city much.  Catch-22.

So Detroit has the best mayor it could possibly hope for, a universally respected local citizen, a successful businessman, and a long-time civic leader.  And the auto industry is coming back.  But that hasn’t helped Detroit much, and trade agreements (NAFTA, for example), have devastated the main Detroit industry.

It’s hard to see things getting much better.  One good thing that might come out of this bankruptcy might be just simple bill collecting–a lot of companies are in arrears in the paltry taxes they are required to pay.  The Red Wings need to pony up.  So do the Lions and Tigers (oh my!).  But most of all, I really do think Detroit needs and deserves a federal bailout.  If city services could be restored, and the downtown could revive, Detroit might be able to solve its own problems.  But that’s a very long shot indeed.  I spent this morning researching the Detroit bankruptcy, and getting more and more depressed.  I’m not sure this story is going to get a happy ending.  Maybe I’ll root for the Tigers to win the World Series this year.  Maybe that’ll help a little.

 

2 thoughts on “Detroit

  1. Bill

    Interesting commentary. As a city planner, I see things from a similar perspective: Detroit’s failure was due to internal and global concerns that created a perfect storm of insurmountable issues.

    While Detroit is the largest municipality to declare bankruptcy, there have been others (Orange County, CA, and Jefferson County, AL, for example, as well as Harrisburg, PA). Municipalities gain their revenue through taxes, ad valorem (property) tax, sales tax, and (to a very small extent) other franchise fees and taxes. Providing municipal infrastructure to residential areas is always expensive and doesn’t pay for itself – streets, sewer lines, water lines, parks, etc. always cost more to install and maintain than residential areas can provide for. So cities come to rely on intensive industrial and commercial uses to bolster ad valorem taxes, and retail centers to bolster sales tax revenues in order to off set the expensive residential areas.

    So with people leaving Detroit in droves, the market conditions are not conducive for regional shopping opportunities. And with attractive tax incentives in other regions – not just due to NAFTA, but even domestically, where plants are seeking workers who are not union and perceived to be less expensive – Detroit looks unappealing. These are coupled with global energy crises in the 60s, 70s, and 80s, and you have a crippling trifecta of blows that no community can resist.

    What might have been done differently? It’s hard to say. I work for the City of Beaumont, Texas, where things are very much like Detroit (although at a much smaller scale). Things in the region have taken hits due to the energy crisis. This area of Texas is very much dependent on the petrochemical industry for survival, and we have learned down here to diversify or die. Beaumont has, in the last couple of decades, really worked hard to change both the perception and the reality of life here. Some of the things we’ve done here include creation of a vibrant historic district, which preserves the past and provides loans to help rehabilitate historic structures. We’ve seen the expansion of a commercial corridor that is a regional draw, which interestingly is centered on and around an older mall. We have an aggressive building demolition program, which may seem counter intuitive, but having dilapidated or dangerous buildings has a measurable impact on the property values such that it is more economical to remove them. It reduces vagrancy, vandalism, and health issues (animals love abandoned structures), and improves the aesthetics of a neighborhood. Further, reducing the available stock of housing improves property values across the City, making supply better match the demand.

    No doubt the folks in Detroit knew all of these tactics and at some point tried to implement them. It is not clear yet why it is successful in some places and not in others. But I am confident that lessons can and will be learned that will help every community weather these kinds of storms better.

    Reply
    1. admin Post author

      I really appreciate your thoughtful comments, and I feel like I’ve learned a lot from them. Thanks so much for sharing! I desperately hope Detroit can turn it around.

      Reply

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