Detroit: Descent into despair - FT.com ©Eyevine Faded glory: grand architecture lies in ruins since the decline of the motor industry in Detroit. The city has shed a quarter of its population since 2000 Just ahead of Detroit's bankruptcy filing last week, Kevyn Orr, the city's emergency manager, proposed a bus tour for creditors, claimants and advisers to show them first-hand the ruins of much of the municipality. "He wanted a photo op of all the suits from Wall Street in front of abandoned buildings - we were being set up as the bad guys," says a lawyer representing a group of creditors whose lack of interest contributed to the tour being cancelled. There is no shortage of boarded-up homes and empty, rusting factories to make a dramatic backdrop for Mr Orr's message but Detroit's plight extends well beyond its broken balance sheet. Even if Mr Orr can restructure the city's debts by negotiating large haircuts for bondholders and retirees" pensions, he still faces a big challenge. It will be even harder to create upward momentum than stop the downward spiral. From 1972 to 2007, Detroit lost about 80 per cent of its manufacturing as the motor industry struggled in the face of global competition. In the decade from 2000, the city shed a quarter of its population, which stands at about 685,000 and is still falling. Only about a third of the remaining residents pay tax of any kind. But reversing, let alone stemming, the decline and attracting enough people and businesses back to the city to rebuild its shattered tax base will not be easy. Detroit cannot afford to keep the street lights on; its emergency services can take up to an hour to respond to a heart-attack call, and heavy snowfall can strand residents in poorer areas as if they were in the remote countryside because of a lack of capacity to clear the roads. The city has started to accept donations to fund safety inspections of its fire ladders after the fire chief told his workers not to use the equipment except in life-threatening situations because the authorities could not afford to carry out checks. Detroit has also been forced to accept charitable donations to upgrade its emergency medical services fleet. The bankruptcy proceedings seem sure to end with city employees" pensions being cut and healthcare benefits curbed , further draining confidence and buying power. Taking a moment away from his street-corner protest this week against his pension being sliced, David McLeod, a 52-year-old firefighter, said he had moved out of the city as soon as he could, just over a decade ago. My house was broken into. Then my car was broken into and, one day, I found some bum in it," he says. Everyone who can afford to leave has left. The only people remaining are poor and sick or criminals. The magnitude of Detroit's debt - $18.6bn and possibly as much as $20bn, according to Mr Orr - makes it in some respects a special case. But its predicament sheds light on similar but less grave problems that afflict many US cities, among them Chicago, Cleveland and Philadelphia. Research by the Cleveland branch of the Federal Reserve last year found that growing cities tend to have dense urban centres, while shrinking cities find them thinning out, with knock-on consequences for productivity. There are spots of growth throughout Detroit. Condominiums are selling out in a revitalised downtown. The nearby midtown area is being revitalised by the efforts of an alliance of grass-roots activists and private business. Some of the efforts by state and city leaders to inject life into the city, such as diverting $248m of tax revenue to help fund an ice hockey stadium for the local Red Wings team, have attracted ridicule. "Let them eat pucks," said one commentator when the plan was approved this week. Yet by agreeing to contribute to the $650m development project, which includes residential, retail and office space around the stadium, Detroit is signalling that its bankruptcy is about more than wiping away debt. "This is part of investing in Detroit's future," says Rick Snyder, the Michigan governor, who has also approved state help for the stadium. The municipal leaders involved in the project echo an emerging consensus among urban planning experts and financial analysts that dealing with urban blight involves moving from one area at a time, building out from a core that should be lavished with attention to bring in not just money but also a sense of vibrancy. Pittsburgh, historically the home of the US steel industry, is often cited as an example of urban renewal that Detroit might follow. Pittsburgh has 25 per cent of its jobs within 3 miles of its central business district, just above the average for big US cities, according to Bruce Katz of the Brookings Institution. In Detroit, the figure is 7 per cent. "Your core is your initial stand for city revival," says Mr Katz. Detroit is an extreme case and the level of population and job decentralisation is much more substantial than in other parts of the US. The more spread-out a city, the more room there is for blight within and between neighbourhoods. This makes it harder and more expensive for emergency services and the police to carry out their responsibilities. Detroit is a vast wasteland of 139 square miles with block after block of empty houses and apartments with even the metal fixings on window sills removed, and factories whose machines ceased humming decades ago. "The fact that services have to cover all this territory is a major expense," says Jack Dorer, public finance analyst at Moody's, the rating agency. If you have urban blight, you have extensive areas where property values are suffering. It is hard to entice people to move there and to tax them enough to cover expenses. Detroit's central business district is thriving, Mr Snyder says. It is going to continue to thrive, and it is a good investment. The question is, what are we going to do with the other 130 square miles? Mr Orr's financial restructuring proposal for the city sets aside $1.2bn over 10 years to deal with blight, and there are also federal resources being brought to bear. Michigan has just been granted $100m from a pot of money in the troubled asset relief programme that also bailed out Wall Street in 2008, and half of the funds will be funnelled to Detroit. The federal money will be used to bulldoze 78,000 structures and clear away rubble and accumulated debris from blighted areas. Tarp money aside, the city has little to show for any largesse from Washington. A portion of the city's interstate highway received a small part of the $787bn stimulus spending in 2009.. Most of the stimulus money was used by local governments to maintain their payrolls rather than allocate to infrastructure projects that would have left a legacy for Detroit and other struggling cities. More generous is neighbouring Canada, which is providing all the money upfront for a $6bn bridge connecting the two countries. Once completed, the bridge will be a vital artery linking the auto supply chain across the river that marks the border. Compounding the city's physical blight is a political mess. Kwame Kilpatrick, the former mayor, is in jail awaiting sentencing after being convicted of conspiring with other city officials and his father to rig city contracts. The dominant Democratic machine that produced and promoted Kilpatrick, however, has not been shamed by his fall. When Mike Duggan, a lawyer with experience in business and government, emerged as a leading candidate for mayor this year, members of the party machine forced him off the ballot in the Democratic primary on a technicality. After he decided to run as a so-called write-in candidate, which requires voters to write his name on the ballot paper, a rival candidate emerged this week, with almost the same name, in an effort to sew confusion. Mike Dugeon, a local barber, filed paperwork on Thursday to register as a write-in candidate. According to local press reports, Mr Dugeon has never voted before. On his Facebook page, he complains that he cannot attract women unless he has alcohol and marijuana to offer them. But local corruption alone is no explanation for Detroit's plight. "Detroit has been mismanaged but is it any worse in that respect from Chicago or Philadelphia?" asks Tom Sugrue of the University of Pennsylvania. I doubt it.