Category Archives: social trajectory

DETROIT’S SOLUTION

Anniversary Rededication CollageIf the key to a successful Detroit Revival is lowering crime, and if the key to lowering crime is to reform our schools and to put everyone to work making living wages, can we not just get on with putting everyone to work making living wages? Well, it is not that simple. For one, there is a cost to putting everyone to work making living wages. Yet putting everyone back to work also has benefits.

We will examine both the cost of putting people back to work and the benefits of doing so. Yet, before we get started, I can tell you that the benefits of putting everyone in Detroit back to work are at least 10 times the cost. If I am correct, isn’t it a slam-dunk decision that we should get on with paying the cost, and putting everyone to work. The short answer is of course, absolutely yes!

However, the political difficulty of such a decision is in determining fairly who will pay the cost and who will gain the benefit. For instance, all levels of government will benefit to some degree. Yet, no mechanism exists for government to share in the cost in proportion to benefits received.

Since the benefits outweigh the costs by so much, and in fact are the difference between Detroit thriving and withering, we absolutely must find the way to overcome the political obstacles that have held back the city for so long, and have cost Detroit a trillion dollars in the last half-century.

That said, let us start by just examining the direct costs and direct benefits of putting people back to work. Remember that the direct benefits are only a fraction of total benefits, and yet as we will see, direct benefits are already twice the cost even before determining fair payments and benefits.

What is the cost to put 100,000 people to work? If factories are profitable after employing them, then the net cost is zero. But we know that 40,000 labor-intensive factories have left our shores for the East, partly because the cost of labor in America made them unprofitable here.

Yet at $4 per hour, a factory might be able to compete with overseas factories that have shipping costs on top of labor. If a government were to subsidize the factory’s labor cost so that the factory could pay a worker $12 per hour and yet have an equivalent labor cost of $4 per hour, the factory could have a net profit and the cost to the government would then be $8 per employee hour worked.

If for instance, a government entered into contracts for companies to build factories in Detroit and those companies employed 33,000 workers, the cost to that government would be $550 million dollars annually.

What about the 140,000 businesses in the Detroit area, could they hire more employees? Businesses generally hire people in response to demand, yet there is a gray area of demand that makes businesses begin to think about hiring without actually making the decision to pull the trigger and hire.

What if businesses were given an economic incentive to hire? Could an additional 33,000 employees be hired this way? What would the incentive need to be to increase demand for employees? One way to determine an acceptable incentive would be to have each individual business tell the government what the incentive must be and for the government to decide whether or not that incentive was acceptable.

A formal method to accomplish this task would be to hold a job subsidy auction each month and to have companies bid on acceptable subsidies. Then the government could decide how many jobs to subsidize each month and what the clearing subsidy price must be each month to incentivize hiring. Suppose that 33,000 employees were hired through this process at an average $5 per hour incentive rate. The annual cost of incentives plus administration of the program might be $350 million.

In addition, as factories come to Detroit and as businesses expand, adding labor, the money spent by these business multiplies through the local economy. More money is spent in restaurants, more is spent at the barber, more is spent on Doctors. Additional labor is needed to cover the needs of an expanding economy. Suppose the remaining 34,000 are hired to support the growing economy without subsidy. The total gross cost then for a government to expand the economy by 100,000 workers would be $900 million dollars annually, or $9,000 per employee, a rather inexpensive investment.

So if the cost to government of creating a hiring mechanism for 100,000 employees is $900 million, what is the direct benefit just to government of having these 100,000 employees hired? These individuals will now be taxpayers and the direct costs of social safety nets will be lessened. The revenues generated through their new employment that is directly attributed to them is almost double the expense of employing them. Yet these benefits only begin to scratch the surface of benefits.

(in millions)
Federal Income Tax….100
State Income Tax…….175
City Income Tax…… …60
Utility Tax………… …..10
Additional sales tax……40
Social Security……… 375
Unemployment…… ….50
Social Services…… ..420
Bus fare…………… …..25
Health Care………… ..120
Property tax……… ….190
Corporate tax………….200
Total…………… ……1765

Still, just looking at the benefits to the governments that provide the initial funding, how many times do the incomes of these 100,000 individuals multiply through economy? I have assumed 0.5 in the hiring process, yet we know that it is much higher, perhaps 4 times, perhaps 7? At 4 times, the benefit listed about jumps to $7,060,000,000.

What about the benefits to the justice system? People working aren’t scrapping or burglarizing. They aren’t being arrested, arraigned, sent through the court system, or jailed. They are not causing property damage, maiming or murdering others. Cutting crime in half by employing Detroit’s downtrodden would save the city conservatively $500 million annually, half of which would be saved by government.

How about property values? Employing these 100,000 would improve neighborhood appearance, would reverse blight, would reduce crime, and property values across the city would increase conservatively $20,000 per house or $7 billion dollars. The 25,000 acres of empty lots would increase in value conservatively by $5,000 each or $120 million dollars. Now some of these properties are owned by the city, and those dollars directly translate. But one thing is for sure, tax collection would go up dramatically on tax sales. In addition, the mill rate value of an additional $7 billion dollars of property value would increase annual government revenues by $440 million annually. Plus the stamp tax on sold houses would also benefit by increased home values. More homes would sell as well. Stamp tax collections would increase by $50 million. And with city services now able to be provided, the collection of an additional $150 million in unpaid property taxes would be easier to collect.

