So what happened? Population loss, many said. A bloated workforce, said some. Corruption and mismanagement, according to others. Liberals, said conservatives. Conservatives, said liberals. Job loss, high taxes, the list goes on. It's clearly complicated, years in the making, and caused by more than a single issue.But a special report from the Detroit Free Press shines a light on the factors at play over the last 60-odd years, and shows that the city's dire financial straits could have been avoided. One fact that leaps out: as Detroit's revenue hovered under $2 billion for the last two decades, city leaders made the decision to keep borrowing, as debt (not including long-term liabilities) ballooned from $3 to $9 billion (though it's shrunk somewhat since then):
Free Press reporters Nathan Bomey and John Gallagher looked at decades of public records to create a history of Detroit's bankruptcy and provide an in-depth look at some of the key decisions city leaders made -- or failed to make -- that led to financial ruin. The full report is a crucial read, but here are a couple highlights from the story:
The total assessed value of Detroit property -- a good gauge of the city’s tax base and its ability to pay bills -- fell a staggering 77 percent over the past 50 years in today’s dollars. But through 2004, the city cut only 28 percent of its workers, even though the money to pay them was drying up.
Pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money -- mostly in the form of so-called 13th checks -- could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.
The report asserts that bankruptcy was avoidable -- at least until 2001, when former Mayor Dennis Archer left office. It's the decade of relying on borrowing since that sealed Detroit's fate, including an enormously bad deal executed by former Mayor Kwame Kilpatrick in 2005, that at the time won the accolades of Wall Street (and the approval of the Free Press editorial board).
The Detroit Free Press report paints a grim picture of a city that continually borrowed for today, without thinking about the consequences for the residents of tomorrow.
“It just makes me ill. Almost cry,” former Mayor Gribbs told the paper. He served from 1970 to 1974. “You can’t continually borrow money and use it for operating expenses and expect never to have the trouble of paying it back. That’s where you end up going bankrupt.”
Read the full report at the Detroit Free Press.