James Morris is the owner of DSE, a downtown Detroit T-shirt business. He hadn’t noticed that his city had filed for bankruptcy and he doesn’t particularly care. “There hasn’t been a moment when Detroit wasn’t dealing with problems. Now it’s just official,” he said.

The facts of Detroit’s dissolution are astonishing: 76,000 homes and buildings in once-prosperous neighborhoods abandoned; vast factories crumbling like monuments to America’s manufacturing heyday. But on the weekend following the city’s symbolic admission of defeat, there was defiance in the air and a sense that Detroit can turn the corner.

“This was always a place of great community,” said writer and publisher Cary Loren. “The car industry’s gone and it’s not coming back. Capitalism has failed us, but so what? We’ll just go on to the next thing.”

The resurrection of Detroit will not happen overnight. No city better illustrates an economist’s nightmare scenario — collapsing industry triggering a rapid decline in population to the point that there is no longer a tax base to meet ever-increasing pension and health care costs, or the money to maintain services.

In Detroit’s application for protection from creditors, emergency manager Kevyn Orr said that by 2017, 65 percent of the city’s financial obligation will be “legacy” costs on previous debts. No other major U.S. city has similar obligations exceeding 20 percent of revenues.

Orr, who was appointed in March, explained his decision to act: “We were not getting to where we need to be, so I pulled the trigger.” He added that the financial irregularities in Detroit’s management were hardly new. “This has been going on for a very long time.”

As it stands, 40 percent of Detroit street lights are broken. It takes, on average, an hour for police or ambulance services to respond to emergency calls. Gang murders are carried out in vacant buildings that are then set on fire, in the knowledge that overstretched emergency services will not attempt a search.

The flight from blighted areas appears to be accelerating — in the past decade alone, Detroit’s population fell by 26 percent. It now stands at 700,000, having once been 2 million.

Remaining residents in districts such as Brightmoor, northwest of the center, are besieged by vandalism and crime. Streets have been turned into ad hoc dumps for car tires and abandoned boats. One spray-painted sign reads simply: “Dumpers will be shot.”

What isn’t dumped is stolen. Factories and homes have largely been stripped of anything of value, so thieves now target cars’ catalytic converters. Illiteracy runs at more than 56 percent; half the adults in some areas are unemployed. In many neighborhoods, the only sign of activity is a slow trudge to the liquor store.

At its peak in 1950, Detroit was 82 percent white. The “white flight” after the 1967 race riots flipped the ratio — it’s now 82 percent black. When the 2008 financial crisis reduced the cost of living in the suburbs, the black population moved out of the center, too.

“No other city in America has been blighted like Detroit but I think the bankruptcy will bring an end to it,” said Lenon Smith, a life-long Detroit resident. “Everybody is optimistic that we can now reinvest in our communities and amenities.”

One leading optimist is multibillionaire Dan Gilbert, founder of online mortgage lender Quicken Loans and majority owner of the NBA’s Cleveland Cavaliers. Gilbert now owns or runs 30 buildings downtown as part of an effort to turn the city into a technology hub.

Another man looking on the brighter side is Bill Pulte, whose nonprofit Detroit Blight Authority plans to tear down thousands of abandoned homes and clear out vacant lots. Pulte, scion of one of the nation’s largest housebuilding firms, plans “total blight elimination” across all 360 square km of Detroit.

The authority is clearing 500 sites in Brightmoor before turning them back over to the city. “We want to set a model so the whole city can be cleaned up. We want to clear out the criminal and fire activity, and increase property values and tax revenues to the city,” Pulte said. “The only way to do that is to clean it up and restore some semblance of normal supply and demand.”

Detroit’s revival depends on Orr settling Detroit’s mountainous debts for a fraction of their value, slashing legacy costs and investing billions on structural improvements while still maintaining basic services. But he faces legal challenges and political turbulence. Conservatives want to blame public sector unions and big government; union representatives claim they’ve been misled.

“We made sacrifices to avoid bankruptcy,” said Chris Michalakis of the AFL-CIO union. “So now they’ve declared bankruptcy and they still want more cuts.”

Last month, Orr drew sharp attention to Detroit’s problems when he floated the idea of selling the city’s vintage car collection, its share of the Windsor U.S.-Canada tunnel, and world-class works of art from the Detroit Institute of Arts, that include a Rembrandt self-portrait as well as paintings by Bruegel, Gainsborough, Van Gogh, Picasso and U.S. abstract artist Robert Motherwell, and a vast Diego Rivera mural commissioned by Edsel Ford.

Orr says he’s assembling a list of assets for creditors, but given the damage the sale of art would inflict on Detroit’s image, few think it can be pursued. Even the idea of selling the 60,000-piece collection has been condemned. “It’s a violation of the ethics of the field,” says Ford Bell of the American Alliance of Museums. But he concedes: “There’s nothing to stop them.”

Creativity may be the key to the city’s revival. Cheap industrial and residential spaces and a plentiful supply of raw materials make Detroit a potential alternative to art market centers such as New York and Los Angeles. Detroit native Jack White recently paid back taxes on the historic Masonic Temple, a famous performance space for rock bands.

In May, London-based charity Artangel unveiled its first international project — a mobile home with a secret basement designed for “rites of an anti-social nature” by the late Detroit artist Mike Kelley. Kelley looked to subconscious aspects of American life and consumerism — discarded furry animals, girls’ bedrooms, comics, bikers and baser forms of pop culture — and turned them into installations, sculpture and film.

“He’s a natural icon for the city, with his own anti-authoritarian vocabulary,” said Marsha Miro, board president of the Museum of Contemporary Art Detroit. “Mike was this anti-conventional, hybrid artist-musician, and Detroit is unfettered by the conventional politics of the art world. We need someone of his stature to be a figurehead.”

Loren agreed: “There are a lot of positives here. It’s like a huge laboratory. The young and the artists will help save it. They’ll create the next Detroit.”

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