Jim Armitage: Desolation of Motor City carries a warning for other American cities as Detroit files for bankruptcy

Bondholders and unions will see Detroit as a test-case for cash-strapped cities

Global Outlook For many advocates of the free market, the collapse into bankruptcy of one of the biggest cities in the US will doubtless be seen as the epitome of good sense. If a city fails to make enough of a profit to pay off its debts, just like a company, it should collapse and its creditors should lose out.

The problem is, while this may make sense for a company, like, say, Chrysler or General Motors, it’s hard to see how it can be anything but another disaster for the long-suffering residents of this once-blessed conurbation.

Already, services have been cut dramatically. Around 40 per cent of the city’s street lights no longer work. More than half of its parks have been closed since 2008. Only a third of ambulances are operating. Police take nearly an hour on average to respond to calls in a place where the murder rate is at a 40-year high.

The Michigan governor (a Republican ruling over this Democrat city) says he hopes this will be the first day of the city’s path to recovery, “the foundation of the city’s future”, as he puts it.

But that’s far from clear. Where bankruptcy allowed Detroit’s big car makers to shrug off their past debts, pension and healthcare liabilities, this was based on the promise of renewed growth in the future. The promise of fairly reliable future cashflow with which to negotiate renewed terms.

In the case of Detroit, as with Greece, there can be no such promise. It’s hard to see how, in this city that has been in decline for the best part of 50 years, it will be able to attract new investment. The decline of centrally provided services such as police and ambulances is hardly an advertisement for new businesses to move there, or for wealthy young go-getters to move their families in. Quite the opposite: the population has fallen from 1.8 million in its 1950s pomp to fewer than 700,000 today.

The flight has gathered pace in recent years, with more than a quarter of the population packing its bags since 2000. That means thousands upon thousands of taxpayers disappearing every month. It means house prices collapsing, with a further impact on the city’s income as property tax revenues melt away. It means more empty, boarded-up districts to put off newcomers.

It’s not even clear how bankruptcy will make it easier to force creditors and state employees to accept bigger haircuts on their loan repayments and pension entitlements. The municipal bondholders and the unions will clearly see Detroit as a test case for other cash-strapped cities. A line that must be held. Expect them to throw the country’s best lawyers, and big bucks, at the situation.

It’s plausible that a judge may have more luck in the negotiations than the city’s emergency manager, Kevyn Orr, has had so far. But the city will still need to win support from the majority of those it owes for the judge to give any plan his or her blessing.

Uncertainty abounds. But one thing’s for sure, Detroit will be using up huge resources of time and money sorting out this mess at a time when its citizens can ill afford either.

Alarming number of fracking violations

What the sprawling city of Detroit really needs is a whopping great shale gas discovery. Believe it or not, the state of Michigan is actually not too badly furnished with fracking opportunities. Unfortunately for the people of Detroit, most of it seems to be far to the north, away from the empty acres of Motor City’s wastelands.

One can imagine that given the Detroit’s current plight, it would bend over backwards to appeal to exploration companies to set up shop there – even ignoring the occasional tremor or pollution incident, such as that which hit the courts of fellow rustbelters in Pennsylvania this week.

The Exxon subsidiary XTO was fined and ordered to spend $20m (£13m) improving the way it handles the water it jets into the ground to free up the gas during the fracking process. The water emerges full of chemicals, including barium, strontium and chlorides. Failure to handle it properly and you end up getting serious pollution of the local water supplies, as happened when XTO polluted a tributary of the Susquehanna river in Pennsylvania with up to 57,400 gallons of the sludge over a period of two months.

It’s the latest in a long run of fracking violations in the state which are causing unease among many residents.

Just to give an idea of how widespread environmental mishaps are, records show that 25 of XTO’s wells have had 179 violations of  pollution laws. Thanks largely to XTO’s poor environmental performance, the 1,000 citizens of Penn Township, Lycoming County, where this incident occurred, have endured one of the highest number of drilling violations in the  shale gas-rich state.

Not wishing to spread alarm, but residents of Surrey might take note. XTO has its UK base in Exxon’s UK and European headquarters in Leatherhead, not a million miles from the proposed fracking sites of the Home Counties.

Exxon so far has adopted a watch-and-wait stance on fracking in the UK. But they’ll surely have noted new tax breaks for Britain’s would-be frackers announced yesterday.

Start your day with The Independent, sign up for daily news emails
News
peopleJonathan Ross has got a left-field suggestion to replace Clarkson
Sport
Lewis Hamilton secured his second straight pole of the season
f1Vettel beats Rosberg into third after thunderstorm delays qualifying
Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
News
Johnny Depp is perhaps best known for his role as Jack Sparrow in Pirates of the Caribbean
peopleBut how did he break it?
Sport
football This was Kane’s night, even if he played just a small part of it
Travel
travel Dreamland Margate, Britain’s oldest amusement park, is set to reopen
News
news
News
Founders James Brown and Tim Southwell with a mock-up of the first ever ‘Loaded’ magazine in 1994
media
News
Threlfall says: 'I am a guardian of the reality keys. I think I drive directors nuts'
people
Voices
voices The group has just unveiled a billion dollar plan to help nurse the British countryside back to health
News
The Westgate, a gay pub in the centre of Gloucester which played host to drag queens, has closed
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss