Detroit must act now to support recovery from bankruptcy | Opinion
Since last night’s sold-out in-person and virtual premieres, some 2,000 people in southeast Michigan have seen “Gradually, then suddenly,” the seizure and – I emphasize – timely documentary that traces the 16 months of 2013-14 in which we nearly lost our city to the largest municipal bankruptcy in American history. More Detroiters will be able to see the film for free next week, ahead of a potential national release.
The film tells the near-miraculous story of creativity, resilience and courage that saved Detroit from the black hole of creditor claims against city pensions, artwork and municipal assets. As producer Sam Katz promised when he approached us for help with financing, this film makes the complexity of bankruptcy understandable without losing sight of the historical context of the city’s fall into insolvency and its costly impact. on residents. It captures the high-stakes clashes in courtrooms up to the $800 million Grand Bargain — to which the Kresge Foundation contributed $100 million — that became the linchpin of a consensus resolution, sparing the city a decade of crippling litigation.
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More importantly, “Gradually Then Suddenly” captures the pain and cautious optimism with which Detroit emerged from bankruptcy. He quotes US Bankruptcy Judge Steven Rhodes’ message to the Detroiters as he approved the final adjustment plan: “I urge you now to remember your anger. Your enduring, collective memory will be exactly what will prevent this from ever happening again.
We lose sight of these words today at our peril.
Reset and renewal
The adjustment plan gave us a window to put our financial situation in order, to chart the way forward. The implicit idea: a city managed with prudence and offering high quality services to residents would increase its population, encourage new businesses and maintain its financial balance. Success would catalyze more success.
Indeed, the sweep of success over the past decade has been breathtaking.
Mayor Mike Duggan has rightly earned his reputation as the Fix-It Mayor. City finances are well managed. New accountability and transparency mechanisms are in place. The streetlights are on. Destroyed structures are demolished. The parks are modernized. New residential and commercial projects dot the landscape – in the town and city center, as well as in the city’s booming neighborhoods. More and more Detroiters are benefiting from bold workforce development initiatives. Federal stimulus and infrastructure investments promise a transformative and lasting impact. Bond ratings have risen. And much more.
The other side of the ledger is sobering. Even taking into account the 2020 census undercount, the city’s population continues to decline, including for middle-class black households. A city long proud of its ownership has become a city of majority tenants. Despite new commercial and industrial jobs, Detroit has the second-highest official poverty rate of any major city — over 30%. A downtown that seemed to be taking off faces deep uncertainty in a post-pandemic world of flexible, remote work.
Moreover, we continue to be burdened with the cascading consequences of high property taxes, as they drain wealth, discourage development and fuel the relentless machinery of foreclosures. We still haven’t found a recipe for residents to generate and maintain wealth.
Which brings us back to Judge Rhodes. Because we are working against the clock.
The bankruptcy adjustment plan delayed by 10 years – until July 2024 – the city’s obligations to restart its annual payments to meet unfunded pension liabilities. These payments, if not well managed, could threaten funding currently allocated to essential services and investments in quality of life. Fortunately, the Duggan administration is planning ahead so Detroit has a smooth transition to meet those obligations.
We have received a temporary lifeline from the federal cascade of COVID-19 relief, recovery and infrastructure dollars. Not because they can be used to fund pension liabilities – they can’t. But instead, because they can be applied to other parts of the city budget, allowing creative reallocation of capital between key activities. The challenge, of course, is how to avoid creating a spending pattern that will have to be abandoned soon after pension payment obligations begin.
It can be done. But we must design creative combinations of public, private and philanthropic funds that will ensure efforts are both transformative and sustainable.
What to do ?
We have only one way out: to forge a series of civic pacts between public, private, philanthropic and civic centers to undertake transformative investments and policies to increase municipal revenues, reduce poverty and generate the wealth.
The good news: We can couple federal and state stimulus funds with municipal budget priorities and private and philanthropic capital to seize a once-in-a-generation opportunity. The outlines of what needs to be done are increasingly clear. Here are four community must-haves:
• First, reform our property tax system. Our property tax system erects a stubborn structural barrier to the economic stability and long-term health of the city. Simply put, we must create a city that empowers residents to generate and sustain wealth, especially black wealth, if we are to succeed.
A recent study commissioned by Kresge suggests a blueprint for doing just that. It proposes to reverse municipal taxation by reducing the burden on landlords and other owners of developed properties and to offset increased taxes on vacant or underutilized land to compensate. We cannot move fast enough to determine whether this reform or another can break the high-fiscal stranglehold on our city.
• Second, adopt innovative strategies to reduce poverty and create wealth among black and brown Detroiters: beyond removing the unfair burden of taxation on Detroiters, we must deepen our public, private and philanthropic commitments towards clearly marked paths to wealth creation.
Equip community development financial institutions to transfer dollars to black real estate developers. Provide incentives to community banks to provide more flexible loan terms to community organizations. Create vehicles that give residents the ability to purchase real estate assets, allowing them to benefit when those assets appreciate in value. Use federal funds to strengthen public-private workforce development and placement systems.
Once the domain of academic theorizing, these strategies are now being field tested in communities across the country. Our early efforts in Detroit need to be greatly intensified.
• Third, seize the catalytic potential of investments in open spaces. The development of open spaces of all sizes—from pocket parks and neighborhood greenways to the revitalized riverfront—has been an integral part of Detroit’s revitalization. The growing commitment of federal, state, local and philanthropic dollars to complete the Joe Louis Greenway and the West Riverfront recognizes that these spaces are not only a down payment on improving public health, but also a powerful stimulus for housing. and business investments.
• Fourth, improve K-12 public education and link it to an equally strong early learning system. Many major companies in the area continue to participate in education reform, providing staff and funding to support the efforts of Detroit Public Schools Community District Superintendent Nikolai Vitti to execute the facilities master plan for the district. This must go hand in hand with deep and transformative investments in early childhood development.
Committing federal and state dollars to create universal pre-K programs is a good start. The next step must be to secure long-term investment structures that ensure that every child has access to a high-quality preschool program, that early childhood providers receive fair wages, and that all programs are governed by high quality standards. quality.
The Grand Bargain was a unique response to a crisis of the moment. While the fiscal challenges of 2024 and beyond may seem less urgent, they are not. We have both the time and the resources to set in motion a wheel of capital-intensive innovation, programmatic boldness, and systemic reform that will reposition the city for long-term health and vitality. Anything less will breathe tragic new meaning into the title of Sam Katz’s film title – “Gradually, Then Suddenly”. We cannot allow this to happen.
Rip Rapson is the president and CEO of the Kreske Foundation.