How Detroit Went Broke

About the Project

Tired of well-worn and often cartoonish reasons given for Detroit’s financial downfall, a team of Free Press reporters and editors set out to find the truth behind Detroit’s six-decade fall from prosperity to massive financial problems and the largest Chapter 9 bankruptcy filing in U.S. history.

Other U.S. cities had suffered decades of population decline, loss of manufacturing jobs, spikes in crime and social pressures without resorting to bankruptcy. What made Detroit different? How did it happen — this spectacular calamity affecting 100,000 creditors, 27,000 pensioners and 700,000 residents suffering high crime, high taxes, faulty streetlights, buses that don’t show up and blighted houses in nearly all neighborhoods?

The Free Press’ groundbreaking investigation, “How Detroit Went Broke,” gave surprising answers and immediately generated an avalanche of public reaction. The findings are now part of the lexicon for journalists covering the story and used as a reference for what really happened. We submit that it’s the best kind of public service journalism: Reporting that illuminates a difficult issue for readers and puts it within a rich context buttressed by hard facts and numbers.

Who really made the decisions that doomed Detroit’s finances? When, exactly, did the city pass the point of no return? Of all the blame passed around, what was fact? What was myth?

To find the answers once and for all, reporters Nathan Bomey and John Gallagher led a months-long effort that started before the official bankruptcy filing July 18. We unearthed, examined and analyzed more than 10,000 pages of arcane documents from the past 60 years — Detroit annual budgets (sometimes missing), city audits, pension fund reports, City Council minutes, and much more.

Digging through public library archives that had never been digitized, the Free Press created an unprecedented database of Detroit’s financial history. We were careful to make apples-to-apples comparisons, as accounting terminology and measurements varied from decade to decade. Finally, we conducted hundreds of interviews with dozens of officials and bureaucrats from the last six mayoral administrations, as well as outside data analysts and financial experts.

Published across multiple platforms, the investigation illuminated the real causes and astonishingly poor decisions behind Detroit’s slide. The Free Press discovered that:

• The popular myth of Mayor Coleman Young (1974-1994) as a big-spending Democrat who destroyed Detroit is flat wrong. Young was one of the city’s most austere leaders — slashing budgets and keeping debt at bay.
• Detroit has NOT been in free-fall since the 1960s, when riots and racial tension drove away wealthier white residents. In reality, city leaders failed to seize on periods of growth and calm, such as in the mid-1990s, to make hard decisions and reform government operations.
• Mayor Kwame Kilpatrick sealed Detroit’s fate in 2005 when he and Wall Street concocted a $1.4 billion pension borrowing scheme and complex interest rate hedge that crippled city finances — and now represents 20% of city debt.
• Pension boards OK’d nearly $1 billion in bonus payments in recent years, even as city finances and the stock market were in free-fall. The analysis showed that if left in the system, that money might have prevented dangerous borrowing and saved the city from bankruptcy. (This became its own exclusive front page story.)
• Amid an exodus of residents, falling tax revenues and home abandonment the last 20 years, Detroit’s leaders repeatedly tried to balance the books with a billion-dollar borrowing binge they could not hope to pay back.
• City leaders also tried to reverse sliding revenue through new taxes. The Free Press analysis shows that despite a 1962 income tax, a 1971 utility tax and a 1999 casino tax, revenue in today’s dollars fell 40% from 1962 to 2012.

The Free Press team fashioned its multiple findings into a fast-paced narrative brought to life with colorful anecdotes. In a reversal of traditional production, the package was designed first for iPad and later for print, using an alternative storytelling format that relied heavily on interactive graphics integrated with prose.

The response to “How Detroit Went Broke” has been amazing. The story, a top web attraction for the year, has drawn nearly 400,000 page views on desktop, mobile and apps. The numbers also were driven by social sharing, with more than 20% of page views coming from Facebook and Twitter.

Based on phone calls, e-mails and social media, other media and academics now rely on “How Detroit Went Broke” as a blueprint for research and reporting as cities and states across the nation navigate their own pension and budget problems.

Multiple national media, pundits, politicians and professors linked to the project. Raved the Washington Post’s Wonkblog: “Wow, wow, wow … This is a spectacular piece of journalism from the Detroit Freep on how Detroit went broke.” The Columbia Journalism Review bestowed one of its laurels, calling it “superbly reported, written and illustrated … every reporter covering government finance will benefit from studying this package.”

Government officials are also using our work as a resource. Indiana State Treasurer Richard Mourdock sent an e-mail to our reporters, saying he would bring copies of “How Detroit Went Broke” to a panel discussion with other state treasurers. “The clarity of information you presented is outstanding,” he wrote. Governing magazine, with a national circulation of 90,000 to all levels of public officials, awarded the work its highest public service honor for 2013.

The Detroit Free Press is proud to nominate “How Detroit Went Broke” for the Explanatory Reporting prize of the Online Journalism Awards.