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What happens as Detroit begins to fight its way back to prosperity

Sep 10, 2014

Well, yesterday was indeed one of the more momentous days in Detroit’s modern history. The city not only reached an agreement with Syncora, the major opponent of its bankruptcy filing. Detroit also reached a deal with the suburbs on the water system, something that has eluded everyone for years.

When I heard about all this, I was instantly reminded of economist Paul Romer’s famous quote: “A crisis is a terrible thing to waste.” Detroit is in its worst crisis since Cadillac beached his canoes and scrabbled up the riverbank in 1701.

And for once, it hasn’t wasted it. Whatever you think of Federal Bankruptcy Judge Steven Rhodes and Detroit emergency manager Kevyn Orr: This would not have happened without them. Rhodes is the real hero in the water settlement.

Oakland County Executive L. Brooks Patterson acknowledged this yesterday. For more than 40 years, Patterson has had a political career based on bashing Detroit. He had no intention of ever agreeing to a water deal with the city.

But Patterson knew that if he wasn’t willing to play ball, Rhodes could, quote, “cram down our throats his settlement of this issue, and this was always looming over our heads.”

The settlement itself is reasonable, logical, simple, and could have been designed by a graduate class in political science. A new Great Lakes Water Authority is being created.

The city will still own it, but it will be run by a six-member board with two Detroit representatives, one appointed by the governor and one each from the three major counties. Five votes will be needed for any major decisions, ensuring city-regional cooperation.

Even this would probably not have won over Macomb and Oakland Counties, except for this: If they don’t agree, the governor will appoint members for them.

Going back to the bankruptcy, the deal with Syncora resembles the one Orr crafted with the pensioners last spring. They get far more than the city was first offering, but far less than they demanded.

The banks and the bankruptcy judge still have to sign off. But the deal is quite likely to be approved.

Syncora gets millions in bonds, a long term-lease on a major parking garage, and 20 more years of running the Detroit-Windsor tunnel. Plus, it gets a credit slip it will probably use to buy the Joe Louis arena when the Red Wings move out.

If approved, this settlement will also drastically increase pressure on the few remaining holdouts to do a deal.

It now seems likely all this could end sooner than most people thought, and that Detroit could be out of bankruptcy by the end of fall. After that comes the hard part.

When he walked out of the Constitutional Convention in 1787, Benjamin Franklin told a woman who asked that they had given her “a republic, madam, if you can keep it.” Soon, Detroiters may have a city freed of most of its crippling debt burden, and with more open and rational institutions.

Then, Detroit will have a chance, a bare chance, to stay solvent and to begin to fight its way back to prosperity. This story won’t end any time soon. But we may be about to start a more hopeful chapter.

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.