"RESTARTING THE ECONOMIC ENGINE”
‘The Detroit Olympic?’

In July 1996, the cover of Across the Board, the bimonthly magazine of The Conference Board Inc., a business-oriented think tank, asked the provocative (cynics would say ridiculous) question, “Why Aren’t the Olympics in Detroit?” The cover illustration depicted a Greek statue gripping a hubcap like a discus.

That cover, that question, and the article inside hit anyone who loves Detroit like a punch in the mouth. The Conference Board, which has studied management and marketplace trends since 1916, gave further legitimacy to the notion that Detroit is a dysfunctional city that can’t get its act together. The lengthy article, taken from a report by Boston University’s Institute for the Study of Economic Culture, contrasted the lack of progress in Detroit and a few other cities with the success of Atlanta, which had won the right to host the 1996 summer Olympics.

The theme of the article (and the Institute’s report) was business leadership. It argued that Atlanta was a city with a winning profile because corporate executives there took responsibility for the city’s image and worked closely with local government to make things happen. It was also noted that Atlanta’s business community promoted civic involvement through a number of very visible networking groups, and contributed to the city’s growth by seeing the future from a global perspective.

Detroit lovers could take a bit of comfort in the fact that everything written about our city was past tense and narrowly focused. The main thrust was that from 1974 through most of the 1980’s, the primary business-government relationship was between the city and General Motors, and that GM’s view of its markets was domestic during a critical period of expansion by foreign automakers. As we know, GM is definitely a progressive, global company today, and when the article appeared, Detroit was experiencing a tremendous year of business investment.

Many believe Detroit turned a corner in the business community in 1996, beginning a period of massive investment in excess of more than $14 billion, as agreements to build Comerica Park and Ford Field were reached and approved by local voters; voters approved a statewide measure to allow for downtown casino developments; and numerous other projects were announced throughout the city, including previous commitments made to Detroit’s Empowerment Zone.

The Conference Board article also pointed out, to its credit, that much of Atlanta’s positive image was due to hype and not substance, using the city’s leading corporate citizen, Coca-Cola, as a metaphor. Coke is all about marketing, from start to finish, and the rest of Atlanta has learned from the leader, the article suggested.

But eight years after that stinging report, the lesson for Detroit evident in Atlanta and other major cities still applies. Cities that are viewed as progressive and exciting are places where the business community – from the biggest corporate executive to the individual entrepreneur -feels welcome and works in partnership with government to improve and promote the city. When government has the support of business, civic involvement of business leaders often includes the engagement of nonprofit foundations associated with their companies.

Although Detroit has seen real progress in the past decade – and new investment from foundations has been a major breakthrough – broad business commitment to the city is not yet a permanent part of the Detroit culture. The economic engine that was roaring a few years ago, based as much on pent-up demand in Detroit as on national factors, has slowed down to a mere idle.

Fortunately, the city possesses many of the raw materials it needs to restart that engine. Businesses and the creative, educated people who make them work are attracted to cities that offer diversity, cultural amenities and rich educational opportunities. Detroit, to its credit, is home to the Charles H. Wright Museum of African American History, fifth largest fine arts museum in the nation; it boasts a world-renowned opera company and more live theater than any city in America besides New York.

There are two world-class universities, countless fine and ethnic restaurants and over 350 city parks. Plus we have four, count’em four, major league sports teams. Why aren’t businesses lining up at the city gates to get in? Because we don’t make it easy for businesses to operate here and we don’t embrace the entrepreneurial spirit that would result in the kind of robust business-government partnerships that have worked for cities like Atlanta. That is the reality of doing business in Detroit today, it is what we must change and I want to discuss how to do it in this chapter.

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‘Assessing The Business Environment’

The tradition in Detroit is reliance on federal and state government financing for economic growth. During much of his time in office, Mayor Coleman Young primarily relied on government funds to revive the city, and as a natural power broker, he enjoyed controlling the flow of resources from Washington and Lansing to Detroit. The money flowed freely during his early terms in office, but after allies President Carter and Governor Milliken departed, redeveloping Detroit without the strong support of business leaders became much tougher. Businesses and residents continued to disappear; victims of auto industry recession and restructuring, bank lending policies that drew the line on urban rehabilitation – and their own fear of the city’s future. At the end of the day, the most successful projects in those years were those Mayor Young championed with the help of private funding – Poletown, Chrysler Jefferson, River Place, for instance.

