The classic action-comedy Beverly Hills Cop was showing on TV this past week. In it, Eddie Murphy plays a Detroit police detective who follows a murder suspect to the West Coast. The opening 10 or 15 minutes includes a chase scene through Detroit. The city is full of vacant buildings and land—and the 1984 film showed a better-looking Detroit than you’ll find today. Axel Foley’s Detroit declared bankruptcy late last week—the largest city ever to do so—ending a fall decades in the making.
Readers can find a surfeit of descriptions of the specifics that pushed Detroit over the precipice. More than 100,000 creditors are officially owed more than $1 billion, though with unfunded pension fund liabilities and other issues, the financial obligations of the beleaguered city could reach as much as $18 to $20 billion, according to the state-appointed emergency manager, Kevyn D. Orr. Detroit joins Stockton, California; Harrisburg, Pennsylvania; Central Falls, Rhode Island; Jefferson County, Alabama and other communities in seeking the protection of federal courts against debts that they can’t repay.
Instead of addressing what might be involved in Detroit’s potential protection under Chapter 9, we’d like to raise issues for nonprofits and foundations concerned about Detroit and other cities like it. Although Detroit’s large foundation community, led by the likes of the Kresge Foundation, the Skillman Foundation, the McGregor Foundation, and the Hudson-Webber Foundation, has been actively engaged and putting big dollars into Detroit initiatives, traction and results have been hard to come by. Many longstanding Detroit nonprofits have not fared well in recent years, some with organizational finances following Detroit’s trajectory. Where do foundations and nonprofits go from here? How can they participate in and help shape the necessary fixes for the Motor City?
Investment capital: There’s enough vacant space in Detroit, available for next to nothing, to make Detroit a city of start-ups. While Dan Gilbert of Quicken Loans claims to have invested a billion in downtown Detroit and to have moved 9,000 employees to the area, there are few corporate moguls who are going to recommend a similar corporate relocation. But for small business start-ups, and for entrepreneurs who need space, subsidy, and financing, Detroit is an ideal laboratory. A couple of programs have emerged with entrepreneurship potentials, including Venture for America, a program of placing program graduates in Detroit and other troubled cities to counsel new startups, and Challenge Detroit, which induces college graduates to live and work in Detroit and, through the incentive of a stipend, devote extra time to working with community organizations on community improvement projects. Although Venture and Challenge are both described as modeled on Teach for America, they seem to have more the feel of a VISTA or a Peace Corps.
That may be one of the challenges facing Detroit. With a surplus of generous foundations, Detroit has the ability to invest philanthropic capital in nonprofit community development initiatives. What is striking about Detroit’s nonprofit sector is that groups like Focus: HOPE, Motor City Blight Busters, and Southwest Solutions show a track record of nonprofits that have persisted when many others would have simply given up the ghost. Unfortunately, many Detroit nonprofits are shells of what they were a decade ago or less. But they remain investment vehicles, some built into plans for the revitalization of the city, that could be mechanisms for creativity and innovation working with foundations, businesses, and what remains of the local government. Maybe Venture and Challenge feel like Peace Corps operations, but perhaps reviving the domestic Peace Corps—VISTA, which still exists in the array of AmeriCorps program vehicles—and committing to the kind of organizing and community mobilization that made VISTA workers so striking during the early decades of the program might be what the nonprofit sector can deliver right now on the ground. Detroit’s foundations, and those of the nation, could be making a major investment in the VISTA-like capacity and inherent creativity of community-based commitment in this city.
While this might be a distinct possibility for Detroit’s future, it has to begin from a premise entirely different than the dynamic that led to Detroit’s economic abyss. While Detroit is 83 percent black, the Detroit metro area suburbs of Oakland County, Macomb County, and some parts of Wayne County are predominantly white and, in some cases, among the most affluent communities in the nation. The wealth generated by Detroiters over the years has been taken out of the city and the poverty kept within. The symbol of this was always Eight Mile Road, the line between the city and the suburbs where the bus system of Detroit ended and the bus system of the suburbs began, with dysfunctional or nonexistent linkages in between. People of wealth moved out of Detroit and took their wealth with them.
If Detroit is going to be the laboratory, as it can be, for a new entrepreneurial dynamic, it has to be based on new conceptions of reinvestment and redevelopment that include and benefit, rather than exclude and impoverish, Detroit’s remaining 700,000 residents. That means networking reinvestment to community-based organizations, building on rather than bypassing the infrastructure that exists in the community, and maximizing the recirculation of capital inside the city rather than a dynamic of pure outflow.
There is, of course, a racial dimension to all of this. As Joe Darden and Richard Thomas noted in Detroit: Race Riots, Racial Conflicts, and Efforts to Bridge the Racial Divide, “more than forty years after the riot [in 1967], blacks in the city of Detroit still rely on white-owned employer firms for jobs, despite residence in an overwhelmingly black city.” Then with the Kirwan Institute at Ohio State University, john powell [sic] once described the “solution” to Detroit’s structural problems of race and poverty as “promoting an equity-based regional agenda in an undercapitalized city.” He advised Detroit’s leaders toward “proactive policymaking that gives all people access to neighborhood resources, connections to opportunity-rich areas throughout the region, and a voice in the future of their communities.”
