Detroit bankruptcy and Ann Arbor: 'The notion that we're separated ... is flawed'
The Monument to Joe Louis, known also as "The Fist" in downtown Detroit. The city filed the biggest municipal bankruptcy in U.S. history on Thursday.
Ryan J. Stanton | AnnArbor.com
- Related stories: See MLive.com's coverage of Detroit's bankruptcy
News that the City of Detroit filed the biggest municipal bankruptcy in U.S. history on Thursday sent shockwaves throughout Michigan.
For some, the move by Detroit’s state-appointed emergency manager Kevyn Orr was necessary to help the long-troubled city climb out of its multibillion-dollar debt and pave the way for reinvention. Others believe that the bankruptcy, which could cut pension benefits to city workers and retirees and leave bondholders with pennies on the dollar, will go down as a dark moment in the city’s history.
On Friday afternoon, the status of the bankruptcy was uncertain after an Ingham County judge ruled Thursday's filing unconstitutional. Initial reports indicate the judge says the filing was rushed.
Yet, now that Orr's intent to pursue bankruptcy is clear, community and business leaders 45 miles west of downtown Detroit are surveying the landscape. Washtenaw County is trying to determine what the bankruptcy will mean for the future of Detroit, southeast Michigan and the state.
“The notion that we’re separated from Detroit is flawed,” said Albert Berriz, CEO of Ann Arbor-based real estate company McKinley.
“The real estate values in Washtenaw County decline geometrically as you go east, not surprisingly,” he continued. “If you don’t think the city of Detroit and Wayne County have an adverse effect on real estate values, you’ve got your head in the sand. A stronger Detroit and a stronger Wayne County result in a stronger Willow Run and a stronger Ypsilanti.”
A major concern among local elected officials is how Detroit's bankruptcy might affect the municipal bond market and local governments' ability to borrow money to finance major projects.
Washtenaw County Commissioner Conan Smith, executive director of the Michigan Suburbs Alliance, said that what is unfolding in Detroit is complex, and it's difficult to say at this point what the long-term implications might be for the region and the state.
With Detroit possibly owing $18 billion or more in debts, it's expected there will be a fight among more than 100,000 creditors over who will get paid — most at risk are those holding $11 billion in unsecured debt.
Smith said it's a risky move on the state's part to classify hundreds of millions of dollars in general obligation bonds as unsecured debt. He fears that could result in higher borrowing costs for other municipalities in Michigan, not just Detroit.
Local governments like the city of Ann Arbor and Washtenaw County use general obligation bonds to finance major capital projects like new buildings and parking garages.
"The state is in charge of the City of Detroit right now, and they made this bankruptcy decision, and they've chosen not to pay these general obligation bonds," Smith said. "That has the serious potential to disrupt the general obligation bond market for every locality in the state of Michigan."
Michigan Gov. Rick Snyder and Detroit’s state-appointed emergency manager Kevyn Orr.
MLive.com
Smith said there are already people speculating there will be a premium placed on Michigan bonds in the future, and that “we'll pay a higher amount just because we're from Michigan." But he doesn't think there will be dramatic impacts in Washtenaw County.
"We have a AA bond rating, we're very financially secure, and we're seeing strong growth in our tax base," he said. "It may affect us in terms of the expense of borrowing money, but it's not going to stop us from doing the things we need to do."
Ann Arbor Mayor John Hieftje said he's been listening to what the financial experts have to say about what could happen to the municipal bond market.
"There's been some speculation about that, but we are very hopeful Ann Arbor will be in fine shape because our bond rating has actually been improving over the years and we're in a very strong financial position," he said. "We can't predict what will happen overall, but we hope any fallout from that doesn't affect Ann Arbor and other cities that are strong."
Tom Crawford, the city of Ann Arbor's chief financial officer, said he's viewing the bankruptcy as a Detroit-specific issue and not anticipating a local impact yet.
"However, we are watching it, because this is only one step in a process that really goes through the courts," he said. "There are a number of legal questions that come up in going through that process, and the result of those legal decisions may or may not have an impact on us locally, so we're still in a position of wait-and-see just as we have been for the last six months."
Smith noted there are tens of thousands of Washtenaw County residents who are part of the Detroit water and sewer system and he's not sure if there will be implications for their services.
For the entrepreneurial ecosystems of Ann Arbor and Detroit, the bankruptcy could test a relationship that has have been strengthening over the past few years.
“I sincerely hope that [the bankruptcy] won’t discourage the increased connectivity we’ve been seeing between our startup communities,” said Adrian Fortino, who lives in Ann Arbor and now works as a vice president for Invest Detroit.
“I hope people still see that there are great things happening in Detroit. There is great potential here and great opportunity. We’re certainly not going to stop building that bridge.”
Fortino, who started multiple companies in Ann Arbor, said that filing could end up have a solidifying effect by creating an "it's up to us" mentality.
“The city's problems are not going to stop us from getting together as entrepreneurs and investors to work on our ideas and our businesses,” he said. “It creates a level of uncertainty with regard to the city, but it won’t stop us from moving forward.”
From a real estate investment standpoint, Stewart Beal of Ann Arbor-based JC Beal Construction is hopeful the bankruptcy can “right the ship” and lead to further development in the city of Detroit.
Berriz agreed, adding: “I think from a business view, in terms of political certainty and people wanting to invest in Detroit, this is a watershed moment.”
Beal said JC Beal Construction, which operates an office in Detroit and has completed many projects within the city boundaries, swore off working directly with the city last year.
“We are fully invested in doing business in the city of Detroit, just not with the City of Detroit, because it has been so abusive in the past,” Beal said.
He cited several examples of the city hiring JC Beal Construction for projects — including an $800,000 contract to demolish 100 homes in 2011 — but then failing to pay until months after the projects were completed.
“I was owed over $400,000 for over eight months before (the city) finally paid. It really hurt us. It hurt the people that were my employees, it hurt my contractors, and it hurt my subcontractors because I couldn’t pay them since I wasn’t paid.”
Beal doesn’t believe Washtenaw County will feel the direct impact of Detroit’s bankruptcy — at least not in terms of real estate investment and business activity.
“I think people have known about this for so long that all of the market reactions to this have already occurred,” Beal said. “Ten years ago, when I started buying properties in the City of Ypsilanti, I knew that was 25 minutes from Detroit, and I already weighed that in my investment decision.”
