Atif Detroit

Detroit: Thoughts for the Urban Environment

2014 Summer Tour, Columbia Team 1 Blog Comments (0)

By Atif Z. Qadir

It goes without saying that Detroit faces monumental challenges from decades of city sprawl, political turmoil, industrial decline, public sector expansion, and infrastructure decay. Even worse, population decline exceeding 25% in just 10 years has resulted in the twin evils of plummeting tax revenues and abandonment of large swathes of the city.  In reading about Detroit in the press and talking with friends and family back in New York, the question that kept on coming up was “How do you fix Detroit’s problems?”  After talking with hard-working local entrepreneurs, and innovative civic leaders, being immersed in the vibrant DIY small business environment, and seeing the city for myself for a week this summer with the MBAs Across America program, I realized that the question of how to fix Detroit can be more accurately framed since the city’s challenges also represent opportunities.

First I considered “Why does the urban environment matter to business?”  As an architect, I am aware of how the physical infrastructure of a city influences the character of a place.  As a long-time New Yorker, I am aware of how a strong emphasis on physical renewal under the Koch, Dinkins, and Giuliani administrations helped save a city on the brink of financial and social collapse.  I think this experience has not been lost on the many Detroit-ers I have met who are thinking of the future of their own city.  Second, I wondered, “How does Detroit address the problems in the urban environment?”   After reviewing ambitious plans such as the Detroit Future City project, three key concepts seemed to come up again and again as we tried to answer this question for myself:

1)     Frugality: Municipal bankruptcy has made frugality a harsh reality for the city, but it has also given the city the opportunity to emphasize how much can be done with limited resources through innovative and forward-looking strategies.  This isn’t a simple task, because as the owner of Oakland Living, the successful Detroit-based small business and my client during MBAs Across America noted, “it is easy to fall into the trap of tripping over a dollar to save a penny.”  That said, fiscal conservatism has to be the first step of any recovery.

2)     Performance Metrics: Specific goals for population growth, job creation, crime reduction, and tax base expansion help to hone efforts to improve the urban environment.  The city must make accommodations for robust data collection and vigilant measuring and monitoring of performance of these metrics, similar to what is done in retail or technology services.

3)     Accountability: Making the city’s finances publicly available through the Finance Department through formal annual reports has helped rebuild trust in a government.  The city can take this to the next level with more frequent and easier to understand information with relevant reporting on a department-by-department basis.  This would ensure frugality and a performance-oriented approach to investment in the urban environment.

THOUGHTS ON HOW TO DRIVE CHANGE IN THE URBAN ENVIRONMENT

Sources:

Detroit’s leaders should continually emphasize the development of reliable supply-side sources of revenue that allow for a diverse stream that is not dependent on federal allocations like tax credits.

  1. Sell Real Property held in City Receivership: Detroit is sitting on thousands of acres of underutilized or abandoned land and buildings.  All of it cannot be saved, and potential buyers are hard to come by, but land or buildings that can be sold could be done so even at a severe loss in order to a) take the properties off the City’s books and b) encourage an influx of outside cash.  Along with the transactions, the City could consider selling ground leases or adding covenants to deeds in order to maintain control of development, while also initiating flexible zoning to kick start private development.
  2. Pursue Grants from High Net Worth Individuals with Deep Ties to Detroit: The City could look to prominent Detroiters in creative fields, such as Marshall “Eminem” Mathers and Madonna (Music), Anna Sui (Fashion), Francis Ford Coppola (Film), and Steve Balmer (Tech) for grants as well as social capital to help brand the resurrection of Detroit’s urban environment as forward-looking and inventive and drive exposure to the City and its renewal. New York City’s Highline Park is a great test case for such an effort.
  3. Take Tax Credits and Other Funding from State and Federal Government: Detroit could access New Market Tax Credits, and Low Income Housing Tax Credits to build and renovate the dilapidated stock.  It is important to be very controlled in the use of these funds, as they equate to credit taken on potential future tax revenues.  The successful implementation of these resources require strong cooperation between the government agencies providing funding and in turn expecting results, and the community-based developers using the funding.
  4. Offer EB-5 Visas for Qualified Foreign Nationals: The City could raise funds through zero-interest loans from foreign nationals from the EB-5 visa program.  This program allows foreign nationals to invest at least $500,000 in a business investment in the United States that creates at least 10 jobs.  The City could designate the most promising parts of the Downtown area as a Targeted Employment Area (TEA) in order to qualify for the $500K EB-5 hurdle and streamline the application and approval process.  It could stipulate that visa grantees must a) relocate to this TEA and b) invest into new or existing business enterprises in this specific area.[3]
  5. Raise Equity from Passive and Active Investors: The city could access equity from private developers who are willing to do Public Private Partnerships with the city for infrastructure projects in Detroit.  Also, the city could consider raising funds in more creative ways, such as forming a social impact focused REIT with the most prominent, historical buildings in the New Detroit Cores that could produce rental revenue once they have been renovated and then selling shares in the REIT.  Potential investors include social mission focused foundations, pension funds and university endowments.

