Tag Archives: bankrupcy

Detroit emerges from bankruptcy. Not quite.

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missing homes Detroit

While Detroit’s central core comes back, surrounding, homes burn at 220+/month, leave Detroit streets looking like the teeth of an aging hillbilly.

Detroit went bankrupt last year, the largest US city to do so since New York in 1970. As with New York’s bankruptcy, Detroit’s was used to cancel old debts and rewrite ill-thought contracts. Detroit also got to jail some crooked politicians including mayor Kilpatrick, described as “a walking crime wave.” But the city and county have no easy path out of bankruptcy as both city and county are likely insolvent. That is, they spend more than they take in despite massive out-state funding, and high taxes, 10% above the state level. To make matters worse, they are losing population at the rate of 1% or so per year. It’s hard to fund a city built for 2 million on the tax revenue of 1/3 as many, especially when they are mostly unemployed. Unless a lot changes soon, another bankruptcy is almost inevitable — likely this time at the county level.

We got in this state, largely as a result of a 50 year war between the black, solidly Democrat, somewhat anarchist, political establishment of Detroit, and the white, stayed, mostly Republican out state. The white population fled following the riots of the 60s and the richer black population soon followed. The remainder stayed, trapped in slowly decaying neighborhoods as the city went broke. White flight allowed the black community to develop its own, Motown culture, but except for the music industry, it has not benefitted from this culture.

Detroit's murder rate, 45/100,000, is the highest in the US. It's coming down but not that fast.

Detroit’s murder rate is the highest in the US. It’s come down 10% in the last 2 years, but has far to go.

Detroiters have poor health, poor savings rates, high murder rates, and a fire rate of about .22% per month, 2.6% per year. The city lacks basic city services like reliable fire fighting and street plowing. Police at one point erected signs that said, “enter at your own risk.” There is a lack of small businesses and the services they would provide too: laundromats, grocery stores, and taxis (though no lack of bars and marijuana maintenance clinics). Employment in the auto-industry is down. And it’s not being replaced by home-grown small business – perhaps hampered by the low savings rate. A surprisingly large fraction of the Detroit homes are in foreclosure, see map, and with it a high abandonment rate and a high fire rate. As pheasant and dear return, non-core Detroit is beginning to look like farm country.

Detroit foreclosures near me. Blue is occupied homes, red is unoccupied, yellow unknown, and green is destroyed homes or vacant, foreclosed land.

Detroit foreclosures near me. Homes in dark blue are occupied foreclosed, red is unoccupied, and green plots are destroyed homes or vacant, foreclosed land.

It’s not clear what political leaders should do. The city council would like to return to their pre-bankruptcy ways where they could borrow as much as they felt they needed and spend on whatever they saw fit — often on fast friends, fast cars, gambling, and vacation homes outside of the city. But the out-state population has been reluctant to give them the credit card. Is this racist or is it prudent — probably both, but this can not continue. The city and county pension funds were ransacked for ill-advised investments and consulting fees to cronies and their power-lawyers. Either the money is replaced from out-state or there will be some unhappy retirees in the not-too-distant future. My guess is that the state will have to pick up the tab for this mismanagement, but that they won’t want to hand over management control afterwards.

Rand Paul, a potential GOP presidential candidate, has proposed rebuilding business and property values by a method that the city will almost certainly reject. His solution: cut services to low-population density areas and cut taxes on business and earned income. While this would likely bring in new people and new businesses, the people would likely be white, and the businesses white-owned/ white-serving. Black-Detroiters have too little savings, organization and income to directly benefit from this plan. Detroit’s Democrat politicians will claim, not without merit, that this is welfare for rich whites: a way for them to become yet-richer while doing nothing for the poor blacks of the burning neighborhoods. They are likely to demand control as the elected officials of the town: regulating business and raising the minimum wage to create “equality.” I suspect this is a bad idea.

Detroit hunger games

Detroit suffers from two populations and a divide.

To some extent we’re already seeing the return of white-owned, white-serving businesses. Classic buildings in the core of the city have been purchased by white developers – notably Dan Gilbert of Quicken Loans leading to gentrification and an influx of single, white hipsters. The newcomers are viewed as half-saviors, half-carpetbaggers. They dwell in a whiter city core with hipster bars and expensive restaurants. Does a poor city with massive debt, crime, and unemployment benefit from a core filled with high-priced, gourmet coffee and fern bars?

The author, Robert Buxbaum, enjoys a day at an artificial beach in central Detroit.

The author, Robert Buxbaum, enjoys a beer at an artificial beach-cafe in central Detroit with some, few black folks, none poor. Is this good for Detroit?

