It was years in the making and still came as a shock: Last month, Detroit became the largest city in U.S. history to file for bankruptcy, marking a new low in the history of the place that once symbolized American industrial prowess.The crisis has long been obvious to any visitor: The former Motor City is virtually empty of traffic, thanks to the long exodus in which nearly two-thirds of the population has fled since its 1950s peak. From murder and illiteracy levels to jobless and foreclosure rates and its 80,000 empty buildings, Detroit showcases the worst of America’s manufacturing decline.
Race crises and official corruption have made matters worse. Fires, decay and blood-red graffiti have left some streets looking like a war zone. Even the border guard at the Detroit-Windsor crossing warns Canadians on their arrival: “Don’t quote me on this, but don’t wander anywhere.”
But this is not the whole story of Detroit. Its public sector may have hit rock bottom, but among the ranks of private business people, non-profits, artists and activists, there has been bold talk for a while now of a Detroit renaissance.
There may be extra blocks on that road today, but the momentum in Detroit’s core “is real and palpable and provides a strong foundation for future growth,” noted researchers at the centrist Washington think tank the Brookings Institution in July.
Some of this new crop of Detroit boosters even welcome the bankruptcy filing, saying it may be the very thing the city needs to wipe its slate clean, and to begin to act on the new blueprint it adopted earlier this year for a sustainable future.
It isn’t the easiest thing to believe. Here is a city where police take almost an hour to answer an emergency call, and where racial divisions, lack of safety and insecurity have undermined education, leaving the general population well behind any call for modernized 21st-century employment.
But many entrepreneurs and experts really seem to think the poster child for urban ruin could become a testing ground for adaptation to a post-industrial age. If so, it would be just in time. Cities such as Buffalo, Cleveland and Youngstown, Ohio, are undergoing similar transitions. In Canada, Detroit’s neighbour, Windsor, and northerly Thunder Bay, Ont., also have seen populations shrink.
“There is a movement in North America now which is focusing on declining cities and what to do with them from a planning perspective,” says Pierre Filion, a professor at the University of Waterloo’s School of Planning.
Other cities have gotten stuck in spirals in which government costs grow faster than revenues, adds Michigan State University’s Eric Scorsone. Chicago’s credit rating, for example, was downgraded this summer. “This is a wakeup call for other cities to … avoid Detroit-style problems in the future,” he says.
City journalist Charlie LeDuff argues that the challenge speaks to the very soul of America. In his raw recent book, Detroit: An American Autopsy, he acknowledges that things are “awful.” But, he writes, “Detroit is America’s city. It was the vanguard of our way up, just as it is the vanguard of our way down. And one hopes the vanguard of our way up again.
“Detroit is Pax Americana. The birthplace of mass production, the automobile, the cement road, the refrigerator, frozen peas, high-paid blue-collar jobs, home ownership and credit on a mass scale. America’s way of life was built here. … Detroit cannot be ignored, because what is happening here is happening out there too.”
The Quickening of downtown Detroit
The most optimistic of Detroit’s boosters has already placed a big financial bet on the city’s recovery. Dan Gilbert, the founder and chairman of Quicken Loans, the third-largest mortgage lender in the United States, relocated its headquarters from suburban Michigan to downtown Detroit in 2010. He didn’t want his employees just to work there – he wanted them to live and play there, too, and he was willing to pay them to do it.
Today, more than 10,000 people, many of them young, work in Quicken Loan’s city offices, and staff get subsidies for living downtown: $2,500 toward apartment costs their first year and $1,000 the year after, or a $20,000 forgivable loan toward the purchase of a home.
On top of that, Mr. Gilbert has invested nearly $1-billion to buy more than 20 office buildings in the city so far, which he wants to fill up with his own and other businesses, along with residential units. This year alone, he has bought a majority interest in the Greektown Casino-Hotel, snagged a Woodward office tower and brought Papa Joe’s Gourmet Market into the city.
