Agenda for Detroit: It’s all about the tax base

This is the first article in a series Public Sector Inc. will be running over the next two weeks. The purpose is to offer policy recommendations for a post-bankrupt Detroit. The series will culminate with the live stream event “Detroit: The Next American City of Opportunity,” featuring Gov. Rick Snyder and Emergency Manager Kevyn Orr, on March 24th. 

Post-bankruptcy, the basic problem Detroit will face is the same problem that, more than anything else, caused its fiscal collapse: most property within city limits is worthless. Soaring crime rates and a negligent city government under Mayor Coleman Young (1974-1994) led to decades of white flight, followed by black flight over the 2000-10 decade. With the middle class exodus now approaching completion, the demand for real property in most parts of the city is headed asymptotically toward zero.

It is thus hardly surprising that 47% of property owners in 2011 did not pay their property taxes, as the Detroit News reported. It’s still less surprising that city revenues have cratered.

How, then, to strengthen demand for real estate citywide?

Effective policing is clearly essential. Detroit’s crime rates have already declined somewhat since the Coleman Young era. To strengthen that trend, a post-bankruptcy city government should study the successes of other cities, especially, but not exclusively New York. This is a task not only for the police department, but also for citizens and voluntary associations. Private security forces, like those in Palmer Woods and Indian Village, should be encouraged elsewhere.

City government should actively support the ongoing gentrification in the Woodward Avenue corridor from the Detroit River to Grand Boulevard. Development of business improvement associations should be encouraged. The model is New York’s Bryant Park, once a hangout for drug dealers, now a beautiful urban oasis. Aesthetics matter. Detroit has beautiful buildings and potentially beautiful park spaces. Beauty is not a luxury—it increases property values.

Other parts of the city are potential nodes of gentrification—the Jefferson Avenue corridor adjacent to Indian Village, the Livernois “Avenue of Fashion” area adjacent to Sherwood Forest, perhaps the Grand River corridor around Rosedale Park. For many years, city government understood its main duty to be providing aid to the very poor. But, to become financially viable, it must nurture gentrification.

That said, gentrification’s potential is limited to perhaps 30 or 40 of the city’s 139 square miles. What about the rest? Let me offer a suggestion whose legality and practicality is, I admit, debatable. Law-abiding property owners should be given the right to purchase, through eminent domain, adjacent pieces of property which are vacant or the site of ruins. Prices could be determined through standard eminent domain procedures; since much property in Detroit has zero market value at present, many lots could be obtained for $1.

There exist in Detroit many beleaguered property owners, still holding on, who find themselves unable to do anything about the blight of neighboring parcels. Eminent domain would allow them to take possession of the property and improve it, giving them a more direct stake in increasing property values. This would amount to privatizing a task which city government is currently unable to perform itself: clearance and upkeep of abandoned structures and properties. Others will have better-informed opinions on whether such a proposal is practical, feasible and just. I offer it as a way to harness market forces to raise Detroit property values above zero and thus provide a workable tax base for city government.

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