You know how the saying goes: when life gives you pork, revive the McRib… Or was it something about lemons?
My point is, it’s when commodity futures dip, not soar, that investors dig in. And while Detroit isn’t exactly a commodity like pork, it is at what some believe is the bottom of a 60-year dip, prime time to plant the seeds in this fertile economic garden.
If Detroit is teetering on the edge of some humbling realities, it also is propped at a precarious tipping point that could define its future. But one giant fear still lurks in the not-so far-off shadows: Municipal bankruptcy.
Such a catastrophe, even if welcomed by some, would fit nicely onto Detroit’s crisis-driven timeline. Which, since the city’s boom in the 1950’s, has included widespread blight, severe population decline, startling crime rates, sluggish basic city services, pitiable poverty rates and an ever-looming financial boogeyman (aka an EFM).
This rattling list woes has inspired some to label the city a national basket case. Yet, if despair is in order, most Detroiters didn’t get the memo. In fact, many are projecting another ending altogether, one in which the hardships of the past give rise to a powerful hope. For all of its troubles, Detroit is a place where adapting to the whupping of post industrialism actually seems doable, and creative and bravely speculative investment ventures in the city are on the rise.
Supported by state, federal and private sector boosts, these upticks are actually gaining credence, so much so that moguls like Quicken Loans headman Dan Gilbert, longtime Detroit investor Mike Illitch, and financial guru John Hantz are racking up investments and beginning to build on long-term investments in the city. In other words, Detroit is the Place To Be. That’s not only a hip and speculative reality but also the title of a new book that's getting national buzz.
Perhaps Dan Gilbert knows it best. He is adding to his Detroit skyscraper collection.
The Detroit News today reports:
This would be the 16th purchase of a downtown property by Gilbert and company since January 2011. Gilbert, founder and chairman of Quicken Loans, relocated the headquarters of the nation's largest online home mortgage lender from Livonia to Detroit in August 2010. Gilbert's portfolio of companies has since moved more than 7,000 people to work in downtown.
.... "Our focus in 2013 will be on the three R's — residential, rail and retail — all of which are vital in creating the vibrant, thriving urban core that we all envision," Gilbert said in the statement.
Detroit stocks may be in the crapper but who cares? It’s the futures that count.
As thousands of right-to-work protestors descend on Lansing today, state lawmakers are in the final hours of debates before deciding whether Michigan will be the 24th state to pass the highly controversial legislation.
Right-to-work laws make it illegal to require payment of union dues as a condition of employment, but workers who opt out of paying those dues would still receive all the wages and benefits of the union contract negotiated for their workplace.
It seems unfair, opponents argue, to force middle-income wageworkers to make such a decision; of course a few extra dollars seem more useful –short-term—in pockets than in union coffers. The long-term effect of right-to-work laws on unions is projected to be a crippling one, while critics of right to work laws say there is no evidence that such legislation improves the economic climate of a state.
Proponents of right-to-work laws say optional union membership make a state more welcoming to businesses. Governor Snyder said in an interview last week that Michigan should go the way of Indiana, which passed similar legislation in February. Snyder, who had said that right-to-work was not on his agenda, changed his talking points last week when the bills flew through the house in a matter of days.
“I looked at it as ‘this is becoming divisive’. I’m confident that we’re doing the right thing,” Snyder said of his decision to throw his support behind right-to-work legislation. Snyder said right-to-work would force unions to make membership more “exciting” to entice workers to pay dues instead of making it mandatory for employment.
Snyder said in an interview on WDET's Craig Fahle show that his support for right-to-work is twofold. First:
“It’s about worker choice. It’s about giving the workers a freedom to choose because this whole issue is about worker’s relationship with the union. This has nothing to do with collective bargaining and the relationship between the union and the employer. I think it’s important that people not be forced to pay to belong to an organization if they don’t see any value in that. They should have the ability to choose. I encourage unions to be proactive in presenting great value equations that get people excited to say they should join.”
Second? Better jobs, Snyder says:
“I’ve been tracking carefully what’s been going on in Indiana they passed similar legislation back in February. And if you look at the pipeline with the Indiana economic development corporation there are 90 companies that have identified themselves as having right to work as one of the considerations of coming to Indiana. Literally those companies could end up creating thousands of jobs in the state that otherwise would be there and a lot of those jobs are good jobs.”
Still, opponents of right to work laws say that all economic boosts from right to work are purely speculative citing that there is no proof that right to work packs a jump to economic growth. Snyder said right-to-work must be paired with other business-friendly legislation within states in order to be economically effective.
On the other side of the right-to-work debate stands President Obama, who was very clear at a rally in Redford yesterday that right-to-work was wrong for Michigan:
"These so-called right-to-work laws, they don't have anything to do with economics, they have everything to do with politics. What they're really talking about is giving you the right to work for less money."