But former Ann Arbor Chamber of Commerce president and Ann Arbor Transit Authority chairman Jesse Bernstein, is worried Detroit’s reputation could take a major hit in the wake of the filing, dragging the region down with it.
“I can’t even begin to imagine what the impact will be on southeast Michigan,” he said.
“If nothing else, if everything works out financially, this is a huge stain on Detroit and Michigan… Who knows what impact that will have on tourism and whether people will want to come to conventions or meetings or even move here.”
Bernstein is also worried about what effect the filing could have on the AATA. He said that with the regional transit authority overseeing state and federal funding, he’s concerned that money that previously would have gone to Ann Arbor could instead be re-routed to the Detroit Department of Transportation bus system.
AATA CEO Michael Ford said via email that the information is new and it’s premature to speculate on the impact it could have on the transportation authority’s finances.
Lizzy Alfs is a business reporter for AnnArbor.com. Reach her at 734-623-2584 or email her at lizzyalfs@annarbor.com. Follow her on Twitter at http://twitter.com/lizzyalfs.
Comments
Gerry
Mon, Jul 22, 2013 : 4:39 a.m.
This news is the true realization of Coleman A. Young's legacy.
Steve Bean
Sun, Jul 21, 2013 : 10:45 p.m.
The notion that property values equal community strength is flawed.
Thinker
Sun, Jul 21, 2013 : 4:09 p.m.
Sure A2 is connected to Detroit -- we're part of the same greater metro area. With some of our nations wealthiest suburbs, the Detroit Metro area is not poor. Disinvestment in the City of Detroit means investment by Grosse Pointe, Bloomfield Hills, Birmingham, Troy developers in Ann Arbor.
P. J. Murphy
Sun, Jul 21, 2013 : 6:51 a.m.
So the birth of "New Detroit" begins with welching on pensions? How naive. What is happening is that Detroit is being cut loose, by the state, by the federal government. If you think this heralds a new beginning, may I interest you in purchasing a valuable bridge located in Brooklyn? Yes, there were short sighted and corrupt politicians. But what's unique about that? Does any American city lack it's quota of these parasites? Detroit's collapse is a good deal more complicated. The story begins with the industrial boom that made Detroit a magnet for people from places as diverse as the U.S. South, Eastern Europe, and the mid-East. During the 50's & 60's it was one of the most ethnically diverse cities in the world. But it also was a fragmented community, with a pattern of ethnic based politics and social tension that followed it's prosperity like a shadow. By the time of the '67 riot, the city was well past it's peak. The near suburbs, Southfield, Warren, Livonia, were already luring many to the suburban dream. Northland, one of America's first shopping centers symbolized a local culture that associated success with mobility and consumption, and of course it was a mile beyond the city limits. Maintaining the urban core was not a priority. As the auto industry sagged and finally more or less imploded, this only increased the momentum downward. The wealthy left, the upper middle class left, and finally the city was mostly left to the lower middle class and the poor. Everyone sort of knew a day of reckoning was out there, they just wanted to get theirs before it dawned. Many love to cite Detroit as an example of how their favorite personal boogeyman ruined a once viable city. But one factor doesn't explain something this big, something that's been in the making for such a long time. And likewise, cancelling a lot of worker's pensions and health care doesn't have much to do with re-building the city either.
ChelseaBob
Sun, Jul 21, 2013 : 12:34 p.m.
PJ- Cuts to pensions will be tiny compared to the hit taken by wealthy bondholders. This is not a class issue. The rich will be hurt much more by this bankruptcy than those of us in the working class.
Mike
Sun, Jul 21, 2013 : 12:49 a.m.
Too many questions in the posts here. What caused the demise of Detroit? The business leaving town? The residents leaving town? The city government? Only being raised in the 50's I am to young to answer that question for sure. But, as I listened to my father, he said Detroit was a fabulous place in the 20's and 30's. There were street cars and movie houses. Plenty of places to eat and sleep. There was jobs on every street. You may not realize just how much work there was for you if you supported a certain political party. When the republicans were in office the private sector employers had work for anybody willing to do a fair days work. Than when the Democratic party was in office the city had work for their supports. Private sector employers were fighting to avoid the unions while the government sector allowed unions to boost it's democratic followers. The taxes needed to be increased in the city in order to pay the government workers. Still fighting the unions and the high taxes in the city, private sector jobs were relocated away from the city. This was not just the BIG 4 this also included shopping centers just outside city limits. Car dealers found it cheaper to do business in the townships as well. The residents in the city found that they too could have a yard in the suburbs and lower taxes. The automobile made it possible to commute to work if you worked in the city and the tax savings would pay for the gas. Those that chose to stay in the city soon discovered that many of the residents could not find suitable work and turned to small crimes to feed themselves. Than came the burning of the city. The exodus was paramount. The city still believing that they could manage on this meager tax base continued to work on the democratic base giving away the world with out a chance to succeed. The only thing that could help Detroit is the opportunity to get out from under their financial obligation ANN ARBOR COULD BE NEXT
Jay Thomas
Sat, Jul 20, 2013 : 6:22 p.m.
It's true that we are all linked together. Just as Detroit had liberal democrat unions negotiating with the liberal democrat politicians they helped to put in office, we have the same money laundering scheme going on here in Washtenaw County. The unions just got a ten year contract as a result. It is still fascinating that Detroit took 8 months to pay people for knocking down those houses when the money was given to them by the Feds in the first place. I wouldn't take an IOU from them.
Vivienne Armentrout
Sat, Jul 20, 2013 : 3:02 p.m.
Which "we" is Conan Smith referring to when he says, ""We have a AA bond rating, we're very financially secure, and we're seeing strong growth in our tax base," he said. "It may affect us in terms of the expense of borrowing money, but it's not going to stop us from doing the things we need to do." ? Conan Smith has multiple loyalties. He is a Washtenaw County Commissioner and his "day job" is to represent several Detroit suburbs. Their needs and concerns are different from Ann Arbor's (we are an exurb, not a suburb). He was instrumental in getting Washtenaw County pulled into the Regional Transit Authority that is actually aimed at the metro Detroit area. When he speaks of "borrowing money", it is especially significant given that he is one of the supporters on the BOC for a huge bond sale that would place the county in debt for 25 years.
Ricardo Queso
Sat, Jul 20, 2013 : 2:44 p.m.
