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Politics & Government
Mon June 17, 2013
Commentary: After the Fall
It’s hard to be shocked by anything relating to Detroit’s financial crisis. But frankly, I was, when I read the details of the report Emergency Manager Kevyn Orr gave to the city’s creditors.
For months, we’d been hearing that the city had as much as $14 billion in long-term debt. The real figure is more like twenty billion. No other city in the country pays even twenty percent of its revenue for what they call legacy costs -- debt service and pensions. Detroit pays more than forty percent.
With all that going to service the past, there’s precious little left for the present. The city owns thirty-six ambulances, but no more than a third actually run. Police can take nearly an hour to answer an emergency call. Fewer than one in five violent crimes are solved. The city’s electrical grid is deteriorating.
Meanwhile, the per-capita tax burden on the residents is the highest on the state, but revenues are dropping like a stone.
The city, in short, is collapsing. There are countries where, if such a mess were discovered, everybody involved in municipal finance over the last half-century would be shot.
That would not, however, solve anything. Things are, however, about to change in Detroit. There is now no real doubt the city is headed for some kind of bankruptcy filing. Last week, Emergency Manager Orr refused to make a nearly forty million dollar payment to one of the city’s debtors, and announced the city would no longer make any payments on its unsecured debt obligations.
Unsecured obligations, by the way, are debts where there isn’t an asset, like a car or a truck that the creditor can drag away if you don’t pay. Orr said he will use the money instead to improve city services, principally perhaps police protection, and to clean up blight.
This has to be popular with the residents, and sends this not-so-subtle message to those to whom the city owes money:
Make a deal with us now and get something, or wait maybe years for the bankruptcy process and end up with maybe nothing. It is barely possible that if enough creditors agree, Detroit could reap the benefits of bankruptcy without going through the formal process.
Possible, but not likely. I’ve noticed an interesting small change in the way Orr, a high-powered bankruptcy attorney from Washington, talks about Detroit. He has started saying “we” and “us,” and I think that is sincere. He told a newspaper the goal was “to get to a point where rational people want to engage in rational behavior,” and where choosing to live in Detroit would be a rational thing to do.
What’s not clear is what kind of attitude adjustment is taking place within Detroiters themselves. There are hundreds of thousands of people living lives of poverty-stricken desolation. Most are undereducated and underemployed.
Many are not in the workforce and don’t have a tradition of rational behavior. How will all this affect them?
What is clear is that, for the first time, someone is forcing us all to see and confront the true condition of our largest city.
Now the task is to fix it, and then add two words to Detroit’s official motto: Never Again.
Jack Lessenberry is Michigan Radio's political analyst. Views expressed in the essays by Jack Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, the University of Michigan.
Politics & Government