Infrastructure Management Lessons from Detroit’s Bankruptcy

Detroit Slowing Down – Graphic from Economist Magazine

Detroit was in the news as the city filed for bankruptcy – the largest municipal bankruptcy in US history. The Economist has a succinct 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 1960’s to barely 700,000 today.

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

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

911 calls take an hour to answer, and only one-third of the cities 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 decline in services – a downward spiral.

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

Detroit’s major loss of population over a 50 year period and corresponding loss of businesses and service providers have no doubt lead to a steady erosion of the City revenue base.

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

Growth leads to demand for more infrastructure – often in a short space of 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 difficult 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 scenario of decline (which can be 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.

Hard-headed decisions will need to be made about service provision, and affordability of services – in generally difficult political environments.

Managing decline is tough. Infrastructure management as a discipline has the tools to complete 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 just got harder with the bankruptcy.