By the 1990s, after decades of top-down federal programs had produced mixed results at best, the government-centered approach to urban redevelopment was discredited. President Bill Clinton and a new generation of big-city mayors proved that a much more effective strategy for economic growth was the “third way” of using government incentives to stimulate and supplement private investment.

One of the most widely discussed examples of the difference between a government-centered strategy and a more entrepreneurial approach has been the slow, but successful introduction of significant retailing and residential developments in New York City’s Harlem. In 1994, the state stopped funding a quasi-governmental development agency that local politicians had controlled for years. Subsequently, more flexible relationships between developers, retailers and newly formed community development corporations – notably the Abyssinian Development Corporation, launched by the historic Abyssinian Baptist Church --brought in new projects that offered Harlemites the likes of Starbucks, The Disney Store, Old Navy and Magic Johnson Theaters.

These projects have not ignored the politically important factor of African American ownership. Besides the participation of Earvin “Magic” Johnson in the theater and Starbucks deals, the new projects have encouraged local black investors as retailers. African-Americans own and operate a national eyeglasses franchise, for instance, and have thrived as individual redevelopers of Harlem’s attractive brownstone homes. The result is that what was a stereotypically impoverished; inner-city community has rebounded without big government handouts and political back-room deal making. It is a shining example of the kind of thing we can and should accomplish here in Detroit.

How can Harlem’s successful brand of business-government partnership work for a city like Detroit? Well, one thing is certain: Step One must be to reestablish a positive environment for businesses here that is a model of openness, transparency and participation by all stakeholders. Only then can Detroit gain the legitimacy and credibility it needs to become a magnet for committed investment by the business community.

A city like Detroit must be known for its free markets. Barriers to entry must be few or none. Most importantly, Detroit city government must go all out to take the structural reforms begun during the Archer years to the next level and beyond. Lower taxes, streamlined business regulations, establishment of an Office of New Projects dedicated to fast-track business start-ups and real estate development, faster land assembly, increased pressure on do-nothing commercial property owners, even friendlier downtown parking policies will make a huge difference. Only when barriers to new investment in the city are eliminated will Detroit take off the way we know it can in the remaining years of this century’s first decade.

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‘A Sea Of Stagnant Properties’

Nothing symbolizes the stubborn obstacles that remain in the way of Detroit’s continued redevelopment more than the backlog of 40,000 to 50,000 land parcels that have reverted to City ownership, due to nonpayment of property taxes. The City’s recent failure to advance steps taken in the 1990’s to tackle the backlog reflects an old-fashioned, slow motion, approach to fixing Detroit’s problems that persists at the highest levels of government.

One of the principal accomplishments of the Archer administration was cleaning up the Planning and Development Department. We discovered and put an end to the corrupt practices of several long-entrenched employees (who had used city-owned residential properties for illegal rentals and other money-making schemes). We then catalogued all abandoned properties owned by the City. Later, we worked closely with the state, Detroit Renaissance, and Fannie Mae, to dramatically speed up the process of clearing title to tax-reverted properties.

The City took responsibility to put a big dent in the backlog. In addition, we created a public walk-in center for the Planning and Development Department in the Cadillac Square office building that continues to operate today, allowing potential developers, homeowners or investors to go determine the ownership status of Detroit properties via the Internet. The database includes the thousands of City-owned properties that are abandoned and should be available for purchase. However, the sea of abandoned City–owned properties will continue to stagnate and hinder efforts to redevelop neighborhood blocks and commercial strips throughout Detroit until City leaders take aggressive action.

In my opinion, two major policy changes will break up the political iceberg and get us moving again. First, the City needs to drop its insistence that all City-owned, abandoned properties be resold at market rates. Second, we need to end the arms-length relationship the City has had with viable, community-base developers and redevelopment organizations, and instead, give those parties resources they can use to make a big difference in how our neighborhoods look and function.

Detroit lost its investment in most abandoned properties it controls decades ago. Successive City budgets have essentially written off the tax revenue that once came in from this real estate, along with any revenue expected from reselling them. So stubbornly insisting that new investors buy them from the City at market rate or not at all makes no sense. The way to get these battered buildings and vacant lots cash flowing again is to get them in the hands of competent investors and developers, CDC’s and non¬profit organizations with proven track records that are ready and able to launch innovative renovation projects and make them even better than they were before.

