Detroit battles 'legacy of bad management'

A shrinking tax base and poor governance may make it difficult to recover from the largest municipal bankruptcy in history.

By Julie K Balise Jul 22, 2013 4:56PM

Life after bankruptcy won't be easy for financially strapped Detroit, according to Bloomberg Economics editor Michael McKee.


"Nobody's come up with a good idea how to make Detroit viable once it gets through the bankruptcy," McKee said in an interview Monday. "They're pretty much the standard ideas."


It's an intimidating problem. Detroit filed for Chapter 9 bankruptcy protection on Thursday with an outstanding obligation estimated at $18 billion. It is the biggest municipal bankruptcy in history.

At 139 square miles, Detroit is bigger than the combined area of Manhattan, Boston, and San Francisco. Some 40% of its street lights and 66% of its ambulances don't work. City services must stretch to cover its vast area, much of which is uninhabited.


Detroit used to be home to almost 2 million residents, McKee said, but now has about 700,000. Those who remain face a difficult economic situation. About 16.3% of residents are unemployed. The median income is $27,000.


A man walks past a vacant, boarded-up home near downtown Detroit, Michigan on July 19, 2013 (© Rebecca Cook/Newscom/Reuters)"No one has a plan to bring in enough jobs to fill in the holes of that vast city," he said.


McKee pointed to a "legacy of bad management" in Detroit. Detroit has the highest violent crime rate in the country, according to McKee, and battles 11,000 to 12,000 fires each year.


"Those are problems that the bankruptcy can't fix," McKee said.


The state has taken efforts to boost its economy by offering tax incentives to film makers. But not enough came.


Quicken Loans founder Dan Gilbert, one of the largest private landowners in the city, has made a mark through hiring in downtown Detroit. That, too, is not enough, McKee said.


"What he's trying to do is bring in entrepreneurs, tech startups, and things like that," he said. "So far they've created about 4,000 jobs, nowhere near what you need."


The city can't increase property or income taxes, which are already the highest in the state. Income tax collection has fallen 20% over the past five years, according to the report.


Detroit's shrinking population is not only hurting its tax revenue; it's also taking a toll on real estate. There are about 78,000 abandoned houses and 60,000 vacant lots, according to McKee, but residents have rejected ideas of shrinking the city.


"Once you get past bankruptcy, there isn't much left to build on there," he said.


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Jul 22, 2013 6:15PM

Poor Detroit, who built Detroit into the power house it was? Walter P. Chrysler, Henry Ford,and Sloan.
Who destroyed Detroit. Those smart guys that ran unions, the government etc leached off the producers until the host virtually died. I toured a Detroit auto factory in the70s. Those working in the plant looked like they were in a slow motion film. I ask why is production so slow. OH! that is the union, they negotiated  for the worker that they only had to produce so much each day, so they produce no more than they have to, In the 90s I was again in Detroit, the company I visited sold furniture. They were anticipating the Christmas holidays, I was told the factory bonuses can be 25,000 for a worker on the floor. Just forklift drivers here make as much as 70,000 a year. All this for not putting in a days work, I thought.  By the 70s US autos had become  poor quality rattle traps. poorly put together and cut to the bone trying to maintain a price. First the Japanese came in and started selling a nice product, the US car buyer began to walk. not to be out done? the unions negotiated a contract that would give workers life time health benefits.  My Dad said when he read that, the handwriting is on the wall. That will not be maintainable. How on earth could a man 400 miles away from Detroit, not associated with the auto industry, read the story and see this would be a problem, where as those in charge had not a clue. When Henry Ford, and Walter P. ran their respective companies, both men knew something about how and what it took to make a car. In later years those managing and making decisions did not know a lug nut from a steering wheel. The auto industry was doomed. In 2003 I told a couple people I worked with, GM would fold up along maybe with another auto company, they laughed. A few years later I got an email from one of those co-workers asking, how did you know. keep your eyes open folks this is a preview of what is coming in a city, state, country near you. It will be as a thief in the night. what will happen to Detroit? it will revert back to what it was at the turn of the 20th century....A question? all those old factory buildings are still there in Detroit. why don't the unions and government open them back up and build cars, make tons of money and give everyone a free lunch. Because they have no idea. Business built Detroit and business left.. ever read the story about the goose that laid golden eggs, someone killed it, the story needs to be revisited. OH! it's not part of the Ivy league curriculum, nor is the story of the Little Red Hen. 

Jul 22, 2013 6:22PM

Detroit run by Democrats since 1959!!!! Chicago will be the next Democrat city to go down the Crapper


"If Obama had a city, It would look like Detroit"



Jul 22, 2013 5:51PM

MISMANAGEMENT-PHOOEY. Outright corruption between city mafia/posse and union thugs. Cleveland, Trenton, Philadelphia, Chicago among others that will soon follow suit.

Thought the auto bailout was supposed to save Detroit- surprise surprise.

