From left, Edward Luce, Dan Gilbert, Bruce J. Katz (all photos by Asa Mathat)
Bruce J. Katz
Chairman, Rock Ventures
Bruce J. Katz
Vice President and Director, Metropolitan Policy Program, Brookings Institution
Chief U.S. Commentator, Financial Times
If we’re entering a new era of metropolis-as-self-contained-ecosystem, in which cities and municipalities are more and more masters of their own domain, is what Detroit has—tech savvy business leadership and intense civic engagement—what Detroit needs? In five years, will we look at Detroit as an example of how to bring a city back from the brink?
Read the full transcript below. (Transcript by Realtime Transcription.)
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Luce: This is a very brief session, 25 minutes with a hard stop, because the governor is coming straight afterwards. So if you two don’t mind, I’m going to be quite sort of rude and house of commons-ish in terms of interrupting and hackling if you give long answers.
It’s a great privilege and pleasure to be on the stage with both of you in different ways. Dan, because I think you’re the only person I know who single-handedly managed to turn an ailing metropolis downtown around. I think we are familiar with that story, but we’d love to hear more of that.
Gilbert: Definitely wasn’t single-handedly. Lot of great people before we got here that had it on the right path, we were fortunate enough to join in.
Luce: And I will get to you, to the first swell in a second, but, Bruce, for those of us who live in Washington, D.C., and are in despair about federal system’s ability to address America’s problem, Bruce tells a story of a federal system below the top level of government that is thriving and experimenting, and he’s also a very generous colleague introducing me to people like Dan.
So, Dan, I would like to start with you. I used to be based in India, and so I’m very familiar with cities that have highly innovative city centers, downtowns, but you can see slums stretching out as far as the eye can see. And the two don’t seem to meet that much.
What is it about Detroit and your incredible success in the downtown and the midtown here, that gives you confidence that this is going to be scalable, that the 93 percent of Detroit that isn’t thriving is going to become 80 percent, 70 percent, 60 percent? How do we get there?
Gilbert: First of all, to have any great major city, you have to have a great thriving downtown. There’s no city I can think of probably in the world, certainly in this country, that you can say all the neighborhoods around are doing really well and delivering, but downtown stinks. That doesn’t exist. And it doesn’t exist for a reason, because downtown is the heartbeat, it’s where there’s a lot of jobs, more producing jobs, anyway, than anywhere in a major city.
So when you have a thriving downtown that has activity, action, and growth associated with it, you are going to hire a lot of people who live in those neighborhoods or will live in those neighborhoods, that’s number one.
Number two is just a strategic tactical viewpoint from Detroit. To get the neighborhoods going, we’ve got to take town the 78,000 or so—we don’t even know the exact number of structures that need to be taken down, mostly houses.
Once we can get that done, you will have open pieces of land, and you’re going to have more importantly, hope and optimism.
I mean, I was at the White House a couple weeks ago. We were talking to several of the secretaries and the cabinet about this very issue. And the thing is, the money is actually there. There’s money available to do this. It’s just a matter of getting the infrastructure in place and getting ours in a position to actually make it happen, to—
Luce: The federal government will be an important component?
Gilbert: The federal government will absolutely be important. There’s money in different places right now that we can get it done; but when you think of a 10-year-old kid walking to school in a neighborhood, and you can give them all the hope you want in the world and sing and dance and tell him, hey, look at downtown. Look at how great it is, look at all these jobs one day you could potentially be part of; but when he’s got to walk by three burned-out houses, one has a crack dealer or something going on inside, he’s going to see that.
And so, you know, you can put all the education stuff that needs to happen, of course, crime is important and all that stuff, but for me, tactically, number one, we have got to the get these buildings and these structures down. And once we do, you are going to have a lot of people look at this, both who live in the neighborhoods and developers, they are going to look at this and say, wow, what an opportunity. We have utilities, streets in place, all the old decrepit buildings are gone and we’ll have kids and families who feel better and safer. And so, to me, that is number one that we have to do to get the neighborhoods going.
