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Detroit

Detroit is getting an “emergency manager”

This is startling news considering that much of the news out of Detroit has been good lately.

I spoke with several people deeply involved in counselling the governor on Detroit, and none doubted that his next move is an emergency manager. Managing the restructuring of the city’s $12 billion of debt and pension liabilities is too complex to be handled through the political process.

There’s also a rumor that more bad news is coming on the pension shortfall that will make erasing the deficit even more difficult.

Pieces are falling into place quickly. The Financial Advisory Board will get an update Monday on the work of the three consulting firms hired to handle the restructuring.

Teams from Conway MacKenzie of Birmingham are embedded in all city departments and are finding broken systems — and savings — in every single one. The advisory board and Ernst & Young are digging deep into the budgets of each department in an attempt to match spending to revenue.

The goal is to achieve positive cash flow for the first half of the year. By then, the restructuring blueprint being worked up by New York-based Miller-Buckfire & Co will be ready. It will either be used to take the city into bankruptcy or handed to the emergency manager.

Which one implements the turnaround depends on how cooperative Detroit’s creditors are in shaving the debt. If the manger can convince them to take a significant haircut, the city may avoid bankruptcy.

What are the businesses that will rebuild Detroit?

As Jane Jacobs said, “New ideas require old space”. Detroit has a lot of old spaces that will lead it’s comeback.

10 Empties U.S. Cities

Anyone home?  Anyone at all?

One of the unfortunate results of a bad housing market is an increase in vacant homes, which has grown by 43.8 percent since 2000, according to the U.S. Census Bureau. Homes can be vacant for a number of reasons, but are defined as both rental inventory that are unoccupied and “for rent,” as well as homes that are unoccupied and up for sale. As of the 2010 Census, there were approximately 15 million vacant housing units in the country, with an 11.4 percent gross vacancy rate nationwide.

Related: Detroit is on the rise again and 100 Abandoned Houses

The challenges of remaking a city

With apologies to Eminem, this story about urban reengineering of Detroit shows how hard it is to remake a struggling city.

Mayor Dave Bing wants to save Detroit by persuading residents to leave their homes for better neighborhoods, but the city has struggled to accomplish the smallest of relocation projects — even when they involve cash incentives.

Two of the most recent initiatives that required moving residents have dragged on for several years, cost millions of dollars and prompted criticisms that the efforts exacerbated blight and left nearby neighborhoods in limbo.

In one case, the city has spent $19 million buying land for an industrial park on the east side that has attracted one tenant. In another, an effort to build a safety buffer near Coleman A. Young International Airport has cost at least $28 million and lasted 17 years, even though it was supposed to wrap up in 18 months.

Critics say the projects should be a warning to Bing, who plans to announce details in the next few months of his Detroit Works Project to possibly consolidate residents into seven to nine neighborhoods. It’s a larger scale than other land-use efforts, but the mayor has little cash to buy properties, won’t condemn land and may instead only offer residents tax-foreclosed homes in nicer neighborhoods.

What does this town know about luxury?

What an amazing ad.  Not only is this the best of the Super Bowl ads, this may be one of the best commercials that I have ever seen.  If you are going to drop several million dollars for a 2 minute ad, this is the ad that I would want to have produced.

The future of Detroit

City Journal has a good article on the problems and future of Detroit.

The new mayor’s boldest argument may be that Detroit needs to shrink to revive. Detroit has contracted from 2 million residents to about 900,000; whole areas of the city have virtually emptied. As many as 70,000 homes stand abandoned. On some blocks, many homes have gone unoccupied and untended for so long that summer vegetation completely engulfs them; only the outline of the house suggests something man-made. Detroiters refer to certain city districts as “feral”—that is, having reverted to nature. Yet the city must still provide services to these areas’ few remaining occupants, at great cost.

Bing hopes to raze entire underpopulated neighborhoods and relocate their few residents to more viable areas of the city. Perhaps as much as one-quarter of Detroit would revert to unoccupied parkland and woods under Bing’s plan. The controversial initiative is a necessary step, the mayor believes, in reducing the size of government and hence regaining control of finances, out of balance after years of mismanagement. The city has an accumulated deficit of $300 million. Even though Bing has already cut about 1,000 positions, the city still employs some 13,000 workers to serve its fewer than 900,000 residents, yielding one of the highest ratios of workers to population among major American cities.

As I posted earlier today, the school system is still in shambles

Detroit’s school system is in even worse shape than Newark’s, if that’s possible. Secretary of Education Arne Duncan recently called it “a national disgrace.” The problems are both financial and academic. Because the political class in Detroit has long viewed the schools as patronage mills, the system didn’t shrink as enrollment fell by half over the last decade. A state-appointed monitor has uncovered approximately 500 employees on the payroll in positions that aren’t budgeted. He’s requiring workers in the system to show up to collect their checks in person because of widespread concerns about “ghost” employees ripping off taxpayers. Detroit also suffers from astonishingly poor academic standards. In last year’s National Assessment of Educational Progress, Detroit’s students registered the lowest score of any school system in the history of the test, with 69 percent of fourth-graders and 77 percent of eighth-graders scoring below the basic level in math.

