Kevin Klowden
Executive Director, Center for Regional Economics
California and Entertainment & Sports and Global Economy and Regional Economics and Technology
Kevin Klowden is the executive director of the Milken Institute’s Center for Regional Economics. He specializes in the study of key factors that underlie the development of competitive regional economies (clusters of innovation, patterns of trade and investment, and concentration of skilled labor), and how these are influenced by public...
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What Detroit can teach other cities
By: Kevin Klowden
October 16, 2013

While the fight continues over DetroitaEUR(TM)s bankruptcy, it is essential for other cities to examine what lessons can be learned from DetroitaEUR(TM)s decline so they can avoid the same pitfalls. DetroitaEUR(TM)s demographic decline and loss of its key industries are extreme, but many of its problems are not unusual. What other cities have done to address key concerns is just as important. Here are efforts made by other cities that have faced declines but have tried to act smarter and with an aim towards the future.

DonaEUR(TM)t blow the budget on sports. One of DetroitaEUR(TM)s most high profile efforts to boost its downtown was to build a new baseball stadium for the Tigers more than a decade ago, at a cost of $300 million, and to lure the Lions football team back in from the suburbs with a new $500 million stadium, aided in part by private funding. While both efforts produced new infrastructure and new buildings and succeed in bringing people in from the suburbs, the return on investment is not the same as a broader tourism, retail and entertainment complex would likely have produced. While some cities have successfully pursued development without new sports arenas, the best revitalization projects have seen the stadiums as part of a greater picture, such as in BaltimoreaEUR(TM)s connecting stadiums to its Inner Harbor revitalization, or San DiegoaEUR(TM)s integrating Petco Park into the revitalization of its Gaslamp Quarter. This allows the new infrastructure to be shared by a much broader economic base and helps to guarantee the flow of money into the neighborhood even on non-game days.

Improve public spaces. For people to want to spend time in a city, they need to have a reason to walk around and actually stay in town, rather than visiting just one venue or store and leaving. DetroitaEUR(TM)s master plan, established in 1946 and in effect for more than twenty years, ignored that insight. Significant efforts in the 1960s and 1970s focused on building large structures such as the Detroit Renaissance Center and the Poletown Manufacturing Plant. While these created some jobs, they provided little broad economic impact to the surrounding neighborhoods.

A new approach, the Detroit Future City Plan, issued in January, focused more on neighborhood transformation and public improvement. A good step aEUR" but decades too late. In the meantime, several cities have pursued successful public-private partnerships, such as New YorkaEUR(TM)s Bryant Park. The improved public spaces can help attract retail and boost property values in the surrounding areas. Even revitalizing retail and commercial districts can make a significant difference. Chicago has bolstered once moribund State Street, starting in the late 1990aEUR(TM)s, by eliminating its status as a aEURoetransit mall,aEUR? introduced twenty years earlier, and adding highly popular events such as the winter aEURoeSkate on State,aEUR? and working with established retailers to beautify the area. These efforts have paid significant dividends in terms of many new businesses and increased foot traffic. It is vital to recognize the decline in public spaces earlier rather than putting it off.

Reduce the divide between city and suburbs. The exodus of population that affected Detroit over the past few decades not only saw a racial division between the city and suburbs but one of wealth as well. Major retail centers, sports arenas, banks and centers of investment all moved to the suburbs, as did both auto manufacturers GM and Chrysler (before GMaEUR(TM)s return in the past decade). Several U.S. cities have seen a dramatic flight of wealth out of the city limits, not just Detroit. St. Louis, Baltimore, and Washington, D.C. all showed significant signs of this by the 1980s, and others have similarly suffered. One solution is to significantly improve mass transit and commuter rail, as has been tried successfully in Washington, Portland, Denver and elsewhere. But that is normally expensive and time consuming, and difficult in cases of dramatic decline.

Another solution is to consider merging the governing authorities of cities and counties, such as in Nashville and Davidson County and Miami and Dade County. This encourages broader solutions and can help overcome divides often seen between rich and poor areas. The model has become increasingly common in Asia, and is well established in cities such as London and Hamburg. It does not result in wealth redistribution, but it does help smooth some of the funding issues and can help avoid much of the aEURoeus versus themaEUR? attitude that became common in Detroit politics.

Plan city finances for 10 years from now. Detroit, like many other cities and states, made a habit of following in the footsteps of the auto industry, reducing the amount of short term salary owed to employees in favor of generous long term health and retirement benefits. As population growth slows and populations age, this is simply not sustainable. A balance must be reached to protect the interests of employees who were provided certain promises while also protecting the ability of the city to pay for services and to pay its employees in the future.

The best example of reforming the system rationally can be found in San Jose, Calif. Facing both massive pay and benefits rises over the past decade, San Jose, under the leadership of Mayor Chuck Reed, passed a citywide initiative last year that reduced pay and pension benefits for new hires and increased contributions from existing workers. In contrast, Detroit has dealt with its pension and operational shortfalls through massive borrowing, helping result in its current bankruptcy situation. The willingness to think about the impact of financial decisions now is essential, and most major cities will have to face the pensions issue sooner rather than later.