We have only touched on benefits to the governments for we haven’t even explored the benefits of wage increases over time for employees that are gaining skills, nor have we even begun to explore the improved performance from school graduates, their increased income potential and all of the tax benefits that will accrue the governments from students that graduate high school, not to mention college. We haven’t even begun to explore the dollars spent by the businesses that enter Detroit and their tax implications, or of the taxes generated by the the businesses themselves. And these are just the benefits to government, not even calculating the value to the individuals, their families, and the community.

But thus far, the initial investment of $900 million has returned the governments $8 billion and will easily surpass the 10X figure I initially posited. The pay back is obviously enormous. The value accrued is different to each government entity, but all benefit. This investment in Detroit’s people is a no brainer. It is simply a matter of determining how this paradigm shift can be accomplished through the cooperation of all levels of government.

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Detroit Must Commit and Go All In….

Rdetroit-casinoeversing the plight of Detroit rests with integrating the economic success of all of Detroit’s citizens into the future success of the city. The city can no longer afford to do otherwise.

Integrating all Detroit’s citizens implies providing living wages to the city’s underclass, and to providing jobs to future high school graduates. It also implies reforming Detroit’s schools to give students a realistic hope for a brighter future.

Detroit has 100,000 out of work citizens that require living wages. Yet, Detroit’s history has left many functionally illiterate, high school dropouts with few employable skills.

To date, Detroit has had very limited success in bringing in companies that could provide jobs to Detroit’s unemployed. Most of the jobs that have been provided thus far are minimum wage jobs that cannot sustain living standards above the poverty line.

The type of jobs that Detroit must lure to reduce the city’s structural unemployment are labor-intensive jobs that require low skills. These are the very ones that China lured to her special economic zones in the 1980s and 1990s. These jobs pay low, internationally competitive wages that are much lower that what would be considered a living wage in Detroit.

* Detroit’s Revival ** rests in being the first major city to create a way to bring plants and jobs back to Detroit from Asia and that can simultaneously create a way for these returning plants to pay employees a wage that is livable by Detroit standards and that is much higher than companies are used to paying.

For plants to return to Detroit, they must be reasonably assured that they will make comparable (actually higher for taking on Detroit’s political and socioeconomic risks) profits. Detroit must make the benefits so enticing that 1,000 plants are willing to repatriate to Detroit. And Detroit must be prepared to act quickly on the plan that it conceives, so as to establish Detroit as the place to come above all other cities that might try to copy Detroit.

Detroit must gain the support of the State of Michigan for the idea and Detroit’s government must be willing to commit 100% to the effort. The city must be fully prepared to integrate hundreds of plants into the city.

Detroit must go all in….

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Detroit Can Either Reinvent or Wither…I Vote For Reinventing!

blight buster
My analysis of Detroit’s problem is that the roots of racism that exists in all of America was uniquely exacerbated in this city. For the past 40 years, Detroit has been in a stubborn conflict of philosophies that unless is finally resolved will keep the city from a much needed recovery. In fact, this deadlock has now thrust the city into a crisis of immense proportions.

One side has attempted to create a conclave of gentrification to push through the malaise, to grow Detroit in spite of the frustrating residue of the city’s blue-collar era. The other side continues to try to find an economic solution to the city’s problems despite a school system that has failed miserably and community that commits crimes against itself at appalling rates.

My analysis suggests that no city government could have turned around Detroit’s depopulation without resolving the city’s institutional racism, which until now, has been a suppressed issue that acts out in violence. And my analysis also suggests that no attempt to gentrify Detroit out of its decay will have the growth rate to overcome the city’s budget issues. Even if the city’s small growth of last year were tripled to maximize the potential of the millennials, it would take a quarter century to grow out of the city’s financial crisis. The city’s infrastructure and pension costs are just too great for any realistic gentrification population growth to meet the city’s growing needs for revenue, even if we ignore for the moment the violent reaction and tax collection difficulties that would accrue to such an apartheid policy.

At some point, the city is going to have to find a way to reinvest in the city’s existing population as part of a holistic solution. Mr Gilbert has done a masterful job of buying up real estate and creating a vision of what Detroit could become. He just has no viable pathway to get there without bringing along the city’s population. Detroit has 620,000 African Americans spread throughout who are part of the equation. Their history is one of oppression, defiance, and internal struggle in the face of exodus.

Social safety net policies will not placate Detroit. Only a solution that builds a real economy that includes the current population will work. Yet few businesses remain in the United States that can provide a living wage to a population whose educational system has failed them so miserably. A radical departure from the status quo is what will be required to turn around Detroit.

My suggestion is that the gentrifiers who are putting their hopes in Kevin Orr to bust apart the city and start over should stop thinking that this path has any chance of success. Can Detroit gerrymander its geography and carve out the parts of the city that would take decades to recover under a build out scenario, returning blighted areas to the historical township structure of unincorporated American lands? That scenario is vastly unlikely politically or realistically, and no other city would annex blighted sections of Detroit. The emergency manager will not choose such a path. Detroit must face its demons.

Yet, with the right strategy, one that is inclusive of all its citizens, Detroit can actually recover quite quickly, and in so doing, Detroit can provide the rest of the country a blueprint to find the gold buried in all of our inner cities, our people. The strategy must overcome the catch 22 circular arguments I have listed above. No current political or economic policy exists to do so. It must be invented. As such, the paradigm shift that is necessary to create such a political invention will be called radical by some.

Radical or not, with no other viable alternative in sight, Detroit can either reinvent or wither. My vote is for re-invention.