Action #1 should be to scrap the ugly fist featured in the image.
hawkhulk
Sat, Jul 20, 2013 : 12:20 p.m.
Did we need an emergency manager to make this assumption about bankruptcy, as such was inevitable? The EM law is flawed. If a city is going to file bankruptcy, it will do so regardless. That being so, the city of Detroit is such bad shape it needs to be gutted and reconstructed from scratch. This will also require totally new leadership, and not from the major candidates now running. Mike Duggan was connected to the corrupt leadership of the late Ed McNamara, as was disgraced, convicted former mayor Kwame Kilpatrick and former governor Jennifer Grantholm, all were protegees of the former Wayne County executive. Benny Napolian is part of the old guard through former Mayor Dennis Archer and Tom Barrow is who he is. We won't even get into the city council who past and present has disgraced itself. Without new leadership getting out of bankruptcy will not matter.
Basic Bob
Sat, Jul 20, 2013 : 1:38 p.m.
The mayor does not have the power to declare bankruptcy and city council didn't have the nerve or even the understanding of how to hire a competent bankruptcy lawyer. This is exactly why we need emergency management. The governor was able to appoint someone with both the power and expertise to kick this off. Snyder gets my vote in 2014 for saving Detroit from its own crony politics.
The Picker
Sat, Jul 20, 2013 : 11:58 a.m.
Nothing will change in Detroit ! When the EM leaves and the reins of government are returned to the elected officials, it will be democrats in conjunction with their union accomplices that will begin the swirl down the wazoo again !
The Picker
Sun, Jul 21, 2013 : 1:12 a.m.
I reiterate! Nothing will change in Detroit !!
shadow wilson
Sat, Jul 20, 2013 : 2:30 p.m.
Please cite specifics regarding Duggans alleged corruption.......you can't because it aint there. Duggan is far and away the best person to be the next Mayor. He(Duggan) was McNamera's hatchet man....so what....it was a neccesary function. There is no one else remotely qualifies unless we continue with race card politics.
LXIX
Sat, Jul 20, 2013 : 11:22 a.m.
Detroit exemplifies the danger of relying upon single stream employment. With healthcare costs about to be squeezed, a declining population for the new "self-enrichment" - a more-resources-per-person- for-me society, and the advent of cost-effective on-line education, The University of Michigan could very well cease to be the economic driver for Ann Arbor. Disappear half the UM in a generation and tree-town could very easily become the next chopped block. Ironically, as Detroit is rebuilt into a multinational "economic zone" for globalist billionaires, UM might just decide to return its place of origin - downtown Detroit.
ChelseaBob
Sat, Jul 20, 2013 : 12:04 p.m.
LXIX- You are correct about online education. The high cost model of college campuses is about to be in real trouble. As former graduates struggle with student loans and underemployment, fewer students will matriculate. There is no way this can continue.
belboz
Sat, Jul 20, 2013 : 10:56 a.m.
Ann Arborites are just another piece of the downturn of Detroit and the US Economy. From my observation, over 50% of the people purchase foreign cars. In a state that depended on this economy, Ann Arbor will rightly feel some of the pain. Of course lending rates will be affected. Of course property values are affected. Ann Arborites have their own share of the responsibility and consequences. A state with less tax revenue to pay for teachers is just another consequence. Time for the bill to be paid for choices from all people.
KMHall
Sat, Jul 20, 2013 : 3:25 p.m.
The Detroit auto industry is directly responsible for my switch to Honda back in the 70's. They were too arrogant to see what people would need.
PhillyCheeseSteak
Sat, Jul 20, 2013 : 4:37 a.m.
Detroit = White flight AND Black flight.
Jay Thomas
Sat, Jul 20, 2013 : 6:30 p.m.
250,000 blacks over the past ten years migrated to the burbs. When they did that, and even Detroit's top public officials started really complaining about the crime problem, it was no longer legitimate to say that whites were racist for leaving. Safety comes first.
easy123
Sat, Jul 20, 2013 : 2:25 a.m.
The commonality is called the Democratic Liberal cabal who has an agenda. Spend other peoples money because you have none and it is easy to do. What is common about this: Flint, Saginaw, Willow Run Bay City - The list goes on and on?
Jay Thomas
Sat, Jul 20, 2013 : 6:32 p.m.
The commonality is that they are all places where democrats are found. Democrat problems.
LXIX
Sat, Jul 20, 2013 : 2:13 a.m.
@johnnya2 - History check. The auto industry and White Flight to "their" new auto jobs and homes in the suburbs was the cause of the 1967 riots. People left. Property values dropped. Tax revenue upholding @Ann English's "Socialist State" plummetted and the remaining residents holding the empty bag revolted - a Vietname Veteran's homecoming party at "The Blind Pig"joint in the City was mistakenly invaded by police thinking only a few targets were there. Dumbfounded the corrupt chief ordered that everyone at the party be jailed. Fires broke out soon thereafter. Suburbia was in and all the cities back then were in trouble. Hello school bussing and the new DDAs ! The rise of the Japanese machine started with cheap tin cans that got better mileage during the Opec Oil manipulations of supply and prices. Honda civics could bested 40/48mpg. The Datsun B-210 and Toyota Corolla got near 30MPG. The Big Three couldn't offer better in mileage and/or quality and the tin cans won the purse - then continued to get even better (continual improvement process). Now who is responsible for decline in Detroit and the Big Three ? It's those Stupid voters again.
Ricardo Queso
Sat, Jul 20, 2013 : 3 p.m.
I get the feeling LXIX that in 1967 you were not yet born. I did live through the 1967 riots albeit as a youth. You have some of your story out of order. The riots happened first. Middle class flight (that includes all races) started shortly after and ramped up with the infamous Coleman Young declaring that all of Detroit's problems emanate from north of 8 Mile. The flight of the auto plants is a separate issue. If you wish to place blame it can fall squarely on the greed of the UAW, the acquiescence of management to union demands, value of the yen vz. the dollar, and a complete misread of the 1972 oil crisis. When Japan decided to build cars in the US, the militancy of Coleman and the UAW scared them away. It didn't help when Vincent Chin was beaten to death by two autoworkers in 1982 for the crime of being Asian. What executive in their right mind would drop a major investment into this caldron?
LXIX
Sat, Jul 20, 2013 : 2:01 p.m.
