Detroit May Be Out of Bankruptcy, But Is It Out of the Woods?

Detroit may have emerged from bankruptcy, but predictably, it now must face the factors that got it into trouble to begin with, and that haven’t just vanished by judicial decree. The intractable facts are many, but two stand out. First, the population of Detroit has largely left and fewer and fewer people are paying local taxes. Those Detroiters who are still around are largely poor and unable or unwilling to pay taxes, for which it is hard to blame them, being that Detroit provides exceedingly poor public services to its inhabitants. Second, Detroit remains a mess most of whose population has left, leaving few employment opportunities. It is odd for a state or country to go fully bankrupt because it is often about businesses facing bankruptcy where all the news surrounds. Bankruptcy in states isn’t that different, it essentially means that they are clearing all their debts but it also means a lot of issues for the residents who live there.

For our earlier insight into the problems that post-bankruptcy Detroit is facing, click on

But life must go on, so the Detroit City Mothers have now turned to the desperate strategy of trying to squeeze blood from a turnip, and are stepping up foreclosures of homes with delinquent tax bills. To give you an idea of the vastness of this task, this year alone 62,000 properties located in the city are subject to foreclosure — which means that their owners are at least three years behind on their tax payments. According to the New York Times, only half of these are occupied and nearly 13,000 are probably vacant lots. “Probably?” That’s what it says in the Times. Monica Davey, A Hearing on Housing in Detroit Draws a Reluctant Crowd, N.Y. Times, Jan. 29, 2015, p. A13 (New York edition).

The problem now faced by Detroit is, who is going to buy all these wrecks in foreclosure sales, and what is to be done with them afterwards? No answers to these questions appear to be forthcoming. In the meantime, interest is running on all those delinquent taxes at the current rate of 6% which is a big deal being as it was 18% until the Michigan legislature enacted legislation reducing the rate of interest for those folks who still live in the houses with delinquent taxes.

Being a pessimist by nature, we don’t see much of anything on the horizon that bids fair to turn things around. Remember, it isn’t just Detroit; it’s a whole bunch of older American cities, some of which (Camden, NJ, for example) are in worse shape than Detroit. But if you have an interest in the depressing subject of the decline of American cities, stay tuned. You may even want to take a look at our article on this subject, Detroit and the Decline of Urban America, 2013 Mich. State L. Rev. 1548. It will give you an idea of how things got to their present sad condition, and why revitalizing American cities is in the nature of “Mission Impossible.” Suffice it to say here that it wasn’t a case of Americans “falling in love with the automobile” — as some planners are fond of putting it — and on a whim moving to the suburbs. No, it wasn’t that. It was the lengthy interaction of government policies that for all practical purposes bribed your Mom and Dad to leave the city and move to the suburbs, to say nothing of the fact that city crime rates soared, city living grew dangerous, particularly in the 1970s, and urban schools became not only ineffective but also hazardous for the kids.

So we wish all those Detroiters luck. They will need it.

Follow-up: For another pessimistic look at Detroit’s future, this one having to do with local xenophobia that views newcomer-investors with disdain, see Aaron M. Renn, Is Detroit Open for Business? City Journal, Winter 2015, go to