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Is Saving Detroit Worth The Effort? (Yes)

detroit kids

Thus far, I have outlined Detroit school principles and Detroit work responsibility principles, two sets of principles amongst others that will be important to outline as the basis for a holistic solution. Yet already the solution set to accomplish just these two sets of principles might seem extremely difficult to some. To accomplish the two sets of principles that I have outlined thus far, for example, would take a great deal of cooperation between local, state, and potentially federal governments on both sides of the aisle and would force a paradigm shift that would be difficult to accomplish even with both major political parties working in concert. For this reason, many would simply scoff at my principles as unrealistic.

Yet, no other set of principles set forth thus far have been implemented in the past 60 years of Detroit’s decline that have resulted in the city’s turn around. And no principles being presented contemporaneous solve Detroit’s immediate growth problems either. Without a bold set of principles that sets the bar as high as the stars, Detroit cannot expect to even hit the moon. And right now, Detroit’s revival depends on hitting the moon.

I am suggesting that Detroit reach for a difficult task (that is reachable) to avoid a terrible alternative of bankruptcy and further decline. The alternatives thus far presented to Detroit by others show a strong and good future yet without a viable path forward. The thriving path forward requires that the city grow robustly, but the initiatives thus far presented project a slow growth.

Could Detroit achieve slow growth from Downtown and key city centers without a bold jobs initiative? Perhaps, yes, perhaps no….the answer depends on how deeply city services must be cut to balance the city’s budget and how much more crime and blight will be exacerbated by such cuts. The answer also depends on how many city assets will be sold off to forestall bankruptcy or whether bankruptcy will cause the city to lose its ability to borrow for the future.

A seemingly more complex but actually more viable solution is one that aggressively pursues a much higher rate of city growth. If a viable solution can project a realistically higher growth trajectory, it will also project a balanced budget at higher city revenue levels that can put Detroit in a position to borrow, not to pay for further operating deficits, but to create assets for the City’s future prosperity.

Since Coleman Young’s terms in office until now, Detroit has attempted to lure businesses to the city to provide jobs to keep Detroiters from leaving. The city has had some successes but not nearly enough to save Detroit from having to endure the emergency manager’s executions.

A net 1.1 million people have left Detroit since 1950, to find work and to escape Detroit’s growing crime. Now that the rate of exodus has slowed in Detroit, city leaders might be able to bring residents back if they can first bring businesses back. Yet to do so, they must convince business owners to relocate their businesses in Detroit instead of other alternatives. Detroit’s blight and crime rate make the effort formidable.

Even more formidable, the city’s leaders find themselves in two catch 22 dilemmas. First, without reversing its crime rate, Detroit will not bring in new businesses quickly enough to overcome mounting deficits. If the city cannot grow quickly enough, it will resort to selling off assets to pay debts and the sale of those assets could cripple the city. Yet, without bringing in enough businesses to provide good paying jobs, Detroit cannot reverse its crime rate. This is the circular argument that has haunted the city’s mayors for the past four decades, the catch 22.

The second circular argument is even more insidious than the first in that to lower crime, jobs must provide living wages. Yet, the type of jobs that most unemployed Detroiters qualify for pay the lowest wages. Half of working Detroiters aged 25 and under have jobs that pay minimum wage. Minimum wage is already too low to keep a worker out of poverty. Bringing in more jobs that pay minimum wage to hire unemployed Detroiters does not take them out of poverty. Without reducing Detroit’s poverty, crime will not significantly decrease. And if crime is not lowered, even those minimum wage jobs will not come to the city, hence catch 22 squared.

Since jobs could not be lured into the city to decrease crime, city leaders resorted to entertainment businesses like casinos and sports arenas, and gentrification, creating mini-walled off cities within the city, to increase the tax base, yet the pace of growth from these pursuits did not compensate for the losses due to depopulation, and now Detroit faces the impending possibility of bankruptcy.

The principles I have outlined for schools and business development will lower crime but both depend on breaking the circular arguments. If they can be broken, jobs can be brought in that provide current residents with livable wages, and Detroit can significantly lower its crime rate.

With lowered crime, the vision that Detroit is now presenting to the business community of a better Detroit will be viable. Detroit’s vision of the future city, combined with significant incentives for businesses to invest in the city, can then help the city bring in more jobs. More jobs will increase property values, which will in turn create higher city revenues that will lead to reinvestment in the city’s livability and a path toward a thriving Detroit.

To break the circular argument, however, two things must simultaneously occur. First, businesses must be convinced to hire 100,000 employees from the ranks of Detroit’s largely illiterate unemployed. Second, businesses must be convinced to pay new hirees a living wage that is above minimum wage, when half of Detroit workers under the age of 25 are being paid minimum wage. This is the herculean task that has perplexed a good many people without a solution. Therefore, Detroit faces bankruptcy.

Yet, the fact that no viable solution has been proposed in 40 years does not mean there isn’t one. The solution requires a paradigm shift. It requires the collaboration of both sides of the political aisle, and of local, state, and possible federal government leaders. Is saving Detroit worth all that effort?

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If Detroit Will Follow these Principles, Detroit Crime will Drop

crimeDetroit’s future hinges on reducing its high crime rate to allow newcomers to venture back into the city. The city has restructured its police department, putting more police on the streets, and has adopted state-of-the-art multifaceted programs that other cities like Chicago are implementing to mitigate youth violence, yet crime persists. Modifications to the status quo will not affect crime quickly enough to curb what has become a violent roadblock to Detroit’s future. What is required is a radical departure from past practice. Detroit needs a major step improvement toward a safer community if it is to recover.

