Detroit has been the subject of so many depressing headlines, for so long, that it can seem like the bankruptcy filing this month was somehow inevitable. Ask someone why the city is in so much financial trouble and they will likely rattle off a list of big, historical trends that brought the city down: industrial decline, racial tensions, and globalization. Detroit, as far as most are concerned, has been a victim of forces bigger than one city could possibly control.
But that doesn’t exactly explain why Detroit’s problems have been so much more severe than other places. No city anywhere near its size has ever gone bankrupt before. The next largest was Stockton, CA, which contains less than half as many people. Detroit’s situation isn’t just extreme. It’s unique. There has to be an explanation for its troubles that goes beyond the usual reasons that apply to so many other post-industrial American cities that experienced extreme white flight throughout the second half of the 20th Century.
So while it’s true that Detroit’s finances were undermined by population decline, there’s more to it than that. The city went from 1.8 million people in 1950 to about 700,000 in 2010, in large part because white residents moved out to the suburbs. But many cities experienced white flight and suburban sprawl during the same period, while still managing to retain enough population to have a viable tax base. The way they did it didn’t involve some special trick to attract more people inside their borders. Instead, many cities expanded their borders to include the areas where people were moving.
Phoenix, San Diego, Indianapolis, and Houston have all surpassed Detroit in terms of population over the last half century. Those aren’t really places that have seen a huge surge of people relocating to their city centers in the decades between the 60s and today. Instead, all four cities grew their populations by annexing surrounding land. As families moved out to suburban-style single family homes outside the city, the city government absorbed the land under those homes and made them part of the tax base.
While those cities were expanding, Detroit remained the exact same size for almost a century. In fact, Detroit has a relatively small land area. With the exception of San Francisco and Philadelphia, every major American city that has more people also has a greater square mileage. While suburbanization did drain away Detroit’s population over the years, the city stopped expanding its borders long before the process of suburbanization even began.
The reason for that dates back to a time in the early 20th century known as the Progressive Era, when the United States underwent a frenzy of political reforms at all levels of government. It was a period that gave us American democracy as we know it today, with all kinds of changes to improve popular representation from primary elections and women’s suffrage. And as part of this movement, Michigan joined many other states by instituting something known as “home rule,” which gave citizens more power over their local governments. Before home rule, it was common for new cities to be created by the state government and for a city’s mayor to be appointed by the state’s governor. Home rule gave localities the power to incorporate themselves as a city and select local officials to run that city by a majority vote.
And while home rule was being implemented in states throughout the country, Michigan took the concept to another level. The state amended its constitution three separate times during the Progressive Era to give municipalities more autonomy from the state government influence. This laid the groundwork for how cities would grow as the state underwent a population explosion as the auto industry attracted workers.
As new people were flooding to Detroit, real estate developers struggled to build enough new homes for them all to live in. There was plenty of cheap land to build on just outside of town, but those areas often didn’t have the infrastructure for plumbing or running water. It would have been expensive and complicated for the developers to coordinate building the pipeline infrastructure themselves, so instead they undertook a different strategy that took advantage of Michigan’s home rule laws. They pushed an enthusiastic campaign to encourage the city of Detroit to annex surrounding land, which would then require the municipal government to build sewage and water systems in those areas using tax dollars and government borrowing authority.
At first, Michigan’s strong home rule laws enabled a rapid expansion of the city’s borders. The developers didn’t actually need to obtain permission to annex new areas from the city government, which was sometimes reluctant to take on so much new spending. Annexations only required approval from voters in both Detroit and the area being incorporated. As the residents of the central city dealt with booming growth, developers published newspaper articles and held public meetings encouraging residents to cast ballots in favor of expanding Detroit borders. It turned out to be an easy sell, as many felt this once small town was getting too congested for comfort. Detroit’s total area more than tripled in the period between 1915 and 1926, adding what is now the entire area of the city north of I-94.
This expansion, however, created problems. Detroit quickly reached its debt limit paying for new infrastructure on all of the newly incorporated land. The mayor, the public works director, and the city controller all began to criticize the rampant annexation being pushed by developers, arguing that it was draining the city’s finances. But the people of Detroit kept voting for border extensions anyway. The last area to be added was the neighborhood now known as Brightmoor, where sanitary conditions were exceptionally poor and some migrant families lived in shantytowns while they waited for their permanent homes to be built.
