Detroit

Good News for Detroit: Truck Production Transfer from Mexico

Wendell Cox — Sat, 13 Jan 2018 14:03:39 -0500

The Wall Street Journal reports good news for Detroit, with a somewhat rare expansion of production in Detroit (specifically in Warren, suburban Macomb County). Fiat Chrysler will be moving some of its truck production to Warren from a plant in Saltillo, Mexico, creating 2,500 new jobs. The Detroit move is to be contrasted with the near monopoly that Southern states have enjoyed in attracting vehicle manufacturing by foreign suppliers.

Just within the last few days, Toyota and Mazda have announced a major new manufacturing plant to be located in Huntsville, creating 4,000 jobs. For Toyota, this will be its second assembly plants in Alabama. Alabama has become a major auto manufacturing center, having previously attracted Mercedes, Honda and Hyundai assembly plant. The Toyota-Mazda venture involved a competition among 15 states, from Texas to North Carolina and Michigan.

How To Develop Detroit

Rick Harrison — Tue, 28 Jul 2015 12:35:18 -0400

Detroit's downtown is gentrifying— or, to be more accurate, a very small portion of the 139 square miles that make up the city is doing so, as it becomes populated by a new generation of workers. But the city's vast, remaining area is mostly blighted. A massive effort has been made to remove substandard and neglected homes, creating large sections ripe for redevelopment. We believe that a model community for families could be built within that devastated area, and we've launched a kickstarter campaign to get development going. You can look at this idea in detail on our new video, too: https://www.youtube.com/watch?v=cGOY_04k7Vw. A minimum land area of fifty acres would be a significant enough mass to provide a sustainable approach to growth. Here's what we would like to see:

At Rick Harrison Site Design Studio our redevelopment model is vastly different from existing models that either want to turn Detroit into farmland, or to place the existing population into high-rise projects. Both those approaches would need subsidies to be achieved. Our model takes a 'market focused' approach that is competitive with the cookie-cutter housing of the surrounding suburbs.

The plans we've developed at well over 900 sites during the past twenty-five years have averaged a 25 percent reduction of infrastructure, compared to conventional design. This reduction of street paving and utility mains has translated into increased green space per resident. For Detroit, our goal is to eliminate 60 percent or more of the existing infrastructure, and recapture the right-of-ways for residents. That will enable us to increase density while also increasing space.

We will start from scratch and design the main trails first. The street system will reduce both time and energy, compared with designs in the surrounding suburbs. All the homes will have interior floor plans and living spaces that coordinate with adjacent open spaces and views. And every home will have an energy savings HERS rating of 50 or better, so more of the resident funds can be used for better living, rather than going towards energy that escapes from a chimney. Elegant, meandering walkways will connect every home to the main trail system.

A half-century ago Detroit was America’s model city. Then, segregation and racial tensions led to the riots of 1967, which created a mass exodus to the suburbs. Those residents and businesses that could afford a new home on a large lot left the city. I began my planning career in 1968, designing those Detroit suburban subdivisions.

Let’s make Detroit a leader again by increasing living standards, connectivity, property values, tax base, open space, density, and safety while significantly decreasing construction costs, environmental impacts, energy usage, and the enormous infrastructure that currently plague the city. Detroit was once an inspiration for other cities. We'd like to make it an inspiration again.

Michigan’s State Legislature Needs to Cut Detroit Down to Size

Wed, 13 Aug 2014 11:07:00 -0400

What’s often forgotten in politics and governance is municipalities are the creation of state legislatures. A good deal of the population growth in major cities in the second half of the nineteenth century was due to annexation. One of the best examples is New York‘s amazing growth due to annexing Brooklyn. Few people are talking about it but it’s time to consider smaller political units. As Detroit struggles with failure of bankruptcy, the geographical size of the Motor city is becoming a major issue.

Detroit’s long decline eventually put it a federal bankruptcy court. The reasons are numerous but the reality is here. How Detroit exists from bankruptcy court is now an issue. Putting Detroit on a sound economic footing is essential to preventing another bankruptcy. The Detroit Free Press reports:

The investment banker representing the City of Detroit had talks with billionaire real estate investor Sam Zell and investment firm the Blackstone Group about selling them the city’s vacant property — but the investors weren’t interested, the Free Press has learned.

The revelation comes as the value of Detroit’s abandoned and blighted property — which the city considers assets in its Chapter 9 bankruptcy — is in dispute.

Creditors argue that city-owned property is a source of significant value that is being ignored in the city’s bankruptcy restructuring blueprint, called a “plan of adjustment.” The creditors argue the approximately 22 square miles of vacant or blighted property the city owns could be sold — with the proceeds distributed to creditors and even reinvested in the city.