For sure. Notice the mention "White Flight" out of Detroit was to "their" new jobs and homes in the suburbs. Economic opportunity beyond frontline military grunt somehow favored non-minorities everywhere in the United States. Not that Automobile manufacturers and public institutions were quietly biased in any way against minoritties back then - or today. Its all about money to some. Who has it, and who keeps others from getting it back. When people revolt leadership everywhere takes notice and change happens. The riots in Detroit and marches amassing millions of minorities, women, hippies, anti-war protesters reshaped the socio-economic world in the 60s and 70s. Globalisation planners hit back. Like Wall Street and the DDA, they are back on top today yet that clout is rapidly becoming passe itself. When an economic force takes command and control it also inherits the responsibility for actually making the entire system work. The new Liberal governance didm't work perfectly. Conservatism followed. That failed. Corruption and cronyism from both sides of the isle moved in to ice the burning cake. Now that "solution" is boxed in by less and less opportunity. Overpopulation and resource distribution in a bounded world has become the core economic driver. The globalization borders in the U.S. will likely rise again soon and some form of "fair" self-reckoning with reality within will have to take place. Even in Detroit. Even in Ann Arbor.. Nobody wants a war. Nobody wants a revolution. Everybody wants the status quo on Easy Street. The resource driven economy has to be dealt with soon, however. China is in trouble. Capital is about to collapse in the U.S.A. I really hope those who call themselves academic brains have the next better idea.
vivian
Sat, Jul 20, 2013 : 12:04 p.m.
LXIX, did I read you correctly? You say that the 1967 riots were the result of white flight and the auto industry? Doesn't that analysis fail to take social factors (such as those operating in the other cities where rioting occurred) into account?
Dog Guy
Sat, Jul 20, 2013 : 12:51 a.m.
Over the past dozen years, the City of Ann Arbor has gone from being in the black to over a half billion dollar debt from a big shell game played with buckets.
LXIX
Sat, Jul 20, 2013 : 12:48 a.m.
Sound like Tree Town? Who's running this tree train anyway? Ref. Crains June 2013. Detroit's Downtown Development Authority reveiled their details of a $650 million Detroit Red Wings arena and entertainment district. Ref. Mlive The development would be funded with a mix of $365.5 million in private investment and an estimated public investment of $284.5 million. The $450 million sports and entertainment center and accompanying $200 million residential, retail and office district is getting public money through tax increment financing. Led by Little Ceasars Pizza and Detroit Red Wings owner billionaire Mike Ilitch (who's daughter Denise is Dem. UM regent. They recently voted for big Illegal alien tuition break), the DDA unanimously voted to approve a memorandum of understanding between itself, Ilitch's Olympia Development and Wayne County. Eventually, the DDA will own the arena and lease it to Olympia Development. Founder and chairman of Quicken Loans, billionaire Dan Gilbert has already invested over $1 billion in downtown Detroit and has moved over 9,000 employees of Quicken and other related companies into downtown. Near Billionaire Governor Snyder got his wish for a brand new bridge linking Detroit and Windsor instead of the other billionaire's wish to keep the old one. Hired Emergency Manager and UM grad Kevyn D. Orr to fix the Motor City. Only to become the largest Municipal bankruptcy in U.S. History.
a2citizen
Sat, Jul 20, 2013 : 12:41 a.m.
I remember hearing about revitalizing Detroit over 40 years ago. I think it's still about 25 years away.
Basic Bob
Sat, Jul 20, 2013 : 12:04 a.m.
Will the creditors accept vacant land? There is no shortage of that.
SonnyDog09
Sat, Jul 20, 2013 : 12:41 a.m.
Homesteads for illegal .... er... undocumented immigrants.
Nicholas Urfe
Fri, Jul 19, 2013 : 11:16 p.m.
That big fist would look mighty fine in front of our city hall. Will it also be for sale?
SonnyDog09
Sat, Jul 20, 2013 : 12:26 a.m.
We could never have the big fist in the Glorious People's Democratic Republic of Ann Arbor. Comrade Citizens would lose their PeeCee minds explaining that the fist belonged to someone known as "The Brown Bomber."
SonnyDog09
Fri, Jul 19, 2013 : 11:14 p.m.
The city of Ann Arbor also does not consider its unfunded pension and healthcare liabilities to be debt.
Jay Thomas
Sat, Jul 20, 2013 : 6:36 p.m.
The underground garage was an example of fiscal insanity. Water Street also put Ypsi in a hole the same way.
talker
Sat, Jul 20, 2013 : 4:32 a.m.
Detroit's problems from spending too much could be Ann Arbor's problems if we let the DDA and mayor have their way. Now we have the debt of an underground garage with the huge extra costs of building a garage strong enough to hold a hotel or convention center. Most people in town are against those building plans, but money from our property taxes goes toward the extra costs of the underground garage's surface/top. Each small millage adds up to the point where many long time residents now pay more in property taxes than they pay or paid in mortgage costs. Each unnecessary project takes money from Ann Arborites who would rather spend that money in local businesses. Ann Arbor can't afford a new train station and subsidies toward commuter trains that would carry few paying customers when vans can transport people cheaper and with greater flexibility regarding stops and routes. We need to look at how we can avoid troubles in future years. Among other things, we need to recognize that as baby boomer city employees, including firefighters and police officers, retire, we need to pay what we've promised them.
mmouradian
Fri, Jul 19, 2013 : 10:34 p.m.
Detroit was a boom town. Much like the Gold towns in the west or even Michigan's Logging or Mining towns. When the fair trade laws went into effect it was like the mine closing down. All the jobs went away and anyone who could moved too. All that were left were the poor or untrained who couldn't move. No leader can fix that. Maybe if we we had some froward thinking folks like in Pittsburgh we could have avoided this.
Jay Thomas
Sat, Jul 20, 2013 : 6:42 p.m.
Detroit still had the highest income of a major city in the early sixties. It went to hell after the riot (which was bigger than anything seen elsewhere by a mile) and two decades later with Coleman Young it was a disaster. He raised taxes endlessly, replaced competent people with cronies, got rid of that STRESS police program (because it was stressing out all the criminally minded people). Even told the business people to leave if they didn't like how he was doing things at a meeting of the DEC (I'm not talking about the 8 mile rant). You can see other towns that are economically depressed but don't have the same crime problems. The crime is what kills it.
emsgp
Sat, Jul 20, 2013 : 1:17 a.m.
