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A vacant, burned house is pictured in Detroit's east end on March 19, 2013. There are almost 150,000 vacant or abandoned parcels of land throughout Detroit, covering ground equal to the size of Manhattan. (Deborah Baic/The Globe and Mail)
A vacant, burned house is pictured in Detroit's east end on March 19, 2013. There are almost 150,000 vacant or abandoned parcels of land throughout Detroit, covering ground equal to the size of Manhattan. (Deborah Baic/The Globe and Mail)

Detroit may not return to past glory, but don’t stop believing Add to ...

Has the bankruptcy news weakened his will? Not at all. The filing “is the first step toward a better and brighter” future, Mr. Gilbert says, and he is “more committed than ever to Detroit and the opportunities downtown.” The city will thrive again, he insists, “and sooner than most think.”

That’s also the vision of Josh Linkner, head of Detroit Venture Partners, a firm that funds tech startups and aims to spur employment and urban density in the city. Its funky offices, aimed at being the “ground zero of entrepreneurship,” still show the brick bones of its century-old movie-theatre origins. The glitzy Madison bulb sign still hangs outside.

Inside, though, more than a dozen new businesses are humming, their young workers focused on the next app. The walls are writable, so people can scribble ideas or hold collaborative meetings on beanbag chairs. Some have relocated from San Francisco, Seattle or Philadelphia. The dream, however farfetched, is that with its cheaper labour and living costs, Detroit could one day rival Silicon Valley.

Mr. Linkner was born and raised in the city, with a front-row seat to decades of corruption, hubris and decay. Sitting in his office’s boardroom, he radiates optimism: “There’s a magic in the air. An incredible vitality is taking hold,” he says – adding that the next five to eight years in Detroit will represent “the greatest turnaround story in American history.”

Mr. Linkner hopes that the activity in his building will do for entrepreneurs what Detroit’s Motown Records did for soul music in its day, launching the Jackson Five, the Temptations and Stevie Wonder. He rattles off numbers: If it keeps up its pace of investment and the companies grow at the same pace as Silicon Valley startups, it would bring 6,500 new high-paying jobs in the next decade and more than $1-billion in economic impact to the city.

So far, the evidence that private sector investing has boomed in Detroit is mostly anecdotal, and there are few concrete figures to support the view that private money is pouring into the beleaguered city.

“Good secondary data have not caught up to the anecdotes,” says Kurt Metzger, director of Data Driven Detroit, a non-profit agency that tracks and analyses information about the city. Still, he says, “the corporate and private philanthropic investment are real.”

Some numbers do suggest things are improving: The Brookings Institution has ranked Detroit seventh among 100 cities for its degree of economic recovery since the recession. The web site CareerBuilder says Detroit is among the top four metropolitan regions for job growth between 2010 and 2012. And the Detroit region’s chamber of commerce says almost $10-billion has been invested in commercial, industrial and regional properties in the city in the past five years.

How will these businesses be affected by the bankruptcy? The direct impact so far has fallen mainly on companies that sell goods or services to the city. They will likely not get all the money they are owed, perhaps only a few cents on the dollar.

For entrepreneurs in the city core, services such as fire fighting and policing were already sketchy, and can’t deteriorate much further. Now, at least, the filing means that money for those activities will not have to be diverted to pay down debt.

Mr. Linkner and other entrepreneurs think that Detroit has an edge because of the very qualities that are born of turmoil and struggle: grit, resilience, innovation and self-sufficiency. And they are willing to bank on that.

Under new management

The question is, will the city ever match their investments and energies? Reading recent reports, it’s hard to believe there’s been any responsibility in City Hall, much less inspiration. And for a long time that was true.

John Boyle, a Detroit-based consultant, remembers looking at the books a decade ago and realizing that the city was set to run right out of money. He prepared a presentation for city council and dropped the bombshell – pension and benefit liabilities meant Detroit was $7.2-billion in the hole. Bankruptcy was a real risk.

The response? Some councillors doodled in their notebooks; no one asked a question. “I was dumbfounded,” Mr. Boyle says.

It’s that kind of neglect that left the city too broke to pay the billions it owes bondholders, and to cover the pension and health-care costs of city workers. In early spring, the state of Michigan appointed an emergency manager, Kevyn Orr, to try to turn the city around. Mr. Orr finally concluded there was no out but bankruptcy.

Yet even a couple of years before this moment, necessity had begun to shift attitudes in city government. Under popular Mayor Dave Bing, a former pro-basketball star and businessman, Detroit began a broader search for a new vision in 2010.

“It became clear to me that ‘business as usual’ would not effectively transform our city,” he said in January, “and a new framework for Detroit’s future needed to be developed.”

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