What went wrong in Detroit? Practically everything, the city once the reflection of a booming industrial engine that included the likes of Pittsburgh and Akron, Gary and Flint, now in bankruptcy, owing its creditors $18.5 billion. Most telling, Detroit failed to hold its people. If the 1967 riots proved devastating, many fleeing then for the exit, the decline has been of a much greater magnitude, the city losing that indispensable energy at its core. Public leadership failed for too long, corrupt at times yet more often plans for revival both misguided and poorly applied.
Three decades after the riots, the population still declined sharply, plunging 26 percent since 2000, to the current 706,000. That loss of population helps explain an array of miseries. Today, the cityís unemployment rate is 18.6 percent. By comparison, the jobless number in Akron is 7.9 percent, the rate in Detroit roughly 10 percentage points higher than in Cleveland.
Lose population and jobs, and the tax base suffers, harming the quality of services, diminishing further the cityís position. Kevin Orr, the Detroit emergency manager, notes that the city collected just 68 percent of the property tax revenues owed. The average response time to an emergency call is almost one hour. The crime rate is the highest for any major city. Forty percent of the cityís streetlights do not work.
In March, Rick Snyder, the Michigan governor, appointed Orr to take command of the cityís finances. Orr sought unsuccessfully to strike deals with city employees and the many creditors. They balked at harsh concessions and pennies on the dollar. Thus, bankruptcy became the option of last resort for the city, an avenue to the necessary restructuring, the imperative perhaps captured best by Detroit still covering 140 square miles with just 40 percent of its peak population.
The city must shrink, in a process that promises to be difficult and painful, and likely longer than the year or so Orr has projected. Hard to imagine Detroit emerging from bankruptcy without its pension system substantially revamped, essentially a deal with employees broken as part of what is required to move forward. Bondholders may fare better, a significant share of their lending secured. Yet they hardly will go unscathed.
Detroit needs resources to shore up its financial position and to begin reinvesting in its services. What business or other investor will plow money into the city without much improved prospects?
At some point, the state and the federal government may have to take steps to ensure that the city gets through the transition, the funds available, say, to sustain services. Yet, in the main, this is Detroitís problem to solve. What offers hope is the path to something better, a solid plan devised and executed. For other aging industrial cities, there is the stark lesson: Lose focus for too long, and you will end up like Detroit, people racing to leave, taking the cityís future with them.