DETROIT: Detroit’s plan to recover from bankruptcy includes several blueprints for a new future. The only problem is the city, the largest ever to file for bankruptcy, is still a long way from financially healthy and its restructuring plans leave little room for error.

Detroit is far short of the $1.7 billion it needs over the next 10 years to remove abandoned buildings, replace outdated technology and increase public safety to stem the exodus from the city. The city will be hard pressed to get its daily operations onto a stronger footing and has few clear ways to raise all the needed revenue, critics say.

“What Detroit needed to start with was a reinvestment programme,” said James Spiotto, managing director of Chapman Strategic Advisors, a municipal finance consultancy.

“If you don’t solve the systemic problem and fix it for real, all you’re going to do is repeat it going forward.”

Detroit’s 1,034-page plan for fixing the city’s finances will be the subject of a weeks-long bankruptcy court proceeding, beginning on Tuesday.

Detroit filed the largest-ever municipal bankruptcy in July 2013, with $18bn of debt. Critics, including a court-appointed bankruptcy expert, are raising questions about whether Detroit has reduced its debts aggressively enough, and even city officials acknowledge Detroit faces significant challenges, with little room for error.

Federal bankruptcy Judge Steven Rhodes ultimately will rule on whether the financial restructuring proposed by Kevyn Orr, Detroit’s state-appointed emergency manager, is realistic.

City officials are beginning to see glimmers of hope in the form of business investment, a downtown housing boomlet, and major investment from Quicken Loans founder Dan Gilbert, who has snapped up dozens of downtown buildings.

The $1.7bn over the next decade is meant to address some of the city’s most vexing challenges. The biggest chunk, $558.7 million, would go to public safety, while an upgrade of the city’s decrepit information systems would eat up the second-largest piece, $479.9m.

But it is not clear how the city will get the money. So far, the biggest chunk for Detroit’s restructuring initiative is coming from $300m in federal grants. JPMorgan Chase & Co announced a $100m, five-year commitment in May to help spur bankrupt Detroit’s economic recovery that includes $25m to address blight.

There is no cash in a bank account to fund the initiatives, court-appointed expert Martha Kopacz wrote in her report that gave Detroit’s plan a tepid endorsement for feasibility.

The state of Michigan has committed $195m toward the $661m “Grand Bargain” designed to protect the Detroit Institute of Arts collection, but all of that money is earmarked to ease city retiree pension cuts, and will not be directed toward the $1.7bn of restructuring initiatives.

Published in Dawn, September 3rd, 2014