Detroit’s Bankruptcy: A Good Reminder to Other Cities


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MASON CITY, IA – For the first time in U.S. history, a major city has filed for bankruptcy.

Last Thursday, Detroit filed for chapter 9 bankruptcy protection and to many it was not a surprise.

The city of Detroit has gone down in history, but in this case it’s because the municipality has too much debt, about $18 billion of debt.

Financial experts say they saw this coming for some time now, especially when the cities’ population took a drastic drop.

“The population since 1950 has fallen from 2 million people to around 700,000 today and the cost to provide the services to run a major city don’t get any less and its spread over fewer people and it just gets more and more,” says Casey Martin, Senior Vice President at Raymond James.

Since Detroit is tied to the auto industry many people fled the city when the industry took a downfall in the 1980’s.

“It’s very, very hard if you don’t have a diversified work base to be able to soften the blow when one of the industries goes down,” adds Martin.

Many think the current situation in Detroit will motivate city officials all over the country to make sure their cities are in a good place financially.

It may not be realistic to compare cities like Detroit to one like Mason City for example. But it is important for cities to make sure their fiscally responsible regardless of their size.

“Our city council has made cuts within the budget and made decisions that allow us to have a balanced budget each year,” says Brent Trout, City Administrator.

Besides the balanced budget Trout says there’s a city policy that requires $5 million in reserves. He says they also make sure to have a reasonable amount of debt.

“We borrow for projects that we need to have completed and we keep our level of borrowing to a minimum as much as possible so that way our property tax amount isn’t excessive on property owners,” explains Trout.

He says all these steps are taken to ensure that Mason City doesn’t have to worry about bankruptcy at all.

The city also has incentive programs to make sure people choose to build homes or expand on their homes in Mason City versus other places.

The program diminishes the amount of taxes folks have to pay on the first $75,000 of the value of their home.

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