Detroit’s Financial Crisis: Top 10 Problems

On July 18, 2013, the city of Detroit officially filed for chapter 9 bankruptcy, which is the largest municipal bankruptcy filing in American history in terms of debt. Kevyn Orr was appointed as the Emergency Manager of Detroit by Michigan’s Governor Rick Snyder. Orr estimated  the city’s debt to be between 18-20 billion dollars.

Last summer, I stayed with my parents, who live in Detroit. I barely did anything in the city because I was not fond of it. The city has been going undergoing some serious issues. Listed below are the 10 things I see as the biggest problems in Detroit.

detroit 1

1. Street lights are not being replaced- Driving through this city at night can be quite difficult. According to the city’s estimate, nearly half of the 88,000 street lights are out.  Judge Steven Rhodes, who affirmed the city’s eligibility for bankruptcy, said that the lack of streetlights confirms the city’s hardship. In the December 3, 2013 ruling that cleared the path for Detroit to cut future payments to unsecured creditors, including pension funds, Rhodes said: “the city does not have enough money to take care of its residents, let alone pay its debt.” Detroit’s Emergency Manager, Kevyn Orr, is working to approve a lighting authority to replace the city’s lighting department and plans to borrow $210 million to replace streetlights in areas that are most populous.

There has been numerous traffic accidents reported on East Outer Drive-a main road in Detroit- where nearly 70% of the lights are burned out.  Odis Jones was appointed head of the new lighting authority. The city granted him $12.5 million to fix close to 5,000 streetlights. However, Jones said it would take much more to relight this city; he estimated the total cost being nearly $400 million.

2. Thousands of Police officers have been laid off –To combat a multi-million dollar budget deficit, nearly 1,000 police were laid off.  As a result, there are fewer marked police cars on patrol, longer delays on emergency and nonemergency calls, and slower work action on felony investigations. The FBI reported that Detroit had the most crimes per person of any city, estimating nearly one million crimes to date.

According to police officials, residents should expect to encounter new delays in dealing with police on such matters as gun registration or making a complaint about a break-in due to the fact that police officers have been reassigned from desk work to patrol duty. Police workers were cut by nearly 25% at the Detroit Police Station headquarters.

3. Streets are not being plowed in winter-As a former resident of the city, I can attest that the streets look horrible after a snowstorm. In the snowstorm that hit near the end of December, 2013 -with 10-12 inches of snow- many cars, including mine, was stuck and it took some residents hours to dig their cars out.

When snow storms hit, of 6 inches or more, the city calls on three contracting companies to plow its 1,880 miles of residential streets. It costs the city $370,000 just to plow a 10-foot path through each street after a significant snowfall, according to the contractors estimate.

Weather channel reported that Detroit currently has a total of 67.9 inches of snowfall for this winter season, making it the seventh snowiest winter in history.

detroit unplowed

4. Potholes are not being repaired in a timely manner-After winter storms, it is typical to see Detroit’s streets riddled with potholes. Yes, it is common to see potholes in most places, especially places with colder climates. However, the problem is, potholes are not being repaired in a timely fashion in this city; therefore, they expand as time proceeds, making the roads very dangerous and causing damage to vehicles.  Belle Tire, on 12 Mile and Telegraph, reported in January that they have been unusually busy this season and that they were running out of tires as a result.

Michigan’s Department of Transportation spokeswoman, Diane Cross, said they have received numerous calls reporting potholes. Here’s what she reported in a recent statement: “the reals answer is we’ve got to get funding from Lansing. We are down by 100 million dollars in the last 10 years for what we need for our roadways. It was just last week that we had a foot of snow in metro Detroit. We had at least three days of sub-zero, freezing weather, and all of that allowed cracks in our roadway, water to get in, freezing temperatures. It expands, it breaks through the roadway -we get a pothole.”

5. Detroit public schools cut 40% of teachers over 4 years- In September of 2011 a plan was set in motion, by city officials, to cut 40% of Detroit Public School (DPS) teachers by the year 2015. The plan was approved by the state just one week after its request. Governor Rick Snyder believed it was necessary to make such cuts due to the city’s deficit. Snyder explained that cuts will save $74 million in salaries and $15 million in pensions to be used toward DPS’s $372 million budget deficit. Due to staff being cut, the teachers who remain at DPS have more than doubled their loads.