But Ken Buckfire, president of the city’s investment banking adviser Miller Buckfire, testified that city-owned land “to some extent has negative value,” according to a deposition transcript obtained by the Free Press.

One way to interpret the comment about “negative value” is where the land is located. If Michigan’s state legislature re-drew Detroit‘s geographical boundaries, investors would be more interested in the land. A new municipality, without Detroit’s corrupt and expensive politics would be a major reform. Detroit as it exists today isn’t viable for job growth and a stable population. Detroit’s local politicians and special interest groups would obviously fight any changes in geographical boundaries in Michigan’s state legislature because a declining Detroit was a way to plunder taxpayers. But Michigan taxpayers need to start asking themselves: is Detroit’s 143 square miles a viable long term enterprise?

Detroit Bankruptcy: Missing the Point

Wendell Cox — Mon, 22 Jul 2013 12:54:50 -0400

Nobel Laureate Paul Krugman tells us that “sprawl killed Detroit” in his The New York Times column.

The evidence is characterized as “job sprawl” – that a smaller share of metropolitan area jobs are located within 10 miles of downtown Detroit than in the same radius from downtown Pittsburgh (see Note on Decentralization and “Job Sprawl”). It is suggested that this kept the city of Pittsburgh out of bankruptcy.

Not so. The subject is not urban form; it is rather financial management that was not up to par. State intervention may have been the only thing that saved the city of Pittsburgh from sharing Detroit’s fate.

Detroit and Pittsburgh: Birds of a Financial Feather

The city of Pittsburgh had been teetering on bankruptcy for some time. In 2004, the city’s financial affairs were placed under Act 47 administration (the Financially Distressed Municipalities Act“) by the state of Pennsylvania. One of Act 47's purposes is to assist municipalities in avoiding bankruptcy. A 2004 state ordered recovery plan summarized the situation:

The City of Pittsburgh, already in fiscal distress, now stands on the precipice of full-blown crisis. In August 2003, the City laid off 446 employees, including nearly 100 police officers. City recreation centers and public swimming pools were closed, and services from police mounted patrol to salt boxes were eliminated. In October and November 2003, the City’s credit ratings were downgraded repeatedly, leaving Pittsburgh as the nation’s only major city to hold below-investment-grade “junk bond” ratings. With the City’s most recent independent audit questioning the City’s ability to continue as a going concern, a looming cash shortfall now threatens pension payments and payroll later this year. (emphasis added)

The good news is that Act 47 has worked so well that the city could soon be released from state control. It may have helped that all of this was overseen by former Democratic Governor Ed Rendell, whose tough administration saved another abysmally-managed municipality when he was mayor of Philadelphia more than a decade before.

Not everyone, however, is willing to grant that Pittsburgh has solved all its problems. Democratic candidate for mayor of Pittsburgh, Bill Peduto, recently urged Harrisburg to not release the city from Act 47 control. According to Peduto, “the city is not out of the financial woods,” and “we're still in the middle of it, and in fact we have an opportunity in the next five years to build a sustainable budget for at least a decade.” Given the strong Democratic majority in the city, Peduto will probably be the next mayor.

The Key: Strong Management

In Detroit’s case, the state dithered for years, jumping in only when it was too late. Maybe the “tough love” of a Michigan-style Act 47 could have saved Detroit.

Meanwhile, best of luck to the Detroit bankruptcy court and Pittsburgh’s next mayor. Both were dealt a bad hand by predecessors who said yes to spending interests too often, to the detriment of residents and taxpayers.

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Note on Decentralization and “Job Sprawl”

The dispersed American metropolitan area has performed better than its mono-centric (downtown oriented) urban form of the past. American metropolitan areas are the most affluent in the world, and they are also the most decentralized. Decentralization of employment facilitates mobility, as economists Peter Gordon and Harry W. Richardson found 15 years ago. Work trip travel times are shorter and traffic congestion is less intense in US metropolitan areas than in similar sized metropolitan areas in Western Europe, Japan, Canada and Australia. At the same time, metropolitan areas around the world are themselves becoming more decentralized. The bottom line is that better mobility facilitates greater economic growth, which also reduces poverty.

Comparing the “job sprawl” of Detroit and Pittsburgh not only misses the point; it also glosses over differences that render any comparison virtually meaningless.

Detroit is Larger: The Detroit metropolitan area has nearly 60 percent more jobs than the Pittsburgh metropolitan area. Other things being equal, this would mean that Detroit would cover more area than Pittsburgh. As a result, even if the employment densities were equal, a smaller percentage of the jobs would be within 10 miles of downtown Detroit and within 10 miles of downtown Pittsburgh.

