Now, Detroit itself is edging closer to a similar precipice, only unlike the automakers, its chances of getting a federal bailout are almost nonexistent.
The story of Detroit’s decline is decades old: Its tax revenue and population have shrunk and labor costs have remained out of whack. But the city’s budget problems have deepened to such an extent that it could run out of cash in a matter of weeks or months and ultimately be forced into what would be the largest-ever Chapter 9 municipal bankruptcy filing in the United States.
Frustrated by the lack of concrete progress, Michigan Governor Rick Snyder, a Republican, last month appointed a team to scour the city’s books. The audit could result in a state takeover of Detroit’s finances through the appointment of an emergency financial manager. Such a manager, who would seize control of the city’s checkbook, could then propose federal bankruptcy court as the best option. Snyder, who has called the situation “a crisis in terms of financial affairs,” said the team would deliver its report in February.
“Detroit is teetering on the verge of bankruptcy after the City Council has failed to make the necessary cuts to deal with having a smaller population,” said Rick Jones, chairman of the Republican majority caucus in the state Senate.
Jones, who has indicated he does not favor a bankruptcy, said he would like to see an emergency manager installed to fix the city’s problems. If that failed, there would be a case for finding a way to shrink the Detroit municipal area, he argued.
Detroit’s population is now just over 700,000 – down 30 percent since 1990 – but the city still has to provide services to an area encompassing more land than San Francisco, Boston and the borough of Manhattan.
Signs of decline are everywhere – in a rising crime rate, streets without lights and block after block of abandoned buildings. The murder rate of one per 1,719 people last year was more than 11 times the rate in New York City. The jobless rate is above 18 percent, more than twice rate for the country as a whole.
A bankruptcy would be messy.
The interests of creditors would likely collide with those of labor unions wanting to protect workers’ benefits, said Eric Scorsone, a Michigan State University economist who has written papers on municipal bankruptcy and on the state’s emergency manager laws.
“It is going to require the players – the City Council, the mayor, the state – to be on the same page. If you go into bankruptcy with a lot of conflict and dissent, it’s going to cost more,” said Scorsone.
It could also be racially explosive. Detroit has the largest percentage of black people of any U.S. city, with 83 percent of the population identifying themselves as African American, black or Negro, according to the 2010 U.S. census. Most of Michigan’s state government, including the governor’s office, is run by white Republicans.
Detroit Council Member JoAnn Watson, who along with two other members of the city’s all-black City Council has been resisting reform measures, said she is still hopeful of a federal bailout or an injection of state money that she claims the city is owed.
A public hearing over leasing Belle Isle to the state turned ugly today when opponents heckled supporters and suggested the deal was a racist takeover.
“White whores can’t save us,” one resident said during a boisterous, two-hour period of public comments.
At issue is whether the city should lease the island park to the state for 30 years.Supporters say the island has been neglected because the city can’t afford to maintain it. Opponents counter the state can’t be trusted with the unique gem, which has a rich history of racial integration.
Rowdy council meetings have been routine since the state announced last year that it would begin intervening in the city’s budget decisions. But not before today have supporters of some state intervention – in this case, Belle Isle – spoke out at council meetings. And many in the crowd were not pleased.
“Get out of here,” one Detroiter yelled at supporters, most of whom were white and lived in the suburbs.
“You should be ashamed of yourself, telling us what to do,” another cried out.Another exclaimed: “We have too many people outside of the city in our city’s business.”
Police officers stepped in when speakers got out of control or refused to sit down.“We’re having a good conversation,” Councilman James Tate tried to remind the audience, but to no avail.
Here’s a sampling of today’s comments to the council:
“Get rid of the invaders!”“You’re selling us out.”“You’re saying we’re too incompetent and ignorant to run our own land.”“Power to the people.”“I am ashamed to be white because … it’s a racist takeover.”“This would never have happened before the city became black.”To be fair, many in the audience were respectful.Council members may vote on the issue as early as Tuesday.The deal would save the cash-strapped city $6 million a year. If it’s rejected, the state likely would appoint an emergency manager, sources told me today.“I don’t deal with guns to my head,” Councilman Kwame Kenyatta said.