There is some hope

As for Detroit, it remains a gateway to Canada and the Great Lakes region, and its airport is one of the nation’s busiest. Despite the years of decline, the city boasts what development experts call a “meds and eds” economy—that is, major health-care and research institutions like Henry Ford Hospital and important universities like Wayne State. Detroit also has a rich infrastructure and architectural legacy from its glory days, including numerous art-deco commercial towers. Many of them were abandoned over the years but still stand, such as the hauntingly beautiful old Michigan Central Station and the Book Tower.

And the upside of the city’s population decline is that affordable office space and homes are plentiful, even in well-occupied portions of the city. “Detroit has the opportunity to make itself attractive to young professionals who work at its universities and are drawn to urban living, and to immigrants, who now make up just 5 percent of the population,” says Lou Glazer, president of Michigan Future, Inc., an economic development group. “Mayor Bing can make a difference by making government more business-friendly.”

Crime and Corruption in Detroit

Mother Jones investigates crime and corruption in Detroit, where the police cook the books, criminals stoke the fire, and reality TV is the only way out.  This may be the best bit of writing I have read this year.  Make sure you read the entire article.

IT WAS JUST AFTER MIDNIGHT on the morning of May 16 and the neighbors say the streetlights were out on Lillibridge Street. It is like that all over Detroit, where whole blocks regularly go dark with no warning or any apparent pattern. Inside the lower unit of a duplex halfway down the gloomy street, Charles Jones, 25, was pacing, unable to sleep.  His seven-year-old daughter, Aiyana Mo’nay Stanley-Jones, slept on the couch as her grandmother watched television. Outside, Television was watching them. A half-dozen masked officers of the Special Response Team—Detroit’s version of SWAT—were at the door, guns drawn. In tow was an A&E crew filming an episode of The First 48, its true-crime program. The conceit of the show is that homicide detectives have 48 hours to crack a murder case before the trail goes cold. Thirty-four hours earlier, Je’Rean Blake Nobles, 17, had been shot outside a liquor store on nearby Mack Avenue; an informant had ID’d a man named Chauncey Owens as the shooter and provided this address.

The SWAT team tried the steel door to the building. It was unlocked. They threw a flash-bang grenade through the window of the lower unit and kicked open its wooden door, which was also unlocked. The grenade landed so close to Aiyana that it burned her blanket. Officer Joseph Weekley, the lead commando—who’d been featured before on another A&E show, Detroit SWAT—burst into the house. His weapon fired a single shot, the bullet striking Aiyana in the head and exiting her neck. It all happened in a matter of seconds.

"They had time," a Detroit police detective told me. "You don’t go into a home around midnight. People are drinking. People are awake. Me? I would have waited until the morning when the guy went to the liquor store to buy a quart of milk. That’s how it’s supposed to be done."

But the SWAT team didn’t wait. Maybe because the cameras were rolling, maybe because a Detroit police officer had been murdered two weeks earlier while trying to apprehend a suspect. This was the first raid on a house since his death.

It’s not just bad policing

Detroit’s east side is now the poorest, most violent quarter of America’s poorest, most violent big city. The illiteracy, child poverty, and unemployment rates hover around 50 percent.

Stand at the corner of Lillibridge Street and Mack Avenue and walk a mile in each direction from Alter Road to Gratiot Avenue (pronounced Gra-shit). You will count 34 churches, a dozen liquor stores, six beauty salons and barber shops, a funeral parlor, a sprawling Chrysler engine and assembly complex working at less than half-capacity, and three dollar stores—but no grocery stores. In fact, there are no chain grocery stores in all of Detroit.

There are two elementary schools in the area, both in desperate need of a lawnmower and a can of paint. But there is no money; the struggling school system has a $363 million deficit. Robert Bobb was hired in 2009 as the emergency financial manager and given sweeping powers to balance the books. But even he couldn’t stanch the tsunami of red ink; the deficit ballooned more than $140 million under his guidance.

Bobb did uncover graft and fraud and waste, however. He caught a lunch lady stealing the children’s milk money. A former risk manager for the district was indicted for siphoning off $3 million for personal use. The president of the school board, Otis Mathis, recently admitted that he had only rudimentary writing skills shortly before being forced to resign for fondling himself during a meeting with the school superintendent.

The graduation rate for Detroit schoolkids hovers around 35 percent. Moreover, the Detroit public school system is the worst performer in the National Assessment of Educational Progress tests, with nearly 80 percent of eighth-graders unable to do basic math. So bad is it for Detroit’s children that Education Secretary Arne Duncan said last year, "I lose sleep over that one."

