Detroit City Goes Bankrupt – What Infrastructure Asset Management Lessons We Can Learn

Hoping for an economic resurgence, Detroit filed for bankruptcy on 18th July.

The Economist published an article explaining the situations that made Detroit do such move.

According to the “Detroit files for bankruptcy, Motown’s blues continue” article, the city’s economic life has been trying to survive for half a century.

Among the reasons cited are:

• Jobs have ceased to exist and the unemployment rate is 16 percent, which is more than double the national and state rate.
• Declining population from 2 million in the 1960’s to barely 700,000 today.
• Declining quantity and quality of available services, as indicated by the following:
  • The city is debt-ridden
  • Poor streetlight maintenance
  • Most city parks have close
  • Very poor quality education
  • It takes an hour for 911 response
  • 1/3 of the city’s ambulance are working
• City services status to worsen further as effect of the bankruptcy

From the point of view of infrastructure asset management professionals, the deteriorating Detroit situation is expected.

When a city’s services decline it becomes unfavorable for people to reside, so they leave, which affects revenue collection of the city. With less income in the city’s coffers, their ability to maintain services is diminished, so it results to further decline.

Basically, infrastructure and services provision, operation and maintenance are sustainable when a city or local government has revenue base. Losing population for more than 50 years and business establishments moving somewhere else, Detroit has definitely diminished its revenue base.

A city or region that grows or declines creates challenges for infrastructure asset management practitioners.

Growth implies an increase of infrastructure needs and often to cope with it, infrastructure has to be constructed within a short period. This is assuming that capital is available and a firm revenue base is present to raise capital.

The decline is far more challenging to deal with. In most cases, it is hard for residents to see the diminishing quality of services provided and the ability to maintain such services with decreasing revenue base.

For a declining situation (in the aspect of population, demography, or economic), infrastructure asset management experts have to consider carefully management, analysis and modelling of scenarios. The limited fiscal resource must be invested wisely and surely.

It’s quite hard to lift up a declining city but infrastructure asset management discipline has proven systems to come up with needed evaluation, analysis, and recommendations to leaders on the viability of services and infrastructure.

Whoever are the infrastructure management experts of Detroit, they surely have a difficult task at hand. Detroit’s filing of bankruptcy has made the job even harder.