All of Detroit's Bankruptcy News in One Easy-to-Swallow Capsule
2013 was an apocalyptic mess for Detroit. It filed for bankruptcy, can't pay city employee pensions, and is trying to sell off any assets that aren't bolted down. The whole story can seem hopelessly complicated, which is why I put together this handy...
Pretty much every end-of-year news roundup in the US has the Detroit bankruptcy story somewhere on the list. If it’s so important, why don’t you know what’s going on other than, “Some buildings crumbled. The automakers took a bailout. Something something… Bankruptcy"?
If you didn’t read about the largest city in American history to ever go bust because it’s boring and involves the word “fiscal,” I can help. Ordinarily, even when things get heated in municipal government, the intrigue is on a modest Leslie Knope-sized scale. Not so with Detroit. The place is full of so many psychos and lunatics fighting it out in City Hall, it’s a wonder no one cashed in by making it a reality show. For instance, below is a screencap of Fire Commissioner Fred Wheeler swatting away reporter Charlie LeDuff’s microphone and saying “fuck you” on the news right before he was fired:
Here’s a brief rundown of what happened in Detroit in 2013. I can’t make you an expert on Detroit, but at least you’ll be able to have conversations about it in 2014.
Who Are the Bastards Who Bankrupted Detroit?
Clinging to any ideology, or trying to find good guys and bad guys, is the easiest way to confuse yourself when you read about the Detroit mess. Fox News’s coverage repeated the same talking point the right has been using to explain Detroit’s decline for 50 years: Unions make it impossible to do business. The left maintains that the bankruptcy happened because of decades of institutional racism. Much of the mainstream media is most comfortable blaming mismanagement at City Hall as well as widespread corruption. It really is all of these things, in more or less equal measure.
There is, of course, the usual Reagan-era bitching about unions like the United Auto Workers being greedy and corrupt—according to that narrative, the UAW drove the car manufacturing industry out of the US by making it too expensive to build anything. There are also stories of union-created waste, like unionized horseshoers being on the city’s payroll until recently, and there are anecdotal horror stories like the one about the plumber who had to wait a day for a union operator to turn off a valve before he could fix a pipe. The city workers’ unions are the villains in this version of the story, not just the UAW.
Leftists, meanwhile, say mortgage redlining, the practice of segregating the city via a vast banking conspiracy, was widespread in Detroit throughout the 20th century. Actually, that’s just a fact no matter who says it. Redlining created clearly defined ghettos, which in turn led to white flight, which in turn led to affluent suburbs coupled with a jobless city center where the hopeless residents turned to crime as a survival strategy and drugs as a coping mechanism. New and exciting ways of taxing the people of Detroit were devised, but since the affluent were no longer there to pay the taxes, revenues continued to decrease.
Right about now you’re probably saying, “Hey aren’t there unions and racism everywhere in America?” That brings me to what makes Detroit truly unique: corruption and incompetence. For decades, Detroit’s City Hall was just a dog-and-pony show distracting the population from rampant laziness and criminality. In 2007, an annual audit was handed in to the state 14 months late. Departing Mayor Dave Bing could have been a pot of clam chowder behind a desk and he would have been able to restore dignity to City Hall. He leaves with Pope Francis-like approval ratings among the left, having scored with popular programs like layoffs of city workers and outsourcing of labor. His predecessor, Kwame Kilpatrick, was so bad that he’s now in jail. In case you missed it the first time around, here’s a sample of the sexts between Kilpatrick and his Chief of Staff Christine Beatty that brought him down politically in 2009, before the really serious criminal charges landed earlier this year:
Beatty: “Baby, if I was with you right now, I would sit you down, get on my knees in front of you. I would pull myself up to you and gently suck on your ear lobe and come around kiss you so passionately, then...”
Mayor Kilpatrick: “PLEASE TELL ME MORE!”
Beatty: “Then I would take off your shirt and kiss you down your neck and suck on your XXX. After that I would take off your pants and lay you down on the bed. Then...”
Mayor Kilpatrick: “MY SHIT IS SO HARD ALREADY.”
