|A Detroit intersection. Source: nextcity.org|
Three weeks ago the Detroit Free Press produced a special report that painted a view contrary to many public perceptions about Detroit’s financial history. The Free Press pored over city budget documents dating back to the 1950s and found some interesting things:
The numbers, most from records deeply buried in the public library, lay waste to misconceptions about the roots of Detroit’s economic crisis. For critics who want to blame Mayor Coleman Young for starting this mess, think again. The mayor’s sometimes fiery rhetoric may have contributed to metro Detroit’s racial divide, but he was an astute money manager who recognized, early on, the challenges the city faced and began slashing staff and spending to address them.
And Wall Street types who applauded Mayor Kwame Kilpatrick’s financial acumen following his 2005 deal to restructure city pension debt should consider this: The numbers prove that his plan devastated the city’s finances and was a key factor that drove Detroit to file for Chapter 9 bankruptcy in July.
The State of Michigan also bears some blame. Lansing politicians reduced Detroit’s state-shared revenue by 48% from 1998 to 2012, withholding $172 million from the city, according to state records.
Decades of mismanagement added to Detroit’s fiscal woes. The city notoriously bungled multiple federal aid programs and overpaid outrageously to incentivize projects such as the Chrysler Jefferson North plant. Bureaucracy bogged down even the simplest deals and contracts. In a city that needed urgency, major city functions often seemed rudderless.
When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy.
Perhaps the most interesting piece of information to me is the absolute devastation of property value in Detroit. The Motor City’s assessed property values peaked at the same time the overall population peaked, in the 1950s. By about 1955, Detroit’s total property value was about $45 billion in 2012 dollars. By 1980, property value sunk by 67 percent, to just $15 billion. However, the decline did not stop there. Property values bottomed out at $8.8 billion in the late ’90s, before the housing bubble lifted values over the next decade. Today’s total property value of approximately $9.6 billion.
Once again, I maintain that Detroit was devastated by white flight in a way that no other American city has suffered. The city could not counter the loss in property value, and without new growth or investment in the city, bankruptcy was bound to happen.
The Detroit News took a more human approach in its special report by examining actions and policies on a decade-by-decade basis. Those who have studied Detroit’s collapse will be quite familiar with much of the News’ analysis, but like the Free Press makes the case that bankruptcy was virtually inevitable.
Two quotes stuck out in my mind that capture the Detroiter’s attachment — or lack thereof — with place. Kevin Boyle, a Northwestern University professor raised on the city’s East Side, said:
“It was always a city built on money. People came to Detroit for jobs, not the natural beauty or the great weather. There was never a commitment to place. It was to money. And then the boom ended.”
And then this quote:
“You had a system that pits against each other immigrant whites and blacks from the South,” said the Rev. Richard Sauerzopf, who studies Detroit for Michigan State University’s Global Urban Studies Program.
“In Detroit, the solution wasn’t to make it work. It was to leave.”
I suppose the very unfortunate and very public embarrassment that is municipal bankruptcy is causing at least some in the city to develop some introspection. Can this be the basis for much needed change?
The Motor City emerged from bankruptcy in December 2014, an astounding 17 months after its July 2013 filing. The deal that made it happen brought together the business community, government leaders and nonprofits from across the city and state, in what truly was an existential crisis for the city.
Two points stand out to me about Detroit’s collapse. First, the absolutely flabbergasting drop in property values in Detroit. It must be said again: from about $45 billion (in 2012 dollars) in 1955 to just $15 billion by 1980, and to $9.6 billion in 2013. Second, the quotes from the Northwestern and Michigan State professors who accurately note that there’s never been a strong commitment to place among Detroiters, which enables such a dramatic loss of value. I recently wondered what happens when demand disappears; in most cities the collapse of demand is contained to a portion of the city, but in Detroit it was citywide.