When a burned-out shell is turned into a solid new home or an attractive commercial establishment, the enhancement to the community and the municipal tax roll is worth far more to the City than any “market rate” price it could reasonably hope to extract from a serious investor. In fact, under the right circumstances, donating the land to the investor or developer, free and clear of any liens or back taxes, can be the absolute best thing to do. I look forward to the creative energy that will result on the development scene when the City and the Detroit City Council finally lets go of its hard-line stance on reselling idle, City-owned land. That pipe dream is just as bad as the refusal of the perennial private speculators to sell their Detroit properties at reasonable prices. With Detroit’s redevelopment at stake, all public and private landowners need to get real!

As we seek to eliminate the public backlog, the City of Detroit will do itself a big favor by reaching out for a much closer working relationship with community developers who have or who can produce viable redevelopment projects for their neighborhoods. At the top of the list should be established, nonprofit community redevelopment corporations that have already proven their commitment and ability to rebuild neighborhood properties, but need more funds and better strategic partners, perhaps, to get more done. These CDC’s and other non-profit groups with proven track records are the proper entities to launch innovative renovation projects and make them even better than they were before. I would certainly include faith-based development organizations in that list of preferred community developers.

The City should seriously entertain the idea of deeding properties at little or no cost to these organizations, especially properties on the outer edges and inner pockets of the city where no momentum for redevelopment currently exists. At the very least, church-base and other community organizations with a track record of long-term neighborhood involvement and the wherewithal to complete successful development projects should be offered a first option on real estate the City wants and needs to put back on the market.

Finally, inspired private developers who are ready to take on several redevelopments or a major project involving dozens of units should also have a prominent seat at the planning table. City government can lead the way by encouraging corporations, foundations, banks and other financial institutions to put significant new investment funds into the hands of worthy community developers. Therefore, local representatives of the Local Initiatives Support Corporation, a national organization that has supported community redevelopment for decades, should play an important role. Of course, the City’s role should be a matter of leveraging partnerships that already exits between City officials and leaders of institutions in position to invest in neighborhoods.

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‘Good Ideas, Bad Ideas, Proper Tools’

Potential redevelopers should find tremendous value in 10 documents that together formed the 1997 Community Reinvestment Strategy report, which was commissioned by Mayor Archer, CRS was a grant-funded project and The Greater Downtown Partnership, a non-profit corporation whose mission is to accelerate the physical revitalization and economic development Downtown and midtown districts served as fiduciary; the Planning & Development Department sponsored and managed the project, and provided in-kind support. and paid for by the Greater Downtown Partnership the business coalition that prepared redevelopment strategies for the central city’s Lower Woodward Corridor and Midtown districts.

The CRS report, prepared by more than 100 Detroit residents active in their neighborhoods, produced detailed recommendations for redeveloping every underused parcel in Detroit. The ten Cluster reports produced by CRS participants were placed on file for public review at the Detroit Public Library, at library branches throughout the city, Neighborhood City Halls and at the Planning and Development Department. Rather than let this valuable document continue to collect dust, City officials should use it in strategic planning sessions with community developers to chart a course for Detroit’s neighborhoods.

A third step that could make a big difference would be the creation of the Office of New Projects possibly within the City’s Planning and Development Department to put all commercial development projects as well as residential subdivision or multiple-unit residential projects on a permanently fast track. There is no reason for developers to spend huge amounts of time and money on government approvals for Detroit projects that would fly through the approvals process in other cities. The advances made in the 1990’s to streamline approvals procedures in City departments that regulate real estate and new business development (Planning and Development, Building and Safety Engineering, Consumer Affairs, Finance, and other departments that impact the business startup process) should be consolidated in the New Projects unit.

However, a solution proposed by the state legislature and supported by Mayor Kilpatrick in 2003, the creation of a land bank in Detroit, would be the wrong way to handle the city’s vacant land problem. The proposed land bank would have consisted of four members appointed by the mayor of Detroit, with the fifth member appointed by the governor. This quasi-governmental entity would have full control over any vacant land deeded to the state due to non-payment of taxes. The sale, leasing and redevelopment of the land would be determined solely by the land bank panel, and all proceeds of any sale would go to the land bank, presumably to pay for more demolition and title clearance, instead of the City.

Rather than give up its authority to determine how City property will be reused, government leaders should grasp a better understanding of tools the state has already given Detroit for quick land condemnation and redevelopment, such as the Obsolete Property Rehabilitation Act, a law passed in 2000 that authorizes local governments to establish commercial redevelopment districts eligible for exemption from property taxation. Another important tool is the Brownfield Redevelopment Act, also passed in 2000, which offers developers a credit against the state’s Single Business Tax. This law allowed the Sterling Group/Schostak joint venture to receive a tax credit for as much as $1.7 million for their ongoing Lofts of Merchants Row project, a $17.3 million redevelopment of six historic buildings on Woodward at Grand River.