The city is collapsing in debt and depopulation. Yet, a radical departure from the status quo seems almost too dystopic a medicine to take, even for a city that faces bankruptcy. Detroit is just as polarized as the country over how to reduce crime, and Detroit’s community reaction to past police performance has been a divisive obstacle to major change. So without a clear path forward, radical change seems daunting. However, a comparison of the extreme right and left views of America’s think tanks regarding crime suggests that while their viewpoints may differ, the similarities of their stances indicate that a clear path forward might be possible.

While their solutions may be different, they both speak of the same root causes of crime. They couch them differently for each side’s solutions must fit the entirety of their differing political views. Therefore, each side focuses on different symptoms of the root cause, and their solutions focus on resolving those different symptoms. A holistic solution, however, must encompass the root of each extreme’s problems and solutions.

What do conservatives suggest is the root cause of crime? The Heritage Foundation suggests that crime is the outcome of failing families. They cite numerous studies that show that crime is committed most by those raised without fathers. Yet, the Heritage Foundation seems to negate the nexus between crime and poverty.

The Cato Institute supports the Heritage Foundation’s conclusion regarding single parent families stating that, “the relationship is so strong that controlling for family configuration erases the relationship between race, low income, and crime.” Yet the Institute also states that both violent crime and property crime are highly related to economic conditions.

The National Academy of Sciences agrees with their positions regarding single-family households and further suggests that jail policies, which create a lack of young, marriage age males in a third of Black families, excessively exacerbates the problem of fatherless homes.

The progressive think tank Economic Policy Institute does not disagree that dysfunctional families lead to crime. In fact, EPI suggests that dysfunctional families lead to poor school performance, high dropout rates, and then to crime. Yet EPI suggests that poverty is the root cause of disruptive families.

The liberal think tank Economic Policy Research reasons that dropouts do not qualify for 90% of jobs, leading to high unemployment, and argues that unemployment is directly correlated to burglary, rape, robbery and assault.

The progressive think tank Center for American Progress supports EPI’s claim that poverty is a root cause. They point to President Clinton’s policies as having been the solution that drove a drop in crime rate more than any other time in U.S. history. They state that lack of work, lack of police on the streets, high poverty rates, a shrinking middle class, underperforming schools, and lack of affordable housing was a combined reason for higher crime rates that Clinton’s policies corrected.

The above examples suggest that conservatives focus on the destruction of the family as the root cause of crime, without then connecting the impact of extreme poverty and lack of hope for any change of circumstances to the destruction of the family. The examples also suggest that liberals point to social disruption caused by poverty as the root cause of crime without acknowledging the breakdown of family as a key component in that social disruption. But both political parties are just emphasizing aspects of the root cause and solutions that align with their party’s platform. Detroit, however, must cut through the political clutter and create a bold solution that will reverse the city’s plight now.

To create a clear path forward, Detroit’s factions must agree on principles of crime reduction. In the spirit of survival, acknowledging that each sides understanding of the issues may not be mutually exclusive, is in order. By doing so, the left and right might agree to the bold solution that meets each other’s political needs while restoring the City of Detroit. Disregarding for the while how to achieve them, the following principles are critical to Detroit’s crime transformation and should be supported by Detroit’s bold solution:

.1. Families remaining intact
.2. Detroit’s single-parent families gaining community support
.3. Detroit’s youth having safe and successful learning opportunities from pre-school through high school
.4. All teens graduating from Detroit’s high school, functionally literate
.5. Teens delaying marriage, cohabitation, and child rearing until financially secure
.6. Kids having financial and social alternatives to crime during school years
.7. High school graduates having a reasonable expectation of a living wage job if they choose to work after
high school graduation
.8. High school graduates from all socioeconomic backgrounds that academically qualify, having access to
college
.9. In the decade that Detroit is transitioning to a culture of less crime, the existing subculture of
crime that has grown in a vacuum of viable alternatives, must be curbed through both preventative and
policing means.

Once clear principle are in place, a bold solution set that will meet them fast enough to sustain Detroit will be the commitment that is required by all that would have Detroit recover.

These principles outlined above must now be added to those of Detroit’s other stakeholders to achieve a holistic solution that meets the needs of all stakeholders, not the least of which are the 700,000 citizens who are struggling each day to raise their families in a hostile, crime filled environment in which 60% are either victims or witnesses to crime.

After years of decline, Detroit’s murder rate has risen for several years, peaking at 411 in 2012. Detroit is named the most dangerous city in America. If following the principles outlined above will curb Detroit’s high crime rate but Detroit is the most dangerous city in America, then a gap should exist between the stated principles and how well Detroit fares against them.

How well does Detroit compare to principles for low crime?

Principle 1. Keep Families intact

From 9% in 1960, 80% of families in Detroit are single parent today

Principle 2. Give community support to Detroit’s single-parent families

Detroit communities have been damaged by blight and depopulation. Detroit is focusing on bringing communities back together and Corporate sponsors such as Ford have prioritized investment in community development. Organizations from Jewish Federation to Goodwill organize to support single parents. Yet, 40% of single parent families in Detroit are living in poverty.

Principle 3. Ensure all students pass each grade proficiency and are safe from pre-school through high school

Mt. Elliot neighborhood is listed in top 25 most dangerous neighborhoods in America. Chances of being victim of a violent crime in any one year is 1 in 9. Organizations like Take Action are actively working to reduce violence against Detroit Youth. Yet only 4% of Detroit eighth graders can pass minimal standards in math and only 22% of Detroit kids graduate from High School. 79% of Detroiters do not want their kids to attend Detroit Public Schools. Detroit has formed an organization, Excellent Schools Detroit, committed to bringing Detroit’s graduation rate to 90% by 2020.

Principle 4. All teens graduate from Detroit’s high school functionally literate

.47% of Detroit Adults are functionally illiterate.

Principle 5. Ensure Teens delay marriage, cohabitation, and child rearing until financially secure

Since 1990, Detroit’s teen pregnancy rate has been cut in half to 103 per 1,000, yet is still 300% higher than the national average of 31. Detroit ranks #1 of American cities in the rate of unmarried births.

Principle 6. Kids having financial and social alternatives to crime during school years

In 2012, Detroit youth unemployment was 42%.

Principle 7. High school graduates having a reasonable expectation of a living wage job if they choose to work after high school graduation

.50% of Detroit’s workers age 25 and under that have jobs make minimum wage.

Principle 8. High school graduates from all socioeconomic backgrounds that academically qualify, having access to college

In 2012, only 2% of Detroit’s graduating seniors were deemed capable of performing college level work.

Principle 9. In the decade that Detroit is transitioning to a culture of less crime, the existing subculture of crime that has grown in a vacuum of viable alternatives, must be curbed through both preventative and policing means.

In 2012, the Police union spokesperson stated that Detroit is the most dangerous city in America and to enter at your own risk. He said that police officers are understaffed, overworked, demoralized, and sometimes fear for their lives. The department has reorganized to emphasize gang management.

Mitt Romney, son of Michigan Governor George Romney and recent presidential candidate stated, “for those who graduate from high school, get a full-time job, and marry before they have their first child, the probability that they will be poor is 2 percent. But, if those things are absent, 76 percent will be poor.” Detroit’s kids must have the opportunity to acquire the three ingredients that Romney says will put them in the 98% probability of making it out of poverty.

With such recent Detroit statistics, Detroiters should agree that drastic actions are required. What is needed is a bold, new plan.

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Detroit Must Now Roll Up Her Sleeves and Attack Her Root Problems

wayneCity lights continue to be an issue in Detroit. No matter how much effort is seemingly thrown at fixing them, half the city stays in darkness. Yet lighting is only a visible symptom of Detroit’s crumbling infrastructure. The same infrastructure problems that can be seen by Detroit’s citizens in broken lights exist below in the belly of the city’s networks.

Detroit is barely surviving on high cost, obsolete infrastructure that was constructed in its heyday to meet the needs of a million more people. Old infrastructure can be maintained and replaced but at increasing costs as time goes on (compare Detroit’s maintenance to maintaining an old car).

Detroit’s small population cannot continue to indefinitely maintain its large, failing infrastructure without increasing city taxes. Yet, Detroit taxes are already the fourth highest of any city in the nation, and 47% of the population is already not paying their property taxes. Many say they refuse to pay taxes because they are not getting the services that their infrastructure is supposed to support (a catch 22).

Without growing Detroit’s population, the city cannot repair its infrastructure, and infrastructure becomes another cause of spiraling city failure. A minimum population that is growing and paying taxes, therefore, is not only needed to manage growing city pension costs, but also to maintain the city’s infrastructure and to ultimately reduce infrastructure costs through reinvestment.

So, how does Detroit reverse the trend and grow its population? And since the city is already years into deficit spending, how does it accelerate growth to a minimum sustainable population? Millennials have been targeted as a group that will populate the downtown district. They have lost interest in owning homes and gentrification can create livability standards that will attract them. Yet, their increase will not be at a rate great enough to thwart the city’s deficits. Gentrification is not a solution to a citywide problem. Creating an attractive downtown might create a functioning commerce district but it does not impact choices to live in other parts of the city. Downtown reinvestment has been tried now for 40 years in Detroit without success.

Some Detroiters hope that that low cost citywide housing and a recovering America will combine to reverse the city’s exodus. Citywide, housing prices have precipitously dropped to the extent that they have slowed depopulation. Those wanting to leave Detroit cannot sell their houses for enough to leave, and low prices have brought some newcomers to Detroit.

Yet, crashing home prices are a horrible alternative for attracting population back into the city. Besides devastating Detroit’s citizens, falling housing prices devalue the city’s tax base that it needs to increase. While the fire sale of homes has brought balance to the population, the massive difference of home prices between Detroit and its suburbs is still not enough to bring people back.

If Detroit wants to save itself from fiscal suffocation, the city cannot hope that downtown reinvestment or housing price equilibrium will save it. Detroit must finally deal with the root causes that devastated the City’s population. For now that the city sits below a minimum population for recovery, only fixing its root causes of depopulation will help it to repopulate.

Certainly, loss of autos and ammo started the slide, and highways and FHA insurance provided the means of white flight. Detroit was dealt several suffocating blows that would cause its minimal sustainable population to drop from 1.8 million to perhaps 1.2 million from these two factors alone. But Detroit’s depopulation has been unlike any other city.

While Detroit’s suburbs were engaging in economic transformation along with the rest of the country, Detroit missed the opportunity in its midpoint of depopulation to bring in new innovators to change its business profile. Cities like Akron and Pittsburgh stopped their rustbelt bleeding through investment in new, job-based innovation and came back to life. Yet, key investors in the Detroit metro area instead sought reinvestment outside the city proper, choosing instead to invest in entertainment branding within the city. Sports and commerce brands are important to a City’s livability but these investments did not add enough to the city’s tax base to survive without adding businesses that could support a minimum population.

So, part of the city’s fall can be explained by a lack of restructuring the city to attract new business. Yet, other cities that failed in this mission simply stabilized at a smaller size without imploding as Detroit did. Detroit’s white flight, however, was greater than any other city. Detroit’s black population continued to grow from the 1970s until the 2000s, but the city’s white population dropped to 7.8%, leading the city’s drop in population from 1.8 million to 700,000.