The new hipsters put a squeeze on city services too — one that’s hard to deal with fairly. Detroit can not afford to plow all the streets after a snow. Should the new high-tax white folks get plowed streets, or should they suffer equally with everyone else? Detroit education is abysmal, but the high tax-bracket folks want better. Should they get it, or suffer equally? They want extra street lights and police protection. Should they get it, or suffer equally? Is this the way up?  A solution I’d proposed some while ago was to divide the core city from the now-rural outskirts so that each could be managed more sanely. It’s not a grand a solution like Rand’s plan, but less likely to be rejected. One way or another, we seem destined to have a Detroit with a rich core and abandoned neighborhoods. I suspect it might as well be managed that way.

Robert E. Buxbaum, February 10, 2015. I don’t have solutions, but write about the city’s problems, and the partial solutions I’ve heard as a way to clarify my thinking — and perhaps yours too.

Detroit Teachers are not paid too much

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Detroit is bankrupt financially, but not because the public education teachers have negotiated rich contracts. If anything Detroit teachers are paid too little given the hardship of their work. The education problem in Detroit, I think, is with the quality of education, and of life. Parents leave Detroit, if they can afford it; students who can’t leave the city avoid the Detroit system by transferring to private schools, by commuting to schools in the suburbs, or by staying home. Fewer than half of Detroit students are in the Detroit public schools.

The average salary for a public school teacher in Detroit is (2013) $51,000 per year. That’s 3% less than the national average and $3,020/year less than the Michigan average. While some Detroit teachers are paid over $100,000 per year, a factoid that angers some on the right, that’s a minority of teachers, only those with advanced degrees and many years of seniority. For every one of these, the Detroit system has several assistant teachers, substitute teachers, and early childhood teachers earning $20,000 to $25,000/ year. That’s an awfully low salary given their education and the danger and difficulty of their work. It’s less than janitors are paid on an annual basis (janitors work more hours generally). This is a city with 25 times the murder rate in the rest of the state. If anything, good teachers deserve a higher salary.

Detroit public schools provide among the worst math education in the US. In 2009, showing the lowest math proficiency scores ever recorded in the 21-year history of the national math proficiency test. Attendance and graduation are low too: Friday attendance averages 71.2%, and is never as high as 80% on any day. The high-school graduation rate in Detroit is only 29.4%. Interested parents have responded by shifting their children out of the Detroit system at the rate of 8000/year. Currently, less than half of school age children go to Detroit public schools (51,070 last year); 50,076 go to charter schools, some 9,500 go to schools in the suburbs, and 8,783, those in the 5% in worst-performing schools, are now educated by the state reform district.

Outside a state run reform district school, The state has taken over the 5% worst performing schools.

The state of Michigan has taken over the 5% worst performing schools in Detroit through their “Reform District” system. They provide supplies and emphasize job-skills.

Poor attendance and the departure of interested students makes it hard for any teacher to handle a class. Teachers must try to teach responsibility to kids who don’t show up, in a high crime setting, with only a crooked city council to look up to. This is a city council that oversaw decades of “pay for play,” where you had to bribe the elected officials to bid on projects. Even among officials who don’t directly steal, there is a pattern of giving themselves and their families fancy cars or gambling trips to Canada using taxpayers dollars. The mayor awarded Cadillac Escaldes to his family and friends, and had a 22-man team of police to protect him. On this environment, a teacher has to be a real hero to achieve even modest results.

Student departure means there a surfeit of teachers and schools, but it is hard to see what to do. You’d like to reassign teachers who are on the payroll, but doing little, and fire the worst teachers. Sorry to say, it’s hard to fire anyone, and it’s hard to figure out which are the bad teachers; just because your class can’t read doesn’t mean you are a bad teacher. Recently a teacher of the year was fired because the evaluation formula gave her a low rating.

Making changes involves upending union seniority rules. Further, there is an Americans with Disability Act that protects older teachers, along with the lazy, the thief, and the drug addict — assuming they claim disability by frailty, poor upbringing or mental disease. To speed change along, I would like to see the elected education board replaced by an appointed board with the power to act quickly and the responsibility to deliver quality education within the current budget. Unlike the present system, there must be oversight to keep them from using the money on themselves.

She state could take over more schools into the reform school district, or they could remove entire school districts from Detroit incorporation and make them Michigan townships. A Michigan township has more flexibility in how they run schools, police, and other services. They can run as many schools as they want, and can contract with their neighbors or independent suppliers for the rest. A city has to provide schools for everyone who’s not opted out. Detroit’s population density already matches that of rural areas; rural management might benefit some communities.

I would like to see the curriculum modified to be more financially relevant. Detroit schools could reinstate classes in shop and trade-skills. In effect that’s what’s done at Detroit’s magnet schools, e.g. the Cass Academy and the Edison Academy. It’s also the heart of several charter schools in the state-run reform district. Shop class teaches math, an important basis of science, and responsibility. If your project looks worse than your neighbor’s, you can only blame yourself, not the system. And if you take home your work, there is that reward for doing a good job. As a very last thought, I’d like to see teachers paid more than janitors; this means that the current wage structure has to change. If nothing else, a change would show that there is a monetary value in education.

Robert Buxbaum, August 16, 2013; I live outside Detroit, in one of the school districts that students go to when they flee the city.