Detroit Needs More 'From the Heart' Transactions, Less Government

(Editor’s note: On Nov. 6, 2013, Fiscal Policy Director Michael D. LaFaive took part in a forum sponsored by the Hudson Institute titled “Don’t Forget the Motor City: Philanthropy in Detroit.” The following is an edited version of his remarks. You can watch a video of the forum here.)

Thank you, Bill, for your kind introduction. It is great to be here today and to discuss Detroit and the countless efforts of people and institutions to make the Motor City a better place to live and work; to raise families and to participate in civil society.

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Detroit needs much more of this if it is ever to experience the revolution, renaissance or rebirth promised and hoped for by people of every stripe. In short, it needs more “From the Heart Transactions” and less government meddling. It is my hope that the first may facilitate the second.

So important is the concept of civil society to the Mackinac Center that we once named one of our budget studies — a line item analysis of the state budget — “Advancing Civil Society.” We did this because many of our budget reform ideas were designed to encourage greater peaceful, voluntary association between people and institutions than had existed previously.

Organizing affairs in a civil society relies on private intermediary institutions — family, voluntary associations, religious groups, commercial firms and foundations — working in a free market economy. This is as opposed to a “political society” which relies more on official mandates from distant bureaucracies.

As my former colleague Joe Overton said, “in this environment the creative energies of free people are engaged to solve problems as close to the source as possible. Resourceful individuals, strong families and community institutions, are looked to for the most effective solutions.”

That is just one reason the Center is quick to applaud the work of foundations and individual initiatives in Detroit. As Suzanne Perry’s articles have shown, foundations have been pouring money into Detroit in the hope of making it a better place and on many levels. Individuals have also dedicated their time and treasure to Detroit in ways that are quite inspiring.

The Mackinac Center is also quick to offer its sympathy to those philanthropists who invest in the Motor City. There are not many great options available when a city government insists on being as dysfunctional as Detroit. Look what happened to Michigan philanthropist Bob Thompson. In 2003 he offered $200 million to build 15 new charter schools in Detroit. Mayor Kilpatrick and Gov. Granholm happily welcomed the investment, but ultimately had to pull their support in response to opposition from the American Federation of Teachers. Imagine that: A city with crumbling infrastructure and schools rejecting $200 million in gifts that would come with performance guarantees. Again, philanthropists have our sympathies.

Consider a broader view of what charitable organization and people are up against in the city. Shortly after Kevyn Orr, the state-appointed emergency manager for Detroit, arrived he reported that it:

  • was currently spending $100 million more than it was taking in;
  • had an accumulated operating deficit of $325 million; and
  • long-term debts of $15 billion.

All of these figures were tallied up in a city that has been at its legal property taxing and debt limit and which maintains a byzantine code of onerous and expensive regulations. The per-capita tax burden on city residents is the highest in Michigan. One Detroit entrepreneur told it took three years to get a permit to put tables and chairs on the sidewalk outside his restaurant. The bureaucracy it seems is so busy strangling entrepreneurs that it doesn’t have time to answer the phone. In addition, city services are awful. According to Orr, as of April 2013 there was a “backlog of approximately 3,300 complaints regarding the city streetlights alone.” That’s just for one city service!

Well-meaning people and the institutions they operate are working hard to overcome these issues, but in many ways are swimming against a tsunami of incentives that undermine the goals of both privately and publicly financed efforts, some of which have been grand in scale. Consider a few examples:

The Renaissance Center was a privately financed initiative and so named because it was supposed to herald a renaissance for the city. It cost $350 million to build and was sold for just $76 million 19 years later. On the day of its dedication, Henry Ford II said, “Detroit has reached the bottom and is on its way back up.” It was not to be. 

The People Mover was supposed to bring suburbanites back to the city. It did not. Fox Theatre’s refurbishment was supposed to bring a city “renewal”; and Comerica Park and Ford Field — both stadiums highly subsidized by taxpayers — were supposed to “bring the city back to life.”

In 2000 [then] Mayor Dennis Archer said that “Comerica Park will help restore the excitement of urban living that has been missing far too long from downtown Detroit. Over the proceeding decade 250,000 people fled the city. There is no single metric better able to measure quality of life issues than that of migration. A quarter-million Detroiters voted with their feet in just 10 years and they did not vote for the city’s version of “renewal.”

In November 1999 and in reference to the two-stadium deal, Mike Duggan — who is currently running for mayor — predicted that “20 years from now when people come downtown, they will look back at this day as the turning point in Detroit’s comeback.” That was 14 years ago and the city is now in bankruptcy proceedings.

I argue that it is not the flashy projects that will ignite a revolution, renaissance or rebirth but to government and private charities focusing their efforts on the microeconomic foundations of macroeconomic growth. That is, on the individual.

I realize that philanthropists are already doing that and in very positive ways. One need look no further than examples covered in Suzanne’s series. The Skillman Foundation’s investment in neighborhoods is one example. I’ve written about and publicly praised private support for Detroit’s wonderful jazz festival and — in a truly inspiring story — followed the work of Motown’s “mower” gangs.

For those of you who are unfamiliar with this “gang,” they are Detroiters who — despite paying full freight for city services — have taken up mowing parks and walkways long abandoned by Detroit’s dysfunctional government with their own money, lawnmowers and time. There are others, too. The East Side Riders, which tricks out bicycles for youth and my favorite, Detroit’s first “No Kill” animal shelter. The shelter was actually founded by a former Detroiter who was denied a permit to film a Discovery channel documentary about Detroit’s 50,000 abandoned and wild dogs.

I worry, however, that the from-the heart-transactions of philanthropists and volunteers alike are minimized by a city that punishes entrepreneurial and even philanthropic or volunteer initiative with a toxic mix of crushing taxes, unnecessary regulations, and awful public services.

To the extent philanthropists wish to work with the city, it is my hope that they use their influence to push for broader policy changes that will help maximize their own grant making work.

In order for the city as a whole to experience the long-sought revolution and renaissance it must stop punishing people and businesses for trying to make a go of it. That means eliminating personal income tax and rolling back property tax burdens to more competitive levels while simultaneously improving services the city must provide.

Only when people and business feel safe again — economically and physically — will they return in droves. When that happens, generous philanthropists will be swimming with the tide instead of against it.