Mind you, there are those in Detroit who regard Mr. Gilbert as a property vulture, taking advantage of a depressed city and feeding off tax breaks to his own advantage. But according to Brent Ryan, who teaches urban planning at the Massachusetts Institute of Technology, Mr. Gilbert’s leap of faith is fuelling the biggest privately financed urban-reclamation project in U.S. history.
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.”
The resulting 349-page, 50-year plan, unveiled this year, is the first such comprehensive blueprint for any city, says one of its authors, Dan Kinkead, director of Detroit Future City. Its creation involved hundreds of meetings and 30,000 conversations with residents and community leaders, along with 70,000 survey responses.
Its scope is ambitious: The Detroit it describes would have high-density, walkable communities, punctuated by forests, farms and ponds, along with – in a twist, given its roots as Motor City – efficient public transit. Business startups and industry clusters would fuel job growth, and art, landscaping and bike paths would dot the city.
Detroit Future City is also the first plan to accept that the city will not return to its peak population of almost two million people from its current 700,000. That means tough decisions on which neighbourhoods should get the benefits of reinvestment and which should be “decommissioned,” with a long-term plan to reduce services as people move to denser and more vibrant areas.
Many residents will be angry and resistant to the idea of leaving their homes. But “we just don’t have the means to provide the same level of renewal across the city,” as the costs of services are rising just as the city’s tax base is falling, Mr. Kinkead says.
The question, especially now, is how the plan would be implemented and who would pay. The philanthropic Kresge Foundation has pledged $150-million over five years to support the plan, but that is just a small fraction of the billions needed. Mr. Kinkead says the bankruptcy should not have a direct impact on the project, because it does not rely on government funds, which sounds like a rosy claim.
Many other smaller cities have gone bankrupt, but none even close to the size of Detroit. The next largest was Stockton, Calif., half Detroit’s size, which filed for bankruptcy protection in 2012. The closest parallel, though, is New York, which came perilously close to bankruptcy in 1975 but was saved by a federal loan and an investment by the city’s teachers union in city securities.
Like Detroit, New York faced massive job losses because of a decline in its industrial economy, exacerbated by a recession, and debilitating crime. It did recover, of course, by slashing its crime rate and revitalizing its decayed industrial neighborhoods into spiffy residential areas. But it wasn’t until the 1990s that the recovery really kicked in, and it took two decades after the near-bankruptcy to recoup its population loss.
Significant improvement in Detroit, then, will be a long road, even if the city comes out of the process with a clean slate and Mr. Orr follows through with his promise to erase the debt and invest $1.25-billion in boosting services and infrastructure.
In the meanwhile, though, far from City Hall, many people on the ground have started building their own new Detroit.
‘Hardship has forced us to be creative’
DJ and bar owner Zak Pashak, 32, moved here from Calgary last year to pursue his ambition to establish a bicycle-manufacturing plant. He describes the city’s mood as curious, weird and still having “the remnants of a pretty glorious place.”
He bought a 50,000-square-foot industrial space, with functioning light and electricity and a paint booth, for just $190,000. It’s easy to find motivated, qualified workers, he says, particularly those with a mechanical aptitude. He aims to produce 100 bikes a day, priced at about $500 each and hopes to distribute them through North America. The brand name? Detroit Bikes. Perhaps some day they’ll be calling this the Pedal City.
“It’s a very interesting city to me,” says Mr. Pashak, “and I wanted to find a way to be part of this nice energy that’s happening.”
As the pattern often goes, young artists arguably seized upon the area’s advantages even before the entrepreneurs. Attracted by all the available space and perhaps the romance of the city’s past, artists from as far as the Netherlands and Germany are coming to stay and work “in a city that’s supposed to be washed up,” says Jenenne Whitfield, executive director of long-established art-and-education program the Heidelberg Project, an oasis of bright colour on the half-burned-out east side.
“This city is a place of new ideas that have changed the face of the world,” Ms. Whitfield says. “Hardship has forced us to be creative. And art is a catalyst for change.”
Meanwhile, not far from the downtown core, in a greenhouse warmed by the spring sun, Devin Foote is picking spinach. He’s the urban-farm-operations manager for Greening of Detroit, which supports about 1,400 agricultural projects in the city. Detroit has the space for a green revolution, he says, with more vacant land than any urban setting in the country.
