Detroit: The Poster Child for Urban Failure Goes Bankrupt

With debts of at least $15 billion, Detroit has become the largest municipal bankruptcy in the history of the United States. Kevin Orr, the state appointed emergency manager of the city, asked a federal judge to place Detroit under bankruptcy protection which effectively protects the city from its creditors, who include public sector workers and their pension funds. Regardless of the move, the Mayor of Detroit, David Bing has vowed that municipal workers will be paid and that services will still be provided.

Detroit was once an industrial power house that was called the Motor City due to its prosperous links with the automotive industry. When the industry declined, unemployment rose and the city became a decaying urban sprawl known more for its crime levels than the cars that for decades were produced there.

Jonny Dymond of the BBC US team said:

“Detroit’s fall is complete. It is a depressing, if inevitable, end to a grotesque saga of decline, corruption and mismanagement. The irony is that the bankruptcy comes just as the private sector is picking up in Motor City.

There is a buzz downtown, with commercial and residential occupancy at record levels. But public services are in a state of near collapse. Around 70,000 properties lie abandoned. Great swathes of the city need to be written off.

For some, the announcement will come as some kind of relief. When I was last there business leaders told me that some kind of decision had to be taken about the city’s future – that agonising limbo was unsustainable.

The problem now is not just image. Bankruptcy looks bad. But Detroit is already a poster child for urban failure. Nor is it just about being locked out of capital markets – few would lend to the city anyway. But bankruptcy could take years to sort out, when Detroit’s real world problems need urgent remedies.”

Kevin Orr feels that ridding itself of crippling debt will allow the city to reinvent itself and is the first step to restoring the city.  However, with well less than half the population it had in its heyday and a notorious reputation as a crime-ridden jungle, encouraging both businesses and citizens back to the city may be a problem.

• Population has shrunk from a peak of 2 million in the 1950s to 713,000 today
• Highest violent crime rate of any major US city, with 15,245 reported incidents in 2011
• Some 78,000 abandoned and blighted buildings
• 40% of street lights do not work
• Only a third of the city’s ambulances are in service
• Just 53% of owners paid their 2011 property taxes

Source: City of Detroit Proposal For Creditors