The Late, Great Detroit…

Detroit.  Motor City.  Motown.  The city that forged itself into the car capital of the world and turned iron into some of the most powerful muscle cars of the 60’s.  The city that took elements of the blues, mixed it with street harmony and created a music genre that expanded and enhanced rock and roll and became known as the “Motown Sound.”

Now this once great city is in crisis.  Destroyed.  Bankrupt.  Seeking protection of the federal courts.

What the heck happened?

Hindsight, being 20/20, clearly shows that battered by a declining auto industry, aided by many years of leadership from either incompetent or corrupt mayors, Detroit has been staggering along the fine edge of a fiscal cliff for a long time.

More than $18 billion in debt, with a shrinking population within city limits that do not shrink, the city boasts the highest property tax allowed by Michigan law, leaving little room to raise more money.  City services are so anemic that two of every five streetlights don’t work and the average wait for a police response is an hour.  A whole lot of crime can happen in an hour and in the dark.  Is it any wonder people are fleeing the city?

Detroit’s decline did not happen overnight but took decades to occur.  Once known as an industrial powerhouse, Detroit was synonymous with the nations booming post-WW II auto industry.

The decline certainly mirrors the disappearance of this country’s industrial manufacturing base once centered in the Midwest – the “Rust Belt.”  During the past 50 years, Detroit has lost close to two-thirds of its population, dropping from 1.8 million to just over 700,000 today.

Detroit’s income tax revenue declined 40% between 2000 and 2012 while unemployment jumped to 23% in 2010.

With a geographic footprint as big as Boston, San Francisco and Manhattan combined, Detroit still had the same number of miles of streets to pave, streetlights to keep lit, parks to maintain and neighborhoods to provide police and fire protection.

Huge parts of Detroit are empty.  Businesses are boarded up.  Middle-class and upper-middle-class homes have been abandoned and are falling down.

One of the problems has been the city’s cozy relationship with the employee unions.  Pension benefits have escalated exponentially due to sweet-heart contracts that were negotiated during better times.  Detroit has a 9,700 workforce but has a staggering 21,000 retired employees.

Benefits being paid to current retirees have to be changed.  Municipal finance experts say that Detroit cannot save itself if it cannot provide minimal levels of public health and safety to its residents.  As long as pensions and other retiree benefits crowd out essential public services, Detroit will continue to bleed population and business essential to its survival.

The message from Detroit is very simple: It does not matter how big and successful and influencial a city has been in the past, the fall into financial failure will be universally tragic.

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