Detroit has a unique history of racial prejudice due to its 20th century migration patterns and its development of institutional racism in response to its dramatic increase in Southern migration. Repeated efforts by many thoughtful civic leaders failed to turn the tide of how Detroit would repeatedly manage racial conflict. The result of years of missed opportunities to repair the city’s racial tensions resulted in a Detroit whose negatives now overwhelm its positives.

The average citizen that wants to raise their family in safety, to give their kids a decent education, to see their kids get a decent paying job, and to watch their children then settle down in town to raise their grandchildren, this average citizen simply could not see a way to continue his basic American dream in Detroit, and sought refuge outside the city.

Detroit became overwhelmed with crime. Violent crime expanded and now dots all parts of the city. Detroit’s schools have failed the city miserably. Half the city’s population is functionally illiterate and lacks the skills needed for the types of jobs that some see as the savior to city revitalization. Revitalization cannot ignore the base of Detroit’s citizenry or the root issues of education and crime will remain unresolved.

Jobs that could provide a living wage are not available to current residents. This broken pattern that causes city flight must now be reversed in a city that only graduates 22% of its kids and that has the highest crime in the country. Without vastly reducing crime and undertaking massive restructuring of the city’s schools to create successful outcomes, and without creating livable wages for the city’s high school graduates, no urban planning or investment will reverse the city’s loss of population.

Ok, so let’s get to work. Detroit can be the first city in the nation to reverse such a trend. Detroit MUST be the first city in the nation to reverse such a trend for its own survival. The institutional and structural impediments that have kept the City from struggling back must now be removed. Root causes of Detroit’s plight must now have bold solutions that attack root causes. A system-wide solution that supports all of Detroit’s citizenry must now be employed.

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How Small Can Detroit be and Still Survive?

detoit popIn Detroit’s emergency phase and subsequent turn around phase, Detroit must stabilize its population to minimum sustainable level. What is the Blue Sky Turn Around Survival Number To Stop Detroit’s Bleeding? Has anyone asked?

Current projections show Detroit’s population sliding a bit more. The white population has bottomed out. Blacks left during the housing boom but access to housing credit has dried up. Millennials are coming back to the city as are a small percentage of immigrants. Yet violent crime is increasing and is prevalent in all parts of the city, forcing residents to continue to look elsewhere to live.

The emergency manager must stabilize the city’s exposure to continued deficits. He must project a revenue trend in making his decisions regarding budget cuts. Given current population and city revenue projections, he is likely to make draconian cuts. What growth must Detroit realistically project for the next three years to satisfy the emergency manager that more draconian measures needn’t be taken for Detroit’s survival?

Will 50,000 net new jobs, 25,000 less people on public assistance, 35,000 more home property taxes, 3,000 new businesses and 50 new small factories and plants strategically dotting the Detroit landscape over three years be enough to reverse the city’s bleeding? What would be a satisfactory number without regard to whether it could realistically be achieved?

Whatever the number, shouldn’t Detroit be resetting its paradigm to achieve that goal and more? And if that flow of new business could be achieved, then the city must ask itself, “Are we prepared to do what must be done to support that level of new business?” Could the city’s land use and livability plans, city administrators and regulators, developers and contractors support the minimum growth that would satisfy the emergency manager, if that level of growth could be achieved over 3 years?

What would the turn around goal need to be to avoid a destructive sell-off of vital city resources that will occur to satisfy emergency restructuring, absent any growth to stabilize the city? Whatever that number is, set the target 25% higher. Now, how can it be achieved?

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Detroit Must Simultaneously Balance The Needs of All Its Stakeholders in Three Phases to Survive

detroit cant wait
Detroit has competing visions of its future that must finally meld if it is to realize Detroit’s great potential to re-create itself. Re-creation involves three distinct phases that must all begin immediately and in parallel, with each having different goals and differing endpoints, but with all participants in Detroit’s posterity understanding the importance of each phase being complementary of the others.

The first phase is Orr’s emergency planning phase. It should be expeditious and its pain and discord should end as swiftly as possible. All must sacrifice, but their sacrifices must be in keeping with optimizing the next two phases.

The second phase is the turn around phase. Detroit will not have the opportunity to grow if it cannot repair the structural impediments that are draining the city. For the turn around to succeed, crime will have to be dramatically reduced, 100,000 jobs will need to expeditiously return to the city targeting existing residents, schools must dramatically improve to contribute to reduced crime and to support an influx of new business, and home ownership must immediately be stabilized. What must be done to quickly implement these requirements? What impacts will they have on Detroit’s stakeholders?

The third phase is the most exciting for it is the growth phase in which Detroit has the opportunity to recreate itself. To sustain and to grow Detroit, the city must be re-tooled into an interwoven blend of modern livable communities that support existing and newcomer residents, including innovators and millennials who demand world-class standards in the cities they call home. How will Detroit integrate livability standards to compete as a growing, world-class city while meeting the needs of all its stakeholders?