Unlike the bailout of the auto companies, national policymakers are not going to be able to tell taxpayers that capitalizing an undercapitalized Detroit will yield the kind of returns and actual profits that they got from taking an ownership position in General Motors. Rather, this is reinvestment in Detroit to rebuild a city to give hundreds of thousands of people a path toward opportunity. To realize the potential in a “new economy” Detroit—a networked, entrepreneurial Detroit—the reinvestment in the city needs to be undertaken because it must be done, not because of the anticipated upside of public co-ownership of the Chevy Volt or GMC Sierra.
Public assets: A Chapter 9 filing, which covers municipal bankruptcies, differs from Chapter 11s that apply to private entities in a number of ways, one of which is that neither a judge nor the creditors can actually force the bankrupt city to liquidate its assets. But public assets might be on the chopping block nonetheless. In May, the emergency manager hinted that the city’s dire financial straits might force it to sell public assets such as the masterpieces in the Detroit Institute of Arts. Despite the outcry against that scheme and questions about whether the city or state really had the authority to sell any part of the collection, the official bankruptcy declaration will renew pressures to sell and is spurring fears that public museums in other cities might face pressure to monetize the value of their collections. Imagine a scenario in which creditors look to the sale of Van Gogh’s “Portrait of the Postman Roulin,” Picasso’s “Fruit, Carafe, and Glass,” Diego Rivera’s Detroit industry frescoes, or Henri Matisse’s “The Window” to meet Detroit’s pension fund obligations. The DIA doesn’t think that it is the property of the City of Detroit, but in the wake of the bankruptcy filing, Orr asked for the DIA for an inventory, which notably includes the original Howdy Doody puppet worth a reported $1 million. One report suggests that the 38 leading artworks in the DIA are worth $2.5 billion.
The line between nonprofit and public in the context of the DIA collection is porous to be sure (although the DIA’s artwork is technically owned by the city, the DIA itself is run by a nonprofit entity), but art isn’t the only public asset that Detroit might consider selling. The mayor of Windsor, Ontario, has suggested that Windsor might be willing to buy the Detroit-owned half of the tunnel between the two cities (and countries) if there were a possibility that the tunnel might be sold to an entity with dubious public interests. Probably the most valuable public asset is Belle Isle, the 982-acre island park in the Detroit River that is home to the Belle Island Conservatory, the Dossin Great Lakes Museum, and a municipal golf course. A solution based on selling the assets of the city, which could include Belle Isle for residential or mixed-use development, means that the City could find ways of generating one-time revenues to deal with some creditors, but selling core assets held in trust not just for Detroiters, but for residents throughout the state, doesn’t address the issues that led Detroit to this point in the first place.
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Nonprofit service providers: Governor Rick Snyder and Emergency Manager Orr assured Detroiters that everything would continue as before, just like normal, regardless of the bankruptcy filing. Garbage would be picked up, police would respond to calls, and so forth. That is a fine sentiment, except that normal for Detroit is a matter of extreme turbulence for Detroiters, city agencies, and nonprofit service providers. The average police response time in Detroit is 58 minutes, compared to 11 minutes nationally, with the variation among precincts ranging from a fast response time of 31 minutes to a slow time of 115 minutes. The heirs to Axel Foley’s police department solve only 8.7 percent of their cases, compared to a 30.5 percent statewide average, according to the bankruptcy filing. Forty percent of Detroit streetlights do not work, leaving the city with less than half as many working streetlights per square mile as Cleveland or St. Louis. The number of active public parks in the city is down to 107 from 317 in 2008, and 50 of the active parks are slated to be closed.
Vendors—nonprofit and for-profit—providing services in the city have been promised to be paid by the state, but the language of the announcement is that they will be paid for “essential services.” Which vendor services might be classified as essential, and how? The City has already been slow in many cases to reimburse vendors for expenditures. Despite the promise to pay, the emergency manager recently set up a hotline for vendors to call if they don’t get paid. According to Tim Delaney, the president and CEO of the National Council of Nonprofits, nonprofit service providers with city contracts “become another creditor” in the huge list of creditors that Orr and the bankruptcy court judge will have to sort through.
In their huge commitment to continue offering services and meeting demands as the city’s public infrastructure crumbled, nonprofits have tended to put the best face on Detroit’s plunge into the financial abyss. They continue to do so, even in the wake of the bankruptcy filing. The Wall Street Journal quoted Marian Noland of the Community Foundation of Southeast Michigan as suggesting that the bankruptcy filing might be a turning point “moment where maybe Detroit can start to move forward.” Responding to the bankruptcy, Bruce Katz and Jennifer Bradley of the Brookings Institution described a number of nonprofit initiatives, such as Midtown Detroit’s anchor institution development strategy, the public-private partnership to build the 3.3 mile M1 light rail line, and the $100 million investment of a consortium of philanthropies in the New Economy Initiative with a similar kind of confidence about the role of nonprofits and foundations.
