Once regarded as the cradle of the American automobile industry, Detroit has become a municipal basket case. The decision this week to seek bankruptcy protection under the crushing weight of more than $18 billion in debt distinguishes Detroit as the biggest American city to ever declare insolvency. It took decades for the city to mismanage its way to fiscal ruin. Now a federal bankruptcy receiver will have the opportunity steer Detroit on the very long and painful road back to recovery.
The ingredients that led to Detroit's financial implosion include city hall corruption, incompetence, overly generous government pension benefits and a failure on the part of the Big Three automakers to realize and respond to the shifting dynamics of the world's vehicle market until it was too late. The numbers recounting Detroit's downfall are staggering. Since 1950, the population has declined from 1.7 million, which made Detroit the fourth largest city in the nation, to 700,000 residents today, crippling Detroit's tax base. Retired city workers outnumber current employees by a 2-1 ratio. About 40 percent of the city's streetlights do not work. It can take almost an hour for police and fire units to respond to an emergency. Thousands of residential and commercial properties have been abandoned. The average cost of a home in Detroit today is $17,000. Motown has become Ghost Town.
Though Detroit's woes are far deeper and systemic, other financially stressed cities, most notably Cleveland, New York and Philadelphia, all at one time teetered on the brink of bankruptcy and all of them eventually recovered. The stigma of bankruptcy at least allows Detroit a chance to jump-start its future. It also is a reminder to local governments nationwide that the wheels really can fall off if public officials do not act responsibly.