Who are some of the stakeholders of Detroit who will demand that a collaborative solution for Detroit meet their needs as well? An optimal system-wide solution will ethically balance the best alternatives of each stakeholder, given the real alternative that Detroit’s sinking population might force dissolution if urgent actions are not taken to create a best effort model that can begin to go forward:

Current residents: Seek jobs, preservation of existing neighborhoods, lessening of crime, and better services

New residents: Must make up the remainder of a sustainable target population and want a highly livable city that meets professional, social, community, health, safety, and development goals

Detroit communities: existing and newly developed as part of a future envisioned Detroit

Property owners: Whether homestead or remote, that must upgrade and maintain their units, plus banks and trusts that must work with Detroit in the best interests of a master plan

Existing Businesses: Detroit’s Legacy industry and community businesses that anchor will key commerce zones in the new Detroit layout

New Businesses: Growth industry targets that will lure the innovators and entrepreneurs, and manufacturing industries that can optimize existing assets and fully employ Detroit’s existing citizens

Creators: Detroit professional and community planners such as the Downtown Economic Growth Corporation, Rock Ventures, Detroit Works, Greenways Coalition, and the Universities, Developers such as Detroit Venture Partners, and businesses that will tear down and construct, move homeowners, reuse and revitalize Detroit’s assets

Community activists that speak for the disabled, the elderly and the young, that seek balance against issues such as environmental injustice, and industrial racism, who will react to the solutions involving 100,000 feral cats and wild dogs.

Political activists that will protect against a shift in political and economic power that can isolate the minority as Detroit changes direction from decay to productivity and livability.

Philanthropists and Historic preservationists that seek a better Detroit and a preservation of Detroit’s character

Investors, shareholders, bankers, all who seek the profit motive of an optimal solution, ensuring efficiency of effort

Detroit services such as Detroit Emergency management, Police and Fire

Disenfranchised youth and organized crime that will be impacted by a shifting economy

Governments: City government, interconnected regional, state, and federal governments

People of United States who have a stake in the outcome as can be modeled by those that follow and Citizens of the world who have a stake in America living up to our ideals.

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Home Ownership’s Role in the Downfall and Rebirth of Detroit

24ferry-boardupThe New York Times article is a good read on an important facet of the continuing story…

http://www.nytimes.com/2013/04/14/business/dan-gilberts-quest-to-remake-downtown-detroit.html?pagewanted=all&_r=1&

An acre of land in Manhattan goes for $90 million. An acre of land in Queens goes for $2 million. An acre in the slums of Tremont, Bronx goes for a half million. An acre of land in Detroit goes for $3,000. Iowa farmland goes for more. The price for an acre of land in Livonia, Michigan, a suburb of Detroit, can go for about $300,000.

Mr. Dan Gilbert purchased a downtown skyscraper that should have gone for $200 a foot for $5 a foot. He sees a gold mine that just hasn’t yet struck gold and is willing to invest in Detroit. Detroit will either continue to wither until it is forced to be broken apart, dispersing the gold nuggets to those that would cart them off, or it will recover, saving the city’s heritage for those that have remained and for those that wish to come back. My bet is on the latter, that Detroit is on the verge of recovery if concrete steps will be taken, for Detroit is critical to the success of Michigan and for the United States.

Detroit is ripe for those that would brave the elements, for once cured of its ills, the 88,000 acres that are the city of Detroit will eventually be worth a mega-fortune. The questions surrounding this fortune include, who will be the beneficiaries of the windfall, and how quickly will the fortunes of Detroit turn around, and will Detroit’s recovery create a livable city for those citizens that have remained in the city and that will be required to do heavy lifting.

Would it be wrong to expect that the current residents of Detroit should have a stake in the financial rewards of creating a more vibrant, crime reduced city as well as a better quality of life? At the end of the Civil War, black leaders asked for 40 acres and a mule, the tools of a financial start at that time. A home and a job are today’s equivalent.

Mr. Orr has the responsibility to create a path forward for the city that includes its citizens’ ability to prosper in their efforts to collaborate with those that will come forward to inject new life and new prosperity. A vision that is inclusive of the citizens who remain in Detroit is required.

Home ownership is an institutional privilege of capitalism. The perspective owner must have good credit, must have secured a down payment, must not have accumulated debt obligations, must have a history and prospect of adequate, must apply during reasonable economic times, must be in a location that is not wrought with undue competition for homes that drive their cost beyond reach, and in a location in which the lender feels adequately assured that the home will maintain its value.

Home ownership is a thread that weaves through the story of the African American. So few could own property before the end of the Civil War. So few could afford it afterward.

Most ex slaves were forced to endure plantation housing after the war. The capitalist system requires capital to start a free life. The minimal capital of the era was enough farmland to sustain a family. Yet without a means to acquire it, generations of ex-slaves would resort to share-cropping.

Lincoln’s Homestead Act made land available to hundreds of thousands of immigrants but a mere 20,000 blacks could afford to take advantage of 160 acres of free land offered. Most could not afford the travel and survival while planting the first year, nor could they afford the requirement that they build a house on the land. Yet, the Homestead Act was the impetus for Europe’s flood to the promise of America. Millions of descendants of Europeans in the generations that followed would benefit from the millions of acres freely given.

The 20 year “Long Depression” of 1873 was caused by a bank binge, housing bubble in Europe that sent thousands of immigrants scurrying for jobs in America’s cities, many of whom ended up in the slums of Detroit, competing for housing with newly arrived black migrants during the 1910s.

Housing would be discriminatorily kept from blacks in the 1920s, as restricted covenants supported by the National Association of Real Estate Boards became commonplace. Throughout the 1920s until the Supreme Court ruled them unenforceable in 1948, covenants would segregate neighborhoods.

By the late 1920s, banks created another housing bubble that burst at the start of the Great Depression. Out of the Depression came FHA housing insurance that made buying a home easier for millions of whites, but that continued to discriminate against blacks through a federally accepted practice of redlining. Through redlining, even though they had equal qualifications as whites, many more blacks were denied FHA backing and therefore did not “qualify” for homes.

