Can Detroit's Rich Business Kings Save the City?

Not if their grand plans require grand corporate welfare

DetroitAndrea 44While the rest of the country remains focused on Detroit’s bankruptcy travails, the big story in the city itself is the group of private investors who are attempting an ambitious urban turnaround. Led by Dan Gilbert, owner of Quicken Loans Inc., they are trying to rebuild everything—retail, housing, start-ups, transit and even street life—in the seven-square-mile downtown area.

Their theory is that a thriving core will lift the rest of the 130-square-mile city out of its economic torpor. The challenge for the new mayor, Mike Duggan, will be to let this grand experiment in private social engineering proceed without shortchanging the rest of the city.

Bankruptcy has exposed how powerful unions have contributed to Detroit’s decline by extracting extravagant pension sweeteners and other benefits. But the other cause of the city’s troubles (and one that doesn’t show up on its books) is the corporate welfare—tax breaks and write-offs—it has historically lavished on casinos, stadiums, big events and other flashy private projects whose promises of urban renewal never materialized.

The latest revival plan is different, its backers say. Called Detroit 2.0, it takes a holistic approach, instead of pinning its hopes on any one project.

Gilbert started by scooping up 40 downtown properties, some of them historical gems, that were empty or in foreclosure, available for pennies on the dollar. He isn’t simply sitting on them waiting to make a killing if the city bounces back. He is trying to make the comeback happen.

According to his real estate czar, Matt Cullen, more than half of the $1.3 billion Gilbert has invested in the city has been used to acquire and renovate buildings. Gilbert has also moved his suburban headquarters to downtown—bringing 7,000 employees to work in the city. Other large employers such as General Motors Co. (GM) and Blue Cross Blue Shield of Michigan have followed suit, bringing about 3,000 more.

What’s more, Cullen notes, Gilbert has renovated the buildings as office space and apartments. The office space is almost fully occupied. To encourage occupancy for the apartments—and rebuild Detroit’s hollowed-out population—Gilbert, along with other downtown companies, created a program that offers subsidies to anyone who wants to rent or buy housing in the area targeted for renewal.

Gilbert has also collaborated with local investors to begin Detroit Venture Partners, which seeds early-stage technology companies that locate in the city in the hope of turning Woodward Ave., the main drag, into “Webward Ave.”

Detroit’s lack of street buzz is eerie. Its boarded-up stores discourage foot traffic—and the lack of foot traffic discourages stores, the two essential ingredients for a vibrant city. Gilbert’s team is attacking both ends: aggressively courting retailers and making efforts to bring back pedestrians.

It convinced local information-technology companies to allow some employees to work out of local cafes every week and paid cafe owners to reserve tables for them. To ensure that commuters don’t speed away to their suburban homes after work, it organized evening lawn games, concerts and other events last summer.

There is no doubt about Gilbert’s good intentions. Yet there are reasons to worry whether his downtown makeover will stick and how it will affect the rest of the city.

For starters, should the broader national economy tank, forcing Quicken and other companies to resort to layoffs, the city wouldn’t be able to hang on to its new population, which predominantly consists of singles and renters.

More to the point, though Gilbert and his fellow investors have provided plenty of their own money, their revival plan may still be a net drain on city resources.

Cullen disputes this, noting that Gilbert doesn’t even rely on the city for security (he had an elaborate surveillance system installed in one of his downtown buildings to watch the neighborhood). GM and other businesses donated police cars and ambulances to prevent cuts in public services due to bankruptcy. Moreover, given that Detroit taxes anyone who works in the city, the influx of new employees will rebuild the revenue base.

Nor has Gilbert received many special subsidies or tax breaks from the city, Cullen says, with the exception of one site that is in a Renaissance Zone.

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  • Sevo||

    More gov't 'planning' to repair what gov't 'planning' already did, this time with a helping of private money?
    Good luck; if there's a line on it, I'm betting "fail".

  • prattleon||

    Detroit's saving grace lies in the fact that most residents, me and my family included, have largely lost all respect for the corrupt local government, and started taking matters into their own hands on a community level. I think there is some good in what people like Gilbert are doing, but the real resurgence is happening on a smaller but wider scale. Downtown, Midtown, Corktown, The villages, etc. are increasingly desirable places to live. Midtown has effectively no vacancy. The demand towers the supply of housing, and developers are all over it building new apartment buildings and and turning beautiful industrial structures into lofts, or workplaces. These areas are hotbeds for artists, tech start-ups, and just about everything else you can imagine. It's such a wonderful place to live right now, because there is something new everyday, it's affordable, it's not congested, it's eclectic, it's full of the some of the worlds most beautiful architecture, its music scenes continue to thrive, and so on. All this despite (or perhaps because of) a completely inept and corrupt government.

  • Jingo||

    As long as you ignore one of the highest crime rates in the nation. If you don't mind being murdered, raped, or robbed, then Detroit's for you!

  • Live Free or Diet||

    Still the same old problem: One Bold Plan. One Bold Plan has one chance to work, or it fails. Leave people be to make their own little plans, and those who fail can turn around and benefit from those who do better.

  • ||

    Leaving people to make their own little plans won't provide the kind of tax base that the moochers and looters need to survive. They need a new whipping horse to be chained up to their overloaded wagon. They think they can conjure one into being. The bold plan is always a fantasy of getting back to the days when they had a helpless victim to leech off of.

    Nothing will change until the moochers and looters starve and die.

  • Stephdumas||

    Meanwhile Michigan Governor seek immigrants to set to Detroit.
    http://www.humanevents.com/201.....e-detroit/
    http://www.mlive.com/news/detr.....igrat.html

    And by reading comments here and there....it's a pandora box that Detroit have to face.

