Bill Nojay, formerly the chief operating officer of the Detroit Department of Transportation, tells a tale of corruption, greed, and incompetence:
While I was at the DDOT, roughly 10% of bus-fare collection boxes were broken. In another city, getting a contract to buy spare parts to repair these boxes would be routine. The City Council publicly expressed outrage that we didn’t fix the fare boxes, since the city was losing an estimated $5 million a year in uncollected fares.
But the reason we couldn’t fix the fare boxes was that the contract for the necessary spare parts had been sitting, untouched, in the City Council’s offices for nine months. Due to past corruption, virtually every contract had to be approved by the council, resulting in months-long delays. Micromanagement by the council was endemic; I once sat for five hours waiting to discuss a minor transportation matter while City Council members debated whether to authorize the demolition of individual vacant and vandalized houses, one by one. There are over 40,000 vacant houses in Detroit.
Union and civil-service rules made it virtually impossible to fire anyone. A six-step disciplinary process provided job protection to anyone with a pulse, regardless of poor performance or bad behavior. Even the time-honored management technique of moving someone up or sideways where he would do less harm didn’t work in Detroit: Job descriptions and qualification requirements were so strict it was impossible for management to rearrange the organization chart. I was a manager with virtually no authority over personnel.
There are several strategies for Detroit that make sense. Detroit could just be allowed to stew in its own juices which are, more than anything else, the product of decades of corruption, greed, and incompetence. That is too lacking in mercy or charity to suit me.
Detroit could remain in a lengthy sort of receivership, as is its condition now. On an increasing basis the day-to-day decision-making could be removed from the citizens of Detroit and their elected representatives and done by state or federal officials. There have been attacks on that strategy as undemocratic or even racist but I think that those attacks are mostly just meaningless noise. Any city in Detroit’s straits would have Detroit’s problems and would be taken into receivership. Not everything is about ideology or race.
Unfortunately, as Mr. Nojay notes, that does nothing for Detroit but manage its ongoing decline. You can’t get blood from a turnip, the near term prospects for more revenue are bleak, and Detroit can’t pay its bills now.
What I’ve been advocating is for the state to step in and manage a disincorporation process in which large areas of the city, already largely vacant, are forcibly de-populated and put into a decent condition so that they don’t provide an ongoing source of hazard to the remaining city. The state would need to provide the funds for doing that. Detroit needs fewer public employees who aren’t as highly compensated maintaining a smaller city. Bankruptcy proceedings are the only way to accomplish that.
This won’t be the last time this happens and we may as well start learning how to resolve situations like this in an orderly and humane basis now.
Depopulate and return to green areas of some sort. Use state or fed funds for that. I would also advocate for massive management changes as well as personnel cuts. That should start with a rewrite of city policy and rules. This needs to be mostly done by an outside group. All new hires go on a 401k, no pensions.
Steve
Like most turnarounds, there is a P&L issue, matching expense with revenue realities, and an accumulated balance sheet issue. The balance sheet is so broken that creating parks and sprinkling people around will be like aspirin for cancer. Real fixes will hurt and be very ugly and messy.
Its not about mercy, humanity or orderliness. We are all for that, its just that genteel doesn’t work in deep turnarounds. This isn’t a natural disaster with no real available preventative measures and innocent victims. This is premeditated and perpetuated out of naked self interest of all the principals of Detroit. Unless you want to bail water from the Titanic with a spoon like a fool, or give the other Titanics of the world the notion that they don’t need to get their ships in order because a future bailout with OPsM is available best to get steely eyes and deal with this straight on. Every turnaround guy learns this after recovering from the wall inflicted bruises on their head.
Anyone see the new unfunded pension estimate for Chicago? Think anyone there is putting plans into place to head this off? Change their ways? Or, rather, looking to see how much they can siphon off before – and how big the bailout will be – when the stuff hits the fan. Three guesses. First two don’t count.
Good ideas, Steve. Converting all pensions from defined benefits to 401ks would be helpful to most city problems. However, reducing govt employees would be difficult, as it would involve overriding union safeguards. That’s why problems are more solvable when they are small, rather than waiting until a city virtually collapses under the weight of it’s enormous size. Besides addressing cleaning and clearing out vacated slums, there also should be some kind of incentives created to attract manufacturing or business opportunities to the area. Job creation and economical growth is the key to turning people’ places and countries lives and personal fortunes around.
You always cut to the chase, red. Your post dealt with realities.
