Opinion
8:49 am
Wed October 23, 2013

Detroit bankruptcy on trial

Lessenberry commentary for 10/23/13

Well, today is the day that the City of Detroit goes to court. Bankruptcy court, that is. Not to settle the final details of what will happen, but to ask the judge to allow it to declare bankruptcy.

This has been going on so long now that there’s a tendency to take Detroit bankruptcy as an established fact. In fact, all that has happened is that the Emergency Manager, Kevyn Orr, filed a petition in July asking to be allowed to declare bankruptcy. Since then, we’ve been treated to a long series of revelations that make bankruptcy appear the only option.

Detroit has close to $20 billion dollars in unfunded liabilities, and next to no assets. It wouldn’t make much of a dent if they sold the entire collection of the Detroit Institute of Arts, and then sold the building to a billionaire who wanted a mausoleum.

The city has a largely poor and under skilled population and no way to raise any new revenue through taxation. As they used to say in gangster movies, ‘the jig is up’. Yet there are people fighting against allowing the city to declare bankruptcy. They can be divided into roughly two groups.

The most important are creditors who think they might get a better deal, either by negotiation or lawsuit, if the judge vetoes bankruptcy and tells the city to work something out.

The second group are the political bitter-enders, who say this is all a power grab, and all the city leaders need is for Lansing to give them money, starting with the revenue sharing they were supposed to get. There’s a germ of truth in this; the state did go back on its word and shortchange the city. But even if the state suddenly coughed up all that cash, it wouldn’t come close to plugging the debt.

Dismayingly, both mayoral candidates are pandering to the voters by pretending to believe a version of this, and by saying an emergency manager wasn’t needed. Privately, they have to know better.  

There are, of course, some folks in total denial, who make me think of the Detroit gentleman arrested this year for stealing his father’s body from a cemetery; he took it home and planned to bring it back to life.

While the ultimate decision is up to Federal Judge Steven Rhodes, bankruptcy has to be pretty much a foregone conclusion. This trial, however, is worth following; we may learn new details about exactly what shape the city is in, and how it got there. There will be twists and turns and a few revelations. They say this will last five business days; I have a hunch it may take longer.

But what I really worry about is this: During the last months of World War II, secret teams of experts were busy planning how to run the occupied areas after the war, and return them to economic and political health. Is anybody today thinking about how to help Detroit post-bankruptcy? ‘

Because at the end of the day, when this is all over, Detroit will emerge still a desperately poor city, shorn of debt but with perilously few assets. Where does the city go from there? Somebody needs to be developing a realistic plan. 

Jack Lessenberry is Michigan Radio’s political analyst. Views expressed in the essays by Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.