6. Multiple schools have been shut down-According to a revised deficit plan in January of 2013, officials plan to shut down 28 schools by the year 2016. The closures are expected to save the city $13.4 million in operating expenses. However, these unfortunate cuts will leave hundreds of district employees without a job.

According to CBS Detroit, the district made plans to cut expenses by $120 million in 2013-2014, $42 million in 2014-2015, and $33 million in 2015-2016. This plan was approved by state officials and is expected to cut the school district’s current deficit of $72 million to $46 million in 2014 and $21 million in 2015. These plans will leave DPS with only about 40,000 students-compared to the 150,000 students it once had.

7. Abandoned homes and buildings are not being torn down- The city estimates that there are roughy 78,000 abandoned structures in Detroit, which is one fifth of Detroit’s housing stock. This includes foreclosed homes, which was estimated to be one in every 242 homes in 2010. 38,000 of the abandoned buildings and homes are considered to be dangerous. Emergency manager, Kevyn Orr, is currently making plans to spend $1.25 billion over the next 10 years to overhaul its police, fire and emergency services to restructure these derelict institutions and homes. The cost to tear down one home alone costs the city over $8,500. Given the debt that the city is in, with such costs, it could take a while to see a restructured, more appealing city.

detroit 2

8. Homeless people and beggers are everywhere- There are over 20,000 homeless people in Detroit, but only enough shelter beds for roughly 1,900. 13% veterans, 25% children, and 60% families with children are homeless. Due to the closure of of many shelters, mental institutions, and early prison release programs, many people have found themselves without a roof over their heads.

This is a photo of a homeless man who died in a frozen block of ice

homeless detroit

 9. Crime is at an all-time high (reduced police officers might play a pivotal role in this)- Detroit has one of the highest crime rates in the Country. According to Forbes, in a 2012 report, Detroit is the most dangerous city in the united States, for the fourth year in a row. Forbes stated that the metropolitan area had an unbelievable rate of violent crimes, murder, non-negligent manslaughter, forcible rape, robbery and aggravated assault.

The FBI reported that in the year 2013 alone there were 313 homicides, 809 sexual assaults, 5,335 robberies, 8,496 aggravated assaults, 12,417 burglaries, 17,453 larceny reports, and 12,948 stolen vehicles.

 10. City workers and retirees receive less in pension plans and health benefits- A blueprint was filed this February to cut pensions and retiree health benefits of city workers in order for the city to emerge from its bankruptcy. Many people feared that cuts were on the horizon. For retired workers, such as my father, who are barely getting by as it is, this news was very daunting. In this blueprint, police, fighters and those departments’ retirees will face a 10% cut to their current pension payment. All other city employees and retirees will be cut 34%. According to Orr, pension plans are underfunded by $3.5 billion. This plan is estimated to set aside $1.5 billion over the next 10 years. As a result, it will provide basic services to residents, attract new residents and business, and reduce crime and demolish abandoned properties, according to Orr.

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3 Responses to Detroit’s Financial Crisis: Top 10 Problems

  1. sydhavely says:

    Deanna–Very apt post. The loss of Detroit as a manufacturing hub and the consequences of past fiscal mismanagement or neglect as well as lack of investment is leaving one of America’s iconic cities on the brink. Question: does social media have a role here? Maybe or maybe not. Yet the city must be saved. Former President Clinton has mentioned homesteading as one possible policy option. See an interview with author James Patterson on what he is doing to help make a difference–a small one–but a difference nevertheless. Go to 30 mins on the time bar to see his 14-minute interview with Charlie Rose:

  2. alyssagr says:

    Deanna – Quite a sad situation, although I recently saw a presentation given by a design professor highlighting factors of Detroit’s rebuild that gave me hope for the city’s success. The process could also serve as an example for other parts of the country. Could social media be used to help the development of the city?

  3. ddillworth says:

    Thank you for comments and feedback.Professor-I will be sure to look into that video. To answer both of your questions, which is a great question by the way, I believe social media could definitely help the city as far as getting the word out about the city’s financial state. This in turn may raise donations or cause others to step in and help the city out in other ways. Social Media could be a very powerful tool to get Detroit back on the right track.

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