Free Press Tracks Detroit's 6-Decade Fall Into Financial Hole

The path to bankruptcy was long and marked by "decades of mismanagement," the Free Press concludes in a special report spread across more than half the front page. 

For more than half a century in Detroit, "elected officials and others charged with managing its finances repeatedly failed — or refused — to make the tough economic and political decisions that might have saved the city from financial ruin," Nathan Bomey and John Gallagher write. Their in-depth analysis of city records and other sources stretches back to the 1950-57 term of Mayor Albert Cobo.

The report -- supported by 15 charts, a database the paper compiled and an editorial -- examines "a billion-dollar borrowing binge," repeated failures to cut expenses, "generous bonuses" for workers and retirees, and resistance to cutting health care benefits. The cumulative result is bankruptcy well-known:

Staggering costs that today threaten the safety and quality of life of people who live here. . . .

The paper's comprehensive investigative project isn't a dry balance sheet for finance nerds. Bomey and Gallagher debunk myths while exploring who led and who fled responsibility.

For critics who want to blame Mayor Coleman Young for starting this mess, think again. The mayor’s sometimes fiery rhetoric may have contributed to metro Detroit’s racial divide, but he was an astute money manager who recognized, early on, the challenges the city faced and began slashing staff and spending to address them.

And Wall Street types who applauded Mayor Kwame Kilpatrick’s financial acumen following his 2005 deal to restructure city pension debt should consider this: The numbers prove that his plan devastated the city’s finances and was a key factor that drove Detroit to file for Chapter 9 bankruptcy in July.

The State of Michigan also bears some blame. Lansing politicians reduced Detroit’s state-shared revenue by 48% from 1998 to 2012, withholding $172 million from the city, according to state records. 

The journalists also suggest that the July 18 federal court filing by emergency manager Kevyn Orr wasn't inevitable.

There were ample opportunities when decisive action by city leaders might have fended off bankruptcy. . . . Over five decades, there were many ‘if only’ moments. 

Here are three they cite:

  • If Mayors Jerome Cavanagh and Roman Gribbs had cut the workforce in the 1960s and early 1970s as the population and property values dropped.
  • If Mayor Dennis Archer hadn’t added more than 1,100 employees in the 1990s when the city was flush but still losing population.
  • If Mayor Kwame Kilpatrick had shown more fiscal discipline and not launched a borrowing spree to cover operating expenses that continued into Mayor Dave Bing’s tenure.

In a related column, editorial page editor Stephen Henderson says the investigative report supplies evidence to counteract "impulsive canards and wild untruths . . . [from] those who want to draw a causal relationship between skin color and competence."

The great potential of Bomey and Gallagher’s work is crucial: to remove emotion from the discussion of Detroit’s problems and stick to the facts. . . . Truth shatters the tendency to react with emotion.

To prepare the multi-page article, "the Free Press spent weeks conducting research at the Detroit Public Library’s Burton Historical Collection and Department of Sociology and Economics," says a sidebar on the laborious paper chase.

The Free Press created its own database of 50 years of Detroit’s financial history by reviewing the city’s annual financial audits for 1960-2012, reading a half-century of pension fund reports and combing through many other city records.

City financial audits before 2002 were available in print only. Reports from 1964 and 1971 were not available.

The Free Press also conducted dozens of interviews with outside experts and leaders from the last six mayoral administrations to provide context and additional information.

Read more:  Detroit Free Press

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