5 years after declaring bankruptcy, Detroit reborn

James Murphy, left, and Bryan Knoche work the counter at Fred’s Key Shop in Midtown Detroit Wednesday. Five years after Detroit filed for the largest municipal bankruptcy in U.S. history, Knoche says the small, family-owned locksmith business is “busier than ever” because more people are moving into the area. (AP photo)

Associated Press
DETROIT — It’s been five years since Detroit bottomed out after decades of decline, admitting in the largest U.S. municipal bankruptcy filing ever that the country’s one-time industrial engine could no longer pay its bills.
The turnaround since then has been remarkable, with major investments that have brought new jobs, the rebirth of neighborhoods whose best days were half a century ago and the restoration of street cleaning and lighting — services so basic yet important to a sense of community. It also cost some people more than others.
Jean Estell, 65, worked about three decades in Detroit’s recreation and public works departments before retiring in 2004. Like other retirees, she lost part of her pension and all of her retiree health coverage in the bankruptcy settlement with creditors, and she’s worried about being left behind in this new Detroit.
“I’m glad we’re doing better. I want us to do better,” Estell said of the city. “But it looks like somewhere or other they can find some money and give us our money back. At least some of it.”
Before the bankruptcy settlement, she received about $2,300 per month. Estell said she gets about $63 less per month from her pension and now has to pay for her own health care. Prescription co-pays that once were $3 now are $25 for some of the roughly eight medications she takes, and her doctor visits cost more, too.
“I don’t go as often as I should. You get sick and you suffer through it,” she said.
Given where Detroit stood five years ago, things could be worse for the city’s roughly 670,000 residents, including current and former city workers affected by the settlement, said James McTevia, a turnaround expert and managing member of McTevia & Associates in suburban Detroit.
“Before Detroit sought the protection of the courts to resolve its financial problems, the citizens — who are the real people that count — were in a lot worse shape than they are now,” he said. “Before the bankruptcy, the citizens were not getting the services they deserved. They were having trouble with water, sewer, garbage, feeling secure.”
Indeed, when state-appointed emergency manager Kevyn Orr filed for Chapter 9 protection for Detroit on July 18, 2013, residential streets hadn’t been swept in about three years and the city was well on its way to tearing down thousands of homes abandoned during the exodus of more than a million people that began in the 1950s.
With its tax base decimated, Detroit’s faced $14 billion in long-term debt and a $327 million budget deficit in 2013. City workers, including police and firefighters, had their pay cut. Employees were forced to take unpaid days off.
Detroit emerged from bankruptcy in December 2014, having restructured or wiped out $7 billion in debt. The city was forced to follow a strict spending plan and has been able to build cash surpluses while posting three consecutive years of balanced budgets.
Weeks after Detroit was released from active state oversight, Moody’s Investors Service upgraded the city’s credit rating this spring — the third upgrade in less than three years.
“Since Detroit came out of bankruptcy, there have been billions of dollars spent in Detroit,” McTevia said. “People that were once fearful in investing in the city just fell over themselves to invest in Detroit. If you go to Detroit now, it’s a different city than it was five years ago. It has a different image and it is a vibrant city.”
At Fred’s Key Shop, a family-owned Midtown locksmith that has been in business for more than 50 years, workers have seen the change: they’re busier than ever.