Luce: Bruce, bearing in mind your very well-grounded skepticism in how efficient and helpful the federal government is as a partner to cities and states, to what degree do you think realistically the federal government will participate in Detroit as a whole revival in the—in the coming years?
Katz: So one of the things we need to do is to teach the federal government what they do, because they are probably the biggest single investor in this city and in this metropolis, because of entitlement transfers, whether it’s Medicaid or food stamps or the earned income credit, whether it’s investments in advanced R&D as in Wayne State and other universities, University of Michigan, MSU, then they are part of the solution, the infrastructure, to housing, to the demolition of the abandoned properties that Dan is talking about.
The challenge we have with our federal government right now is they don’t know what they invest and they don’t know where they invest, so I think what Dan is talking about is a very practical, pragmatic solution, let’s unveil for them where they already spend money and really challenge them to help that funding become more flexible and in the service of a vision of the city. You can’t set a vision in Washington, D.C. It has to be set here.
Luce: And then you have to, as a city, force the Feds to respond to that? I mean, there’s a model of how a city uses a federal government well to assist itself?
Katz: Here’s an example. Five years ago, beginning of the recession, Los Angeles passes Measure R, $40 billion in sales tax revenue to build out their transit system. Because the recession was so hard and it hit L.A. so hard, they went to the federal government and basically said, give us an innovative loan and we can do the construction not over 30 or 40 years, but within 10 years and have that big-bang effect on jobs and growth.
Took three years to get and ultimately Mayor Villaraigosa had to get dozens of other cities to come around. But, ultimately, that was passed last year. Washington does occasionally do something. And because of that, L.A. is now moving fast to sort of build out the transit system.
Gilbert: One of the things I learned on this recent trip. I heard bits and pieces before, but there’s an enormous amount of money, more than people even know about. That’s been targeted, set aside over the last several years for Detroit. Detroit—and other cities, by the way, not just Detroit—have not accessed only because they haven’t figured it out, haven’t figured out whatever you want to call it, the bureaucracy in Washington to figure it out, or the having the infrastructure and the amount of people here who can execute on the ground and give people in Washington the confidence they are going to use these fund in the manner in which they are targeted.
So a lot of this is not money or lack of money. A lot of it is having the talent and having the infrastructure to execute on programs that are already there.
Luce: Tell me about the bankruptcy. I mean, I’m obviously aware of, partly because of your help, about the degree to which downtown is revived, and I have written about it, but I can’t get past some skepticism that people say, but Detroit’s bankrupt.
What, to you—to both of you—does this bankruptcy mean? Is it an opportunity? And if so, what’s the likely scenario to result from this bankruptcy once the city’s graduated, as it were?
Gilbert: I’m wearing a shirt that says “Opportunity Detroit,” so there’s definitely an opportunity.
I think Kevin or, the financial manager here, put it really, really correctly a few weeks back when he said we’re already—before the bankruptcy, when they were talking about whether we were going to file or not, we were already bankrupt. I mean, just because you file bankruptcy, that’s a formal legal sort of rubber stamp thing. We were bankrupt already.
And probably if you looked at our balance sheet, that was probably the case for many, many years. I don’t know exactly how many, but many years. So I think, really, this was just a formal manifestation of what was already taking place, and it’s the beginning of the end. The beginning of the end of the bad financial issues.
There’s no question we can come out of the bankruptcy. I’m not going to sit up here and say it’s not going to be painful for many people, but it will be—it will absolutely give Detroit the new start it needs. We just removed the complete overhang and all the kinds of financial weight that has frozen the city to a degree. I think it will do what it did for General Motors and Chrysler.
Nobody talks about the bankruptcies of automobile companies anymore and they are thriving right now. So I see Detroit in the same light.
Luce: I’ve always thought that that Scott Fitzgerald quote, “There are no second acts in American lives,” is a most inaccurate quote.
Katz: And I worked through the Washington, D.C. receivership back in the mid-’90s. That was a fundamental reset, because, A, it got the fiscal house in order; B, it made government efficient and capable and competent again—Dan’s thought about why they are not able to access federal resources. But third, we should remember that cities, unlike the federal government and unlike state governments, are not governments. Cities are networks. Cities are networks of institutions, companies, universities, entrepreneurs, philanthropy.