Even before the bankruptcy announcement, and particularly since Mayor Michael Duggan assumed office in January 2014, there’s been more good news coming out about Detroit’s rebound. Billionaire Quicken Loans founder and owner Dan Gilbert continues his buying spree of buildings in downtown Detroit, in a uniquely personal effort to remake the city center. Midtown, just north of downtown, and Corktown, to the west, have become trendy neighborhood destinations in a city once considered to be devoid of them. The Detroit Red Wings are about to start construction on a new hockey arena that will anchor an entertainment, office and retail district, with a grand opening scheduled for late 2017. Construction of the M-1 Rail Line, viewed as the first leg of the city’s new public/private streetcar system, began this past spring, with a projected opening in late 2016.
These are positive green shoots for the city, enabling it to enjoy the same kinds of good things that cities around the country have been enjoying for a couple decades now.
If Detroit’s revitalization continues to move forward and alter the city’s fortunes, outside observers will no doubt view the bankruptcy as the city’s nadir. I think the city’s nadir came about 4-5 years earlier, in 2008-09, as the Great Recession deepened and the financial house of cards that kept appearances of a fiscally stable Detroit collapsed. In many respects the bankruptcy was the final acknowledgement of the failure of decades of financial mismanagement.
It was also about 2008-09 when Detroit’s green shoots began to sprout, and some of the things that make the city’s people and economy unique began to stand out. I mentioned this in another piece I wrote in December 2013 in which I quote Robert Steuteville at bettercities.net about the Motor City’s rebound:
Take this opinion piece from Robert Steuteville at bettercities.net. In it, Steuteville rightly touts the growth of downtown Detroit and the Midtown area, despite the city’s bankruptcy filing:
The news has been mostly terrible coming out of Detroit: The city declared bankruptcy in July, the largest municipal filing in US history. The city’s population has been in long-term decline, and Detroit now has only about 38 percent of the residents that it had in 1950.And yet the central part of the city is surging. More than 10,000 jobs have been added to downtown in the last few years, and that number is expected to top 15,000 by 2015. Everywhere construction projects are moving forward, almost entirely under the initiative of the private and nonprofit sectors…Downtown enjoys a 97 percent residential occupancy rate. Midtown, just to the west, has seen 3,800 new housing units and $2 billion in investment since 2000. The (private sector funded M-1) light rail line will go directly through Midtown, which is sure to see much more development. Nonprofit developer Midtown Detroit Inc. has 20 current projects and 30 more planned.
Steuteville even sheds light on what could be the next phase of Detroit’s revitalization:
Detroit has a thriving “artisinal” economy. The Green Garage in Midtown is home to about 40 startup sustainable manufacturers. (Kresge Foundation president and CEO Rip) Rapson says there are 10 to 15 such incubators in the city, thriving on cheap space. A high-end watch and bicycle manufacturer, Shinola, has grown from 6 to 120 employees in Midtown in the last two years and has plans to double its workforce. High-tech firms are revitalizing the Riverfront warehouse district, north of downtown. Wedged between Midtown and Riverfront, the Eastern Market district thrives on the local food industry, with retail and wholesale distribution.
I wholeheartedly agree that Detroit’s “tinker” culture — Henry Ford was a tinkerer of sorts who built his first car in his own garage — will play a large role in the city’s comeback. It’s not unrealistic to believe that “tinkerers” from around the nation will once again be attracted to Detroit because of its culture, cheap land and frontier mentality.
At this point Detroit is maybe 5-7 years into a rebound or recovery that could finally be enduring. In my mind the city is in a position similar to where Chicago was in the late 1980’s as it put Council Wars in its rear view mirror, or where Washington, DC was in the mid 1990’s when a Financial Control Board was appointed by the federal government to find a way out of DC’s fiscal morass. One cannot overestimate how low the general opinions of both cities were at their respective nadirs, yet within 15 years their narratives were quite different.
Detroit is not the capital of a regional economy the way Chicago is, nor is it the seat of government the way Washington is, so it might not have the economic heft to change opinions as quickly. But it could happen.