From the WallStreet Journal [HERE]
By SHIKHA DALMIA 

They are calling it "PagerGate." It's a sex scandal involving Detroit's Democratic Mayor Kwame Kilpatrick. It broke in January and, as details dribble out, residents are falling into a depression as deep as the one afflicting their economy.

Although there is widespread disgust at Mr. Kilpatrick, there is also growing regret that the departure of this flamboyant, 37-year-old two-term mayor will end his nascent economic reforms. Actually, Motown isn't so lucky.The hard fact is that Mr. Kilpatrick was a false prophet under whom the city wasn't going to come back – and not just because of his vices, but his virtues as well.

Mr. Kilpatrick has been dogged by scandals ever since he sauntered into office – sporting a diamond earring and "mayor" embroidered on his French-cuffs – on January 2002. He habitually used city funds like his personal bank – running up $200,000 in spa treatments and champagne, for example, early in his term. The mayor reimbursed the city for about $9,000 after the scandal broke, claiming that the rest of the charges reflected legitimate city business. The city at the time was cutting police officers, and even auditors, to plug a $250 million budget deficit.

But the latest, most spectacular scandal had its genesis at a party that supposedly took place in the mayoral mansion to celebrate Mr. Kilpatrick's election, shortly after he took office. The allegation is that Mr. Kilpatrick's wife unexpectedly stopped by the party – and took a bat to a stripper whom she found consorting with him.

The state's Republican attorney general found no evidence that the party took place. The stripper is no longer available for questioning; a few months after the alleged party she was gunned down. But two Detroit police officers launched their own probe to investigate rumors of the party, as well as other complaints that the mayor's security staff was helping arrange extramarital liaisons, including one with his then chief of staff, Christine Beatty.

The mayor summarily fired the officers, who then filed a whistleblower lawsuit. Testifying under oath during trial, Mr. Kilpatrick and Ms. Beatty categorically denied having an affair, much less firing the police officers because of it. Nonetheless, the jury returned a $6.5 million verdict for the officers.

Outraged, Mr. Kilpatrick accused the predominantly white jury of racism, and vowed to appeal. But a month later, he abruptly settled for $2 million more than the jury award.

It now seems that the reason for the about-face was that the plaintiffs confronted him with text-messages that he and Ms. Beatty had exchanged on city-issued pagers. The messages discussed their sexual encounters and the firings. In exchange for the payment, the plaintiffs signed an agreement not to reveal the existence of the messages.

The City Council, oblivious to the backroom deal, rubber-stamped the settlement. But the Detroit Free Press, not wanting to let it go so easily, mounted its own investigation – and uncovered the incriminating messages.

Now Mr. Kilpatrick is being forced to defend himself against allegations that he first committed perjury to cover up the firings, and then tried to cover up the perjury by purchasing a secret deal through taxpayer funds.

The county prosecutor – an African-American woman – has filed eight criminal charges against the mayor, each of which carries a 15-year jail sentence. But Mr. Kilpatrick responded by declaring that he is on "assignment from God," and has hired a team of high-priced lawyers – paid for, in part, by the city – to defend him.

Although few believe that Mr. Kilpatrick can – or should – hang on until the end of his term next year, there is also much worry that, without him, his economic reforms will wither. That, actually, wouldn't be such a bad thing.

Mr. Kilpatrick's entire economic revival plan rests on attracting high-profile, flashy projects. True, he has been more successful than his predecessors because of his wily ability to cut deals and push them through a dysfunctional city bureaucracy. For instance, he managed to land the contract to host the 2006 Super Bowl and convince General Motors, Compuware and, more recently, Quicken Loans Inc. to relocate their offices downtown. He also succeeded in creating three casinos, and in convincing developers to restore old, historic hotels such as the Book-Cadillac to serve the casino patrons.

Mr. Kilpatrick lured each of these projects with targeted tax breaks and subsidies. Quicken alone received $200 million. But corporate giveaways are not the stuff of an economic revival. "If anything, they put small businesses, the true drivers of the economic engine, at a competitive disadvantage," observes David Littmann, senior economist at the Mackinac Public Policy Center. As a result, he says, "Many of them either shut down or just don't open."

Indeed, every indicator of economic and civic renewal has trended in the wrong direction since Mr. Kilpatrick became mayor. There is not a single year in which Detroit's unemployment rate – currently at about 15% -- has been lower than in 2001, the year before he took office. Income tax revenues last year were $27 million less than three years ago, a testimony to the city's contracting tax base. Meanwhile, high school graduation rates are an abysmal 25%, and homicide rates an astronomical 47 per 100,000, the highest among comparably sized cities.

The lack of jobs and city services is accelerating the exodus out of Detroit. A recent study by the Southeast Michigan Council of Governments estimated that, if current trends continue, the city's population will shrink to 770,000 in seven years, from about 900,000 when Mr. Kilpatrick became mayor.

Breaking the vicious cycle of shrinking population, declining revenues and worsening city services requires not a young prince selectively handing out privileges to a chosen few. It requires an overall climate fit for business. To do that, Detroit needs to simplify its Byzantine regulations (home-businesses such as day care centers or hair-braiding salons require 70 building or equipment permits to get started), slash taxes (Detroit is the fourth highest-taxed city for a family of four making $25,000), tackle crime, and improve public schools.

These are mundane, boring tasks to which a high-roller like Mr. Kilpatrick is singularly unsuited. His departure won't guarantee Detroit's economic revival. But, if he stays, Detroit will have no reason for hope, either.