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‘The Race Card Doesn’t Have To Be The Wild Card’

The old urban model of patronage and political empire building won’t work in a city that hopes to create or maintain a positive business environment. As a developer or investor I’m not on a level playing field if I have to put money in someone’s hand or hire the friends or relatives of politicians in order to get a deal done. If I know my proposal is up against one submitted by the sister or cousin of a well-placed official, I’m probably now going to waste my time, effort and money. Right now, Detroit is perceived as a place where these are the grounds rules. It needs instead to be known for the openness and fairness of its processes and the integrity and accountability of its leaders.

Also, I believe much of the politicizing of development projects in Detroit will vanish once we begin electing our City Council members by district, a concept I will discuss further in the following chapter. The need to make the office of city council more accessible to a broader range of Detroiter’s is critical. If Council members have to answer directly to a core group of voters, a great portion of the grandstanding that delays projects in the name of “the people” or “the community” will be eliminated.

Meanwhile, we don’t have to stop promoting entrepreneurship among people of color – African American, Hispanic, Arab, Asian and Chaldean – in order to run a free market economy. However, business preferences that discourage everyone else from coming in simply won’t work. Government simply needs to make it easy for entrepreneurs who adhere to good business practices to succeed – then let the world know that Detroit is a great place for people of color to make their mark. As Atlanta has done, we need to cultivate an image of Detroit as a happening place, a high-growth center, for young black professionals in particular. Detroit’s business networking groups should become more visible and more active in the community – again, following the successful Atlanta model. There are probably more opportunities in Detroit than any other big city for such groups to make strategic investments that can help direct the city and shape its enduring image.

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‘Forging Partnerships With Business’

Despite the cautious relationship that has developed between government and business in Detroit throughout the years, our progress during the 1990’s gave us reason to hope for long-term improvement. The response to Detroit’s Empowerment Zone application in 1994 and the momentum to rebuild the city that grew during the last decade showed us that civic pride among Detroit’s business leaders is not dead – it had just been dormant for too much of the past. We saw what is possible when the business community has confidence in the City’s leadership and is motivated to act in a coordinated way.

Private investment in our 18.3-square mile Empowerment Zone – especially by the major automakers and their suppliers – jump-started the multi-billion [total estimates run as high as $18 billion] dollar reinvestment in Detroit seen during the Archer administration. Commitments from Detroit businesses produced an Empowerment Zone application that the federal government said was the best in the nation, and led to several billion dollars in new development in previously neglected areas of the city. More than $6 billion was invested in new facilities for auto suppliers in our Empowerment Zone and our state-designated Renaissance Zone, many of them owned and operated by African-Americans, Hispanic, Arab and Asian entrepreneurs.

Moving beyond direct manufacturing investment, the corporate CEOs who comprise Detroit Renaissance helped put together an Empowerment Zone Financial Institutions Consortium, which committed to lending $1.1 billion to zone-area businesses and homeowners within a decade. Detroit lenders met their 10-year goal in only four years. In addition, Detroit Renaissance contributed $53 million to create the Detroit Investment Fund, which provides “gap” funding for emerging Detroit businesses.

The members of Detroit Renaissance were also the core group of the Greater Downtown Partnership pact, which was formed in 1996 to re-energize the heart of downtown Detroit. Local foundations and the philanthropic arms of local corporations provided seed money that allowed this agency to study our development challenges, make recommendations, and assemble land for the redevelopment of our central business district and adjacent neighborhoods. Of course, the Downtown Partnership gained control of the Hudson’s Building, whose demolition made construction of Compuware headquarters possible. The Partnership also served as fiduciary to the one-year initiative called the Community Reinvestment Strategy, which allowed Detroit residents to make detailed recommendations regarding the redevelopment of their neighborhoods.

We see the vital business-government partnership at work in the operation of the New Detroit Science Center, the efforts of the Super Bowl committee to make our main corridors more attractive by February 2006, and in preparation for the 2005 Major League All-Star Game – all initiatives launched by former Mayor Dennis Archer. These are just a few prominent examples of the progress Detroit has made toward an improved business climate and a permanent image adjustment.

