Tom Warne Report, 19 July 2013
The city of Detroit has filed for bankruptcy, after over the past four years spending $100 million more annually than the city brought in. This would be the largest municipal bankruptcy in U.S. history, with long-term liabilities estimated to be as high as $20 billion. Michigan Gov. Rick Snyder has hired an emergency manager to help prepare for a Chapter 9 filing.
In May, city manager Kevyn Orr threatened to sell 62 classic cars, parts of the permanent collection at the Detroit Institute of Arts to pay off creditors. While Orr later backed off this threat, many of the difficult choices facing the city will be faced by towns throughout the country.
While the Detroit is worse off than most, many cities are increasingly facing similar problems. Some say that public-private partnerships (P3s) could be the solution in which private equity investors pay large up-front sums to run a public utility or service in exchange for the concession to operate the service under the service that can last for decades.
P3s offer struggling cities an opportunity to bring in the capital from private investors interested in long term returns. American infrastructure is not keeping up with countries like Spain, Italy, France, Poland and Hungary that have long been capitalizing on privatization of urban systems. Such deals may be just what many towns need to recover their momentum.