In 1926, several forces came together to bring rampant expansion of Detroit’s acreage to a halt. There were already some settled areas surrounding the city that were more skeptical of being absorbed, mostly because they didn’t want to have to pay higher municipal taxes. Three of such areas right along the Detroit border voted in quick succession to incorporate as cities–Dearborn to the west, Ferndale to the north, and East Detroit (later renamed Eastpointe) that was in a direction you can probably guess from the name. Imbued with the official autonomy of a city under the home rule laws, these places now had an immense amount of autonomy to resist being absorbed by Detroit. The policy that had originally enabled continual annexation was suddenly being used to stop it.
And like so many trends that enabled the boom of the Roaring 20’s, annexation got a bad name during The Great Depression. As the economy tanked, many of Detroit’s newly added areas that were supposed to be filled with housing ended up remaining vacant for years. People came to associate the manic campaign for Detroit’s annexation with the crash of the financial system.
Then in 1947 the Michigan Legislature created yet another form of powerful local government, known as “charter townships,” which allowed residents of unincorporated areas to prevent their homes from being annexed by nearby cities. Michigan lawmakers seem to have invented the concept of charter townships themselves, because they do not exist in any other state. Charter townships basically have all the same powers as a city, along with strict rules limiting property tax increases that make them cheaper places to live.
As a result of Michigan’s home rule and the charter township laws, the nationwide suburban explosion of the 1950s created a proliferation of new local governments in the Metro Detroit region. A race-to-the-bottom dynamic developed as different areas competed to offer lower tax rates and tried to avoid being annexed by each other. If you glance at a map of the region’s municipal boundaries, there’s an extensive grid of charter townships and cities splattered occasionally pockmarked with even smaller incorporated communities. There are some names that appear twice on the map, such as Monroe, Northville, Plymouth, Royal Oak, which refer to two separate localities, a charter township and a city that are not actually legally affiliated with each other in any way. The region’s local governments are a chaotic and unorganized mess. It’s often hard for a visitor to the Metro Detroit area to know exactly which government represents the ground under their feet, a relic of that mid-century free-for-all of municipal fragmentation.
And while the map may be confusing, the city’s money problems have been made even worse by the balkanized localities. The dynamic of white flight in which homeowners get ready access to downtown’s jobs without having to pay taxes to support city services was turbo-charged by Metro Detroit’s uniquely subdivided local governments. And because the sovereignty of these small cities had strong protections under state law, there was little hope of remedying the situation as the city of Detroit’s revenue declined.
There have been several efforts over the years to bring about more regional cooperation of resources, but the tax base of Metro Detroit has remained disjointed. The myriad of local governments all pay for different police and fire departments, as well as other municipal services. The inefficiency creates higher costs for everyone, both inside Detroit and out. And crucially, the suburban families who have fled the city have been sheltered from paying property taxes that normally come from living in a major metropolitan area.
There is plenty of evidence that combining the region into one unified government would help the city’s fortunes. In his book Cities Without Suburbs, David Rusk argues that the only way for cities like Detroit to keep their finances stable (and avoid bankruptcy) is to expand their borders to include the less densely populated areas that surround them. However, not every expert in the field is a fan of Rusk’s thesis. Advocates for more urban density criticize Rusk’s thesis for accepting that sprawl is an inevitability, rather than the result of ill-conceived policies such as federal mortgage guarantees and local zoning restrictions. But regardless, it’s pretty clear that if your citizens do start moving to the suburbs, for whatever reason, Metro Detroit’s strategy of allowing the surrounding areas to endlessly subdivide into different taxation districts is a recipe for financial disaster.
It should be noted that Southeastern Michigan continues to have a lot of advantages even to this day. While the city itself struggles, the three counties that make up the Metro Detroit region still have a larger economy than the entire state of Oregon. And yet, the city that binds them all together and gives them an identity has suffered a bankruptcy that is unprecedented in the history of the United States.
None of this is to discount the role that white flight played in Detroit’s problems. It’s all too common for the Upper Midwest to overlook its own ugly racial history. But home rule laws and the unique charter township designation served as the tools that enabled an explosion of small local government formation that functioned as tax shelters and a tool of segregation.
In popular culture, the diagnosis of Detroit’s woe usually focuses on big societal issues like racism and the decline of American factories. And those problems, which are inflicted from without and within the region, need to be addressed. But bankruptcy is ultimately an issue of expenditures outstripping revenues, and there is sufficient tax base in Metro Detroit to meet the city’s obligations. It’s only by having a clear-eyed view of the specific policies that led the city to its current financial state that leaders can craft policy solutions to bring it back to solvency.
ben townsend 