And I think what you have seen in Detroit over the past five years in particular is the network beginning to work together. They can always do things by themselves, but when they come together, they can make the kind of sizable investments, and, frankly, then lead the government to make other investments. That’s what we found when we tracked the federal funding. FHA, SBA, XM—they are following the investments in the core, because that’s where you have marked momentum. That’s where your assets attributes and advantages are disproportionately concentrated.
Luce: Is there another city that Detroit should look to as a model for reviving, or is this just Detroit is Detroit, it’s got to find its own way forward?
Katz: I think there’s two things here. I mean, if you want to look for cities that were able to shrink in rational ways to their areas of opportunity, you look to East Germany, you look to Dresden, you look to Leipzig; because after the Wall came down, you had an exodus of business and talent from the East to West, and they had to rationalize their spatial landscape. So we can take a page from that.
On the American side, I think it comes down to metrics, because the one metric I look at is what portion of metropolitan jobs are in your downtown and midtown. In this region, only 7 percent. Cleveland and Philly, 15 percent. Chicago, 20 percent and New York City, 31 percent. If you could double the portion of metropolitan jobs in this downtown and midtown, this—
Luce: This is a question for Dan. How do you sell Detroit to investors?
Gilbert: Well, Detroit sells itself. That’s the thing. We had 1,100 interns this summer from 157 colleges and universities across the United States, and one of the little known things is we had 19,000 applications for those internship jobs—19,000. We couldn’t even figure it out; did we get the best 1,100? Who knows; even putting those folks through the interview process, but my whole point is, once those folks got down here, just like when investors come down here, we had Steve Ballmer, we took him through on a tour not too long ago, and there’s a bunch of people that are coming through here—
Luce: Is he looking for a retirement home?
Gilbert: There’s a condominium we have, we showed him that we—no, this was a few weeks before. I wish I would have known, but they are amazed and wowed. You take them to the River Front and show them what’s happening there, which is probably in my view—and we had nothing to do with that. That was well down before we got here. That is one of the most under-told stories, I think, in the history of cities, to take three and a half—will be five—miles of what was wasteland and all kind of toxic waste and turn it into what it is today and getting better every year is just incredible. It’s an incredible attribute for Detroit.
Then you take them to midtown and show them everything there, you take them to campus marches and, you know, you show them some of our stuff around it and everybody—and the museums and everything, Detroit absolutely sells itself to young people, investors, out of town—they are sort of amazed because they had this perception—the expectation is so low, and you show them something here, the gap is just huge. And there’s not a single person we have taken through and said, you know, it’s not as good as I thought it was going to be here. It just doesn’t happen.
Luce: That rings true. We’re going to go to a couple questions in a second, but I have one eccentric question to ask, given the vast geographic size of Detroit, given that you have a wonderful eastern market here.
And what potential is there for urban farming?
Katz: I think there’s enormous potential, but it has to be part of this broader shrinking city strategy. I mean, you know, 138 square miles, this is a very, very large city. You could put San Francisco, Manhattan, and Boston and other cities in here and you’d still have room.
There really has to be a strategy for how you shrink a city, but it’s shrinking—there is strength here. I think that’s the contrarian story that really has been masked by the bankruptcy. So I think there’s a play for urban agriculture, there may be a play for manufacturing, both traditional and small batch. You’ll already see that with Shinola in midtown.
There has to be a play for life sciences and some of the innovative assets that this state has, that actually could come to ground and have a synergistic effect through density.
Gilbert: I’m one of these guys and maybe I’m out of my mind, which I am for various reasons, but I think if you go back to that point I was making earlier, you get these structures down and, I mean, all of them, not most of them, all of them. And we’ll put a big board up, like a resource board, count it down to zero, my gut is we will be amazed at how quickly these neighborhoods and this plan gets redeveloped because nobody is going to walk into this land and say I want to do something here with that kind of blight.
