New Geography

Tag: Michigan

  • Michigan’s State Legislature Needs to Cut Detroit Down to Size

    What’s often forgotten in politics and governance is municipalities are the creation of state legislatures.  A good deal of the population growth in major cities in the second half of the nineteenth century was due to annexation. One of the best examples is New York‘s amazing growth due to annexing Brooklyn. Few people are talking about it but it’s time to consider smaller political units. As Detroit struggles with failure of bankruptcy, the geographical size of the Motor city is becoming a major issue.

    Detroit’s long decline eventually put it a federal bankruptcy court. The reasons are numerous but the reality is here.  How Detroit exists from bankruptcy court is now an issue. Putting Detroit on a sound economic footing is essential to preventing another bankruptcy. The Detroit Free Press reports:

    The investment banker representing the City of Detroit had talks with billionaire real estate investor Sam Zell and investment firm the Blackstone Group about selling them the city’s vacant property — but the investors weren’t interested, the Free Press has learned.

    The revelation comes as the value of Detroit’s abandoned and blighted property — which the city considers assets in its Chapter 9 bankruptcy — is in dispute.

    Creditors argue that city-owned property is a source of significant value that is being ignored in the city’s bankruptcy restructuring blueprint, called a “plan of adjustment.” The creditors argue the approximately 22 square miles of vacant or blighted property the city owns could be sold — with the proceeds distributed to creditors and even reinvested in the city.

    But Ken Buckfire, president of the city’s investment banking adviser Miller Buckfire, testified that city-owned land “to some extent has negative value,” according to a deposition transcript obtained by the Free Press.

    One way to interpret the comment about “negative value” is where the land is located. If Michigan’s state legislature re-drew Detroit‘s geographical boundaries, investors would be more interested in the land. A new municipality, without Detroit’s corrupt and expensive politics would be a major reform. Detroit as it exists today isn’t viable for job growth and a stable population. Detroit’s local politicians and special interest groups would obviously fight any changes in geographical boundaries in Michigan’s state legislature because a declining Detroit was a way to plunder taxpayers. But Michigan taxpayers need to start asking themselves: is Detroit’s 143 square miles a viable long term enterprise?

  • Placing Amtrak Records in Context

    The state of Michigan recently announced record ridership on three routes supported by Michigan taxpayers. Records mean little when the numbers are insignificant.

    That, to say the least, is the situation with Amtrak in Michigan. For example, the additional passengers (this year versus last) on the Pere Marquette (between Chicago and Grand Rapids) was small enough to be carried in a once daily round trip by an airport shuttle van. The additional passengers on the Wolverine, which operates from Detroit to Chicago would not have filled a single intercity bus operating each way on a daily basis. The same is true of the Blue Water, which operates between Port Huron and Chicago.

    But there’s more. High quality bus service, featuring on-board high speed wireless internet (wi-fi), costs passengers less between Detroit and Chicago and takes about the same time. There is a big difference, however. Train riders are subsidized by taxpayers, while bus riders pay their full fare. Even so, the unsubsidized bus fares are lower than the subsidized train fares.

    In a nation that needs to cut spending, unnecessary transportation subsidies, such as for intercity rail services should be at the top of the list.

  • Kalamazoo Leads Michigan’s Education System

    The city of Kalamazoo in southwestern Michigan may be a shining pinnacle in an otherwise economically withering state. The secret may lie within the city’s well-educated population and its incentives to support an enlightened oasis. For 25-year-olds and older in Kalamazoo, 84.2% have finished high school or higher; 32.7% have accomplished a bachelor’s degree or higher; and 14.4% can boast a graduate or professional degree.

    Compare this to Detroit’s much more bleak statistics: 69.9% of 25-year-olds have graduated high school; 11% have attained a bachelor’s degree; and a petty 4.2% have acquired a graduate or professional degree. The percentage of unemployed in Detroit is 13.8%, while 12.5% are unemployed in Kalamazoo.