Nearly Half of Detroit’s 10 Mile Radius is in Canada and a Lake:But other things are not equal. Approximately 40 percent of the area within 10 miles of downtown Detroit is in Canada or in Lake St. Clair. Canadian jobs are appropriately excluded from the Detroit “job sprawl” numbers developed by the Brookings Institution (Figure), and no 10 mile radius comparison can thus be made to Pittsburgh. None of the 10 mile radius from downtown Pittsburgh is in Canada and none of it is in a large lake.

See Also: Peter Gordon’s Blog: Detroit

The Diminishing Returns of Large Cities: Population Growth Myths

Mon, 22 Jul 2013 09:50:38 -0400

One of the big myths of the twentieth century is that large American cities are necessary and inevitable. Yet in reality growth has been dispersing to suburbs and smaller cities for the last two decades. As the decline of Detroit, once the country’s fourth largest city, reveals in all too harsh terms, being bigger is not always better.

Yet the big city myth remains virtually unchallenged. A biased print media and a subsidized academic cartel are constantly singing the praises of big city life (as opposed to suburban or rural life). While American cities exhibited strong population growth in the early part of the twentieth century, recent Census numbers show America’s mega cities are growing below the national growth rate. According to the 2010 Census, San Antonio was the only city with a population of over 1 million people that grew above the national growth rate of 9.7%.

Years ago, scholar Milton Kotler wrote an important but much forgotten book on local government. Kotler showed what was behind the amazing growth numbers of the some big cities:

Statistics show New York's population increase from 1890-1900 to have been 2,096,370. This seems amazing, except that most of the increase came about with the annexation of Brooklyn, population 1,166,582. In short, its population grew at a rate far less than the increase by annexation.

Municipalities are creations of the state legislature. In many cities, the boundaries changed to expand the power of cities along with their political class and related business rent-seekers. While some would argue about New York city’s population numbers, which has recovered from their lows, few would question Detroit’s long-term decline. As Detroit takes center stage line, the entire municipal bond market is about to take notice. Much is at stake here.

Not only the economic foundation of a large American city but the concept that a creditor will get back its principal back. The Detroit Free Press explains:

Borrowing for Michigan cities could get more expensive in the future, if Detroit emergency manager Kevyn Orr’s restructuring plan is accepted by creditors and Chapter 9 bankruptcy is avoided, some bond experts caution.

That’s because Orr’s plan would set a major precedent by treating all unsecured debt the same way — instead of giving a better payout or greater deference to general obligation bonds, sold for generations as safer investments backed by a city’s taxing authority.

In Detroit, both the lack of checks and balances, and the maintenance of an engaged, informed public undermined the city’s fiscal health. Many Detroit citizens voted with their feet by exiting the corrupt system. With the middle class of all races deserting, the city of Detroit was ripe for looting of the taxpayers.

In conclusion, it’s time for the informed public to realize many of our big cities are expensive, corrupt, and not redeemable. The Michigan Legislature should cut Detroit down to size. Perhaps they should consider de-annexation. It’s better to have Detroit become ten smaller municipalities. Of course there would be major political resistance for those who have made big money from Detroit’s decline. But without de-annexation, Detroit seems likely to remain on the brink of insolvency for a long-term since its political boundaries are too large for responsive governance and the crafting of unique solutions to its problems.

Declining Detroit

Wendell Cox — Wed, 23 Mar 2011 10:00:02 -0400

The historical core municipality of the Detroit metropolitan area, the city of Detroit, continued its steep population decline between 2000 and 2010. The new census count indicates that the city dropped to 733,000 residents, from 951,000 in 2000. This drop of 25 percent was the largest in any census period since 1950, when the city peaked at a population of 1,850,000. Even so, the percentage decline from 1950 of 61.4 percent remains less than that of city of St. Louis, which has experienced the steepest population decline of any municipality that has reached 500,000 population in modern times (62.7 percent).

The decline did not extend to the suburbs, which gained a modest 2.3 percent between 2000 and 2010. Suburban growth has also been substantial since 1950, with 2.2 million new residents added.

However, the suburban growth was not enough to erase the impact of the city of Detroit decline. The Detroit metropolitan area fell from 4,452,000 in 2000 to 4,296,000 in 2010, a loss of 3.6 percent. The loss was the greatest among major metropolitan areas reporting up to this time. Nonetheless, even with the huge city of Detroit loss, the Detroit metropolitan area has grown more than 30 percent and more than 1,000,000 people.