Michigan could become a right to work state before the new year. A fierce legal battle is expected in the wake of the passage of the legislation.
When I was a kid whenever I asked my grandma for something new she always sharply reminded me that, “money doesn’t grow on trees.”
Turns out, she was wrong. Money does grow on trees. In fact, with the gift foresight and some startup funds, it can grow on just about anything.
Don’t take it from me. Just ask Warren Buffet, the third richest person in world who made his fortune based on money growing speculation. He’ll tell you something that all investors know, but perhaps haven’t fully mastered: “The lower things go, the more I buy. We are in the business of buying," Buffet told Fortune magazine in an interview. Well, here in the Tha D, “things” have pretty much bottomed out.
And unless Detroit is the one city that defies history, there’s nowhere to go but up, up, up. You don’t have to be a soothsayer to see the signs. It’s a slow, slow uptick, but it’s happening. It’s not rocket science but it’s a science of analysis: The people who make the big bucks are the ones who see them coming before they land.
John Hantz, the successful investor who plans to buy up a big swath of Detroit for cheap, is one of them. He knows that in 40 years “things”—in this case city land—won’t be dished out at fire sale prices. No. The early bird gets the worm and it’s just a rule of investing.
I ain’t mad at him. He’s a talented guy. He’s a smart investor. He didn’t get rich by leading clients of his finance-consulting firm astray or by making poor investment decisions himself. So let’s put the emotional responses to this proposed land sale aside just look at the facts here.
Hantz has pitched this proposal as a philanthropic act, claiming that he only wants to spend millions on the area surrounding his Indian Village home simply to make Detroit a better place to live; simply because Detroiters deserve better, that more research has to be done on using urban and for agricultural purposes. We can operate under the guise of philanthropy or we can just call it what it is. I prefer the latter. So let’s be real: this is a business investment.
In Detroit there is an element of class warfare, a rich v. poor battle raging on under and at the surface and often justly so presenting a grand clash of idealism and realism given the country and society we live in. Rich people can do stuff that poor people can’t. But if that’s not the oldest story in the book, then I don’t know what is. Well, maybe prostitution is but I digress.
The Hantz land proposal comes from Hantz Group subsidiary Hantz Woodlands, LLC. The company would buy 1,500 vacant city parcels for $600,000 with agriculteral tax credits. The plan is to demolish abandoned buildings and clean up the land which makes up about 140 contiguous acres and plant thousands of hardwood trees. Trees that will take about 40 years to get to the point to where they could be harvested for lumber. Right about the time land values in Detroit will be going up.
So why are we participating in this charade? We all know what the real intentions are: to invest in the land, buy low, sell high or develop and sell even higher. From an economic standpoint this is a great thing. But lets call it what it is and not insult our intelligence. If the city council approves it, approve it for what it is and not for what it’s pitched to be. History can be the guide here.
Look back to New York in the 80s, in the Alphabet City neighborhood. It was a total slum. Now? Million dollar apartments abound there. That was 30 years ago. Look at that happened in Washington DC, in Berlin, Germany. It's the history of cities.
In 30 years it will be happening in Detroit. It’s happening now. Dan Gilbert knows it, John Hantz knows it and the ones who don’t will be crusty visionless naysayers left in the dust. Detroit is coming around, shaping to be an invetor's dream. Time and money is all it takes.
When we consider this proposal we should take a moment too look around the country. This type of proposal is not unique to Detroit. The Hantz Woodlands project may be the largest land sale Detroit has seen but it certainly is not the largest city land grab in the country.
Last year city panels in St. Louis approved a much bigger city land sale to private developer Paul McKee. The St. Louis Real Estate Society reported last year:
Despite the continued legal appeals over losing out on $390 million in tax increment financing (TIF) money for infrastructure improvements, St. Louis mega-developer Paul McKee is pressing forward on his ambitious Northside Regeneration Project. Just this morning, City officials quickly approved McKee’s offer to purchase 1,233 city-owned parcels and option on the neglected Pruitt-Igoe for roughly $3.2 million. All these parcels are located on the Near Northside of St. Louis, just north of Downtown. With this expansion, McKee will now hold around 2,200 parcels, totaling over 250 acres."
Perhaps McKee took a different approach than Hantz but it’s basically the same thing. Because St. Louis has different economic circumstances, it doesn’t need a 40-year of hardwood lot to buffer the land value gap. It’s already there.
Detroit’s top development officals plaud the Hantz land sale, happy to be relieved of the cumbersome responsibility of too much land and too little tax dollars to maintian it with. Perhaps they are lacking foresight here but right now in Detorit it is what it is. Money is tight, you get it where you can.
