Detroit, Michigan

On July 18, 2013, Detroit became the largest city in the U.S. to file for bankruptcy. Massive population loss that began in the 1950s and a decadeslong downturn in the auto industry and other manufacturers had severely slashed Detroit’s tax base. Many neighborhoods were rife with vacant and burned out houses. Empty lots became dumping grounds for trash, used tires and even boats. Poverty, unemployment and crime rates were among the highest in the nation. The city’s budget deficit was north of $300 million. In the months before the bankruptcy, state-backed bond money helped the city meet payroll for its 10,000 employees. In the bankruptcy filing, City Manager Kevyn Orr cited debt of $18 billion or more. In 2013, underfunded obligations for pensions were about $3.5 billion. It was $5.7 billion for retiree health coverage. Orr said the city once had 20,000 workers and 10,000 retirees who were owed pensions. By the time of the bankruptcy filing, those numbers were flipped with 20,000 retirees expecting pension payments. Detroit experienced the largest population decline and witnessed a five percentage point decrease in the share of their population living in poverty. From 1970 to 2018, Detroit became much poorer compared to its immediate suburbs. Over this period, the share of residents living below the poverty line in the city grew from a 10 percent point difference with its suburbs to a 22 percent point difference (Williams 2023).