Mark Covington is a community gardener, too, but his thinking doesn’t stop there. He founded the Georgia Street Community Collective, which has expanded to include a small library, a computer room for kids to do homework, livestock and public movie showings. Yet Mr. Covington is on the other side of a divide from many of the entrepreneurs and urban pioneers: He lives in the East End, in an African-American neighbourhood marked by high crime rates and vacant, hollow homes, where liquor stores and churches, each offering different kinds of consolation, are some of the few buildings left.
His own efforts have not been without setbacks; one place he was set to renovate was torched this spring. But it’s also rekindled a sense of community and he wants to expand. Contrary to the Future City plan, he doesn’t want the neighbourhood he’s been trying to revitalize rationalized away. “I don’t want to move,” says Mr. Covington.
He’s the kind of person who is asking: Will revival in the urban core, which is so far affecting a largely white, educated population, ever benefit those who need it most?
Clean slate or dirty pool?
Even before the summer’s news made his prospects bleaker, the well-liked mayor, Mr. Bing, had announced he would not seek re-election, frustrated by being trumped by the emergency manager, Mr. Orr. The intervention involves a largely white, Republican-led state government (although Mr. Orr himself is black) assuming control of a Democratic city where more than 80 per cent of the citizens are African American. There are many Detroiters who see the bankruptcy plan as an undemocratic power grab.
That charge does not spare the new urban boosters, either. Mark Binelli, author of Detroit City is the Place to Be, recently said that wealthy entrepreneurs such as Quicken’s Mr. Gilbert are buying up land “as if they’re Monopoly properties” and that the city is at risk of ceding power to “an unelected oligarchy.”
And while the new tech jobs envisioned by Detroit Venture Partners are welcome, it will take far more than a few thousand high-tech positions to make a dent on the jobless rate.
As Waterloo’s Mr. Filion says, the city’s poorer residents, many of whom are black, are coping with appalling municipal services and high crime rates and have limited means to move. Meanwhile, without quality schools and improved public safety, families with kids are unlikely to flock downtown. He is skeptical that the city will return to its heyday.
Mr. Kinkead of Detroit Future City says the biggest danger is that Detroit’s own citizens, traumatized by years of mismanagement, will feel the same pessimism: “You have to imagine that for someone like myself, born here, my entire life has been within the shadow of a city in constant decline. … I don’t think any of us fully understand what that does to us. We really need to recognize this might be our only opportunity to turn things around.”
The question is how to get natives to see their city through the eyes of someone like Joshua Smith, an articulate, 23-year-old graphic designer originally from Tampa, Fla. He could have chosen anywhere in America to put down roots, and he chose Detroit. “There is a sense of opportunity here. You can see your footprint,” he says, and then quotes a colleague: “Detroit is large enough to matter in the world, but small enough that you can matter in it.”
Richard Florida, the well-known urban theorist, has been visiting Detroit his whole life. He’s one of the optimists. His chief reason is that the efforts to revitalize the downtown core are being led from citizens and the business community, with a mix of old and new money – something Canadian cities would also benefit from.
“Cities like Detroit are pioneering a new and powerful form of public-private partnership, while our cities depend on government,” he says.
The bankruptcy filing is “unfortunate,” he says, but that needn‘t distract from the bigger process of rebuilding. Michigan’s largest city and metro area has plenty of advantages – proximity to universities, a big airport, affordability, a still-sizable population and a growing group of professionals, entrepreneurs and philanthropists willing to take an active role in the city’s planning.
“Yes, there are issues and there is a long way to go,” Mr. Florida says. “But for the first time in a long time, there is investment and some kind of hope.”
Detroit, the muse for songs like Dancing in the Street and Don’t Stop Believin’, may not return to its past glory. But as 8 Mile’s native son Eminem raps, “there is a resilience that rises from somewhere deep,” and it should not be counted out just yet.
Tavia Grant is a writer for Report on Business. This story includes additional reporting by Richard Blackwell.