Infrastructure Management Lessons from Detroit’s Bankruptcy

Detroit was in the news as the city filed for bankruptcy – the largest municipal bankruptcy in US history. The Economist has a brief article on the issues surrounding this event.

At the core of Detroit’s long-term issues has been the population decline from 2 million in the 1960s to barely 700,000 today.  

This population decline of 1.3 million people over 50 years represents a 65% decline, about 25,000 people per year.

According to The Economist, there has been a corresponding long-term decline in the services provided by Detroit City. Nearly half of all street lights don’t work, most city parks have closed, and schools (under emergency state control) are of inferior quality.  

911 calls take an hour to answer, and only one-third of the city’s ambulances are in service.  

City services are expected to decline further as a result of the bankruptcy.

From an infrastructure management viewpoint, the decline in services in Detroit is not surprising.  

A decline in services leads to a city being less attractive to live in, so people leave, which leads to less revenue and a decrease in services – a downward spiral.

The provision of infrastructure and services is expensive and requires a revenue base.  

Detroit’s significant population loss over 50 years and the corresponding loss of businesses and service providers have undoubtedly led to a steady erosion of the City’s revenue base.

Growth and decline in cities or regions present challenges to infrastructure management practitioners.

Growth leads to demand for more infrastructure – often in a short time, but with the advantage that there is generally capital available and a revenue base to pay for the growth.

A decline is far more challenging to manage – as generally, residents do not want to see an erosion in services provided. Yet, the revenue base to pay for the services declines also.

In the decline scenario (population, demography, or economic), infrastructure management experts need to undertake much more careful management, analysis, and modelling of scenarios – there is generally no fiscal headroom for a poor investment.

In generally tricky political environments, hard-headed decisions will need to be made about service provision and affordability of services.

Managing decline is tough. Infrastructure management as a discipline has the tools to complete the required analysis and provide high-quality advice to decision-makers about the sustainability of services and infrastructure.

Spare a thought for the asset management practitioners in Detroit. They have a very tough job that has become harder with bankruptcy.