This social engineered, institutionally racist, discrimination had a major impact on black communities, for housing was the major way middle class America grew and passed on wealth to heirs. Generations used their accumulated wealth to advance their families through such means as home equity loans to pay for college educations. Yet, this necessity of the industrial era, this replacement of 160 acres and a mule, was denied blacks.

The combination of FHA financing, a post WWII boom and the introduction of the Federal Highway system helped fill the suburbs. Thousands of whites exited Detroit. Restrictive covenants and Redlining kept blacks back in the city with 20% lower home ownership. At the time, 88% of blacks supported integrating neighborhoods and only 12% of whites found integration acceptable.

The remnants of restrictive covenants that were socially enforced and redlining that was institutionally supported continued through the 1970s, even after Congress passed Title VIII of the Civil Rights Act for fair housing in 1968. The efforts of grass roots organizations led to the Home Mortgage Disclosure Act of 1975 and finally to the Community Reinvestment Act in 1977.

The idea behind the CRA was to attempt to redress a century of housing discrimination that had preceded it through what would amount to racial balancing of loans going forward. Yet America’s bankers had already shown that they were capable of creating housing bubbles back in 1873 and 1929. Given the need to fund China’s gold rush that had just begun in 1979, it was only a matter of time for bankers’ greed to use the principles of the CRA as a means to create yet another housing bubble.

In Detroit, the housing bubble was a vehicle for middle class blacks to leave the city when loose credit and anti-discrimination housing laws made home ownership more possible. Yet, as the bubble burst, foreclosure hit blacks twice as hard as whites, continuing our nation’s housing saga. While banks used foreclosures to recoup losses in most parts the country, many banks, faced with plummeting house prices in Detroit, left them abandoned rather than pay the taxes, adding to the blight that earlier banking policies had exacerbated.

Abandoned housing can be assets for Detroit going forward. They can be a component of a more stable, safer Detroit. If allowed to continue to ferment, they may also be yet another stitch in the continuing thread of discriminatory housing as part of institutional racism that fed Detroit’s downfall.

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This emergency manager phase for Detroit Should not be about loss or regret but about hope and rebirth

rebirth
Yet an important phase of rebirth must be letting go…When memories of what Detroit was, or visions of what one hoped it might become are released, then we can be free to see Detroit as it is and to plan for what it can really become.

After the economic burdens of Detroit’s collapsing past are lifted, the city must be ready to finally let go of old paradigms that have kept Detroit from transforming. We are free to state the starting point.

* Detroit is not safe

Detroit will initially still be a city that few will want to move to or to invest in until a clear path is created for Detroit to grow and to prosper. In fact, many will still want to leave if they can if crime is not dramatically reduced. But Detroit can become a very livable city if opportunity replaces hopelessness and if strong incentives for a prosperous future are introduced for newcomers. These are not just platitudes but very achievable goals.

* Detroit is blighted

After Mr. Orr and Detroit’s leadership make the tough choices, Detroit will still not be the vibrant city that downtown represents it to be. But it will have pockets of strong neighborhoods and it will continue to craft a fairly clean, brownfield canvas from which to build a future. Blight will continue to be cleared. Building exteriors, yards, sidewalks and vacant lots can be vigorously maintained by incentive and enforcement, main thoroughfares can be maintained to represent Detroit’s future, key growth centers can be enhanced to seed growth.

* Detroit is spread out and unwieldy

Detroit has three times the land that Walt Disney World had when it acquired 47 square miles in Central Florida. Speckled throughout the city, Detroit’s has liabilities but many can be transformed into assets. And Detroit’s land is one of its biggest assets. The West was settled by the draw of land. Given a well-defined land use vision, clear principles of growth, strong incentives for investment, and a culture recreated to support growth, Detroit can rapidly emerge, and positive signs of growth can simultaneously spread throughout its various neighborhoods, while highlighting the call for entrepreneurs, innovators and industry to return to Detroit’s key economic centers.

* Detroit is Gentrified

In 140 square miles, Detroit’s master plan has room for gentrification. It has room for high tech, for entrepreneurial centers, for commerce, education, and art. But Detroit is already the residence for 700,000 people, many of whom have been the forgotten ones, downtrodden, unemployed, poorly educated. Many have experienced the violence of Detroit. Most are hoping for opportunity and a better life.

Many of Detroit’s residents travel outside the city each day to give of their talents. Most can produce viable products and services right in Detroit, once employed. Yet, from Detroit’s existing population, workers must be matched to work they can readily perform. High wages for low skilled work is gone. Yet, the paradigm that living wages for low skill work cannot exist in an America that must compete in the world, that paradigm must be obliterated to put Detroiters back to work. There is a way.

* Detroit has stagnated in stalemate for decades.

A dynasty of political structures that preserved Detroit’s old economy must give way to equitable sharing of political powers for a new economy. A workforce power structure of high union wages for low skill work must give way to an economy that provides a living wage for low skill work and a city that promotes education and training for higher wage opportunities. Old prejudices that allowed Detroit’s neighborhoods to be underserved must be isolated through economic incentives that change behavior until prejudiced views can be reduced by stereotypes of a new economy.

* Detroit is isolated

A metropolitan region that has walled off communities from one another must be reconnected and interconnected to allow regional collaboration and regional growth. Solutions that can bring innovators, investors, and employers, those key components of growing economies, into the heart of Detroit will require agreement from regional, state, and federal governments, as well as support from entrepreneurs, local, national, and international industries to be dynamically effective.

As age-old paradigms are let go, Anticipation and new expectations can be formed to start rebuilding Detroit’s identity and to create a productive economy that provides jobs and a thriving future for all.

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