A year out from bankruptcy, Detroit sees signs of gradual improvement

Thanks to a projected $35 million budget surplus, the city has been able to improve its public transportation system and response to emergency calls.

First Look

Detroit is slowly showing signs of improvement a year after exiting from bankruptcy, finding it has money to spend to make unexpected fixes to issues that have long troubled the city.

With the purchase of 80 new buses, the city’s public transportation system will meet its posted schedules for the first time in 20 years, while emergency workers can respond to 911 priority calls in nine minutes, down from a reported 50 minutes for all calls.

Under Mayor Mike Duggan, elected in May 2014, the city has torn down 7,100 of its estimated 40,000 vacant homes and auctioned off an additional 500 homes by using its bankruptcy savings and federal and private funds.

The improvements to the long-struggling city are thanks to a $35 million budget surplus it is projected to have after paying down its debt and other expenses during this fiscal year, which began July 1.

Detroit has met all the targets it agreed to after filing for bankruptcy in July 2013 so far, including developing a four-year financial plan and negotiating a major collective bargaining agreement with 14 of its unions, which represent 3,500 workers.

"Looking back, most people would be remarkably surprised at the progress the city's made," state Treasurer Nick Khouri told the Associated Press. "These are the best of times right now for the economy. When we're doing long-range budgets we have to understand and try and plan for the bad times, not just the good times."

In July, the bond-rating service Standard and Poor upgraded its rating on bonds linked to the city’s recovery one notch, to investment-grade status, citing growth in the city’s income taxes and other improvements. Mayor Duggan hailed the move, saying it would allow the city to save $2.5 million annually and $20 million overall as it pays back its debt.

But while developers are looking to create new housing in the city’s downtown and a new hockey arena is in the works, the post-bankruptcy boom hasn’t spread equally across the city.

“I don't think the city is digging in hard enough,” Ronnie Williams, who has lived on the city’s east side since the 1960s told the AP, recalling a moment when a family occupied every house on his block, as he stood raking leaves in an empty lot.

Many of the houses in Mr. Williams’ neighborhood were abandoned three years ago, as the city neared insolvency, while discarded furniture, bags of trash and crumbling houses left behind still remain, the AP reports.

Duggan has said that improving housing conditions across the city is still an ongoing effort. So far, statistics seem to belie a gradually improving picture for residents.

While the city’s population of about 680,000 is about one third of what it was during the 1950s – the city has lost only about 30,000 residents since the 2010 census, a promising sign that the mass exodus of residents in the wake of difficult financial conditions may be slowing.

The city may face some tough obstacles ahead, including paying for its two pension systems for city workers, one of which could climb to $200 million by 2024, while others wonder about the impact of unforeseen challenges to the city’s financial situation, like a difficult winter.

"What will Detroit do when it is hit by its first crisis, say a horrible winter that decimates the snow removal budget or the new revenue and/or payroll systems or protocols go awry? Or when a union demands a big pay hike?” Anthony Sabino, a law professor at St. John’s University who focuses on bankruptcy issues, told the AP.

But some observers credit the mayor, elected in the middle of the Detroit’s historic bankruptcy with the city’s gradually improving conditions.

"I've been very impressed with the mayor's energy, creativity and commitment," Judge Stephen Rhodes, who presided over the bankruptcy case, told the AP. “He invites people to judge him on one criteria – and that's if people move back into the city. He is just what the city needs at this moment in its history.”

This report contains material from the Associated Press.