Detroit must build on this moment

Detroit will exit bankruptcy with the cleanest balance sheet of any city in America, having shed 65 percent of its debt and brought its spending in line with revenues.

The challenge is keeping it that way.

"We have to fundamentally restructure how government works," says Rip Rapson, head of the Kresge Foundation, which contributed $100 million to the "grand bargain," the keystone of the bankruptcy settlement.

Rapson says for Detroit to exploit the opportunity created by the bankruptcy, it has to rapidly fix broken city services, ridding itself of blight, improving public transportation and making the streets safe.

Bankruptcy expert Doug Bernstein defines the task as "breaking old habits." In the old Detroit, he says, "We almost got resigned to and accepting of mediocrity, of poor services."

Expectations must rise, as well as standards. Detroit can't thrive unless it heals its neighborhoods. Residents must demand more of their government, and their leaders must deliver if Detroit is to undergo the cultural change necessary to sustain a comeback.

"Good management will be essential in turning the city around," says John Mogk, a Wayne State University professor and urban affairs expert. "City Hall is in good shape and there appears to be a reasonably good relationship between council and the mayor, which we haven't seen in the past.

"But the problem lies in the neighborhoods, which continue to struggle."

Prioritize neighborhoods, ethics

Fixing the neighborhoods will require Detroit to spend nearly all of the $140 million annually that has been freed up by the bankruptcy on blight remediation and service upgrades. It can't fall back into the past pattern of frittering away resources on costly labor contracts and excessive employee benefits.

Nor can it return to borrowing money for operations instead of tightening its belt when times get tough.

Detroit fell into bankruptcy for many reasons, including that it was poorly managed. Bad practices were allowed to fester for so long they became standard operating procedure.

"The entire infrastructure of how to run government has to be rebuilt," says Ken Whipple, a member of the Financial Advisory Board, which oversaw spending and contracting during the emergency management.

Detroit must consider privatizing more services. Emergency Manager Kevyn Orr outsourced garbage collection to private contractors, and the trash is getting picked up. Build on that success. But city contracts can't again be used to enrich friends and family, as they were in the days of the Kwame Kilpatrick administration.

Duggan has publicly committed to running an ethical administration.

We've expressed concern that he's stacking his staff with too many old friends and former associates, believing cronyism is a stepping stone to corruption. But we trust the mayor will be obsessive about transparency both in bidding and hiring. The city needs the absolute best staffers and vendors it can find, not just those with the best connections to City Hall.

A long to-do list

Bankruptcy didn't fix everything that was broken in Detroit. The to-do list is long. Some examples include:

■Upgrading antiquated technology to enable more efficient operations and enhance revenue collection.

■Reworking the finance department to centralize all operations, including planning and procurement.

■Changing the city charter to diminish the role of the police commission, which will regain its authority in a year. It must not meddle in the relationship between the mayor and the police chief.

■Removing city departments from the charter so they can be eliminated if no longer needed.

■Addressing the city's oppressive income and property tax rates, and bringing property assessments into reality to increase compliance.

■Jettisoning City Airport and other properties that drain resources from the budget.

■Retraining a workforce that has become accustomed to low performance standards.

Unrelenting focus required

Detroit can't waver from the intense focus on getting things right.

The Wall Street Journal reported that in bankruptcy court, financial consultant Gaurav Malhotra was asked what worried him about the city's financial future.

He told Judge Steven Rhodes that pension obligations may again overwhelm the city after 10 years if further reforms aren't put in place. He also expressed wariness that city officials would have the will to keep labor costs in check when current contracts expire in five years. And he had some doubts about whether the city's leaders can maintain the "rigorous focus" needed to fulfill the plan of adjustment.

"I understand the practical limitations," he testified.

There can't be limitations on fiscal discipline; it must become part of Detroit's DNA.

Anything less and the city will be back in financial distress before the decade is out.

The good news is that money should not be a problem for awhile, says Sandra Pierce, chair and chief executive of FirstMerit Michigan and chair of the Financial Advisory Board.

"There will be enough cash flow to build the infrastructure for providing the services residents need," she says.

But as seen in the past, resources can disappear if not used strategically.

"There has to be an organizational culture shift and a different mindset," says Eric Scorsone, Michigan State University professor and economist. "Detroit has to look at other models of government that are dynamic and innovative. In the next 12 months, how the city responds will be critical."

Seize the moment

Detroit Future City is a 20-year plan for rebuilding neighborhoods.

If the city commits to religiously following the blueprint, it has a chance of restoring most of its neighborhoods to viability in two decades.

That's a long time to stay focused, but focus is what it will take.

Fortunately, for at least the next decade Detroit will have the help of a financial review committee, appointed by the governor, state treasurer, mayor and council, to oversee contracting and offer guidance on spending. City leaders should see the committee as a resource, and not get locked into constant friction.

And while the current mayor and council are getting high marks for their leadership, the rebuilding will very likely outlast their tenure. Voters must replace each generation of elected officials with others dedicated to reform.

Beyond the balance sheet and service delivery, Detroit needs jobs for its residents, a third of whom live below the federal poverty line.

"The most important thing to the future is to determine how we can grow and diversify our economy to create more stable revenues," says Reginald Turner, an attorney and lifelong Detroiter. "We have to create jobs for the people who live here."

For that to happen, everyone must realize the hard work of fixing Detroit has only just begun.

The city will need decades of investment, and the private sector, foundations and government must work in harmony.

"Our work is not done when bankruptcy ends," Pierce says. "We still have a lot of heavy lifting to do."

Finally, Detroit must seize this moment of opportunity.

The city is receiving considerable outside interest; there's a curiosity about what's happening here, and a lot of positive reviews are tagging Detroit as the next urban success story. It must leverage that to draw investment.

Detroit must think big. The need for grand ideas, lofty visions and creative leadership has never been greater.

The fifth in a five-part series.

Read past installments at detroitnews.com/opinion.

What have we learned?

There are lessons in Detroit's bankruptcy for other communities forced to file for Chapter 9 protection.

Those include:

■Ask the court for a comprehensive mediation team to work out as much of the settlement as possible outside the courtroom. Chief Judge Gerald Rosen had an expansive group with varied skills to assist him in moving the parties together.

■Make sure everyone understands that problems are not isolated in silos. Everything is interconnected. For example, in Detroit, regionalizing the water authority had been a longstanding and elusive goal. But the lease money from the deal was critical to making Detroit viable coming out of bankruptcy.

■The political branches must be involved. This case could not have been settled without an assist from the state, and that meant Detroit had to get the Legislature on board.

■Be willing to look at ideas not common in private sector bankruptcies, such as the "grand bargain" that spared the Detroit Institute of Arts and lessened pension cuts. It's almost unheard of that third parties would raise more than $800 million to settle a bankruptcy, but it happened in Detroit.