Detroit’s Comeback Story Proved Too Good To Be True
Saturday, July 20, 2013
Detroit was supposed to be a showplace of the urban renaissance.
A little over a decade ago, Detroit was widely touted as one of the great comeback stories in the country. It was a common theme in the mid-to-late 1990s, with a generation of successful mayors leading their cities back from the brink -- which, in cases such as New York, Philadelphia and Cleveland, included near-collapses into bankruptcy.
Detroit Mayor Dennis Archer was seen as one of those big city stars back then, recognized not just by his peers nationally as a solid leader but by President Bill Clinton for appearing to pull off an urban revitalization that seemed proof of the wisdom of the administration's empowerment-zone strategy.
But somewhere along the way, Detroit got unempowered.
Archer, who helped attract new investment and modernize a city workforce that was still using rotary dial telephones when he took office in 1994, left office in 2002 after two terms. But not before he accomplished something almost unthinkable today: Detroit received upgrades from bond-ratings agencies at a rate of more than one per year during Archer's tenure.
Archer's reign proved to be something of a fluke. He was succeeded by Kwame Kilpatrick, who was at the center of an embarrassing sex scandal and, worse, was forced to resign in 2008 after being convicted of perjury and obstruction of justice.
Kilpatrick was convicted on two dozen additional felony counts this year, including fraud.
"They elected this guy who was all flash and no substance," says Ed FitzGerald, the county executive in Cuyahoga County, Ohio, which includes Cleveland. "Kilpatrick's election was exactly what the city did not need, but somehow there was not a consensus that they needed to elect a serious person who was serious about good government."
Detroit's Bad Hand
The symptoms of Detroit's ill financial health are not unique. Other cities have grappled with loss of industry, declining populations and mismanaged government finances.
But none have faced such a toxic combination. And few have been worse about trying to chart a new course once things started to go wrong.
"There were a lot of cities that got a wake-up call that something dramatic had to be done or they would spiral in the wrong direction," says FitzGerald. "It just seemed the political system in Detroit never snapped out of their pattern."
Elected officials in other cities proved willing to cut costs and sought ways to attract new businesses. In Detroit, an often-corrupt local political culture just kept borrowing.
"You had pretty awful leaders, in a sense," says Sujit CanagaRetna, a senior fiscal analyst with the Council of State Governments. "Kwame Kilpatrick, he's now in the federal pen. Even with the iconic mayor from the '70s, Coleman Young, there were whispers of corruption."
A Failure To Reinvent
Detroit faced an unholy tangle of problems, the decline of the auto industry first and foremost. But local leaders managed to make matters worse.
As with Stockton, Calif., which previously held the record for the nation's largest municipal bankruptcy filing, local officials failed to grapple seriously with their finances when they started to sour.
"The first thing you have to do is acknowledge that you have a problem, like any 12-step program," says Kim Rueben, a senior fellow at the Urban Institute.
Pension debt alone now makes up half of Detroit's $18 billion shortfall. Trying to make good on old obligations while providing a high level of services to a shrinking population ultimately proved unmanageable.
"It's not a surprise to anyone that Detroit has higher and higher retirement costs, but they borrowed to try to avoid dealing with it," Rueben says. "They postponed the problem."
It's not just a matter of austerity. When times get tough, you have to find ways to encourage residents and businesses to stay.
Other cities have had leaders -- both in government and the private and philanthropic sectors -- who found ways to switch gears entirely.
Pittsburgh, for example, built on its universities to reinvent itself as a biotech hub after its steel industry collapsed. "It took a long time and was also heavily supported by governors from both sides of the aisle," says Bruce Katz, the director of the Brookings Institution's Metropolitan Policy Program.
Little Help From Lansing
Detroit is huge. At 140 square miles, it's big enough to swallow Boston, San Francisco and Manhattan and still have 20 square miles to spare.
Detroit has a downtown but lacks the kind of clear center that other cities have refashioned for housing or new industries.
Its woes have drawn attention but, until recently, not much help from the outside. Over the years, Pennsylvania and Ohio have been willing to step up to help with economic development initiatives, but Detroit and Michigan have long had a relationship notable mainly for its deep mutual distrust.
Other states also keep a closer eye on local finances because they tend to be on the hook for pension debt in a way that Michigan is not. "There isn't the same oversight that you see in states like New York and Illinois where the state is ultimately responsible," Rueben says.
You'd be hard-pressed to find an example of a city facing the combination of problems Detroit endured over a period of several decades. It would also be hard to find a city that made fewer of the right moves in response.
"Something in the political culture has to respond to crises and something was missing in the way politics worked in Detroit," says FitzGerald, who investigated public corruption cases in Chicago as an FBI agent.
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