Detroit is an excellent example of wrong forecasts. Detroit filed for Chapter 9

Question

Detroit is an excellent example of wrong forecasts. Detroit filed for Chapter 9 protection in July 2013, with an estimated $18-$20 billion in debt. A closer examination of the City's history shews that the demise started sixty years prior to the default. The inevitable result of the city's shrinking population base and a 77 percent drop in the value of property. The city tried to compensate for its decline in property tax revenues by instituting an income tax (1963), utility tax (1975) and gaming tax (1999). The city also lobbied vigorously for greater federal and state funding over the same period, but that went against the headwinds of the small government Reagan Revolution that dominated all levels of politics at the time. That, along with the city's willingness to offer generous benefits to its retirees, a failure to "right size" its workforce as revenues declined, and a borrowing spree under former mayor Kwame Kilpatrick between 2001 and 2006, ultimately led to the city's fiscal demise.

What warning signs were missed? What lessons can be learned from Detroit?

Explanation / Answer

Following lessons have been learned from Detroit :

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