Detroit Journalism Cooperative

 A new report says declining revenues and bad Wall Street deals—not out-of-control spending or generous pension benefits--contributed the most to Detroit’s bankruptcy.

The report from the left-leaning think tank Demos also accuses Emergency Manager Kevyn Orr of attacking the problem in “inappropriate” ways that are “not rooted in fact.”

Detroit Skyline
Dave Linabury / Flickr

With the bankruptcy trial in full swing, we thought we'd share the following facts with you about the Detroit bankruptcy case.

 

  • State declares Detroit is in a “financial emergency” on March 1, 2013

  • Kevyn Orr appointed as Detroit’s emergency manager on March 14, 2013

  • City files for Chapter 9 bankruptcy on July 18, 2013

Detroit is in the news a lot these days, and will continue to be, for obvious reasons, as the city goes through the agony of the bankruptcy process while simultaneously conducting an election. An election, that is, for a new mayor and City Council who will be essentially figureheads until Emergency Manager Kevyn Orr leaves, something that will probably happen a little over a year from now.

But while the media is concentrating on the bankruptcy itself, I sense that we aren’t asking the really important questions. For me, the most important of all is simply this: What happens after bankruptcy is over?

There are streets in Detroit that bear an uncanny resemblance to Germany at the end of World War II. The shells of red brick buildings stand, most of them burned out, roofless, some with homeless and destitute people squatting in the ruins.

Looking at a street like that the other day, I was struck by the thought that throughout the last year of the Second World War, as vast armies raged across Europe, there were teams of planners in Washington and elsewhere working on how to govern the conquered nations after the war; How to lead them on an eventual path to a return to normalcy and democratic self-government.

Steven Depolo / Creative Commons

It’s a question many in local governments across the state have been asking themselves lately.

There are a couple ways Detroit’s bankruptcy could have a bad influence on other local governments.

The simple way: not so good national media attention

The simplest way is all that bad press the nation’s biggest municipal bankruptcy will bring. But Detroit’s finances have been screwed up for decades. That’s not news. Economists that track indicators in West Michigan say it won’t help, but they do not expect this to be a big factor.

The more important way Detroit’s bankruptcy could affect small governments is much more complicated.

The complicated way: “unprecedented” threats to municipal bonds

First, you’ve got to understand these bonds are really important to local governments.

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