Saving Detroit Will Require More Than a Bailout
At the time when I served as Mayor of Cincinnati, Ohio, my city and others across the country looked to Detroit as an industrial and cultural center of America. Motown Records, started by Berry Gordy in Detroit, created some of the best music in the world with hits from The Temptations, Stevie Wonder, and Marvin Gaye. After World War II, Detroit became the North Dakota oil boom of its day, as engineers and workers flocked to the city to prosper and make the classic, gas-guzzling muscle cars which would come to represent everything great about America. By 1960, with the highest per capita income in the nation, almost two million people lived there.
Now, in 2013, that population has shrunk to 700,000. Forty percent of traffic lights do not function. The number of manufacturing jobs in Detroit went from 296,000 in 1950 to 27,000 today. More than 75,000 homes are abandoned. As arguably the most dangerous city in America, it takes about an hour for 911 to respond for the highest-priority crimes. If police actually show up, they have less than a 9 percent rate of solving cases. If you are crazy enough to buy (or perhaps squat) in one of the thousands of abandoned homes in Detroit, you are risking your life. For those few who haven't moved away and have means, private security companies are now part of everyday life in the Motor City.
So what happened? The policies of liberal Democrats who ran the city for 50 straight years destroyed and bankrupted the once great city.
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With unsustainable public pensions and corrupt leadership like Mayor Kwame Kilpatrick, who was sentenced last month to 28 years in prison for fraud, bribery, and racketeering, the city's vast wealth was bled dry. Elected city leaders wasted billions on unnecessary projects like the People Mover, Comerica Park, Fox Theater, Renaissance Center, and others while neglecting the basic needs of their increasingly destitute population.
Unlike the recent Federal government shutdown, Detroit's problems are far greater than closed parks. The streets are littered with trash and the roads look like a war zone. Amid the chaos, we have seen on a small what Alexis de Tocqueville noticed about American society, with local residents banding together to cut the grass in parks and dispose of waste through voluntary association.
But while the efforts of some to clean up the city are awe inspiring, they can never make up for the disaster caused by city government. The city, with an $18 billion shortfall, the city is desperate for a Federal bailout. After seeing the billions lost in the GM bailout, the American people's response to Detroit should be a resounding "hell no!"
Instead, it is time for desperate Detroit to get creative. The city needs real leadership to make tough calls which might have until recently seemed unthinkable. Local government bonds are usually a safe risk, which is why cities can borrow money cheaply. But what is happening in Detroit is turning that assumption on its head. Already, borrowing rates are up for all the Michigan suburbs because of the Detroit fiasco.
As The New York Times recently reported, the fallout is even having impacts on markets outside of Detroit: "The municipal bond market appears to be sending Michigan's cities a message that no matter how well rated they are, they are going to have to postpone their plans and projects or pay more for them." Investors appreciate safety, so it is essential for the city to calm the nerves of the bond market and take drastic action. Restoring Detroit's fiscal health is important to suburban Detroit and the entire state. And, as more major urban cities across the country face similar pressures, it is important for Detroit to become a model of how to prudently handle the results of decades of financial neglect.
Instead of coming to taxpayers with their hat in hand, one idea is Detroit should begin selling off their unused treasurers so they can actually be enjoyed and appreciated. Just the priceless artwork alone owned by the city would be worth billions on the private auction market. With initial support from famous American philanthropists such as Charles Lang Freer, and donations from the Dodges, the Firestones, and Fords, The Detroit Institute of Arts amassed more than 60,000 works spanning centuries. Sitting in storage far away from view are piles of authentic pieces from Paul Cézanne, Vincent van Gogh, Pablo Picasso, Edgar Degas, and Winslow Homer just to name a few. Unlike most art museums that are run by nonprofit corporations, these priceless pieces that any student of art would recognize are controlled by a museum outright owned by an incompetent city. The best way to ensure the pieces are cared for is to sell them to people who will properly care for them. While saying good-bye to culturally significant items is drastic, Detroit's crushing liabilities require drastic action.
In addition, if there is one thing Detroit still has plenty of, it is land. A different idea being floated to help make the city solvent is to sell Belle Isle, which is a little used 982-acre public park. Pushed by developer Rodney Lockwood, the plan is to sell it to private investors and give the property the status of a commonwealth, such as Puerto Rico. The small island would have a price tag of $1 billion and citizenship would be sold for a reported $300,000/person. With low taxes and a business friendly environment, the small isle could become a major business hub, and the billions of dollars generated by their activity would be re-spent locally in Detroit. Allowing risk takers to embody that Detroit entrepreneurial spirit and flourish in a tax-free environment would be a true form of economic stimulus.
Detroit is suffering, but bailouts are never the answer. It is time for the city to clean itself up, become self reliant, and give job creators the tools they need to make the city great again.
