Why Detroit Is Tearing Down A Highway

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The city of Detroit today stands at a crossroads. Property values are relatively low. And if we're going to create a city that works for all, now is the time to do it. After a long cycle of decline, powerful forces are remaking the city piece by piece. As a Detroit resident, you know that I want to see the city that I live in really be an amazing place. We are funding and housing small businesses from across the country. We have so many projects going on, so there's a lot of noise, a lot of dust. People are leaving the city. A lot of Black people are leaving the city. What you call redevelopment is really displacement. These moves could foreshadow the future of America's factory towns. When a city experiences bad economic times, you see property values decline. With a decline, to a certain extent, developers say, Well, it's cheap to buy this, and they buy it and redevelop it. So why didn't that happen in Detroit? That was the big mystery. Are these new developments good or bad for Detroit? And what do residents think of the changes coming downtown? Detroit, Michigan was once the heart of the American auto industry. Being on the river, they were a prime location for access to coal from the south and metals from Minnesota. And so it was particularly well located for what was going on in terms of the advent of manufacturing. Just about 640,000 people live in the city today. That's a huge decline from its heyday. At its height, Detroit's population was just short of 2 million people, and we have all the infrastructure that reflects that. And now when you have a city that literally houses one third of that population, there are some challenges that exist. You don't have necessarily the same tax base to be able to fund all the infrastructure that's already been existing. People from around the world came to Detroit to find jobs in car factories. We think of the assembly line with the automobile, and certainly that's the iconic part of Detroit. But it also turns out that to accommodate this surging population, year after year, decade after decade, they also had to essentially develop assembly line tracks of housing. Certainly, things peak in 1950. As global trade became more important in the 20th century, Detroit's economy shrank dramatically. This loss of jobs eventually led to intense cycles of social unrest in Detroit. Deadly riots broke out in the summer of 1967, and people left for the suburbs in droves. It wasn't that there were just a section here of the city or one over there that had fallen into disrepair, disuse. But it was very widespread and it was widespread literally in the shadow of they're still some of the largest auto companies on the planet. But with the population leaving, with the infrastructure staying in place, it meant strains on the city. Cumulatively, they started to mount over time. Since the peak, very little has been built. New construction of homes stalled almost completely since 1950. Over the years, the city earned a reputation for blighted structures and abandoned factories. The city also still has its huge interstate system that was built largely by the federal government. The Federal Highway Administration in a zeal to, quite frankly, accelerate people getting back and forth from the suburbs to downtowns, put highways all through neighborhoods and cities all across the country. And invariably, many of those interstate highways cut through neighborhoods heavily populated by Black and brown communities. It's a sad story because this neighborhood was split and ultimately eradicated by the construction of a freeway called I-375. It destroyed a few neighborhoods: Black Bottom, Paradise Valley, and that really fractured the community. What stands there today is we have this freeway, which is a very short freeway, but we also have different neighborhoods that don't exactly look the same. And I grew up in one of those neighborhoods called Elmwood Park next to the Lafayette Park neighborhood. And so I think for folks there, it's important to be mindful of that history. Scientists know that the introduction of a freeway can worsen air quality in an area and also increase noise pollution. Local planners say that remaking the highway could create a better quality of life for newcomers. Construction work could kick off by 2027, according to state officials. You know, it'll be, quite frankly, a landmark opportunity to redress the wrongs of this physical scar in our city. As we're reimagining how infrastructure supports people and supports life, we have an opportunity to acknowledge that past and build a future that doesn't make the same mistakes. Others in the city are more skeptical of the plan. The redevelopment of an expressway has little to do with the expressway, but who's going to benefit and why at this point is it taking place? A small but mighty collection of buildings are going up fast in downtown Detroit. At the same time, rents have crept upwards, fueling concerns over gentrification. The biggest annoyance that I find is that a lot of times the developers are coming in and making you feel like they're saving the neighborhood, whereas we have people that have been here for a long time. They have some pluses and minuses. Pluses being that they're shops and more interesting things to do in the city and places to go to that where you can feel more safe and take your families . Cons would be that a lot of people like myself kind of feel out of place. Many of the changes underway in Detroit trace back to billionaire investor Dan Gilbert. Here's the executive director of one of his philanthropies. So back in 2010, Dan made a very intentional decision to bring the family of companies from the suburbs of the city of Detroit to downtown Detroit. You know, both from a business perspective and from a community perspective, his thought process was, we can make an impact as a business by bringing jobs to the city of Detroit. The typical job in the city of Detroit pays well, but many of those workers commute into the city. Residents of the city only earn about $36,000 a year, much less than the national average. Affordability has become a major issue. We believe in a city where everyone has access to healthy, stable housing and the city of Detroit, while its property values certainly are going up, the city of Detroit's property values, really, if you look at the bigger picture, are still pretty low. The issues have to do with what's on the market. Just hundreds of homes were built in the city over the past decade and most were priced above the budgets of the typical Detroiter. That does make it challenging when providing affordable housing because even quote unquote resident apartments at 80% of AMI may still appear a little outside the affordability of what many would call the average