Beatty: “Then I would climb on top of you and start kissing you on the top of your head, move down to your face, then gently move to your stomach and gently lick around your belly button! Then...”
Mayor Kilpatrick: “DAMN... I LOVE THIS!”
Beatty: “Then I would move my way down XXX and gently slide it into my mouth and move it in and out until you feel like you’re inside of me and you’re asking to be in me! Then...”
Mayor Kilpatrick: “SHIIIT!”
Literally the most corrupt mayor of any place ever, Kwame Kilpatrick. Via
Going Bankrupt Is Bad, Right?
Where you’re probably most confused is in the framing of the story. It’s easy to see the sentence “Detroit goes bankrupt” as analogous to “Sick patient dies.” That would be completely wrong in the eyes of many Detroiters, like Wally Nowisnski, a 28-year-old online marketer who paid to promote his sunny, optimistic tweets about the bankruptcy. For an analogy Nowinski would likely approve of, Louis CK’s “No good marriage ends in divorce” monologue is an informative oversimplification:
Similarly, when a city files for bankruptcy, they’re not saying, “Shit, we just noticed we don’t have any money.” What it means is that there hasn’t been money in a long time, and now it's time to open up the books and start negotiating with Detroit’s creditors.
So Going Bankrupt Is Good?
No. Going bankrupt is not good. Detroit has two main creditors, and both of them have to be fucked at least a little, and probably a lot.
Wait, Who's Getting Fucked in the What Now?
The first group are the bankers who sold toxic, high-risk financial products to rock-star mayor Kwame Kilpatrick in 2005. This all turned out to be a tiny fraction of Kilpatrick’s criminal activity that turned a broke city broker. In October he was sentenced to 28 years in federal prison for extortion, tax evasion, and fraud. Despite the illegal circumstances under which the toxic credit default swaps were packaged and sold to Kilpatrick’s Detroit, the city won’t be able to get this debt eliminated. Under the most recent agreement reached, the city is going to pay 43 cents out of every dollar owed to UBS and Bank of America. That may sound nice, but Detroit’s other main creditor is none too pleased with that number.
Detroit also wrote a lot of checks it can’t cash over the past few decades in the form of pensions to city employees. These blue-collar folks—former cops and firefighters along with janitors and clerical workers—were expecting a livable pension in return for a lifetime of service to their city carried out in sometimes squalid conditions with worn-out equipment. Oh, sorry, I’m getting partisan. What I mean is, these greedy bastards want free money for the rest of their lives. Currently it looks like they’re going to have their pensions cut as much as 84 percent. That’s a hell of a lot more of a burden than what the banks are being asked to carry, and retired firefighters make much more sympathetic characters than Wall Street vampire squids.
Detroit's "Benevolent Dictator," Kevyn Orr. Via
Shouldn’t All Those City Employees Elect Someone Who’s on Their Side?
Ordinarily the “Cut all the pensions!” platform is a horrible way to get re-elected. The genius of the Detroit emergency budget negotiations, though, is that they’re being spearheaded by an appointee with powers above and beyond the mayor’s. This guy isn’t accountable to anything as trivial as voters. Meet Detroit’s Emergency Manager, Kevyn Orr, a man who literally said he wishes to be regarded as a benevolent dictator.
Orr controls two areas that get left up to elected officials in most democracies: the city’s finances and its police. Incoming mayor Mike Duggan is in the interesting position of having “take control of the police force” on his mayoral to-do list.
This Orr Guy Sounds Horrible. He Must Be Horrible, Right?
You fell into my trap! Here’s a mnemonic for remembering Orr’s name throughout 2014: He’s either the savior of Detroit “Orr” he’s its dictator. The emergency manager has been given enormous power, but no one can seem to agree on what he’s trying to either accomplish or pull over on the citizens of Detroit. The Detroit Free Press is a left-leaning paper, though, and for what it’s worth, its editorial page is standing by him.
So What Is He Doing?
