America's Suicidal Cities

 

By John Fund
NationalReview.com

Some major American cities are dying, and the worst part is that these grievously ill patients often are refusing to take even the mildest medicine that would make things better.

Take Detroit, a city that has become a synonym for urban failure. The murder rate of one per 1,719 people last year was more than eleven times the rate in New York City. One contributing factor may be that two-thirds of Detroit’s streetlights are broken.

Once the fourth-largest city in the country, Detroit’s population has dropped by almost 30 percent since 2000 to below 700,000. Its vacant lots cover more land than the entire city of Paris. Despite enormous subsidies from the state government, Detroit is likely to finish the next fiscal year in June a full $50 million in the red. An audit could result in a state takeover of Detroit’s finances, and that could in turn lead to the nation’s largest-ever municipal bankruptcy.

With conditions so dire, you’d think the city would grab any life preserver tossed to it. Last year, the state of Michigan offered to take over management of Belle Isle, the 1.5-square-mile island park that sits in the Detroit River, just inside the U.S. border with Canada. Now sadly neglected and crumbling, Belle Isle was once an urban jewel designed by Frederick Law Olmsted, one of the creators of New York’s Central Park.

The state offered to manage it as part of a ten-year lease that could be renewed only if both parties agreed. Access to the park, which is connected to Detroit by a bridge, would be controlled by charging $11 for an annual vehicle pass that would also cover admission to every other state-operated park. The state would pump in dollars to repair and upgrade the island’s facilities, saving the city at least $6 million a year in upkeep.

Sounds like a win-win idea, but Detroit’s city council nixed it at a tumultuous meeting on Tuesday night. The council voted 6 to 3 to not even put the proposal on its agenda. Governor Rick Snyder’s office then promptly withdrew the offer because a key deadline for the state’s budget wouldn’t be met.

Opponents who showed up at the meeting angrily denounced the proposal as akin to selling the island to outsiders. “The governor has his hands on our jewels,” one skeptic told the council.

Some council members seemed to be living in an alternate reality in which Belle Isle wasn’t in dire need of help. Council president Charles Pugh said he would be happy to have the state “beautify Belle Isle, but not the state as the one running it.” His council colleague, JoAnn Watson, said she was holding out hope for a federal or state bailout of the city’s finances. Council member Kenneth Cockrel Jr. insisted that “there are far more pressing issues than this that we ought to be dealing with.” But the council has consistently rejected sensible proposals to contract out its bus system and garbage collection or to sell its electric system to an investor-owned utility.

Henry Payne, a writer for the Detroit News, says the tenor of the council meeting depressed him. “It was a throwback to old conspiracy theories that have long prevented progress in Detroit,” he told me. “Several speakers raved on about the Belle Isle deal being a suburban plot to take over Detroit.”

Not all city leaders agreed with such views. Mayor Dave Bing said in a written statement that he is “extremely disappointed” with the council’s decision: “I believe the majority of Detroiters supported this lease agreement. City Council’s actions today will force us to look at making additional cutbacks that may negatively impact the City’s other parks.” Dan Gilbert, the owner of Quicken Loans, which is headquartered in Detroit, could only scratch his head. “[The deal is] light years better. What is so hard?” he asked in a Tweet.

There are many explanations, but a common one is that Detroit has a reactionary political class that views almost any proposed change as smacking of “union busting” or “selling off the city” to white interests. Unions have sued to block Mayor Bing’s labor reforms, even though the city’s public-pension system is $11 billion in the red. Some city workers now retired and in their 80s have been drawing retirement benefits since they left the city’s employment in their 40s. Budget controls are incredibly lax. This month, it was discovered that Barrett Jones, a full-time consultant for the Detroit Water and Sewage facility earning $139,000 a year, had a second full-time job at $135,000 a year as public-safety administrator for the city of Flint, which is 70 miles away. He has resigned from his Flint job but still works for the city of Detroit.

Despite clear evidence that the city council isn’t interested in viable solutions to Detroit’s finances, pie-in-the-sky talk is still rampant among its members. Council member Kwame Kenyatta claimed at this week’s council meeting: “There are other activities that you can have on Belle Isle that will generate revenue and create jobs.” One potential investor who has come forward with an intriguing proposal has seen it roundly dismissed by city officials. Rod Lockwood, a real-estate developer and former president of the Michigan Housing Council, has published a bold plan to revitalize Belle Isle by having the city sell it for $1 billion to investors who “believe in individual freedom, liberty, and free markets.”

The investors would be given freedom to set up an “enterprise zone,” which would have self-governing commonwealth status with the U.S. much as Puerto Rico and the Northern Mariana Islands have. The new Belle Isle would have a top rate of 10 percent on income taxes, and no taxes on capital gains, dividends, investments, or estates. Lockwood predicts the island would be attractive to finance, insurance, and investment companies, and no factories would be permitted. Former Chrysler president Hal Sperlich, who has endorsed the idea, says the economic dynamism the area would generate could turn it into a “Midwest Tiger” with spillover benefits for Detroit as a whole.

Of course, Belle Isle isn’t going to become an “enterprise zone,” given that Detroit’s leaders can’t even bear the thought of having the state government manage it for free. Out-of-the-box ideas like Lockwood’s are dead on arrival. So Detroit appears doomed to continue to sink until something radical is done. The most likely course is bankruptcy, which would void the city’s contracts with its 18 municipal-employee unions.

“I think . . . off and on, that [bankruptcy] wouldn’t be a bad idea,” former Ford chief financial officer Allan Gilmour, now the president of Detroit’s Wayne State University, told Reuters this month. “Let’s clean this out once and for all.”

Other failing American cities have a chance to rescue themselves before things get that bad. But if present trends continue, dozens of American cities will find themselves on the bankruptcy operating table if they continue to reject effective fiscal medicine.

— John Fund is national-affairs columnist for NRO.