  • Stephdumas||

    And on a off-topic sidenote, I spotted that article from The Blaze" about a book then Kevin Williamson writed titled "What Doomed Detroit". http://www.theblaze.com/blog/2.....sy-quotes/

  • DJF||

    How does he plan on keeping these immigrants in Detroit? Build a wall around the place?

  • Stephdumas||

    That almost like some folks on Detroityes or City-Data forums reports about Oakland County Executive L.Brooks Patterson recent speech. http://www.detroitnews.com/art.....ombustible

  • Stephdumas||

    One more article about L. Brooks Patterson
    on the website Deadline Detroit.

    And back to the topic of immigrants, I saw this article from September 2012 about the hispanic community in the area of Mexicantown in the Atlantic Cities http://www.theatlanticcities.c.....eeds/3357/

  • Stephdumas||

    Here one more article about Mexicantown from July 2013.

  • Agammamon||

    Pshaw, this is the 21st century - ankle bracelets. And guns, lots of guns.

  • ||

    Escape from Detroit would make a great title for Snake plissken's next movie.

  • Stephdumas||

    Yeah, there also a book titled "Escape from Detroit" on Amazon.com but it's not related to Snake Plissken and it's very politically incorrect.

  • The Late P Brooks||

    To encourage occupancy for the apartments—and rebuild Detroit’s hollowed-out population—Gilbert, along with other downtown companies, created a program that offers subsidies to anyone who wants to rent or buy housing in the area targeted for renewal.

    Why do they need subsidies to buy properties selling for pennies on the dollar?

  • DJF||

    The subsides are to pay for replacing your car, TV, etc when they get stolen and to pay for you Obamacare deductibles when you get mugged

  • Nooge.||

    when you get mugged

    ...by Obamacare.

  • ||

    They need to subsidize them so they can pay the taxes that the city hopes to make off of them.

  • The Late P Brooks||

    Gilbert and his cohorts have spearheaded a $140 million project to build a 3.3-mile streetcar line along Woodward Ave. It won’t cost the city anything because private philanthropists and a federal grant are financing the construction—and a state regional transit authority will pick up the operational expenses, Cullen says.

    It's free. Don't you get it?

    FREEFREEFREEEEEEEEEEEE!

  • Cdr Lytton||

    A streetcar?!? Think big Detroit!

    MONORAIL!
    MONORAIL!
    MONOFAIL!

  • Sevo||

    High Speed Rail to, oh, CLEVELAND!

  • Stephdumas||

    "Cleveland, ...at least we're not Detroit". http://www.joeydevilla.com/201.....-me-laugh/ ;-)

  • ||

    Their theory is that a thriving core will lift the rest of the 130-square-mile city out of its economic torpor.

    Their theory is that they can buy the city and it's corrupt union allies and clients a new horse to whip.

    Why is the idea always to strap a bunch of shit to the engine of society and see how much of a load it can pull?

  • Res ipsa loquitur||

    It works for Pyongyang, why not Detroit ?

  • Agammamon||

    Delta City.

  • Piltdown man||

    The real purpose of this plan is to create a speculation bubble to push out the Black residents and lure in SWPLs. We've seen it all before.

  • Sevo||

    Piltdown man|1.25.14 @ 12:14PM|#
    "The real purpose of this plan is to create a speculation bubble to push out the Black residents and lure in SWPLs."

    No kidding! My goodness, it's great to have the inside dope.
    Fuck off, 'merkin.

  • Stephdumas||

    I spotted a discussion about this on City-Data forums.

  • ||

    But the city won’t adjust the tax assessments of existing businesses, even after their property values crash.

    Interesting. That sounds like "imputed income" when determining child support amounts: it isn't what you make, it's what the authorities think you ought to make.

  • R C Dean||

    These guys are idiots, and I'm sure the Detroit machine will be happy to give them the looting they are begging for.

    Reform first, investment second. Not the other way around.

  • AlgerHiss||

    Watch a couple of episodes of "Hardcore Pawn"...

    http://www.trutv.com/shows/har.....index.html

    ...and you'll figure out real quick what's wrong with Detroit.

    It's a true legacy of that punk-thug Coleman Young.

  • prattleon||

    I guess some people have yet to figure out that reality TV is for entertainment purposes.

  • Agammamon||

    Shikha Dalmia warns that the challenge for the new mayor, Mike Duggan, will be to let this grand experiment in private social engineering proceed without getting carried away by grand plans of those purporting to act in its interest.

    So, in reality, the best Detroit can hope for is that the city will leave these guys alone just long enough to determine if they're going to succeed or fail. Then, if they look like they're failing, swoop in an claim that only government (and more of it) can fix Detroit and here's proof. If it looks like they might be successful, swoop in and tax the project into extinction and then claim that only government (and more of it) can save Detroit.

  • SuperOBD SKP-100||

    Good post.
    And SuperOBD SKP-100 is a really good obd2 tool.

  • pob||

    what Steven said I'm shocked that a mother able to profit $9317 in 4 weeks on the internet. official website W­ o­ r­ k­ s­ 7­ 7­ .­ C­ O­ M­

  • pob||

    Molly. I see what you mean... Russell`s st0rry is neat, I just got a top of the range Acura from having earned $5107 thiss month and just over $10k lass month. it's by-far my favourite work Ive ever had. I actually started 5 months ago and practically straight away was bringing home over $85, per-hr. look here W­ o­ r­ k­ s­ 7­ 7­ .­ C­ O­ M­

  • cheap kits||

    Can Detroit's Rich Business Kings Save the City?
    No,unless the Bruce company and Mr Batman would love to help.

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