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.While 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
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.