Time is running out for Detroit

Written by Elena Collins on 1 March 2013

Once the birthplace of the US car industry, The fiscal crisis which has been crippling Detroit for years is now pushing the city ever closer to breaking point. Last Tuesday, it was announced that the city’s financial problems have now been passed over to Michigan’s governor after a state-appointed review team confirmed the city was in a financial emergency with “no satisfactory plan” to resolve it.

abandoned car factory in Detroit
Abandoned car factory in Detroit

The review team found the city has more than $14 billion in long-term liabilities and increasing cash shortfalls, estimated to reach $100 million by June 2013. Alongside of this, the general fund deficit reached more than $326 million in 2012.

Republican Gov. Rick Snyder has now 30 days to decide if Detroit needs an emergency manager to take charge of its finances and spending, and devise a new plan to get the city out of its financial crisis. However, if the emergency manager fails, it could ultimately urge Detroit to enter into bankruptcy proceedings.

‘Detroit represents the fastest climb and the fastest decline of any city in the world’- explains photographer Julia Reyes Taubman who spent seven years documenting the city through photographs to produce her book Detroit: 138 Square Miles.  Once a booming city of industry in the 1960s, the population has sharply dropped to 713,000 residents from 1.8 million decades ago.  The shrinking city is now engulfed by large and half deserted city landscape. The 139 square miles, which Detroit covers, is suited to a much larger population and with the infrastructure to match. But the city is now left with pockets of empty lots, shuttered homes and a continuing foreclosure problem in the face of high unemployment.

abandoned boat house in Detroit
Abandoned boat house in Detroit

In only the last four years, the number of city employees has been reduced to 9,696 from more than 13,400 to save money, and some people argue that the only way to financial stability will be through more cuts, furloughs and benefit reductions. Yet at the same time, residents here complain about slow city services and a significant increase in murders in 2012, and some say police and fire protection needs more investment, not budget cutting.

The financial crisis is not the only problem that was raised by the review team. It also raised the prospect of growing political and racial tension between the city and the state. Detroit’s population is about 83 percent black with Democrat leaders whilst the state’s population is nearly 80 percent white and ran by Republicans, including Mr. Snyder, who controls the capital.

The review team appointed by the State of Michigan concluded that Detroit is mired in serious financial problems, a step that draws the city ever closer to emergency oversight by a state-assigned financial manager.

If Gov. Rick Snyder concurs with the findings in the coming days, state officials will appoint an emergency financial manager who would try to solve the city’s financial woes with the hope to save Detroit from entering into bankruptcy proceedings. If this does occur, it would be the nation’s largest municipal bankruptcy in terms of size of debt as well as city population.

The outcome of the report is sad news for many of Detroit’s political leaders who have fought for years to avoid bankruptcy. Leaders have tried desperately in recent months to cut costs and collect more revenue as evidence that the city can solve its own problems without outside help.

It is now in the hands of Mr. Snyder who must make the crucial decision if Detroit needs a state-appointed emergency financial manager to rescue the city from the ongoing financial mess.

Categories: Governance, Funding, Finance systems, Detroit