Rod Meloni: Detroit's Bankruptcy Exit
DETROIT – Kevyn Orr's job as Emergency Manager is complete.
He admits this moment personally is bittersweet. He will miss Rub's barbecue and Slows too. Motown and its hardscrabble, resilient residents got to him. It turns out he likes us and will miss us as he returns east to the family homestead. Governor Snyder praised Orr's work, saying Detroit is in a much better place having shed $7 billion dollars in debt, has $1.7 billion committed to rebuild over the next decade and says now it's time to head out into Detroit's neighborhoods to remake this city into a livable place once again.
Mayor Duggan, while equally upbeat, also noted at today's news conference that process will take time. The city may be better off than it was 18 months ago in terms of the "service insolvency" as bankruptcy Judge Steven Rhodes declared early on in the process, but he was very careful to point out today really looks little different than yesterday in Detroit and tomorrow is likely to look little different than today. Yes the historic mile markers were laid today; the official exit to the nation's largest ever Chapter 9, the emergency manager sent packing returning local control to a point -- there is still that financial review commission in place for at least 10 years -- and the Grand Bargain financing is officially on its way.
These are all reasons to cheer heartily that the municipal bankruptcy process, authored back in 20th century depression America by Detroit's own mayor Frank Murphy, worked as designed. In Detroit it also worked infinitely more swiftly than anyone ever imagined possible. As an aside, Murphy came up with the original municipal bankruptcy idea and spent years thereafter to get to a law that would stand constitutional muster. The U.S. Supreme Court knocked down his early attempts. Knowing that, there is no small irony that Detroit would become the largest ever Chapter 9. And here we are with the nightmare in the rear view mirror, just like Motown's GM and Chrysler with chapter 11. A job well done indeed!
But getting overly excited by today's milestone is misguided to say the least. Mayor Duggan was first in line at that window today saying this is what he signed up for knowing the uphill climb the city faces. He advised caution at every turn. Yes there is considerable growth downtown. Christmas lights reminiscent of the Oakland County Suburbs light up Woodward Avenue downtown this year, Construction cranes, recently as prevalent as dinosaurs, are dotting the landscape. There are orange barrels going up Woodward for the M-1 rail, there are bars and restaurants popping up like popcorn all around downtown. Yet short drives off of Woodward in either direction you come face to face with the real problem. The governor himself pointed out Detroit's neighborhoods are in shambles. The work just to knock down vacant housing stock dating back before World War II will take time and money. Time the city may have; a lot of money for the demolition not so much. The plan of adjustment comes with redevelopment cash and the mayor has already started using some of it. But this is a daunting task requiring patience and the realization that Detroit's brighter future will be a marathon not a sprint. Development experts will tell you Detroit is at least a generation, perhaps two even, from becoming what anyone would recognize as a major American city like Chicago, Boston or L.A. There is a spark here, but only that.
One of the first and most difficult challenges came up at today's news conference: Detroit's schools. Emergency Managers have proven no better at managing Detroit's schools than the elected school boards. There is nothing to crow about in that. The real problem is that property taxes fund our schools and there is not enough money coming in now to properly fund them. But the money is far from the only problem. Millions have been tossed in the DPS's direction and little has changed. This will require a new and bold determination amongst Detroiters. Most of the city's school buildings are ancient, the system itself was a target of thieves who stole much of what wasn't nailed down for years, and the neighborhoods often aren't populated enough to generate the kind of critical mass a neighborhood school needs to properly function.
The governor said he knows this, wants the emergency manager out of the picture, but a solution to this problem is a long way off. Mayor Mike Duggan made it abundantly clear he in no way wants anything to do with running the school system. He has big enough fish to fry. So if it's not the mayor and it's not the state, who? The answer lies in the community itself. Yet considering the history of horrifying conditions in so many city schools this might very well end up being the most daunting part of the city's comeback. To attract young families to move back into the city you need good and more importantly safe schools. Until Detroit can figure out a way to educate its children in this fashion, its bright future will remain really quite cloudy.
Still, I believe I can offer a unique perspective on why the city can have a bright future. I had the privilege of flying in the Local 4 Helicopter for 12 years. During that time flying throughout southeast Michigan from our downtown helipad, it was as obvious the city has one thing no other major U.S. city can offer: vacant land; miles and miles of it. New York, Chicago, Boston, Los Angeles, Miami, Dallas, Houston and Philadelphia have one way to grow and that is upward.
Detroit has the one thing they don't make anymore: real estate. This vast elbow room can be Detroit's salvation. The urban planners can have a field day providing field day grounds for new residents. Developers can build new homes next to the city's wide variety of parks. Businesses have acres of inexpensive real estate to put up factories. The city can one day return to its greatness of the early to middle part of the last century using its best and most abundant asset. All of these hopes and dreams are attainable if the city can slowly and steadily build on a "new and solid foundation" as the governor put it. It will require the city council and the mayor to get serious about keeping on a budget. If they do that for three years the financial review commission goes dormant. If the city keeps up the good work for a decade the board can go away for good. The pathway to success has been set in place, the issue becomes whether the political will and the momentum already in place are sustainable. Truth be told, the city's track record in this regard has been anything but stellar over the past 50 years. But its future is as bright as its residents want it be.
Kevyn Orr said he leaves Detroit with a great amount of respect for those who work in city hall and who live in this dysfunctional city. He will take the next few weeks off before finding something else to do. The city itself doesn't have that luxury. It must work every day, calmly, steadily and with a serious sense of purpose to begin to enjoy the fruits of this completed Chapter 9.
I will close keeping in mind the words of bankruptcy Judge Steven Rhodes in his ruling that the city's plan of adjustment is feasible last month. He said Detroit is infused with a great energy. He was greatly impressed there was so much passion and emotion on the way into bankruptcy. Yet he also said for all of the anger, recriminations and gnashing of teeth that energy now needs to be redirected. He admonished Detroiters, and the region too, city to put its abundant zeal into improving the city, into making it work the way it is supposed to. What he didn't say but clearly meant was the city needs to put into place public officials who will be more interested in Detroit that than themselves, more interested in making the trains and city hall run well and on time and within budget instead of undoing what bankruptcy and the mediation process accomplished.
The bankruptcy is over, the new chapter begins. Now it's all up to energetic residents to rally around the second chance the largest municipal bankruptcy in U.S. history provides.
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