Looking to Pittsburgh could prove to be wise. The influence that big business had on there turn-around took place in the city center. Pittsburghs neighborhoods were not in decline to the degree they are in Detroit. Detroit is presently undergoing a tremendous city center resurgence thanks to Roger Penske, Mike Illich, Dan Gilbert, and several others. This bankruptcy will have little or no influence on this movement. Hopefully it will spread to the neighborhoods going forward.
a2citizen
Sat, Jul 20, 2013 : 12:22 a.m.
What fair trade laws are you referring to? Detroit's demise started in the early 50's.
DonBee
Fri, Jul 19, 2013 : 10:32 p.m.
More than 2 decades ago, my wife and I tried to look at moving into Detroit, we both had friends there and given job locations it would have been a reasonable place to live. We went to the city to ask about places to live, homesteading, etc. I will never forget the first comment I got from an official. "You are the wrong color to live in Detroit, we don't want your kind, you #$%%^." The supervisor seconded the comment and we stopped looking in Detroit. I hope, that my experience was different from anyone else, but I suspect it was not.
Jay Thomas
Sat, Jul 20, 2013 : 6:55 p.m.
Please look into the black power movement with Jesse Jackson at its head in the 1970's (before he decided on rainbows). They held meetings in places like Detroit, and Gary, Indiana. They were so sure and confident of themselves and their ability to run these cities. What they basically did was affirmative action on steroids; they looked at city government as the source of their prosperity and sought to get rid of anyone not black in the top jobs (unless they were absolutely indispensable). They gave themselves raises and perks that the previous white officials never had. I recall seeing Mayor Young driven around in some odd looking limousine with a white driver in a chauffeur's uniform. Then the city council decided they were like members of Congress and needed a budget in the millions so they could be driven around too. I recall trying to pay a parking ticket in Detroit once. The girl did not want me to pay it. I later learned that they were making a lot of money from the fines/interest off of the suburbanites who do actually pay their bills. The mentality is just different even when it is not racist.
oyxclean
Sat, Jul 20, 2013 : 3:07 a.m.
Detroit has hated whites for a long time. Most racist place I've ever been to.
Hot Sam
Sat, Jul 20, 2013 : 2:55 a.m.
Some clients of mine...young guys...wanted to contribute and make a difference...moved their business in to the city...said the same thing happened to them...would never do it again...
Nicholas Urfe
Fri, Jul 19, 2013 : 10:13 p.m.
Conan Smith certainly helped hitch our transit wagon to detroit. It was a bad move when he did it, and it is an even worse move now. Thanks Conan!
Westfringe
Fri, Jul 19, 2013 : 10:10 p.m.
'The notion that we're separated ... is flawed' Quite correct. Detroit's loss is our gain.
KMHall
Sat, Jul 20, 2013 : 3:19 p.m.
How is it our gain? Ann Arbor flourishes due to U of M and research.
63Townie
Fri, Jul 19, 2013 : 9:52 p.m.
I have lived in southeast Michigan all my life and I have seen the steady decline of Detroit. I think it started with Coleman Young. He made it known he didn't want outsiders in Detroit. What he didn't understand was he alienated subarbanites who would have been ok with going into Detroit after the riots. Dennis Archer never got a chance, and Kwame the Crook sealed the deal. I used to feel compassion for Detroit but the continued corruption, crime and greed has left me cold. I go into Detroit for events, but no more do I feel compelled to spend anymore time in Detroit than necessary. They need to contract the city, move people to concentrate the population into a smaller area, and let suburbs have the additional acerage or turn it over to farmers.
KMHall
Fri, Jul 19, 2013 : 10:57 p.m.
arborarmy Industrial decline and white flight could not be fixed quickly by any particular mayor, but was the corruption a necessary ramification. It is my understanding that the Detroit Public Schools leaders have been corrupt as well and now look at the poor kids.
arborarmy
Fri, Jul 19, 2013 : 10:49 p.m.
My bad. A typo. Actually, neither. 1950 and 1970. It lost another 300K between 70 and 80, withe the largest portion of that coming erly as people fled due to the riots.
DonBee
Fri, Jul 19, 2013 : 10:29 p.m.
arborarmy - Do you mean between 1950 and 1960 or do you really mean between 1950 and 1980 as written? If it is between 1950 and 1980, then Mr. Young would have been in office for several of those years.
arborarmy
Fri, Jul 19, 2013 : 10:11 p.m.
I suggest you read some history. The city's decline began long before Young became mayor. Between 1950 and 1980 the city's population declined by 350,000 (20%) and lost roughly another 150,000 before Young took office in '74. So please tell us how Coleman Young caused the population to decline by 500,000 (with resultant loss of tax revue, jobs, etc) before he took office.
DAN
Fri, Jul 19, 2013 : 9:49 p.m.
We are facing similar funding problems here but not as severely as Detroit. They just kicked the can down the road too many times and didn't try to deal with he problems until it was too late. The County is trying to control it's potential unfunded pension debt by renegotiating a defined contribution retirement plan instead of defined benefits and a bond issue. I recall that when I worked there almost 20 years ago, it was adequately funded but their consultant actuaries[who help determine the county contributions] did not adequately project the damage that the recession caused. I expect that we''ll see other local governments will do something similar to control these types of costs.
Stan Hyne
Fri, Jul 19, 2013 : 10:39 p.m.
Well said !!!!!
Basic Bob
Fri, Jul 19, 2013 : 10:25 p.m.
That's the whole problem - they have shown the inability to control the costs before they become staggering debt.
Linda Peck
Fri, Jul 19, 2013 : 9:32 p.m.
I am not sure why people are surprised or see this bankruptcy as something momentous. Detroit has been "bankrupt" for years and all of the creditors in the world know it. It has not kept Ann Arbor from getting into high rises and downtown commercial interests. In fact, I think business that may have been once Detroit's is now Ann Arbor's.
KMHall
Fri, Jul 19, 2013 : 10:53 p.m.
I totally agree. Ypsi has also been growing and improving in some areas.
D
Fri, Jul 19, 2013 : 8:54 p.m.
This really shouldn't be a surprise. Detroit has been on the decline for decades despite the valiant efforts of the few. I hope the city can begin to turn around to the positive.
leadersandbestfan
Fri, Jul 19, 2013 : 8:35 p.m.
