11 Charts That Show Why Detroit Is Falling Apart And Heading For Bankruptcy

Roco Real Estate Detroit

This morning, Detroit told its creditors that it will stop paying interest on its unsecured bonds.

Emergency Manager Kevyn Orr has proposed a restructuring plan that would pay bondholders just 10 cents on the dollar, and impose similar cuts on city workers expecting pension and health benefits in retirement.

This is drastic. But Orr has a 128-slide presentation explaining why it’s necessary.

The city is running out of money, will soon be spending a majority of its revenue on servicing liabilities, can’t provide adequate police and fire services, and is full of abandoned buildings that keep burning down.

We’ve pulled some of the most interesting data and charts from his presentation to explain how Detroit got into this mess, and why the only way out is default.

Everybody's leaving Detroit. Over the last six decades, its jobs base has eroded and its population has declined 63%.

There's a vicious cycle: People leave because conditions are terrible, which erodes the tax base, which worsens municipal services, which makes conditions worse, which drives more residents out. For example, violent crime is crazy high...

... And Detroit police, mismanaged and understaffed, solve less than 10 per cent of crimes.

More mundane services are bad, too. 40% of street lights in the city don't work.

This winter, the city often had just 10 to 14 out of its 36 ambulances in service. Some have over 250,000 miles on them. In March, a group of corporate donors gave $8 million so the city can buy more ambulances.

Since 2008, the city has closed 210 of its 317 parks. Private donations allowed the city to delay the planned closure this year of another 50.

There are 78,000 abandoned and blighted structures in Detroit. The city doesn't have the money it needs to demolish them.

Property in Detroit is worth almost nothing, so many owners just stop paying property tax and wait for the city to foreclose. In 2011, Detroit collected only 68% of the property taxes it was owed.

It's hard to get income tax revenue out of Detroit's poor populace. Less than half of Detroit residents over 16 are working. Unemployment is 18.6%, and that's down from a peak over 27% in 2009.

Detroit charges twice as much tax per capita as its neighbour cities. Its tax rates are at or near state maximums. This just encourages more people to leave.

Those high taxes don't generate anywhere near enough revenue to pay the city's bills. The city expects $1.1 billion in revenue in Fiscal Year 2013, leaving a $700 million deficit. In recent years, it's covered most of its deficits by borrowing.

But the city has way more debt than it can handle. Adding up bonds, pension and health care liabilities, the city owes over $25,000 per resident.

Detroit spends almost 40% of its revenue on servicing those liabilities. Without restructuring, that will rise to 65% by 2017.

That's not sustainable. So Detroit is proposing to pay its unsecured bonds and unfunded employee liabilities at just about 10 cents on the dollar. Discharging debt will free up $1.25 billion over 10 years to improve municipal services and rebuild Detroit.

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