Rob Anderson, Director of the Detroit Planning and Development Department said the project would save the city money and was all around a good thing. “What we have is an individual who is willing to clean this community and pay taxes. I don’t see the down side,” Anderson told city council members recently.
"Rodney Crim, St. Louis Mayor Francis Slay's top development official, said the land sale agreement was a good one. It moves more than one-tenth of all city-owned property off the books, adding $100,000 to the tax rolls and saving the cost of mowing and maintenance. Some of the $3.2 million proceeds will pay to demolish more crumbling city-owned buildings across north St. Louis, freeing up more land for redevelopment. And much of the ground has been up for sale for decades, with no credible buyers, until McKee. "The market hasn't addressed this issue," Crim said. "Now we have a developer who plans to address the whole area and is ready to move forward."
In 2010, Environmental advocates and concerned citizens gaped at the documentary Gasland which shows people lighting tap water on fire as a result of methane leaks due to “fracking”, a controversial natural gas extraction method linked to ground water contamination. The process involves breaking into shale rock below ground water levels to acess methane. Once the rock is broken, gas released can potentially seep upward into water supplies if not extracted correctly.
A Michigan Department of Environmental Quality (DEQ) spokesperson has decried the film, stating that the images in Gasland are not accurate.
Today, the debate over fracking and its dangers and benefits continues in Michigan as Governor Rick Snyder announced a plan Wednesday to increase the state's production of natural gas.
On Wednesday, Snyder said the best way to tap into Michigan’s plentiful natural gas deposits is to research safe ways to expand the use of fracking. He said an increase of the drilling process will result in lower gas bills for Michigan residents:
"We've been doing fracking for over a decade with some of the toughest regulations in the country and it's worked well," he said. "Fracking is something that is very serious and it needs to be done the right way.”
According to a report in The Detroit News, Michigan plans to team up with the University of Michigan’s Graham Sustainability Institute on a two-year, $600,000 study of best practices for the use of fracking. The increase in fracking may not be halted by the DEQ.
In October Michigan DEQ communications director Brad Wurfel declared hydraulic fracturing, or “fracking” a safe method under the right controls and decried the controversial documentary that smeared the practice.
Wurfel told The Rockford Quire:
“I’ve seen Gasland and it’s a fun movie, but it isn’t real. In Michigan in 60 years and 12,000 wells there has never been a single incident associated with fracking. People get really excited about this. We are the Department of Environmental Quality, we protect the land, air and water. If something was going to damage those resources we would shut it down or outlaw it.”
But there are those who counter Wurfel’s statement, citing a scientific study that linked flammable drinking water to fracking.
On a federal level, the Obama Administration tightened fracking regulations this May, implementing laws requiring the disclosure of chemicals used in the process when done on federal and American Indian lands.
Still, the issue is hotly contested at a state and national level. Those who rely on ground water to drink worry about the affects of fracking. But under the right controls, many argue that it’s a step toward Michigan becoming more energy independent.
If voters were looking to hear more from presidential candidates last night on U. S. leadership in the world, they were sorely disappointed.
Presidential candidates President Barack Obama and GOP challenger, Governor Mitt Romney, rolled out the same discussion points from the previous two debates with topics often sticking on the domestic economy, taxes, and military spending.
The debate, which was slated to focus on foreign policy issues, offered nothing new to the presidential race in terms of content. Discussion had on affairs abroad stayed wrapped around the turmoil in the Middle East—namely Iran and Syria—and trade with China.
During the 90-minute debate, both Obama and Romney addressed some hot-button issues with Romney agreeing with Obama at many points in the discussion. It was as if the rest of the globe did not exist, or at best was irrelevant.
Nowhere in the debate was any talk of Europe’s economic scare, the Central American drug trade, climate change, a rising India, Sub-Saharan Africa or international economics.
Instead, both candidates took whatever chance they could get to drag the discussion back home to domestic issues while moderator Bob Schieffer sat back watched it happen.
When Scheiffer asked about America’s role in the world Romney skirted the question almost entirely in his two-minute response. With a vague statement that the United States has a responsibility to make peace in the world, he quickly jumped home to safety.
"In order to be able to fulfill our role in the world, America must be strong -- America must lead," Romney said. "And for that to happen, we have to strengthen our economy here at home."
Romney then slipped into the same rhetoric from the first two debates, blaming Obama for the sluggish economy and claimed to know what it takes to get the economy booming again.
Obama broke from the topic of foreign affairs in a similar fashion during other parts of the debate. When talking about military spending, he said the focus should be more on spending on education and domestic issues.
“There are some things we have to do here at home as well. It’s very hard to project leadership around the world when we’re not doing what we need to do [at home],” Obama said, using that as segue to talk about more education and other issues facing the U.S.
Schieffer at one point asked the candidates to stay on the topic saying “"let me get back to foreign policy." Schieffer otherwise let the two spin off however they pleased.