Uses:

With these funds, Detroit’s leadership could deploy capital that is raised in efficient ways to improve the urban environment.

  1. Pay Down Debt on Water and Sewer and other Municipal Services: Once totaling as much as $6B or 1/3 of the total debt owed by Detroit, municipal services-related debt is still a serious financial burden.  Therefore, it is important to make this the first use of capital that is raised (Source #1), since this transaction would a) emphasize the need of addressing past issues before new spending, and b) promote fiscal responsibility on a large scale.
  2. Shrink City through Controlled Demolition: The Detroit Future City plan sets out the goals of addressing blight, improving public safety, and encouraging neighborhood-level place making.   In driving through Detroit to and from Oakland Living’s facilities and MBAs Across America events, I was able to really see how big Detroit really is, which makes this goal seem very difficult to achieve.  Detroit could therefore consider prioritizing neighborhoods using population density, building quality, household income, and distance from the Targeted Employment Area as metrics.  HNWI-derived funding (Source #2) could be used to fund controlled razing of deserted areas due to the relative difficulty in finding funds for demolition of areas outside of these “New Detroit Cores”.  This would benefit Detroit by a) serving as a creative response to suburban flight, b) creating jobs in the construction industry, c) reducing costs to the city for maintaining far-flung municipal services, and d) diversifying the city’s economic base with urban farms in the demolished areas, as done by the Michigan Urban Farming Initiative.
  3. Redevelop/Upgrade Buildings in New Detroit Cores: The City could lead the redevelopment of prioritized areas based on data-driven comprehensive community development, and making use of tools such as inclusionary zoning, tax incremental financing (TIF), and transit-oriented development, and other methods as part of the Detroit Future City’s Strategic Renewal Pilots.  Priorities of funding from Source #3 and Source #4 could include building/converting to a) affordable housing to promote movement to the New Detroit Cores, and b) necessary economic drivers like light manufacturing in the Targeted Employment Area.  A great example of this is the headquarters and assembly facility of watch-manufacturer, Shinola.
  4. Encourage Technology/Industrial Business Incubators: Incubators and funding through venture capital firms like Detroit Venture Partners help counter unemployment through investment in the development of startups and small businesses.  Future funding could be funneled to a) mobile applications for motor vehicles or public transportation, or b) new transportation such as hybrid scooters, both of which connect to Detroit’s industrial past.   They could be housed in unoccupied buildings/factories in the Targeted Employment Area and offer training on high-tech skills in coordination with local universities.
  5. Extension of Rapid Bus System: Detroit is a tough city to get around without a car.  The city could identify current high use bus stations and propose a plan with new stations and additional buses which a) helps direct growth but is flexible enough to respond to it as well, b) connects residential areas to commercial areas, not just within commercial areas, and c) connects wealthy suburbs which are a source of skilled labor with the New Detroit Cores. By expanding the bus system, the department will be spending less than on subways or trains, while celebrating Detroit’s motor vehicle heritage.   This could be realized through Public Private Partnerships with for-profit developers or other creative capital (Source #5).

By using the renewal of the urban environment as an example for change in other arenas for the city, Detroit’s leadership can help ensure deep impact that goes far beyond physical infrastructure to economic development and social change.

–Atif Qadir

 

 

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