The issue isn’t just “creating parks and sprinkling people around”. It’s trying to get the city’s operating expenses under control.
Detroit just has too much land area to serve. It can’t light it. It can’t pave it. It can’t provide security for it. It can’t put out fires that start in it.
The other parts of trimming Detroit’s operating expenses are trimming the pensions and healthcare of former Detroit public employees and getting its financing into manageable shape. They’re all necessary.
If we are going to help bail them out a bit, I think we get to dictate terms. If they don’t like it, we don’t help. Now, we might be smart to get some input from people who live there, but I don’t think they get to make demands. I don’t know if we can legally dump their mayor and city council, but I suspect the state could just bypass them.
Retirees get difficult. I am not sure about breaking those contracts. That said, couldn’t they go on Medicare?
Steve
@steve, the city proposal is to shift workers/retirees to either Medicare or the exchanges. The city would have to pay something to the government for doing this, and the workers/retirees will have an unsecured claim for the difference btw/ healthcare promised in the collective bargaining agreements and what is to be received (which in turn will probably only return ten cents on the dollar).
I couldn’t tell how much shifting to Medicare/the exchanges could qualify as a state or federal bailout.
The last paragraph of the straight forward Nojay article kind of sums up the roots of Detroit’s problems, and what needs “fixing:”
I am becoming a fan of the regional visa idea, once and if they can make some progress on the city charter and municipal employees going for forward.
C’mon, Dave, it was shorthand snark. Yes, Detroit needs to do the state version of a corporation shutting down the unprofitable factories and product lines and bringing overhead into line. But I fear the liabilities are so ginormous that the haircut required will scare away all but minimal risk capital, contributed under terms that will drive Ed Schultz nuts.
Would you invest your money in Detroit under anything you could envision other than an almost 100% re-do?
The last sentence got cut.
I think Detroit is cooked. Too far gone to be anything but a pathetic shell of its former self.
That’s a point I’ve made repeatedly in my posts on Detroit’s mess and why I think the prevailing “all Detroit needs is more capital investment” theory of Detroit’s recovery is doomed to failure.
Red Barchetta: Unless you want to bail water from the Titanic with a spoon like a fool, or give the other Titanics of the world the notion that they don’t need to get their ships in order because a future bailout … is available best to get steely eyes and deal with this straight on.
I say let ’em drown.
http://www.youtube.com/watch?v=Pn0WdJx-Wkw
Red Barchetta: Unless you want to bail water from the Titanic with a spoon like a fool, or give the other Titanics of the world the notion that they don’t need to get their ships in order because a future bailout … is available best to get steely eyes and deal with this straight on.
They bought their tickets. They knew what they were getting into. I say let ’em crash.
http://www.youtube.com/watch?v=Pn0WdJx-Wkw
“That’s a point I’ve made repeatedly in my posts on Detroit’s mess……”
I know. And in my opinion, the additional point, just forgiving the sins of the past with a bailout, just perpetuates and increases the scope of the problem.
Despite Zachriels attempt to make a point through absurdity the fact of the matter is politicians, and voting groups who supported them due to promises of fatter wallets, all knew what they were doing, or at a bare minimum had a duty to examine policy in a more circumspect fashion than just “free beer sounds good to me.” (Remember “Obama’s going to pay my rent………from his stash? Super.) As I’ve noted many times, we talk a lot in this country about rights, compassion and all, but almost never about responsibility. Strangely (snicker) it just doesn’t bring in the same number of votes.
These financial rubber bands have been pulled to the limit at all levels of government and despite decades of predicted calamity are starting to break. Those who hide behind compassion as the rationale for continued gross fiscal irresponsibility are doing no one any real favors. The jig is up.
Red Barchetta: Despite Zachriels attempt to make a point through absurdity …
Sorry, we couldn’t get past your absurd analogy. You said to let the people on the Titanic drown, so as to not set a bad example. The actual response was to save as many lives as they could, then pass regulations that ships carry enough lifeboats.
We strongly believe in accountability, but find that sure and steady feedback is more effective than sudden random death.
Walter Russell Mead’s blog, The American Interest, has made some worthy comparisons between the now bankrupt Detroit and the problems in Chicago.
The bold emphasis is mine, in order to highlight how the empathetic musings of social progressives, offers no real relief from the problems of decade’s-long infrastructure and social rot caused by their kind of blue policies. The only thing certain is that money will run out, people will flail around to find more of it, targeting others to blame, as well as compensation for their own errors of governance.