Detroiter. So that's why some of our developers are trying to make deeper inroads in affordability. Now the challenge that exists literally today in 2022 is that construction costs have gone through the roof over the last 24 months, principally during COVID, and they've not abated really. But it has mitigated our ability to do certain forms of housing. While this new round of development stretches on, people continue to leave the city. Economists believe that the steady loss of people is ultimately what fueled Detroit's historic bankruptcy. In July 2013, the city of Detroit filed for Chapter 9 municipal bankruptcy. With the decline of population, that can often come with challenging times for any city. From the city of Detroit's perspective, that meant entering the largest municipal bankruptcy in history, and that meant a lot of challenges for pensioners and for our museums and for our tax base generally. Detroit's filing contained nearly $18 billion in total liabilities. Economists believe that the city's financing of public services and infrastructure were the primary causes of this funding shortfall. So the city was saying its revenues continue to decline and the ability to manage that infrastructure, that big scale that was put in place, it wasn't flexible. You had an inability to manage that. In a vibrant Detroit, a lucrative pension for city employees with a large tax base seemed to make sense. That, too, then became a burden, something weighing on Detroit, until a breaking point was reached. 13 months after the initial filing, Michigan lawmakers provided a bailout loan to the city, ending the bankruptcy. As the city of Detroit goes, so goes the state of Michigan. So the state of Michigan is going to continue to do everything we can in our administration. We were not in power when that happened, but our administration has pulled on every stop and taken every opportunity to make sure that the people of the city of Detroit know that we have their back and are going to invest in their communities. The Federal Government also funded demolitions of about 15,000 blighted structures in Detroit in the aftermath of the bankruptcy and national housing crash. Bailouts for two of the three largest automakers prevented even bigger losses of local jobs. You know, right now, we're still coming out of that a bit. And also, many of the families have moved away to some of the neighborhoods adjoining us. That puts some challenges on our public school system. In the four state budgets that Governor Whitmer and I have negotiated and passed on a bipartisan basis, we've invested more in K-12 education than ever in the history of the state of Michigan. That means more money for Detroit Public Schools Community District, the largest school district in the state, are seeing more investments in their school buildings, more investments in the education professionals who support them, and more investments in the resources that are available to them as learners so they can be positioned to be successful. And we think that those kind of foundational investments, in addition to the infrastructure investments that we've talked about, we think that that really sets the table for the city to be supported and to go forward and to thrive. Detroit today has turned many things around by raising taxes. New revenue is coming in from internet gaming and sports betting. The city has also been accused of inflating property value assessments to extract more cash from its citizens. In response, the city told CNBC that the effective tax rates in the city are high because there's a large number of low value properties around town. Some of this public money could end up going back to companies like Bedrock Detroit, which is controlled by the billionaire Dan Gilbert. In July 2022, one of his new buildings downtown received a $60 million tax abatement from Detroit's city council. Bedrock's CEO told CNBC the decision from the city council was consistent with decisions for other major developments within Detroit, given the city's significant tax rates. Dan Gilbert's philanthropic spending has rippled through Detroit, earning him both supporters and opponents. Dan Gilbert doesn't need a $60 million tax abatement to build this building. It is a big business and it's a handout to a big business, but it supports many small businesses. Detroit's financial future remains uncertain moving forward. A budget assessment from 2022 includes a doozy in the footnotes. City revenues could fall short of spending by 2027. The city says that these are conservative estimates and that it will continue to exercise spending restraint. As inflation sets in, many people living downtown could face insurmountable price hikes. We can do this in a way that doesn't bring about displacement, but that instead encourages and enables people to stay in the neighborhood they live in, in the neighborhood they want to live in, and not be forced to move somewhere else because their home or their community or their block is no longer there. The city is diversifying into new fields while retaining a strong blue collar workforce, which could promote economic stability. With any luck, these new plans will help officials avoid repeating the city's worst mistakes. Detroit was world famous. For it to decline meant that something can happen to a city that was a beacon of progress, of growth globally. You could see the parts where people are still being left behind and just not being told of what's going on. So people don't really get the sense of pride. A lot of people looked at the city of Detroit and just saw the bankruptcy because it was something different and strange. But once you look past that, you see people who are really fighting every day to make their community the best place it possibly can be. A lot of people, I think, are still fearful of coming down here. I think you have to come down and look for yourself. We've got a lot of things coming. The city is buzzing. When it comes to the city of Detroit, you can either be here or you can hear about it. So which one are you going to want to do?
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Channel: CNBC
Views: 1,795,318
Rating: undefined out of 5
Keywords: detroit, rise and fall of detroit, CNBC, business, us news, dealerships, buying cars, ford, GM, michigan, detroit real estate, detroit living, economy, Detroit, Michigan, urban planning, inflation, cost of living, economic indicators, bankruptcy, chapter 9, bonds, tax policy, tax breaks, Dan Gilbert, cities, real estate, commercial real estate, construction, jobs, midwest, rust belt, urban economics, land values, public budget, highway removal, infrastructure, Federal Reserve Bank of Richmond
Id: 0aA_6BTVyCs
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Length: 13min 6sec (786 seconds)
Published: Wed Aug 10 2022
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