Orr was appointed in March, well before the bankruptcy in July, and as an early-stage negotiation tactic having him there was extremely useful. Offering ten cents on the dollar to creditors probably made bankruptcy sound comparatively merciful. Now Orr is responsible for devising creative ways to convert Detroit’s assets into sweet, sweet cash. By all accounts, Orr really has been creative in devising solutions, and he's been thoughtful and deliberate (some might say frustratingly slow) when making decisions.
Everyone in the metro Detroit area jumped to the conclusion early on that Orr was going to pawn the world-class collection at the Detroit Institute of Arts museum and hand the money over to the city's creditors, but that hasn’t happened. Instead he’s still trying to figure out a way to monetize the $850 million collection that includes pieces by Diego Rivera, Rembrandt, and Van Gogh, while keeping the pieces in the museum. Of course, this begs the question of who would want to sponsor a painting for millions of dollars instead of buying it. Still, Orr is open to other possibilities, saying, “Cash is king. Until I have cash in hand, or a firm proposal or a definitive agreement everything is on the table."
Orr has also proposed a similarly convoluted scheme in which he wants to lease Detroit’s water department to the suburbs. Control of the utility, according to this plan, would shift to surrounding communities who are also served by the district, but like with the paintings in the DIA, Detroit would retain ownership. For some reason, Orr feels that this plan will sound appealing. The suburbs have balked at the initial price, but some version of this plan may well come to fruition. Deputy Oakland County Executive Robert Daddow told the Free Press on December 20, “We’ve been meeting and airing some discussion, and I think we’re moving in the right direction.”
Like Orr’s ten cents on the dollar figure, I think these two proposals are early stages of negotiation. When there are no takers, he’ll sweeten the deals. In the meantime, Orr’s plan to give control of Detroit’s Belle Isle to Michigan State Parks seems to have gone reasonably well so far.
The type of photos residents wish the press would include in articles like these. Via
Can Federal Money or Philanthropy Save the City?
Haha! Good one. No, that won’t happen. Cynicism forbids it, but some will try. As of September, Detroit is slated to receive $300 million in federal aid, but that money will be doled out as fast-track versions of subsidies Detroit was already in theory eligible for.
Huge private philanthropic organizations like the Kresge Foundation, which exist to help cities like Detroit, will continue to provide pockets of support to select neighborhoods. Kresge has had better luck working neighborhood by neighborhood—as you might expect, funds from such sources have, in the past, disappeared down City Hall’s money hole when they were added to the city's coffers.
Billionaire Dan Gilbert. Via
Also worth noting is Detroit’s joint public-private endeavor to change the city’s image—its Blight Task Force includes muckety-mucks like Quicken billionaire Dan Gilbert, who told the Detroit News last week, “Let me tell you, either we are going to get this done or we are going to die trying.” They’ll need some serious clout to carry out their mission of physically tearing down all the blighted buildings in Detroit, and doing so without Kevyn Orr’s China-like dictatorial powers.
What’s Going to Happen in 2014?
Detroit's news lunatic, Charlie LeDuff. Via
Charlie LeDuff, Detroit’s answer to Stephen Colbert, Hunter S. Thompson, and Mike Tyson all in one, argues that Detroit is a glimpse into America’s future. Cities like Compton, California, gambled and lost in the finance world, and are now similarly choked with debt. Detroit’s bankruptcy will be watched closely by other cities, and we may see more of these. LeDuff’s book, Detroit: An American Autopsy is a ripping good read if you're still hungry for Detroit bankruptcy stuff after reading this article.
Conservatives are deeply pessimistic about Detroit’s future. What seems to be getting all the press are government efforts to fix debt and corruption, a mere bandage on a festering wound of a city with way too little private enterprise to stimulate growth. A libertarian might say my whole article misses the point that without corporations, Detroit has no raison d’etre, and may as well be completely razed.
Blight tourism is a more booming business than ever, but blight itself maybe be on the decline soon. If most Detroit residents get their way, there’ll be less to talk about in 2014. Postapocalyptic landmarks like the notorious Packard Plant are finally slated to receive facelifts that are decades overdue. Midtown is developing very rapidly. That’s generally the kind of boring shit that gets no tweets or shares on Facebook, and sucks all the glamor out of being a journalist.