Accelerator for America: Letter from the CEO

4, October 2019
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Exciting Things are Happening in the City of Detroit

While the focus of last week’s news was on impeachment, Ukraine, and China, I was in Detroit, and we should all be paying attention to what’s going on there.

I spent several days with Dan Gilmartin, President and CEO of the Michigan Municipal League, his elected leadership, and his incredibly sharp, committed staff. He showed me the suburbs and outskirts of Detroit, where generations of Ford employees could graduate from high school and make a comfortable living building cars that drove the American dream. We saw small, well-built workforce housing with green lawns and nearby shops that many people here in Los Angeles would welcome.

The region’s decline accelerated in the 1970s with the rise of gas prices and was devastated by the 1990s. We know the rest of the story: “white flight” left the city without a tax base, and municipal mismanagement and bad circumstances spiraled out of control until the once mighty Motor City became a shell of itself.

The city hit bottom well before it officially hit bankruptcy in 2013. In January of 2014, current Mayor Mike Duggan took office and initiated a series of positive changes for the city: emergency response times were reduced; streets began to be repaired and paved; parks were cleaned and grass was cut; and, most notably, nearly 20,000 blighted houses were torn down across the city. Businesses started moving downtown again. Dan Gilbert, the founder of Quicken, moved his entire staff, now roughly 17,000, from the outskirts to the heart of downtown, where many of his employees also live.

One of the most enjoyable moments for me was a late lunch with Jared Fleisher, VP of Government Affairs for Quicken, at the Parc Restaurant in Campus Martius Park. We sat just inside the restaurant in the open air, soothed by the jets of the Woodward Fountain, overlooking the park’s famous sandy beach just off to the right. Jared is the essence of the new Detroit. He, Dan Gilmartin, Mayor Duggan, the other urban core mayors constituting the 13 cities in the region, and more than a few others do all in their power to make the area what it is today: a beautiful, embracing marvel of American ingenuity.

Though Detroit and the state of Michigan have made significant progress, longstanding racial tensions and spatial difficulties remain. The city was designed for the nearly two million people who lived there in 1950; today, only about 675,000 inhabit that same geographical area. While the population of Michigan has remained relatively steady at around 9.9 million over the last 20 years, the city of Detroit’s population has experienced a steep decline.

Recovery has been complicated because of Michigan’s tax system. California was hit hard by the collapse of the aerospace industry in the 1990’s, the dot-com bubble burst at the turn of the century, and the real estate bust in the mid-2000s. But California was able to sustain and even expand investments in public services and infrastructure because it allows citizens and local governments to put measures on the ballot to generate revenues in myriad ways.

This is not the case in Michigan, where property taxes are the dominant source of revenue. Once property values are reassessed downward as they were in the recent depression -- and it was a depression in much of Michigan -- they are never reassessed to market level as the market rebounds. This means that the only way to raise revenue for infrastructure -- or much else -- is by raising property tax rates, and you can only do so much of that.

That said, the MML, Jared and many others are finding ways to invest for the public good via public-private partnerships and more.

One tool in the economic development box is the Opportunity Zones legislation, a bipartisan component of the 2017 Tax Cuts and Jobs Act that created a powerful incentive for investment in underserved communities across the country. The problem is, unless local governments are operating at the same level as the investment community, opportunity zone dollars will be steered solely by investors. Accelerator for America has developed tools and offers strategic support to local communities to help them steer investment dollars towards projects that actually create opportunity in opportunity zones.

We are proud that 45 cities nationwide have already completed “Investment Prospectuses” using our toolkit. I’m headed off to Michigan again this afternoon to join the leadership meeting of the US Conference of Mayors, but I don’t need any more convincing that the leadership there is poised to do great things with opportunity zones and new ways to create community wealth across the state.

If you have not recently been to the Detroit area, go. You’ll meet some of the smartest people in the country and have a great time doing it.

Thank you,

Rick Jacobs, President and CEO of Accelerator for America