National policy responses: In 1975, as New York City teetered on the edge of bankruptcy, the New York Daily News printed the iconic headline, “Ford to City: Drop Dead.” Now Detroit is the largest city ever to declare bankruptcy (twice the size of Stockton, California, which was the largest until last week). What will be the message from the current president? Although President Obama famously intervened to save General Motors because he “refused to let Detroit go bankrupt,” he hasn’t quite made the same commitment to the city’s current financial predicament. Rather, according to Politico, “President Barack Obama is monitoring Detroit’s municipal bankruptcy…but has not committed any federal help for the beleaguered city.” Politico pointed out that the White House’s position contrasts with the Democrats’ position in the 2012 campaign—that Mitt Romney’s opposition to the car manufacturer bailout was essentially saying, “Let Detroit Go Bankrupt.” Reportedly, Kevyn Orr strongly lobbied Obama advisor Valerie Jarrett and left frustrated, according to the Detroit Free Press, with “the White House’s lack of engagement.”
The reality is that public policy toward cities like Detroit is virtually nonexistent. Right after the bankruptcy announcement, Vice President Joe Biden admitted with typical candor that the Obama Administration really didn’t know what it could do to help Detroit at this point. Writing for the Washington Post, Dan Balz suggested that Biden’s “don’t know” comment reflected an urban policy with “neither the political will nor the financial wherewithal.”
The issue, however, isn’t just the lack of an urban policy. It is America’s still-persistent racial segregation, a long story in largely-black Detroit surrounded by white suburbs, and the nation’s increasing economic segregation. Former Secretary of Labor Robert Reich described Detroit’s situation in terms that apply to many other metropolitan areas:
“Americans are segregating by income more than ever before. Forty years ago, most cities (including Detroit) had a mixture of wealthy, middle-class, and poor residents. Now, each income group tends to lives separately, in its own city—with its own tax bases and philanthropies that support, at one extreme, excellent schools, resplendent parks, rapid-response security, efficient transportation, and other first-rate services; or, at the opposite extreme, terrible schools, dilapidated parks, high crime, and third-rate services.”
Foundations have played a large role in capitalizing many of the initiatives that Katz and Bradley listed as promising strategies that might lead to a new Detroit. Capital investments like the Kresge Foundation’s $150 million to the implementation of the Detroit Future City plan will almost automatically attract ideas that nonprofits and foundations can carry a large portion of the social and financial fix that Detroit needs. This is where nonprofits have to get a seat at the table to help design Detroit’s path out of not only bankruptcy, but also its decades-long plunge. Tax-exempt capital cannot in any conceivable scenario be expected to save Detroit. The solution requires a federal commitment not simply to Detroit’s finances, but to the socio-economic divides in the metropolitan region that have pushed wealth and assets outside of the city limits.
They must also make sure that the entities speaking for “nonprofit Detroit” are not simply the interests of big universities and hospitals, which can sometimes design their own walled-off trajectories. The solution to Detroit’s problems is going to be in the revitalization of its communities, perhaps following the Futures plan that Kresge and others worked on for so many years. That requires thinking about social inequities and racial inequities. The path out of this morass for the Motor City is not going to be simply charted on a spreadsheet, but designed by the engagement and mobilization of those community residents who have stuck it out and committed to revitalizing neighborhoods like Boston-Edison, Bagley, and some in Midtown and Southwest.
Axel Foley’s City
For some Detroiters, the bankruptcy filing is of little consequence. A Detroit T-shirt company owner said that he hadn’t paid any attention to the announcement and wasn’t all that concerned. “There hasn’t been a moment when Detroit wasn’t dealing with problems,” James Morris said, “Now it’s just official.” Now that it’s official, it’s time for the nation to realize that it owes as much to the people of Detroit as it owed General Motors and Chrysler.
The nonprofit sector has to take the lead in pushing for change, because it isn’t going to come from the desires of 100,000 creditors (minus the nonprofits in the list, though nonprofits weren’t among the major creditors invited to meet with Orr in June nor the 20 top creditors identified by the bankruptcy court last week) looking for the maximum return they can possibly get for the dollars they are owed. But the nonprofit answer has to be one that tackles the issues that no one will address: the racial and economic divides that afflict whatever Detroit emerges from the bankruptcy and so many other cities. To the extent that nonprofits and foundations are committed to dealing with the “root problems” of social issues, they are going to have to be the leading voices at policy tables and in the media, reminding everyone that a deal with creditors doesn’t ultimately deal with the racial and economic inequities that led to Detroit’s current crisis.