The tone of the debate was one that showed an aggressive Obama, perhaps making up ground lost from the first debate, and Romney trying to stick on his strongest point, the national economy.
Obama served up the toughest jabs and smart talk of the night while Romney’s strategy was what some pundits are calling a “prevent defense” tactic: letting sharp charges from the President slide in order to seem less vulnerable.
One of the most tweetable moments of the debate came when Obama chided Romney for numbers he used to portray shrinking on military spending.
“You mentioned the Navy and that we have fewer ships than we did in 1916. Well, Governor, we also have fewer horses and bayonets," Obama said, pointing out that times and technology has changed.
During the debate Obama repeatedly aimed to pin Romney as out of touch.
The President said Romney was stuck in the past with outdated foreign and social policy. “The 80’s called, they want their foreign policy back,” he said of Romney’s charge that Russia was one of America’s biggest threats.
Romney took a few swings at Obama during the debate, saying that the United States is loosing its influence abroad under the President and slamming the president for his attempts at diplomacy.
"The president began what I would call an apology tour, going to the Middle East and blaming America," Romney said.
Obama argued U.S. foreign relations have improved under his administration.
When it came to the closing statements, both candidates drove home national issues instead of foreign relations.
Romney in his closing remarks focused on America’s the struggling economy asserting that he has what it takes to build "strong leadership" and rebuild the U.S. economy.
Obama focused on what he has done to clean up after the Bush administration including ending two wars and getting the economy running against after near collapse in 2009 when he entered office. Obama then compared Romney to Bush, saying the GOP candidate would enact similar policy as the former president.
While Obama seemed to be the stronger performer (it seemed hardly fair, a sitting president pitted against a first-term governor), it mattered little. Other than entertainment, the debate provided no new information to the U.S. electorate.
If nothing else, Detroiters got a chuckle out of hearing Romney claim to be "the son of Detroit."
It’s true. Michigan’s ballot this year is more crammed than I-75 North at 4:30pm on a weekday. Especially in Detroit were voters will face 18 proposals from the State, the County, the City, the public school district (DPS) and the community college (WCCC).
Voters have a big slab of homework to complete before voting.
As you read this, have you decided on your picks for Michigan Supreme Court justices? Or how you will vote on the Wayne County budget and appropriation ordinance? Luckily there are some pretty good voter guides out there.
Some people, the dream voter, keep an ear to the ground and slowly absorb information to make an educated vote. The rest of us have a date with Google a can of Red Bull on the evening of Monday, Nov. 5.
While I’m doing my best to avoid sucking down caffeine last minute in the name of democracy, no amount of ginseng, taurine or caffeine will be able to help me decide on one of this year’s biggest decisions for Michiganders (besides choosing the next President). That decision is on Proposal 1, more commonly known as the emergency manager (EM) law, or Public Act 4. When it comes to Proposal 1, I am the darling target of political ads: the elusive undecided voter.
The Proposal1, the EM law, would mandate a state-appointed official or advisory board to have full control of the finances and academics of financially failing cities and school districts like Detroit and DPS.
This issue is a repeated stumbling block and no matter how hard I study, discuss, or even mediate (ok, at this point I’ll try anything). The litany of opinion on Proposal 1 is off putting. I’m wary of those who are viciously for it as well as those who are vehemently against it. It’s getting harder to stand on the sliver of middle ground.
Maybe that’s what’s wrong with the EM legislation: it’s too polarized. Or maybe it’s what needs to happen to drag some sputtering municipalities in to 21st century? Obviously this can get dizzying.
Generally, supporters of the EM proposal tend to be more fiscal conservatives and supporters, more socially liberal. That’s just an observation. Some people describe the EM law like pulling teeth: “It’s not gonna be pleasant but it has to be done.”
Supporters of Proposal 1 say that without State intervention major cities will have no choice but to file for bankruptcy, plunging bond ratings into oblivion and spreading a dismal economic for all of Michigan. They say it’s the only choice for cities to avoid bankruptcy.
Critics of the EM law proposal say cities facing financial crisis should be able to file for bankruptcy if need be as a path out of a fiscal mess and skip the finance czar.
So when GOP presidential candidate (and Michigander) Mitt Romney framed bankruptcy as a chance to rebound during the presidential debate on Tuesday night it was a bit of a surprise. As a businessman, he basically said bankruptcy isn’t all that bad.
"[Obama] said that I said we should take Detroit bankrupt," Romney said in the debate, "And that's right. My plan was to have the company [GM] go through bankruptcy like 7-Eleven did and Macy's and Continental Airlines and they come out stronger."
Maybe someone can help me out here: If Romney’s right and bankruptcy can be a launching pad to higher heights, then why do we need the emergency mangers in cash strapped cities? Is it bond ratings that are the issue here?
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