Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Friday, July 19, 2013

Detroit files for bankruptcy

Not much to say about this, other than it is merely another example in changing the relationship between employers and labor in the context of a global economy, and how shrinking population, shrinking revenues, and the increased costs that result from abandonment and depopulation and the need to maintain legacy infrastructure constructed for a much larger population.

The "restructuring" of the American steel industry in the 1980s, and the ongoing restructuring of the automobile industry, culminating in the "rescue" of GM and Chrysler in 2009 were indicators of how exogenous changes in the American economy, specifically the rise of global competitors in an inter-connected global economy, meant a change to the relationship between labor and capital.

The same has been happening in cities since the 1970s too, even though there haven't been many examples of actual bankruptcy.

New York City's financial bankruptcy in the early 1970s, DC's bankruptcy in the mid-1990s, Philadelphia's virtual bankruptcy (addressed by then mayor Ed Rendell) presaged the more recent problems of cities in California (like Vallejo), with the addition of other weird problems with cities and counties along the way (Cleveland, Orange County, California; Jefferson County, Alabama; Harrisburg, Pennsylvania) because of bad bad bad dealings, financial engineering schemes that went awry, the Growth Machine wanting to make its way very much known, etc.

-- List of municipal bankruptcies, from Governing Magazine

From "Detroit Files for Chapter 9 Bankruptcy" in Governing:

According to state estimates, Detroit is facing more than $18 billion on debt and unfunded liabilities. Snyder called the city insolvent and announced that "bankruptcy is the only feasible option to fix the city’s finances and do what is right for the 700,000 people of Detroit."  He characterized the filing not as a defeat for the city but as an opportunity that will ensure it can focus on improving quality-of-life and growth.

cf. these articles from 2012, "Forget Meredith Whitney, as Muni Lawyer Predicts New Bankruptcy Wave" from ThinkAdvisor and "When Cities Go Bankrupt: Stockton, California" from 24/7 Wall Street

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At 1:19 PM, Anonymous charlie said...

You'll be glad to hear Meredith Whitney is almost out of work.

That being said, bk is a big win for Detroit. I suspect it the process doesn't take too long others will look at it. WMATA should as well.

I'd say the larger issue is it shows muni finance just isn't big enough anymore, and it there is a chronic lack of investment. And governance.

At 2:35 PM, Blogger Richard Layman said...

Yeah. I guess you ought not to lend money to people who won't manage.

Interestingly, when I was pursuing bike sharing seriously (I've pretty much given up because other cities just want to get what DC or NYC have, they don't want to do a full thorough transformative evaluation) I was talking to a leasing company that does muni leasing and the big thing for their underwriters is that bicycles aren't fixed capital.

But we had a long conversation about the issues for underwriters in terms of successive councils-mayors repudiating earlier contracts, and how you write them to obviate that.

But big bonds, it's "easy" for cities to not be managed well for many years and to have no repercussions. There are repercussions now.

The thing about MW is that she is sort of right, there is a shake out happening. But she shouldn't have pulled a number out of her hat. Because whether or not bankruptcies are going to go through is somewhat politically dependent. E.g., if Detroit weren't run by Democrats and the state didn't have a Republican governor, would things be moving along differently now? Etc.

She didn't account for that.

At 3:08 PM, Anonymous rg said...

One thought I have -- I would love to research it if I had the time -- is the extent to which Detroit's sprawling urban design exacerbates its financial difficulties. Clearly, any city that experienced the population and job loss that Detroit has experienced would be in trouble financially, regardless of its urban design . But Detroit covers 138 square miles and even at its height was composed mostly of stand-alone, single family homes. Even when it had 1.8 million residents, it was not especially dense and now it is not dense at all. 138 square miles of infrastructure would be a challenge for a city composed entirely of prosperous residents to maintain and manage, never mind a city with Detroit's demographics and tax base. Not really much discussion of this angle in the press or in the blogs.

At 3:59 PM, Blogger Richard Layman said...

I think you are definitely right. Detroit had no history of rowhouse type development, all pretty much detached housing. Certainly, all the houses I ever lived in were detached, even if the houses were close together.

I lived in the gray brick ranch til sometime in 3rd grade. It was nicer then, our Congresswoman lived on the next block, and the son of a future mayor of Detroit was in my Cub Scout troop.,-83.229277&cbp=13,256.5,0,0,0&cbll=42.410433,-83.229048&sa=X&ei=IZrpUZmSFZO-4APvw4DwDg&ved=0CC0QxB0wAA

At 5:12 PM, Anonymous rg said...

It still looks like a nice neighborhood -- it has some great housing stock, all the houses are in good shape, no vacant lots and even the commercial corridor nearby looks healthy by Detroit standards. But the address confirms what I was thinking: 16525 and it is still well within the city limits! That is a really spread out city. It would be tough to maintain that infrastructure with a full population 1.8 million much less with half that number. I know a lot of Detroit residents hate to hear this, but the City has no choice but to contract in terms of its geographic footprint. It makes no sense to maintain water,sewer, streets, sidewalks, etc. to blocks with one (or zero) house. Based on what I have read, that is already kind of happening and there is even some growth in the downtown core (which has a great building stock and some awesome architecture).

At 5:35 PM, Anonymous rg said...

Right after our comment discussion, I read this post!

At 11:01 AM, Anonymous charlie said...

Great looking neighboorhood.

I think the sprawl proponents are seeing a bit too much here. Yes, Detroit is massively oversized compared to today. But in terms of sprawl in 1940, probably the same as LA. The difference is LA grew by 3x since then and detroit shrank.

Which was a result of hitching your wagon to one industry -- and one that invented the supply chain.

In terms of the BK, two things. One is the bond holders all have insurance and will be paid. Second, is the idea that we can move pension holders over to Obamacare exchanges for a lot less in health care costs right now. Again, unintended consequence.

and again governance. Not saying this is possible, but if you could merge detriot into Metro Detroit a lot of pension/bond funding issues would disappear. I realize why that isn't the case (oakland county doeesn't want poor black people, and detroit doesn't want to be a plantation) but you need a lot of rationalization in local goverment.

For example in DC I don't believe DC should get a vote in congress and should not be a state. Pretty clear why the founders wanted a terrrority congress could control. That being said, it would be interesting to have a "national capital area" like Brazil which would be DC, alex, arl, Moco, and Fairfax, and PG. Don't give them a vote in Congress and the local states might go along (turn both MD and VA into solid repbublican states). governance is more important than congressional voting.

At 12:57 PM, Anonymous Richard Layman said...

I agree with you about Detroit and Metro Detroit merging, and why it won't happen. I didn't really understand Oakland County's republicanism as a "child" until I ran for City Council in Ann Arbor. The precincts in the ward I ran in that were notorious for turning out scads of Republican votes... when I was door knocking I discovered these neighborhoods looked just like my subdivision in Troy or housing in nearby Birmingham.

... Balt. City and Balt. County have the same issue. They should merge back. They were de-merged in the 1850s. But the same reasons keep them apart. They could be a powerhouse in the state.

... and yes about the concept of a Federal District. I agree. It should be done. (One of my grand jury-mates had a similar idea.) And I have similar thoughts re governance, and maybe the thing would be to have an income tax reduction in return for the lost representation privileges. Although I think that probably the D.F. in Mexico and Paris still have representation.

Plus, I remember this article from many many years ago, about Paris vis-a-vis local and national govt. funding.

At 9:45 AM, Anonymous charlie said...


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