Howes: City oversight ends, business investment deepens
It’s probably coincidence that the Ilitch family confirmed plans Monday for another $200 million investment, the same day the city of Detroit was freed from active state financial oversight.
But it shouldn’t be. Continued business bullishness on Detroit — by the Ilitches and Dan Gilbert, by Ford Motor Co. and its emerging designs for Corktown — is a vote of confidence in Mayor Mike Duggan and City Council. Investment that creates tax-paying jobs and revives real estate drives what the city needs most to cope with obligations deferred in Chapter 9 bankruptcy: growing municipal revenue.
Capital goes where it’s invited and stays where it’s welcomed. Right now Detroit is showing a refreshing ability to do both: to attract investment by business leaders who know the city, its leaders and its foibles best. A decade ago, Gilbert’s Quicken Loans Inc. empire was comfortably ensconced in Livonia and Ford was a dozen years removed from relinquishing its foothold in Detroit’s Renaissance Center.
The exodus is reversing. Amazing what leadership and a serious restructuring enabled by the largest municipal bankruptcy in American history can deliver. Don’t underestimate the city’s financial health — and the assumption it will continue without direct state oversight — in the rationale powering private-sector investment worth billions.
It matters. After decades of population flight, business disinvestment and political dysfunction, fiscal discipline that delivers larger budget surpluses, grows tax collection and increases property values signal a city starting to win again. And that’s the kind of virtuous circle Detroit desperately needs.
For the first time since 1977, Detroit’s elected leadership “will be in complete control of government functions,” Duggan said in a statement Monday. No more active state oversight of Detroit’s books, so long as the city provides monthly financial reports, balances its budgets and submits four-year financial plans.
No longer is there federal oversight of the Detroit Water and Sewerage Department over environmental concerns; no Justice Department oversight of the Police Department; no Housing and Urban Development Department oversight of the Detroit Housing Commission for what the city termed “poor performance.”
No longer are there any excuses, either. The mayor, council members and Detroiters who long chafed at state and federal oversight now have the opportunity to demonstrate that there really is a New Detroit able to manage its books, to provide basic services to taxpayers, to meet financial obligations to employees, retirees and creditors without outside pressure.
Bankruptcy, best-practices and continuing business investment are combining to provide the kind of positive economic momentum that Duggan & Co. need to prepare for looming financial challenges, starting with annual pension-fund payments come 2024.
“Detroit’s emergence from three years of financial oversight following bankruptcy is a testament to the positive momentum the city has made in strengthening its reserves and fiscal operations,” David Levett, vice president and senior analyst at Moody’s Investors Service, said in a statement. “We expect the strong financial management to continue as the city continues to make critical improvements in city services and infrastructure, while preparing for a spike in pension contributions in FY 2024.”
Last October, Moody’s upgraded its outlook on Detroit to “positive.” It cited the city’s newly developed pension funding strategy, the “very conservative approach” of the city’s financial management and “the city’s current economic performance, which is strong considering its historic contraction.”
Monday’s vote by the state Financial Review Commission formally ends active oversight of Detroit, but it’s just beginning the reinvention that is more a continuing process than a destination. Fifty years of contraction can’t be reversed in the nearly 10 years since the end of the Great Recession — or the three-plus years since the city emerged from bankruptcy.
It takes time, results and discipline to reshape Detroit’s narrative of American urban decline into one of redemption. It requires continued business investment from more than usual suspects with names like Ilitch, Gilbert and Ford, and that’s happening, too.
It demands next-generation political leaders at City Hall who, like the guy who survives a massive heart attack, understand that reverting to bad, old habits would yield the same results. But the chances that another governor or another Legislature or another mediation team could produce another “grand bargain” to ease the pain of another bankruptcy?
Next to zero. That’s why Detroit’s second chance, which arrived officially Monday, is so critical. There won’t be a third one.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays.