Detroit's historic bankruptcy and more contributed to city's revival

John Gallagher | Detroit Free Press

When historians write about Detroit's recovery from decades of decline, they will no doubt credit the city's successful 2013-14 trip through municipal bankruptcy as a key reason for the comeback.

Started with the filing five years ago Wednesday, the bankruptcy wiped several billion dollars of debt from the city's books. The settlement in December 2014 set in motion a process that allowed Detroit not long ago to finally emerge from the state's financial oversight and control.

The settlement also safeguarded the priceless artwork at the Detroit Institute of Arts; pinched but did not devastate the pensions of municipal retirees; and gave the city financial breathing room to improve everything from street lights to bus service.

But the city's historic bankruptcy hardly gets all the credit, or even most of it, for the city's current revival.

Many other factors, from an expanding national economy to the new appeal of downtown living, have contributed to Detroit's partial recovery. Indeed, without the confluence of several factors, the bankruptcy by itself could have been nowhere near as a successful as it has been.

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Among those factors:

A booming economy. As the nation recovered from the worst economic crisis since the Great Depression of the 1930s, Michigan regained several hundred thousand lost jobs. The recovery of manufacturing proved particularly robust and led the nation.

As a result, the state's jobless rate dropped from over 14 percent to about 4 percent, and the jobless rate within the city of Detroit also dropped dramatically. That economic recovery boosted the city's tax base and contributed to the recent rise in housing values, factors that make it easier for Detroit to deliver more and better city services.

Dan Gilbert. Businessman Gilbert, founder and chairman of the online mortgage lender Quicken Loans, moved his corporate headquarters to downtown Detroit in 2010. Since then, he has bought or gained control of nearly 100 properties in the greater downtown, filling them with workers and retail shops. Along the way, he has boosted his downtown workforce to nearly 20,000.

Without Gilbert's arrival and all that it has meant for downtown Detroit, the notion of a city comeback would look much less convincing.

Philanthropy. Major foundations, including the Kresge, Ford and Community Foundation of Southeast Michigan among many others, helped create the "grand bargain" in the bankruptcy case that brought in hundreds of millions of dollars to safeguard pensions and DIA artwork.

And since then, the money has continued to flow. The foundations have contributed great sums to workforce training in Detroit, retail revival, human welfare services and more.

Then, too, for-profit corporations like JPMorgan Chase, which has been pumping $150 million into the city to support a variety of efforts from retail to job training, have also played important roles in the recovery.

Without the support of foundations and corporate donors, Detroit's current recovery efforts would look much weaker.

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Downtown living. Millennials and empty-nesters began moving back downtown even before the bankruptcy. But in the past few years that trickle of newcomers has swelled to a flood. To meet that demand, dozens of new residential developments have been built or are underway in the greater downtown, from the revival of classic skyscrapers like the David Whitney Building and Broderick Tower to new construction like the Auburn and DuCharme Place.

Not everybody's happy about it, since the newcomers have driven rental rates sharply higher and sparked a debate about who's really benefiting from the current revitalization trend. But there's no doubt that the appeal of urban living — something we see in cities across America — has played a big role in earning Detroit its new image of a comeback city.

Now, not every city facing the prospect of bankruptcy can count on being as lucky as Detroit. Detroit was able to draw on considerable legacy resources to fashion a successful bankruptcy settlement, from the billions in the treasuries of philanthropic foundations to the good will of everyone who wanted to help save Detroit.

So as we remember the fifth anniversary of the city's bankruptcy filing, it's good to keep in mind that Detroit needed every one of those resources, and all of its lucky breaks, to get to where it is today.

Contact John Gallagher: 313-222-5173 or gallagher@freepress.com. Follow him on Twitter @jgallagherfreep.