Detroit Bankruptcy Underscores Rift Between City and Suburbs

Monday, 29 Jul 2013 11:34 AM

 

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Walking to meet friends for a drink at Fleming’s Prime Steakhouse and Wine Bar in bustling downtown Birmingham, Michigan, Cindy Boudreau said she never goes into Detroit except for an occasional Red Wings hockey game. She doesn’t see the point, especially now that the city is bankrupt.

“We would rather stay in the suburbs,” Boudreau, a 66-year-old retired real-estate manager, said in an interview about a block from a park where children played on an Astroturf-covered mound. “We’ve got all we want here.”

Boudreau’s view exemplifies a generations-long divide between Detroit, where the per-capita income is $15,261, and suburbs such as Birmingham, where it’s $67,580. Detroit’s record $18 billion bankruptcy case raises questions about how affluence can co-exist with poverty, and whether urban areas with hollow cores can thrive.

Cities in Oakland County, which abuts Detroit, constitute what amounts to a parallel community that is whiter, richer and more Republican. L. Brooks Patterson, the county executive for 20 years, argues that Oakland can function apart from a failed Detroit, that Michigan’s prosperity no longer depends on its largest city. Republican Governor Rick Snyder says the entire state’s future is bound together.

Urban Island

“That’s the debate that we really need,” said Lou Glazer, president of Michigan Future, an Ann Arbor nonprofit working to improve the economy. “What’s Detroit going to be? Is it going to be connected to the region or not? Is it going to be vibrant, and if it is, what’s the role of the suburbs?”

Detroit became the fourth-largest U.S. city by 1950 with the growth of the auto industry, as what are now General Motors Co., Ford Motor Co. and Chrysler Group LLC churned out cars. Since then, 1 million have left for places such as Oakland County, whose population more than tripled to 1.2 million.

Even so, Oakland’s population growth has slowed and increased by less 1 percent between 2000 and 2010, Census data show. Population in the Detroit metropolitan statistical area declined by 3.5 percent to 4.3 million during that time, and per-capita income in the metro area also slipped relative to other areas with 1 million or more people, Glazer said.

Affluent Enclave

The county is the state’s wealthiest, according to U.S. Bureau of Economic Analysis statistics. Cities such Birmingham and Bloomfield Hills, where auto executives and former Republican presidential candidate Mitt Romney lived, are about 20 miles (32 kilometers) from Detroit’s vast tracts of decay.

Oakland County’s debt is rated Aaa by Moody’s Investors Service and AAA by Standard & Poor’s, both the highest. It stayed that way even during the recession as the county lost 60,000 jobs in 2009 alone, following the bankruptcies of GM and Chrysler, said Patterson.

The 74-year-old administrator said he’ll make a pitch to the rating companies, at meetings in August, that the county has a “standalone economy.” Its credit shouldn’t be punished because it has distanced itself from Detroit, he said, such as by adopting three-year budgeting, shifting employee pensions to 401(k)-style accounts and diversifying the economy.

“We’ve seen this Armageddon coming,” said Patterson, a Detroit native who has long been critical of city leaders.

Single Fate

While General Motors was Oakland County’s largest employer for decades, it’s now third or fourth behind Beaumont Hospital, Patterson said.

“We can show that we’re not at risk and there’s no reason to treat us like you would treat Detroit,” he said. “In the old days they’d say, ‘As Detroit goes, so goes Michigan.’” That, he said, is no longer so: “As Oakland County goes, so goes Michigan.”

To Snyder, the future of Michigan and its largest city are inseparable.

“For Michigan to be a great state again, we need Detroit to be on a positive path to being a great city again,” Snyder said July 26 in an interview at Bloomberg News headquarters in New York. “There’s been a change in the last two or three years with respect to the perception and the agreement that we’re all in this together, and we need to work on this together.”

Sprawl, Y’all

While the county has been well run, suburbs don’t attract young people the way a healthy city does, and a failed Detroit will drag down surrounding communities, said Matt Cullen, president and chief executive officer of Rock Ventures. The Detroit-based umbrella for Quicken Loans and other entities run by city native Dan Gilbert has acquired more than 30 buildings and brought more than 9,200 employees there since 2010.

“If we’re going to compete as a region,” he said, “we need to have a vibrant city of Detroit.”

Detroit leaders, in turn, have inveighed against the suburbs over the years, and while that “us-against-them” mentality won elections, it didn’t help the region prosper, said Saunteel Jenkins, president of Detroit’s city council.

“We’re all tied together in one way or another in this,” Jenkins said from her office in a municipal building named for Coleman Young, Detroit’s first black mayor.

Part of the division is based on race, with blacks now accounting for almost 83 percent of Detroit’s population after decades of white flight, said Kevin Howley, owner of an Oakland County management-turnaround firm who ran against Patterson last year. Isolationism “has hurt everybody,” Howley, 53, said.

Widening Chasm

The disparity between rich and poor increased during the past decade as Detroit “got hammered” during the longest recession since the 1930s, said Kurt Metzger, director of Data Driven Detroit, a nonprofit organization that tracks social, economic and environmental indicators.

The city and suburbs are unused to cooperation, he said.

“One of these days, kicking and screaming, we will be able to get beyond this,” Metzger said.

Patterson said Oakland County and other suburban areas have been “a pretty good neighbor.” He said that state taxes from the suburbs wind up helping Detroit, as well as levies for the Detroit Institute of Arts and Cobo Center downtown.

Still, the average Detroiter doesn’t use those facilities as much as people from outside the city, Jenkins said, and suburbanites fret that the city may sell art masterpieces to pay creditors.

Spreading Contagion

To be sure, not all of Oakland County is thriving. The rate of residents in poverty has almost doubled to 10.5 percent since 1999, Census data show.

Pontiac, the county seat, is run by an emergency manager who has reduced spending to avoid bankruptcy. Some school districts and areas bordering the city also face distress, said Dave Woodward, a county commissioner and former Democratic Party chairman.

“Poverty is like a cancer,” he said. “Where poverty is prevalent, economic decay occurs.”

The auto industry’s upheaval affected the entire region, though Detroit was more vulnerable after decades of a declining tax base, said Lyke Thompson, director of the Center for Urban Studies at Wayne State University in the city. Almost all research shows city and suburbs are inextricably linked, he said.

“It’s in everybody’s interest to make sure that all of these processes work out to the benefit of as many people as possible and that it gets equitably resolved,” he said.

Susie Sparks, watching her children play at Booth Park in Birmingham, said she made a conscious choice a year ago to start visiting Detroit again after mostly staying away when her first child was born 18 years ago.

Sparks, 46, said she wants her children to know Detroit.

“This little bubble of Birmingham is not reality,” Sparks said.

© Copyright 2014 Bloomberg News. All rights reserved.

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