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Why Detroit’s bankruptcy matters

Posted: July 25, 2013 9:02 a.m.
Updated: July 26, 2013 5:00 a.m.

We who live in other cities ask what drove Detroit into bankruptcy. What we really want to know is whether it could happen to us.

Since 2010, five other cities and two counties, plus almost 30 special districts such as utility authorities have filed for bankruptcy, according the Detroit News.

Days before Detroit became the biggest city to file for Chapter 9 bankruptcy protection, Moody’s Investors Service downgraded Chicago’s credit score three notches from Aa3 to A3 because of the city’s pension problems -- a major factor in Detroit’s financial woes.

But unlike other big American cities, Detroit is the quintessential one-industry town, long-standing symbol of fading industrial glory and rising urban blight.

A century ago it became the “Motor City,” a center of technological innovation. In World War II, it was the “arsenal of democracy.” Producing trucks, Jeeps, tanks, aircraft engines and other products for the war effort helped the city grow to 1.8 million people.

But it has shrunk since then to only 700,000. The decline of factory towns across America hit its biggest one-industry town hardest. Rising crime, a shrinking tax base and a major riot in 1967 spurred more white and middle-class flight.

Yet as recently as the late 1990s, Detroit was a big comeback story, along with other big cities that rode an economic boom and new attitudes about urban development, tourism and gentrification.

Detroit Mayor Dennis Archer left office in 2002 after two terms in which the city enjoyed waves of new investment, a modernized city workforce and upgrades in the city’s bond ratings.

Unfortunately, his successor, Kwame Kilpatrick, became better known for a headline-making sex scandal, a conviction for perjury and obstruction of justice and, after his resignation in 2008, two dozen more felony counts this year, including fraud.

Yet, as one who has known the city pretty well as a frequent visitor during its turbulent decades, I call today’s Detroit under Mayor Dave Bing a tale of two cities in the same city. Unfortunately the old city still needs to get out of the way so the new Detroit can break free.

While there are unfortunately ample abandoned factories and burned-out neighborhoods for television news crews to shoot, other parts of town bustle with renewal.

Most of this can be seen in the city’s 7.2 mile core, which, unfortunately, lacks the sort of commercial or visual focus of downtown areas like, say, New York’s Times Square or Chicago’s Magnificent Mile.

Since the federal government bailed out auto companies associated with Detroit, many ask whether it should bail out the city itself. But neither Michigan’s Republican Gov. Rick Snyder nor President Barack Obama sound eager to do that, especially in today’s political climate. Considering the city’s turbulent fiscal past, who can blame them?

Yet, many optimists see signs of hope through a new wave of public-private partnerships,

As urban specialists Bruce Katz and Jennifer Bradley of the Brookings Institution, co-authors of “The Metropolitan Revolution,” write on the Brookings website, the city has the same strong assets like colleges, research centers and an active business leadership that have helped other big post-industrial cities to recover.

Much of the city is still seeing a surge in private and civic investment in business and residential growth, they write, and the downtown is being transformed by such leaders as Dan Gilbert, founder of Quicken Loans, who moved the firm’s headquarters downtown in 2007.

Besides getting its fiscal house in order, the city needs a strong growth strategy to spur an economic revival, otherwise the money problems will keep coming back.

Katz, in a telephone interview, said he sees hope in such public-private partnerships as the Detroit Economic Growth Corporation, a quasi-public agency network of government and civic leaders.

“Cities are networks of people, not just governments,” Katz said. “That’s an advantage that cities have. When states or the federal government get tied up in gridlock, they have nowhere else to turn. Cities can turn to the business and philanthropic communities. Instead of a bailout, cities need to look at becoming better partners.”

That’s why the world is watching. If Detroit can come back from its financial woes, any city can.

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