CRF Blog

How Detroit Was Reborn

by Bill Hayes

In How Detroit Was Reborn, the Detroit Free Press details the inside story of the Detroit bankruptcy case.

U.S. District Chief Judge Gerald Rosen wondered what the hell he’d gotten himself into.

Rosen was in Florida in August 2013 for a quick golf vacation but was rising before dawn each day to read Detroit’s massive plan to restructure its debt. The numbers were horrific: $18 billion in liabilities, 78,000 blighted buildings, four of every 10 dollars already devoted to debt, pensions and retiree health care.

Thousands of elderly retirees were facing deep pension cuts — their livelihoods. Detroit’s world-class art museum was at risk of losing its treasured pieces in a fire sale. The city needed hundreds of millions of dollars just to begin to climb out of the hole.

Rosen, the appointed federal mediator in the city’s historic bankruptcy case, picked up his pen and doodled an idea on the cardboard back of a legal pad. He wrote “art” and drew a box around it, representing protection for the city-owned Detroit Institute of Arts and its billions of dollars in masterpieces.

He wrote “state” and “pensions” and drew arrows in a diagram. He wrote several phrases — “how much?” “timeline,” “what about fed gov,” “foundations,” “private sources.”

Sixteen months later, Rosen’s idea became the central element of a blueprint to reinvent one of America’s iconic cities. The unprecedented deal that Rosen imagined ultimately brought together a unique coalition of foundations, state government, unions and others to save the museum — and throw a lifeline to thousands of Detroit pensioners.

This is the backstory of how Detroit cleared mountains of debt accumulated over 50 years and emerged with a shot at restoring basic services for 685,000 city residents who deserve better. It’s a story that played out in dozens of little dramas, including the $100-Million Cab Ride, the Christmas Eve Massacre, the Mad Race to the Courthouse and the Haircut at the Haircut — when lawyers decided in a barbershop how to trim millions in Detroit debt.

And, ultimately, it’s the story of how, one by one, like soldiers switching sides in the midst of battle, the major players and creditors at war with the city dropped their objections and joined a “grand bargain” to save Detroit.

For this account, the Free Press interviewed scores of sources at every level of the bankruptcy and reviewed thousands of documents, e-mails and depositions. Some sources spoke on the record, others on condition of anonymity. Some went on the record only after the decision on the bankruptcy came down. That finally happened on Friday, when U.S. Bankruptcy Judge Steven Rhodes approved the city’s restructuring plan. [more]