In a Nutshell:
- The Governmental Research Association’s 2018 conference, hosted by the Citizens Research Council in Detroit, kicked off with a panel discussing Detroit’s historic bankruptcy: How we got there, what happened and what we learned, and where we are now and what still needs to be done in the city.
- Today, Detroit is in a much better place financially and pockets of the city are experiencing real growth and development (e.g., downtown and midtown); however, there is still work to be done in the neighborhoods and the broader region to improve prosperity for all.
- Reform of Michigan’s laws is needed to remove the financial incentives for counties to allow properties to enter the foreclosure process and sell off foreclosed properties in ways that further challenge Detroit’s nascent recovery.
The Citizens Research Council of Michigan hosted the Governmental Research Association’s 2018 conference in Detroit. The conference brought policy research groups from across the country to Detroit to talk about many things related to improving government here in Detroit and Michigan and across the country.
The conference began with a panel of experts talking about Detroit’s experience with the 2013 bankruptcy and beyond. The panel included Sandra Svoboda, a journalist with WDET and the Detroit Journalism Cooperative; John Naglick, the Chief Deputy CFO/Finance Director for Detroit; Jerry Paffendorf, CEO and founder of Loveland Technologies; and Chase Cantrell, a Detroit-based transactional attorney and founder of Building Community Value.
The Research Council’s President, and local government expert, Eric Lupher moderated the panel and set the stage for Detroit’s bankruptcy in 2013. The long road to bankruptcy started with economic and population decline and a corresponding failure to downsize city government. In response to declining revenues, the city borrowed money to cover its cash flow, which masked the city’s structural budget problems. The final straws included a $1.44 billion swap agreement to restructure pension debt; the Great Recession and foreclosure crisis that started in 2007; the fact that the state withheld revenue sharing dollars from local governments, including Detroit, to help meet state budget needs; and, finally, the fact that the governor appointed Kevyn Orr – a corporate bankruptcy attorney – as the city’s emergency financial manager.
With that basic background to municipal bankruptcy in Detroit, Sandra Svoboda talked about her experience covering the Detroit bankruptcy as a journalist. Some unique things she shared about covering this case was the “live” nature of the coverage and the fact that they were blogging and tweeting things in real time, and the fact that the statewide polls showed widespread support for Detroit and the “grand bargain” to use private and state money to save both public workers’ pensions and the Detroit Institute of Art.
John Naglick followed with a discussion of how Detroit’s finances changed as a result of bankruptcy, including reforms required by a 2014 state law, such as new financial structures and four-year financial plans. During the bankruptcy proceedings, the court ruled that not only was the city financially insolvent, but it was also service insolvent, meaning that the city had to dedicate so much of its annual revenue to legacy costs that it could not adequately fund city services. Since bankruptcy, city services have improved.
Jerry Paffendorf talked about what the bankruptcy missed — solving the tax foreclosure crisis in the city. He co-developed Loveland Technologies to help solve the blight problem facing Detroit by creating a map of properties in the city; through this work, they’ve determined that approximately 150,000 Detroit homes have been tax foreclosed since 2005 causing Detroit to move from a majority owner-occupied to majority renter-occupied society. Michigan has an aggressive tax foreclosure law that perversely allows Wayne County to make more money when people pay their taxes late than when they pay them on time, which does not provide the right incentives to help Detroit solve this problem of tax foreclosures and blight.
Finally, Chase Cantrell ended the session discussing how to approach ethical (re)development in a post-bankruptcy Detroit. He talked about some of the realities facing Detroit – 35.7 percent poverty, 16.5 percent unemployment, approximately $26,000 median income, 54 percent of housing units renter occupied – and what these realities mean for (re)development in the city. Development obstacles that are somewhat unique to Detroit include site control (developers do not have access to an updated master plan for the city), the limited pool of trained developers in the city, as well as a lack of a trained labor pool.
Some strategies for meeting these Detroit-specific needs include developer trainings, career and technical training centers with public schools, and building an engine of community development in Detroit through collaboration, a strategic neighborhood fund, and an affordable housing strategy. The key here is not to forget the ethical part of redevelopment; ensuring that the city does not leave its citizens, those that stuck it out through the bankruptcy, behind.
This session provided a great way to introduce conference attendees to the city, its problems, its progress, and its possibilities.