Jul 22, 2013 5:49PM
Jul 22, 2013 6:48PM
Detroit suffered the same fate as the Chrysler plant in St. Louis.  I used to stop at a gas station across from the plant during 2nd shift break and the "workers" were lined up buying "refreshments" for the 2nd half of their shift. Rolling papers, half pints, six packs, glass "straws", etc.  One guy I knew who was supposed to work on the line just tended the BBQ grill and cooked burgers and brats for the people sneaking off while they were supposed to be working. Funny thing happened to him on the way home one night. The new Dodge Ram truck he had just bought that day  started spewing gas all over the lot the first time he tried to fill it up. Someone (on the line he worked on) hadn't connected a fitting on the fuel line properly. One of my wife's clients worked security at the plant and every time he caught someone drunk or using drugs the Union had them back within a few days. The cost per hour per worker was over $85.00 per hour. That included wages, health care, retirement, pay for changeovers, etc.  Finally they just shut the doors and bulldozed the buildings. Now it's just 135 or so acres of polluted ground that nobody wants.
Jul 22, 2013 6:28PM

sadly, this is only a preview of what will happen in the coming decades all over america. detRIOT is a textbook example of how labor unions then negroes can destroy a city like fire ants! $9 billion in unfunded pensions. LAVISH pensions, double dipper pensions, etc etc etc. ch 9 bankruptcy means one thing: RED PEN!!!! then again, welfare rats certainly cant fund the debts! 60 plus years of democrat rule in this sorry excuse of a city! oh, watch roger and me directed by the king of limo liberals= Michael moore. everyone in detRIOT was boo-hooing 30+ years ago!

Jul 22, 2013 6:03PM
dig a hole and drop the city in it.
Jul 22, 2013 6:31PM
Chicago is next! no explanation necessary.
Jul 22, 2013 6:34PM
Let us see how the working class get stuck for this bail out. It is time those of us who work and pay taxes make a stand. Time to stop paying taxes for 1 year. The government can not put us all in jail! 
Jul 22, 2013 6:42PM

I also recall the infamous summer 1967 riots in which Pres. Johnson had to send in an army unit to help put it down...this was almost two years after the Watts uprising in L.A. in Aug. '65.  Detroit is not a bombed out Berlin in 1945 as some have said, but to see the abandoned houses and buildings is very depressing. 

Jul 22, 2013 7:55PM

The unions do have to bear their share of the blame for Detroit's BK, but the #1 culprit by a wide, WIDE margin is the corrupt negrocracy that's ruled City Hall for the last 40 years.  These clowns have gotten elected by guilt tripping black voters into voting for them to keep the feds and white folks out of City Hall, and once they get in it's nonstop corruption.  They hit the feds up for money and then squirrel it away into their own corrupt deals and pet projects that do not benefit the residents of Detroit one iota.  There are similar negrocracies following the same M.O. in cities such as Baltimore and New Orleans, but none are remotely as rotten as Detroit. 


I'm generally never in favour of increased government control and displacement of elected officials, but in this case what's needed is for the Michigan Governor to send the state governmentinto Detroit and padlock City Hall to keep the city employees out, then appoint a pro-tem city manager who answers directly to Lansing to manage the financial and operational affairs of the city whilst it's under BK other words a complete state takeover.  Municipal elections would not be held until Detroit emerges from BK protection.

Jul 22, 2013 7:28PM
The picture of the poor little black boy, walking in front of the closed up house, is a nice touch also. It shows who else is responsible for bring down a once great city. Good move MSN!
Jul 22, 2013 10:27PM
If you live in a blue state and a blue city, this is your fate,  There is no avoiding it.  Dems are way too stupid to ever figure out how to stop it.
Jul 24, 2013 8:14AM
yeah, income tax collection 20%... welfare rats, ACORNS, baby birdies, and other assorted losers dont pay INCOME tax
Jul 23, 2013 10:03AM
It's kind of hard to manage a city when your revenue forecasts are wrong every year because the manufacturing jobs keep leaving every year for China, killing your tax base.  This is what is going to happen to the citiess that rely on manufacturing.  With cheaper labor (due to lack of development and weaker currencies) and less regulations (that turn a blind eye to fake fire extinguishers, and violations of human rights) companies only care about returns they never see the faces of the people that they lay off or fire.  And many don't care they'll lie to your face that they aren't going to move then a month later the doors are locked.  If the citie would've had a more diversified tax base this would've stabilized the area but as it was a dirty manufacturing area in the northern US most higher paying positions would have a bigger draw being based somewhere else.
Jul 22, 2013 9:36PM
    Who built Detroit?  The answer is: the Federal Gov't. In 1940, Detroit was a depressed city with 20% unemployment. By 1943, there was no unemployment to speak of in Detroit and the Motor City had, compliments of Uncle Sam, become the "Arsenal of Democracy". No Austerity to be seen then! But shortly after the War, the stimulus was withdrawn and the city began its long, slow decline. Detroit never did have a balanced economy; since it's Uncle Sam and deficit spending that built Detroit, it's Uncle Sam who will have to save Detroit, if, that is, Detroit is to be saved. Otherwise, Detroit will be just another victim of Schumpterian "creative destruction", aka Capitalism. Yes, it is true- all you right- wing bourgeois- apologist bloggers out there. Look that up in your Funk & Wagnalls!!!
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