Urban Change, a
Loss of Centrality,
and New Destinies
On March 14, 2013, Michigan’s governor, Richard Snyder, announced the appoint-
ment of Kevyn Orr—an accomplished bankruptcy attorney—as the emergency
nancial manager for Detroit. Governor Snyder’s appointment of an emergency
nancial manager meant Detroit’s elected ocials were no longer responsible for
the city’s nancial aairs and policies. e emergency nancial manager could
consult with the mayor and council and keep each informed of his decisions, but
Detroit’s elected leaders had lost their authority to lead the city’s business aairs.
e governor’s appointee has the authority to take any and all actions he deems
necessary to x the city’s nances. ose actions include the power to annul con-
tracts and terminate operating and employment agreements with labor unions and
any municipal employees. e emergency nancial manager can also suspend and
cancel any previous nancial or management policies and decisions made by the
mayor or the city council. Motown—a city that gave America aordable auto-
mobiles and an enduring sound that helped dene popular music for decades—
became the largest city in American history to be stripped of its scal powers and
2 ◾ Reversing Urban Decline
independence. As 2013 came to an end, Detroit had the ignominious honor of
being the largest city in American history to seek bankruptcy protection.
Other large cities have endured periods of extraordinary nancial stress. In 1978,
Cleveland became the rst city since the Great Depression to almost default on its debt
(approximately $16 million; $53.7 million in 2013 dollars).
ree years earlier New
York City faced a nancial crisis, and without help from New York State and the federal
government, it might have defaulted on approximately $14 billion in debt ($57.4 bil-
lion in 2013 dollars). Detroit’s debt had been estimated to be approximately $20 billion
(2013 dollars) when the emergency nancial manager was appointed. at gure was
far smaller than the debt problems that plagued New York City. However, with a 2013
population of approximately 707,000, however, Detroit’s debt relative to the number
of people who call the city home dwarfs the nancial challenges that confronted New
York City (and Cleveland), or for that matter any city in American history. Several cit-
ies have extensive unfunded pension liabilities, but no other municipality is facing the
scale of nancial challenges that must be addressed by Detroit.
What caused these substantial scal problems? To be sure, there have been
excesses related to (1) management ineciencies (failure to collect taxes), (2) poorly
nanced pension funds, (3) corrupt business and political processes, and (4) politi-
cally advantageous labor agreements that might have been negotiated to ensure
that city workers voted for the reelection of city councilors and mayors.
these labor contracts may have also oered city employees compensation and ben-
et packages that exceeded what private sector employees earned.
It would seem easy to ascribe all of Detroit’s nancial problems to excessively
generous labor agreements, patronage, incompetence, and malfeasance. To do
so, however, would obscure and ignore longer-term trends that have changed the
nancial climate for every central city. Politics, policies, and malfeasance may have
exacerbated Detroit’s nancial situation, but those bad decisions did not cause the
extraordinary set of fundamental economic and social changes that led to a loss of
wealth for many older central cities. Simply put, the movement of people and busi-
nesses to suburban and exurban areas has meant that former central cities and their
downtown areas are far less important to a region’s economy. New town centers or
mini-downtowns have been built in suburban areas from coast to coast reducing the
need for and importance of central cities. e core cities of most regions are now the
home to larger and larger proportions of an area’s lower-income households and in
a struggle to collect the tax revenues required to deliver the needed public services.
1.1.1 Population Change
A quick trip through any metropolitan area illustrates dimensions of the change.
What is often not understood, however, is that with cities dependent on local
property, sales, and income taxes (often referred to as own-source revenues), and
as people, jobs, and agship department stores leave central cities for the suburbs,
the nancial health of these communities declines. By 1960, 31 percent of the U.S.