Simply searching “city bankruptcy” on Google will provide Detroit’s bankruptcy as the second search result. If nothing else, this illustrates the national shockwave of Detroit’s bankruptcy. Municipal bankruptcies, similar to individual bankruptcy, release cities from their liabilities to certain debts. When Detroit declared bankruptcy in 2013, the city was in disarray.

Declaring bankruptcy eliminated $8.3 billion of Detroit’s debt. This debt included $5.7 billion of retiree health care debt, as well as $1.3 billion in pension liabilities. The remaining debt came from various other bills the city had accumulated. The financial impact was so severe that Detroit leased out its regional water and sewer systems. Last year, Crain’s Detroit Business highlighted some eye-opening statistics about the city’s financial condition just before it declared bankruptcy:   

• Police response times were averaging 58 minutes across the city (115 minutes if you lived or operated a business in the 8th Precinct in the northwest corner of the city).

• As few as 10 of the city's 36 ambulances were in service in the first quarter of 2013, driving up emergency medical response times to twice the national average.

• About 40 percent of the city's 88,000 streetlights were not working, "primarily due to disrepair and neglect."

Fortunately, the situation has improved in the years following bankruptcy. As noted by Crain’s, new street lights and ambulances have been brought into service. Police response times have improved significantly, which now average 13.8 minutes. The same can be said for the fiscal health of the city, which is reflected by Detroit’s shrinking Taxpayer Burden™.

Detroit’s Taxpayer Burden decreased from $14,100 in 2015 to $8,000 in 2016, according to Truth in Accounting’s analysis of the city’s comprehensive annual financial reports. This dip in Taxpayer Burden derives mainly from the removal of $6.2 billion of bond liability between 2015 and 2016. During this same time, however, unfunded pension and retiree health care debt increased from a combined $1.33 billion to $1.87 billion. While having any Taxpayer Burden is no grounds for praise, the improvement in recent years is commendable. If Detroit follows its current trend, the city will eliminate its Taxpayer Burden in roughy 10 years.

It’s also important to point out a recently established accounting rule that requires state and local governments to disclose all of their pension debt on the balance sheet. This rule added greater transparency to Detroit’s financial reporting, but it did not require the city to report all of its hidden debt, the majority of which comes from unfunded retiree health care promises. In the fiscal year 2018 another new accounting standard will take effect, mandating governments to report those liabilities and providing Detroit’s residents with a more truthful, transparent view of their city’s fiscal health.