Duncan may lie awake, but many civic leaders appear to walk around with their eyes sealed shut. As a reporter, I’ve worked from New York to St. Louis to Los Angeles, and Detroit is the only big city I know of that doesn’t put out a crime blotter tracking the day’s mayhem. While other American metropolises have gotten control of their murder rate, Detroit’s remains where it was during the crack epidemic. Add in the fact that half the police precincts were closed in 2005 for budgetary reasons, and the crime lab was closed two years ago due to ineptitude, and it might explain why five of the nine members of the city council carry a firearm.

The policing ineptitude seems almost comical if it wasn’t so serious

As a reporter at the Detroit News, I get plenty of phone calls from people in the neighborhoods. A man called me once to say he had witnessed a murder, but the police refused to take his statement. When I called the head of the homicide bureau and explained the situation, he told me, "Oh yeah? Have him call me," and then hung up the phone. One man, who wanted to turn himself in for a murder, gave up trying to call the Detroit police; he drove to Ohio and turned himself in there.

There has been some improvement

The Kilpatrick scandal, combined with the murder rate, spurred the newly elected mayor, Dave Bing—an NBA Hall of Famer —to fire Police Chief James Barrens last year and replace him with Warren Evans, the Wayne County sheriff. The day Barrens cleaned out his desk, a burglar cleaned out Barrens’ house.

In Chief Evans’ defense, he seemed to understand one thing: After the collapse of the car industry and the implosion of the real estate bubble, there is little else Detroit has to export except its misery.

Evans brought a refreshing honesty to a department plagued by ineptitude and secrecy. He computerized daily crime statistics, created a mobile strike force commanded by young and educated go-getters, and dispatched cops to crime hot spots. He assigned the SWAT team the job of rounding up murder suspects, a task that had previously been done by detectives.

Evans told me then that major crimes were routinely underreported by 20 percent. He also told me that perhaps 50 percent of Detroit’s drivers were operating without a license or insurance. "It’s going to stop," he promised. "We’re going to pull people over for traffic violations and we’re going to take their cars if they’re not legal. That’s one less knucklehead driving around looking to do a drive-by."

His approach was successful, with murder dropping more than 20 percent in his first year. If that isn’t a record for any major metropolis, it is certainly a record for Detroit. (And that statistic is true; I checked.)

$7000 per home in Detroit

Abandoned housing in Saskatoon Wow, CBS News is saying that the average home price in Detroit is only $7000.

Detroit real estate broker Ian Mason currently has 200 listings, largely foreclosures banks are desperate to get off their books. And that desperation is making for some incredible deals.

Bowers asked him how much he sold one house for.

"One dollar," he said.

It’s a house he says that just a few years ago would have sold for $75,000.

Home values across the country have taken a tumble. Nationally, the median home price is $174,000. But in Detroit, the average is only $7,000 – which may help explain why home sales are soaring.

January sales are up 37 percent over last year with 1,000 homes sold last month alone.

Those are people like young single mom Sofia Hawkins who’s found her home sweet home.

She got a home for $1,100. Can she even believe it?

"No, not really," she said. "It was a good deal."

And now she now owns a three-bedroom house for just twice what she used to pay each month in rent.

It’s hard to believe that it is that bad in Detroit and it’s gotten that bad so quickly.  How many years until houses would reach average levels in Detroit?  Ten years?  Twenty years?  Fifty years?  Will Detroit ever recover?

0-16?

The Detroit Lions struggle along with the city of Detroit

It's hard to be a Detroit Lions fan By the end of the night, one thing is clear — a decent number of Lions fans are actually rooting for 0-16. It’s like the stock market. Detroit needs to bottom out, they say, send owner William Clay Ford Sr. a message, before it can build itself back up. History? Bring it on. Might as well get something out of the season. Perception? Are 1-15 and 0-16 really that different?

Mike Moceri, a financial consultant and lifelong Lions fan, says there’s a huge difference. He was at a holiday party Sunday afternoon, cheering as if Barry Sanders were stretching for a touchdown that put Detroit in the playoffs. He says true Lions fans would never want to see their team lose.

"That’s something," Moceri says, "that will live with our city forever."

During the day, he takes calls from clients who need to dip into their retirement funds just to put food on the table. At night, he goes home and turns on 97.1 The Ticket to get his mind off the roiling economy. The Red Wings make fans happy. This summer, they won the Stanley Cup.

But lately, even sports radio has been filled with talk of subprime lending, foreclosures and mass layoffs. In Detroit, Moceri says, it’s magnified because of the Big Three. Nearly two hours of airtime was filled with talk of the economy Monday.

"Everybody knows somebody whose life is tied into the auto industry," Moceri says. "When you look at the bigger picture, the Lions are unimportant.

"But you kind of hope to escape to the Lions to give you some kind of joy. You can’t even do that."

When Detroit does get good again (I can say this because I cheered for the Saskatchewan Roughriders for most of my life), it will be incredible but until then, there is always next year and it will be a year where Matt Millen won’t be the club president.