Detroit learned during the 1990s that partnerships with private foundations could work wonders in a major urban city. The previous administration formed a Foundation Liaison unit for outreach from the executive office, and local foundations helped pay for the director’s salary. Here’s just a sampling of what we accomplished:

• The Robert Wood Johnson Foundation made a $10 million commitment over 8 years for a program called the Youth Connection, which supports the health and safety of Detroit’s children.
  
• Eleven foundations funded the Neighborhood Founders’ Collaborative, an $11 million, five-year program to increase the working capacity of 16 community development corporations in Detroit.
  
• Seven foundations supported Detroit’s Recreation Recapitalization Project, which completely renovated four popular and historic recreation centers. The foundations matched a $4 million commitment from the City with a grant of $8 million.
  
• The Skillman Foundation established the Detroit Youth Sports and Recreation Commission to invest in our youth by creating better connections between private and public recreational facilities. The Youth Sports and Recreation Commission has provided funds for community programming and development as part of The Pistons-Palace Foundation Park Program, a $12 million program led by the Detroit Pistons organization, local corporations, and the Community Foundation of Southeastern Michigan. Thirty-three Detroit parks and playgrounds were renovated and received new equipment through this initiative.
  
  The Skillman Foundation was also an active supporter of improved communication between parents, teachers and public school administrators in Detroit with its Schools of the 21st Century Initiative. In addition, Skillman’s $2.5 million gift was the largest donation to the capital improvement campaign of the Detroit Institute of Arts.
  
• The W.F. Kellogg Foundation committed $8 million for capital and operating dollars over 10 years to finance The Family Place – a project that turned a closed public library into a renovated facility for daycare, Head Start classes, and other services to families and pregnant women and teens. The Family Place has offices for about 15 government and nonprofit agencies.
  
  The Kellogg Foundation also committed nearly $21.5 million to the Detroit Youth Foundation, a comprehensive program that is focused on a 20-year project to improve the career preparation of low-income youth in a single Detroit neighborhood.
  
• Late in 2003, the Knight Foundation, under the local direction of former Detroit Foundation Liaison chief David Smydra, made a $24.3 million commitment to improve several Detroit neighborhoods and expand regional arts access.

Detroit has virtually written the book on foundation-government partnerships. Yet, I believe the foundation community is willing and able to do even more to strengthen our city’s social structure and improve the business environment. Like the business community which often sponsors and helps lead them, foundations and affiliated third-party organizations need solid relations and long-term confidence in Detroit’s elected officials and other civic leaders to continue their good work. These ties are critical to the future of Detroit – especially in our neighborhoods, where the most important challenges our city faces have yet to be conquered.

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‘Amazing Things Can Happen’

When the business community is mobilized to provide strong civic leadership, and the rules of engagement are clean and clear, amazing things can happen. It doesn’t get much more amazing than Compuware’s relocation to headquarters on Woodward Avenue, the Ford family’s decision to bring the Lions back to Detroit or Mike and Marian Ilitich’s decision to take on most of the cost of Comerica Park.

But I envision an even greater level of business activity and civic involvement in Detroit in the future. With a proper business environment in place, there will be more new headquarters in Detroit on par with Compuware. There will be innovative corporate support of Detroit’s most significant development needs of the city. I can even envision corporate or foundation sponsorship of major economic development projects on a level we’ve never seen before – such as underwriting the private costs of a regional commuter train line, in conjunction with federal, state and city government support. I can imagine joint sponsorship of an industry research center or tourist destination such as an urban enclave that celebrates Detroit’s rich heritage in the modern music and entertainment industry.
It is now common for businesses to pay for the right to put the company name and logo on stadiums, arenas and theaters. I believe inspired companies would also be willing to pay for the brand marketing and goodwill that would be generated internationally as they sponsor innovative economic development projects in Detroit that bring benefits to the entire region, state and nation.

Yet, even as we imagine a dynamic new future for the city, we all must acknowledge that the principal business of business is business! It’s not philanthropy. The missing link in all of our hopes and dreams for Detroit in the 21st century is proper leadership from our city government. My years of experience in both business and government convinces me that proper City leadership – disciplined, bold, experienced, visionary leadership – makes all the difference.

And my faith in Detroit convinces me that we can once again provide the integrity in government that produces a level playing field for all who choose to do business here. We can get off idle and put our economic engine in gear again. We can recapture the entrepreneurial energy and regional momentum that will lift Detroit to the top tier of U.S. cities that is modeled around the world. The world is watching and waiting.

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