Requesting help regarding Detroit's bankruptcy (2013, loans, homes)

[SteveMichiganman]

I lived in Michigan for the first 35 years of my life. I no longer live in the state. However, I still follow all the current events that take place in the Metro-Detroit area. Many of my co-workers have been asking me why did Detroit go bankrupt. Can anybody please provide me with a short paragraph (no more than four or five simple moderately-sized sentences) that summarize the main causes of Motown's financial woes? Mind you, my co-workers have NEVER visited Michigan and know very little regarding the history/politics of Detroit.

All help will be appreciated!

Thank you in advance!

Sincerely,


Steve.

[bmantx512]

Most of the jobs moved to the suburbs decades ago. Most of the middle and upper class moved to the suburbs decades ago. The Downtown stadium district, River area and Midtown are in great shape and a hand full of elite neighborhoods also. But that's about it.

Oh, and btw, millions of folks living in the suburbs of Detroit are prosperous and safe. But that's not a sexy story. So it gets ignored by the media. So be it.

[animatedmartian]

1) Declining manufacturing jobs throughout the 2000s which contributed to a shrinking population and tax base, 2) the housing crash of 2008 which absolutely devastated the already declining city in a very short amount of time which meant the city government had to cut many services very quickly, and 3) to cover the deficit, the city began taking out loans (which only added debt) which after a short while caused the state of Michigan the step in and take financial control city. 4) It was soon discovered that pension obligations were vastly underestimated and underfunded (as well as just general inaccuracies in the budget) at which point bankruptcy seemed like the only solution to somehow right the city's budget.


There were a few other factors and events, but I think those are the general ones.

[Retroit]

While the previous posters made valid points, the same things happened in just about every other major city. I think that what is unique to Detroit is that "outward mobility" is more prevalent in Detroit than elsewhere. The auto industry created many well paying jobs which allowed Detroiters to move out of the city. Detroit once had the highest per capita income of any American city. This began the tradition of single family homes (which Detroit has the highest percentage of than any American city) on large lots in suburban-type settings. Not to mention that in the "Motor City", nearly everyone owned a car and wasn't restricted to living in the city by dependence on public transportation.

In other words...Detroit's success led to its downfall.

[313Weather]

Originally Posted by SteveMichiganman

I lived in Michigan for the first 35 years of my life. I no longer live in the state. However, I still follow all the current events that take place in the Metro-Detroit area. Many of my co-workers have been asking me why did Detroit go bankrupt. Can anybody please provide me with a short paragraph (no more than four or five simple moderately-sized sentences) that summarize the main causes of Motown's financial woes? Mind you, my co-workers have NEVER visited Michigan and know very little regarding the history/politics of Detroit.

All help will be appreciated!

Thank you in advance!

Sincerely,


Steve.

Well basically, Detroit went bankrupt due to the lack of social and economic foresight by its incompetent, self-serving and corrupt leadership.

[animatedmartian]

Originally Posted by Retroit

While the previous posters made valid points, the same things happened in just about every other major city. I think that what is unique to Detroit is that "outward mobility" is more prevalent in Detroit than elsewhere. The auto industry created many well paying jobs which allowed Detroiters to move out of the city. Detroit once had the highest per capita income of any American city. This began the tradition of single family homes (which Detroit has the highest percentage of than any American city) on large lots in suburban-type settings. Not to mention that in the "Motor City", nearly everyone owned a car and wasn't restricted to living in the city by dependence on public transportation.

In other words...Detroit's success led to its downfall.

While yes, other places did lose some amount job loss and city-to-suburb migration, Michigan indisputably lost the most jobs in the nation in the last decade.

Ohio job loss second only to Michigan since 2000 | cleveland.com

Of the 50 states, only Michigan, with its "unprecedented, Depression-level" loss of 496,900 jobs since 2000, or 10.5 percent of its work force, exceeded Ohio's decline of 213,300 jobs.

Even as people were leaving the city for the suburbs in years prior, the city government for the most part was still able to manage the budget until spending began to outrun revenue.


All Eyes on Detroit - Govistics by CGR Blog

More accurately, the graph should say $1.3 billion in revenue for 2009, but either way 90% of Detroit's current debt was accumulated within the last decade. That includes pension obligations and interest on loans.

[mjlo]

Erosion of tax infrastructure, depletion of revenue. Politicians not reacting quick enough, not reacting at all, or using city coffers to bankroll lifestyles. Huge pensions obligations, city depts that were overstaffed and employees that were payed twice as much for the same job done in other cities. The corruption existed on every level, and staffers were given sweetheart deals. There are so many levels that lead the city to where it is now.

[SteveMichiganman]

Thanks for all the info everybody!

Sincerely,

Steve.

[MS313]

Originally Posted by 313Weather

Well basically, Detroit went bankrupt due to the lack of social and economic foresight by its incompetent, self-serving and corrupt leadership.

This is pretty good for one sentence. I knew you were going to hit the nail on the head .

animatedmartian:The total revenue actually increased since 2009? I wonder how that happened.

[animatedmartian]

I'm not sure if the revenue totals includes money that comes in from loans, but I think that's when the city started taking out loans to cover the deficit.