- Conan Smith's comments raise the temperature and, in tone, are not unlike the more emotional comments you consistently see from Detroit City Council members. The Detroit City Council has more often than not been part of the problem not the solution. What is needed is cool heads and real solutions. - The article from the Washington Post from a former Detroiter is very insightful: http://www.washingtonpost.com/politics/detroits-demise-decades-in-the-making/2013/07/19/0b1d8dc6-f068-11e2-bed3-b9b6fe264871_story.html
Basic Bob
Fri, Jul 19, 2013 : 10:01 p.m.
And Conan says it will not impact either current spending or current borrowing in Washtenaw. He's happy to just add onto future debt as bond costs rise.
Lizzy Alfs
Fri, Jul 19, 2013 : 8:50 p.m.
@leadersandbestfan: Thanks for posting that article. I've read a ton of coverage about Detroit since yesterday, but I really enjoyed this perspective. This line stuck with me -- "It's an admirable obstinacy Detroiters have. It's also why the city was destined to go bust."
Ben Freed
Fri, Jul 19, 2013 : 8:18 p.m.
Rick Fitzgerald, a University of Michigan spokesperson said in an email that the University of Michigan is not a creditor to the city and will not be directly impacted by the bankruptcy. He added that as a longtime partner in the revitalization and economic development efforts in the city of Detroit, the university is committed to its full-time presence in the city and the Semester in Detroit program. "The bankruptcy filing is expected to enhance those efforts. A strong Detroit is good for all Michigan residents," he wrote.
GratefulReb
Fri, Jul 19, 2013 : 8:03 p.m.
Shocking that Willow Run and Ypsi property values will go down. NOT! They've been sliding and will continue to do so. I live on the other side of 23 and feel pretty good about my property value.
KMHall
Sat, Jul 20, 2013 : 3:17 p.m.
sttc Yes! GratefulReb is certainly not in touch with the current state of Ypsi.
sttc
Sat, Jul 20, 2013 : 1:01 a.m.
if you think (city of) ypsi real estate prices are on the decline, you haven't been in the market lately.
Basic Bob
Fri, Jul 19, 2013 : 10:25 p.m.
That's a West Michigan value if I ever heard one.
ChelseaBob
Fri, Jul 19, 2013 : 8:03 p.m.
Well written article. I have two observations. 1. The general obligation debt issue will be decided by the federal courts. Bondholders will not quietly let their liens be extinguished. Whatever the result, it will apply to ALL municipal bankruptcies in the future, so if borrowing costs go up it won't just be in Michigan, it will be everywhere. 2.Detroit's reputation is so bad, that bankruptcy is unlikely to hurt what's left of tourism in the city. If there is follow through with improving services and clamping down on corruption, within a few years the city could be a big plus for the state.
ChelseaBob
Sat, Jul 20, 2013 : noon
Ben Freed- It will drag on in the courts for a while. The general obligation piece will change municipal financing dramatically so it will be hard fought. Plus we're already seeing legal grandstanding by an Ingham county judge who has no standing in federal court, but wants the limelight as a catapult to higher office. Expect much more of that before we're done. This will be messy.
GoNavy
Fri, Jul 19, 2013 : 9:42 p.m.
@Ben Freed- How can you not realize that this will absolutely be a precedent-setting case for municipal bankruptcies? I'm not sure it's even up for debate.
Ann English
Fri, Jul 19, 2013 : 8:52 p.m.
When I read recently about the good tourist season for Michigan, I forgot about Detroit not being a part of it. We have lost a US congressional seat because of the population loss due to the job loss. I heard via radio today that Detroit has lost 2/3 of its population from 50 years ago.
Ben Freed
Fri, Jul 19, 2013 : 8:32 p.m.
Chelsea, If you think this has the potential to be a truly precedent-setting case for municipal bankruptcies, do you think that some of the arguments (i.e. general obligation debt as secured or unsecured debt) could be appealed? How long do you think it will take to resolve this bankruptcy? Jesse Bernstein mentioned and MEDC survey from a few years ago to me that showed that the rest of the world/country actually had a much better image of Detroit/Michigan than we do. I'm having trouble finding it, but do you really think perception was already that bad that this will not have an impact?
America
Fri, Jul 19, 2013 : 7:47 p.m.
Lets remember to put the blame where it belongs. 40 years of corruption and poor management have brought us to this point. I don't view this as a left-right thing as the media tends to make everything else. This is about financial promises that were made and can no longer be kept. I have high hopes for my hometown of Detroit. I hope this is the start of fixing all that is wrong with Detroit.
Jay Thomas
Sat, Jul 20, 2013 : 7:18 p.m.
Democrats as a party believe that responsibility should not be placed upon the individual but on society as a whole. So it just makes sense that they would never take responsibility for the result of half a century of solid democrat rule in Detroit and Wayne County. It's always someone else's fault... Bush, Oakland County, some guy in Alpena not paying his "fair share". Arbor Army: that loss of population occurred under Democrats and their policies. The loss of Detroit's industry is overstated. It lost about half of it (the GM plant is much bigger). The real problem is it lost 90% of its small businesses. Detroit was a city built on small business before the auto industry came around. People forget that.
metrichead
Sat, Jul 20, 2013 : 5:08 a.m.
White flight started before the riots. When the factory workers went to fight in WWII, African-Americans moved to cities like Detroit and did the same jobs. When the workers came home from the war, many of them took GI Housing loans and moved to the suburbs. Then came the interstate highways, which moved them further away from the city and along with that, economic activity. The riots in 1967 only expedited something that was already underway.
johnnya2
Fri, Jul 19, 2013 : 10:39 p.m.
@ DonBe, The tax rates and cost of doing business were ALWAYS higher in Detroit. The KEY development in all of this is white flight that started after the riots and the failure of the management of the Big 4 at the time as to how to run a business for higher gas prices. Japanese automakers had NO FOOTHOLD in the US until the early 70's when gas prices skyrocketed. No person ever said Japan made a better truck, bus, van,. or large luxury vehicle. They said they built better mid to small size cars. That has nothing to do with unions (they build F150s as well) it has everything to do with building smaller cars cheaply with bad engineering. There are also some issues regarding currency manipulation, but the bottom line is, as people moved to the suburbs, the tax base eroded. If ANY organization has that happen, it will cause a disaster. No organization is prepared to handle losing over half their "revenue" stream and be ok.
