The voices of Urban Institute's researchers and staff
July 30, 2013

Detroit's Latin motto translated: we hope for better things; it shall rise from the ashes

July 30, 2013

detroitSkyline

Yesterday, I speculated whether the Obama Administration would “bail out” Detroit in the near-term. I suggested that before any major new resources are invested in Detroit, the city must first get its own house in order.

Many have speculated about the causes of Detroit’s current fiscal distress. At the heart of the problem is a city infrastructure built to support a population of 2 million that is now financed by a population of less than half that many people. We need to resist the urge to assign blame for the current crisis, and focus on the opportunities to leverage the current moment for a better future by not repeating the mistakes of the past.

That said, Detroit’s recovery is hampered by significantly diminished capacity within local government to think and act strategically, deliver services effectively, and raise revenues efficiently.

A case in point is Detroit’s antiquated tax assessment and collection system. Earlier this year, a Detroit News investigation found that half of Detroit property owners did not pay their taxes in 2012, leaving $246.5 million in taxes and fees uncollected. How could a city with an $18 billion hole leave resources like that on the table? Obviously, some long-standing challenges with the basic operations of government exist when revenues like that go uncollected. (To Mayor Dave Bing’s credit, he hired a collection firm to begin recouping those revenues.)

Part of the problem could be ambivalent property owners who are not invested in the city or their property. In most places, even when property is foreclosed upon, the banks want to maintain their claim on assets so pay their taxes. Also, homeowners with limited incomes may not be able to afford to pay their taxes.

Basic capacity challenges that impede the functioning of government and economic investment, like the collection of taxes, are what led the Obama Administration to launch the White House Council for Strong Cities, Strong Communities (SC2) -- a program I helped to design while I was at the U.S. Department of Housing and Urban Development (HUD).

Two years ago, the White House deployed teams of mostly career civil servants from across the government to seven cities that have faced significant and long-standing economic distress. Their charge: To unleash innovative strategies to help solve challenging local problems, cut red tape, and, most of all, help these seven cities use taxpayer resources wisely.

Detroit is one of the cities that received a Community Solutions Team during the pilot phase. Without any new resources, Detroit’s team has figured out how to make existing resources go farther by:

  • Facilitating partnerships and laying the groundwork for a light rail system along the Woodward Corridor, the region’s primary north-south thoroughfare, which will link downtown Detroit, the region’s largest employment center, with the rapidly developing Midtown and New Center neighborhoods to the north, serving destinations such as Comerica Park, the Detroit Institute of Arts, and Wayne State. The U.S. Department of Transportation pledged $25 million toward construction of the project that is financed with a mix of public and private funds.
  • Helping the Detroit Housing Commission access $6.5 million from HUD to demolish Frederick Douglass Homes, a public housing development spread over 18.5 acres that is a long-standing symbol of blight and a haven for serious crime in the city.
  • Repurposing funds under an existing Community Oriented Policing Services grant, which was originally designated for new hires, to retain approximately 108 officers that were in jeopardy of being laid off and help the city keep its streets safe.

While national media attention is focused on the Chapter 9 filing and its long-term implications for Detroit, the city still needs to deliver services to its citizens (some of whom have taken matters into their own hands), maximize economic opportunities, and plan for its future. Although the federal government might play a limited role in the bankruptcy, they are, through programs like SC2, well-positioned to help Detroit leverage its current federal dollars to ensure the citizens of Detroit are benefiting from those investments by helping relax the myriad of rules in place.

In addition to intense technical assistance that could be provided through an expanded SC2 Community Solutions Team and expertise that could be supplied through the new SC2 National Resource Network, Congress could act to make existing federal resources dedicated to Detroit more flexible during the next few years, when every dollar needs to go further. Such blanket authority would enable federal agencies to act more quickly and align programs with improvements in operations and management in the city and at sister agencies such as the Detroit Housing Commission, Detroit Water and Sewage Department, and the Detroit Economic Growth Corporation.

Detroit isn’t the only city that has faced or will face liquidity challenges, but it could be the first to test out a new responsive federal approach to meeting cities where they are, ensuring accountability for federal funds, and using a crisis to create opportunity.

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