When that blight is gone, maybe we don’t have to be talking about shrinking cities because it will be such a rush of people who want to get into low-value housing—when all the utilities are there and the land is pretty much close to free—not exactly free, but close to it—and all the utilities are there, it becomes very cheap for a builder/developer to develop a residential unit, and they are going to develop them and develop them in mass as soon as we get the structures down and maybe we don’t have to worry about raising peas or corn or whatever it is you do in the farm.
Luce: We have five minutes, so I guess this is two, three questions maximum and abbreviated answers. So if you could—I can’t really see very well. Is there a mic system?
Audience Member: Hi. So I think that one of the reasons for the disconnect between the federal government in the city is that the U.S. is in a unique position of having a majority of the capitals outside of large metropolitan areas, both Detroit and New York being not capitals of their states. And so, especially Mr. Katz, how do you see—how do you explain that part of what the federal government is doing with their money by really leaning heavily on what can be seen as anti-urban policies, like subsidizing corn and highways?
Katz: Listen, I think if we are talking about legislative change, whether it’s in Washington or whether it’s in Lansing, there’s a political math here. Cities and metropolitan areas, particularly the top hundred, are two-thirds of our population, three-quarters of our GDP, and drive the entire American economy so they don’t tend to work together, cities and their suburbs, to basically push for legislation, particularly around the things that matter, investments in innovation, investments in infrastructure, investments in education and skills.
In states like Colorado where the cities and suburbs do work together, the state government tends to act in the service of their major metropolitan area, Denver. This is about political coalition building, both with governments, but then this broader civic and business and philanthropic network coming together as the engines of economy and basically saying if you want higher return on investment with your policies, state or federal, here’s what you invest.
Humphrey: I have a question over here. Thank you very much for being here. Andrew Humphrey, WDIV Detroit.
Also on the political view for all the panelists, essentially, how do you overcome political gridlock on the federal side, gridlock that seems to be based on ideology and not on taking care of human beings, and locally here in Detroit, the political gridlock that exists at times as well.
Luce: Dan, you have just been to Washington.
Gilbert: Oh. Well, first of all, I look at government as sort of—I think government should take the oath that I think doctors take, first do no harm, okay. That’s number one.
And not that the government—there isn’t a role because there’s certainly a role in many areas for government, but I think this country was founded on a limited government, limited role, and letting people express themselves in free markets and free thought and being able to create stuff. So, to me, if the gridlock prevents them from causing things that shouldn’t be done, you know, governments can do on the negative side, maybe that’s good.
On the bad side, there’s things that absolutely are the proper role for government and are not being done, then gridlock becomes a problem. So that’s probably more than a 25-second response to that.
Luce: I can add a cheeky follow-up. What more can Governor Snyder do for you?
Gilbert: What does cheeky mean, first of all? I don’t know.
Gilbert: I went to Michigan State. I don’t know all those words.
Luce: Cheeky is not Latin.
Gilbert: How come when moderator is—you’re from Britain, right? Just the questions sound so much better. They sound more intelligent.
Luce: It’s an illusion, I can assure you.
Gilbert: I forgot the question.
Luce: Governor Snyder. You didn’t forget.
Gilbert: What about him? Is he cheeky?
Luce: What more can the State do for you, and the governor?
Gilbert: First of all, I, again, think this governor has done a really good job, because I think he’s had to make decisions—he was willing to make decisions that are not popular. I think when a politician, as most of them do, start becoming about who and not what, they are about who and not what, trying to have everything like them, I think that’s when you start having problems.
When you are willing to make a decision about what is best for everybody, regardless of what anyone thinks of you, I think you will be better off. Politicians will never make a decision, a big one, where everyone will say great decision. I think he’s been supportive in that way.
Katz: I would agree, Governor Snyder has been supportive. For all states, they tend to spread their money like peanut butter across the state. It’s more of a legislative strategy than a market strategy, get behind the momentum in downtown and midtown Detroit. That’s how you grow a great metropolis and a great state.
Luce: Thank you to the both of you.
Kirkpatrick: Thanks so much, guys. I was back there with the governor getting ready to ask that question.
By the way, Bruce just wrote a book called “Metropolitan Revolution,” which you should all read. It just came out, so he’s really talked about this in great detail.