DonBee
Fri, Jul 19, 2013 : 10:25 p.m.
arborarmy - Would a well run city government, with reasonable tax rates and working city services have been able to draw more business into the city and keep the population levels up? Only a time machine to an alternate universe can answer the question, but this is a chicken and egg question. Was it the government that drove out the jobs and the people followed, or was it the loss of population that brought in an incompetent city government?
arborarmy
Fri, Jul 19, 2013 : 10:03 p.m.
. . . because the drastic reduction of the city's major industry and the loss of 65% of its population over 50 years had nothing to do with it.
Ann English
Fri, Jul 19, 2013 : 8:46 p.m.
Margaret Thatcher said, "Socialism works UNTIL it runs out of other people's money." Public sector unions are socialist constructs. They pay union members' pensions and health benefits out of OTHER PEOPLE'S MONEY (taxpayers). But the smaller the economic pie (private sector) gets, the less tax money there is, so the time comes when power-hungry union bosses and politicians run out of other people's money. That time has come for Detroit. Snyder was right to free home daycare workers, then a lot more people working and seeking work, from being required to join a union. Power-hungry government creates more problems than it solves. The mainsteam press is power-hungry, too, fooling people who rely on it to vote for socialists.
ManA2
Fri, Jul 19, 2013 : 8:09 p.m.
Well said. It's incredibly sad for those who were promised benefits they will never receive, but the city is simply out of cash. Period. I am personally very hopeful this now starts the long path to recovery.
Ben Freed
Fri, Jul 19, 2013 : 7:38 p.m.
Does anyone here in the comments section have a business in Ann Arbor that also operates in Detroit? If so, are you worried about the future there? For most Ann Arborites I feel like this seems close to home but without any real personal impact... anyone feel differently?
KMHall
Sat, Jul 20, 2013 : 3:16 p.m.
Vivian I think you are right. For industry and productivity to return on a scale sufficient to float the city again will require something that we can't even imagine at this point. I love the artists, the farmers, and the coffee shops and the creative potential, but the output from these efforts will be a drop in the bucket even as they might flourish. Will the city be divided into a bunch of villages? Very challenging, but at least we can all admit that something had to happen.
vivian
Sat, Jul 20, 2013 : 11:54 a.m.
Metrichead is correct; the move from the city to the suburbs was underway all over America when it started in Detroit, and it wasn't 'white flight' at all, as the term is usually understood. After the riots, the movement of the middle class out of Detroit might be called 'white flight,' though I believe that people of all races and ethnicities left the city--but what would those who condemn it have had them do? Would anyone with a choice remain in a city that might burn at any time? Is it reasonable to expect people to remain and watch their property values fall precipitously? Does any sensible person choose to stay in a city where many of the places he might work or obtain services are being closed or destroyed? Or, more to the point, where he's been told--and shown--that he's perceived as an enemy and may in fact be subject to violence if he remains? The death spiral began when people who had something to contribute made the decision that contributing it to Detroit was futile or even counterproductive. The bad decisions of the auto companies and untenable demands of the unions really set it in motion. Years of corruption and incompetence at City Hall just made every bad thing worse. Can Detroit arise from its ashes and decay? I'd like to think so, but I don't see the incentives for productive people and industries to return, and without those, it's dependent on government money. And that can't flow endlessly. Sad situation.
craigjjs
Sat, Jul 20, 2013 : 11:23 a.m.
Simone - I think the risk of DIA works being sold is low. The issue has already come up and the Emergency Manager stated he would not sell them (as part of pre-bankruptcy negotiations). He will be the most powerful voice in the bankruptcy reorganization (other than the judge) and I am confident he will fight very hard to protect those art works.
simone66
Fri, Jul 19, 2013 : 9:13 p.m.
ManA2 I couldn't agree with you more. I do believe that in time, Detroit will rise from this a stronger city. But that will take time. I was born and raised in Detroit but have spent the last 20 years living outside of it, and now here in A2. What concerns me most is how this bankruptcy will affect the Detroit Institute of Arts. I know I'm not the only Ann Arborite who has a membership with the DIA and donate monies to its other programs. If any pieces of art are sold in this bankruptcy, that will literary kill the DIA and take away the one true cultural gem in Detroit that is a symbol of the city's soul and recognition of valuable art from cultures around the world and from centuries past. If the DIA is looted, it will set back any benefits of this bankruptcy and no one will really want to visit Detroit, let alone invest in it.
Lizzy Alfs
Fri, Jul 19, 2013 : 8:44 p.m.
I thought this was interesting, from Albert Berriz: "How do manufacturing companies go into municipalities like Ypsilanti, Willow Run, Wayne County, Detroit? Unless these communities get their financial house in order, you can't expect a business to work in those communities. Why should they? They can go to other places that are a lot less risky."
ManA2
Fri, Jul 19, 2013 : 8:07 p.m.
Ben - It has a real impact. The state loses investment because any out of state company looking at Michigan for investment equates Detroit with Michigan. That said, this is the start of the solution. It's a sybolically sad day, but it is a critical step on the path to recovery.
formerdetroiter
Fri, Jul 19, 2013 : 7:27 p.m.
You know I grew up on the east side in the 50s and 60s. I now live in Ann Arbor. Over the years I have seen it decline ever so slowly. The ones who have run the city (city councel) for the last 20-30 years, especially the current bunch of clowns, have been so stinking useless, but yet they still keep getting voted into office. I don't understand it. So here is the deal. If ANY of the current city council members get voted into office next time around, I blame it on the voters, not the elected officials. It's like saying "yea man, bring it on, more garbage, deeper hole." The city council has their own agenda with all the constant bickering. Clean house 100%. If not, Detroit, you have yourself to blame. . . . again! Then you become the idiots.
Jay Thomas
Sat, Jul 20, 2013 : 7:28 p.m.
Detroit elected a former singer who liked to give racist rants for an hour at the city council table. The council job is a really a part time job that they gave themselves full time pay and benefits for (unlike Ann Arbor at least, people aren't doing it here for the money like they are there). They found her shoveling coins into the slot machines at a casino when she was supposed to be at a city council meeting. She claimed she was helping the city with her gambling on the city's time as she walked back to her city provided car and driver outside the Casino. She would also go on tour when she was still on council (mostly to perform for the white people she didn't seem to care for as a council member). Strange woman, but typical of Detroit.
julieswhimsies
Fri, Jul 19, 2013 : 7:43 p.m.
@Halter. If the voters in Ann Arbor continue to elect the same people into office, then, they are the majority, obviously. Your logic is flawed.
Halter
Fri, Jul 19, 2013 : 7:35 p.m.
The majority of Ann Arbor folks say the same thing about our council, yet they keep getting re-elected since there are no other options
snoopdog
Fri, Jul 19, 2013 : 7:20 p.m.
Let the knashing of teeth begin, Mr. Snyder is the best thing that has ever happened to this state since Henry Ford set up shop in Detroit. I look forward to Detroit rising from the ashes, hopefully before I get turned into ashes. Good Day
Gerry
Mon, Jul 22, 2013 : 4:32 a.m.
I think Gov Snyder deserves credit for refusing to kick the can down the road further. There are things about the emergency manager law that are not pretty, but it seems like more and more like the least bad option. We cannot blindly throw money into a system that is unreformed from that which took Detroit from the industrial powerhouse of the 50s to what it is today. To be fair though, blame should also go to: Greedy unions that overplayed their hands. Incompetent auto execs who put out terrible cars that nobody who is not a gearhead would ever want. White racism (redlining) Black racism (Coleman A Young) Highway-based urban planning that inherently favored the suburbs over the city.
Jay Thomas
Sat, Jul 20, 2013 : 7:39 p.m.
@KMHall: They are not as innocent as you make them out to be. The number of adults with felony convictions is staggering. Half of Detroiters throw their city property tax bill in the garbage. After a while a city comes to look like the people who live there.
Jay Thomas
Sat, Jul 20, 2013 : 7:36 p.m.
Rick Snyder decided that he wanted to be Bill Milliken and get votes from the other side. He let Detroit fumble in the dark for two years ("We can run things, don't steal our democracy") as things only got worse and tried to find small ways to help the city (none of which was really appreciated) Granholm approved every bit of debt Detroit wanted, kicking the can down the road to make them happy as well. That was her "base".
KMHall
Sat, Jul 20, 2013 : 3:11 p.m.
YpsiGreen A city isn't corrupt, the officials are. Most of the people who live there and many of those whose pensions will be cut are innocent. What's the solution? Do you live in a bubble that is not dependent or obligated to the humanity around you?
easy123
Sat, Jul 20, 2013 : 2:33 a.m.
HomelanC - so who really pays the taxes, Buddy. Do you remember who was the largest tax payer in A2 until a few years ago.? Before you continue to lambast the taxpayer - stop biting the hand feeds you. otherwise you will in a land called Detroit. Oh what hypocrisy!!!!!!
YpsiGreen
Sat, Jul 20, 2013 : 2:15 a.m.
Craig & KMHall: "Welcome to Overspenders (and Cheats) Anonymous. Looks like we have a new guy here." "Hi. My name is Detroit and I have a debt problem."
jns131
Fri, Jul 19, 2013 : 11:55 p.m.
This is a massive Phoenix. It will rise from the ashes after all the creditors divvy up the parcels of land that need to be restored. Once done? Detroit will be vastly improved. Can't wait to see what happens in 10 years.
KMHall
Fri, Jul 19, 2013 : 10:46 p.m.
Amen Craig on "this should have happened years ago." I love some of the efforts currently going on in Detroit and hope to see it rise again. Strangely, admitting that it is bankrupt feels like a breath of fresh air and gives hope.
Craig Lounsbury
Fri, Jul 19, 2013 : 10:19 p.m.
I wouldn't say Snyder is the best thing to ever happen to Michigan but he is far from the worst. Lets face it, of all the reasons one can point to for Detroit's bankruptcy Governor Snyder isn't on anyone's intelligent list. This should have happened years ago. It didn't have get to the point of being the biggest Chapter 9 in history but it did. years and years of "leaders" kicking the can down the road.
Dutchy734
Fri, Jul 19, 2013 : 8:11 p.m.
Something tells me you're not the real Snoopdog.
mady
Fri, Jul 19, 2013 : 7:42 p.m.
Mr. Snyder is the best thing that's happened, to all his millionaire friends that is!!!!!
Homeland Conspiracy
Fri, Jul 19, 2013 : 7:38 p.m.
"Mr. Snyder is the best thing that has ever happened to this state" Yes he is for all his rich buddys
julieswhimsies
Fri, Jul 19, 2013 : 7:35 p.m.
Surely you jest. Snyder and his cronies have done such a bang-up job, haven't they?
Ren Farley
Fri, Jul 19, 2013 : 7:18 p.m.
Will the bankruptcy of Detroit lead to higher interest rates for all bonds issues by Michigan governmental entities? If so, by how much? Would the tax payers of Michigan actually save money in the long run were current taxes raised so that the State of Michigan could pay the indebtedness of the city of Detroit and the several other cities that may also no longer be able to pay their bonds?
1bit
Fri, Jul 19, 2013 : 10:49 p.m.
@Ren: The cost of higher interest rates (if it ever came to fruition) is measured in millions. The cost of bailing out Detroit is measured in billions.
DonBee
Fri, Jul 19, 2013 : 10:21 p.m.
The rest of the state has been putting money into Detroit since 1967. Detroit has been a net taker of state funds since then, if you look at taxes collected and money given to the city. If giving them more money would have solved the problem, it should have been solved in the 45 plus years the rest of the state has been sending them a check. Sorry, they need to fix the corruption in the city government before giving them more money makes sense. Look at how many officials (elected and appointed) are in jail, waiting for trials, out on appeals or under investigation. Fix the government so it works right and is not corrupt, then ask for more money please.
Cornelius Nestor
Fri, Jul 19, 2013 : 7:43 p.m.
Is it reasonable to tax everyone to bail out Detroit when, to a certainty, it will just get into financial trouble again? To a large extent Detroit is an utter disaster because the city government bargained with the unions to give them other people's (taxpayers') money. In other words, A agreed to pay B with C's money. They thought the cost didn't matter. Shall we prove them right?
Ben Freed
Fri, Jul 19, 2013 : 7:35 p.m.
Ren, I don't think there's much of a likelihood of the state government "bailing out" the city of Detroit as you seem to be suggesting in your last post. The first question you pose, about government bond interest rates is very important. From what we've heard, officials are still hopeful that the filing will not have a significant impact on interest rates for government bonds from the state or other municipalities but it's really too early to tell.
snoopdog
Fri, Jul 19, 2013 : 7:22 p.m.
You cannot be serious, I suggest if you want to help out go ahead and write the city of Detroit a check from your own personal account. I pay enough in taxes already. Good Day