    These numbers reflect a well-educated workforce that hasn’t had such an apparent impact from the declining industries in the area. It seems that the answer may be in Kalamazoo’s education services. The most common industries for men and women are educational services, where 13% of men and 17% of women are employed. The area also employs 4% of men and 4% of women in professional, scientific, and technical services, which may lend the city with a more developed economy. Universities such as Western Michigan University and Davenport University help diversify Kalamazoo’s employment base opposed to the historically more manufacturing dependent Michigan .

    Unsurprisingly, Detroit’s leading industry for males is transportation equipment (includeing auto manufacturing) at 15% of the workforce. The share in educational services is much lower than Kalamazoo with only 4% of males and 10% of females employed in the area. Figures for professional, scientific, and technical services were not listed.

    Kalamazoo also has incentive programs for students in the local school systems. The “Kalamazoo Promise” is a program funded by anonymous donors who provide scholarships for students who attend and finish high school in Kalamazoo. Scholarships can total up to 100% of the student’s college tuition. The program started in 2006 and has likely contributed to the area’s 3% growth in student enrollment. In 2008, Detroit began a similar program in hopes of replicating the small economic boom that the Kalamazoo Promise instigated.

    If the city can leverage its higher education institutions and its surging base of high school students entering college, it could ultimately become a prime example of a community improving itself through education. Incentives and opportunities provide citizens with a solid and encouraging way out of a weakening economy inthe state while still providing a standard that the rest of Michigan can attempt to replicate.

    For more Kalamazoo facts and figures, visit http://www.city-data.com/city/Kalamazoo-Michigan.html.

  • South Dakota’s Growth Is Noticeable in the Midwestern Arena

    According to the 2010 Census population data for the United States, the Midwest region was the slowest growing of the four Census regions, at a 3.9% increase overall. South Dakota led the Midwest for population with an increase of 7.9%, while the lowest was the battered state of Michigan at -0.6%. These numbers seem to suggest a shift from the Rust Belt to the Great Plains.

    This is more apparent when considering CNN Money’s list of the top 100 best cities to live in for 2010. Four cities represented the Dakotas on this list while only one city, Ann Arbor, stood for Michigan at number 46. The four cities from the Dakotas were Bismarck, ND at 74; Sioux Falls, SD at 77; Fargo, ND at 86; and finally Grand Forks, ND at 97.

    The odds seem to be against the growing state of South Dakota when compared to the once-great Michigan. Michigan has 32 Fortune 500 companies (the largest being GM, Ford, and Dow), a notable IT strength, three well-known universities (University of Michigan, Michigan State University, and Wayne State University), and is one of the biggest leaders of industrial research and development. However, Michigan’s weaknesses lie in its disintegrating manufacturing industries whereas South Dakota has attained a more promising outlook.

    South Dakota’s major city is Sioux Falls in Lincoln county, which has been named one of the “best counties to find a job” with a 67% increase in job growth in the last decade. Sioux Falls has been named one of the “best places to start a business” by CNN where operating a business costs an estimated 45% less there than it does in New York City. It also boasts a crime rate that is half the national average, is home to offices of many financial giants including Citibank and Wells Fargo that come to the state for its slackened usury laws and positive banking regulations, and has some of the region’s leading hospitals. A determined arts scene and a strong retail sector round out the package.

    Can Sioux Falls be compared to the crumbling Detroit? When considering Sioux Falls to be the major hub of its region (the most proximate major cities are Omaha and Minneapolis, both over 150 miles away) it’s no wonder that many people are flocking there to be a part of its thriving economy that can’t be found for miles. Detroit, on the other hand, is a homogenous product in a competitive market. Other Rust Belt cities find themselves in a corresponding situation, offering a similar lifestyle while depending on declining industries.

  • Obama Throws Life-Line to Smart Growth Areas

    President Obama has announced a special program of assistance for home owners in the five states that have been hit hardest by the housing crisis. The proposed program is targeted at California, Florida, Arizona, Nevada and Michigan, where house price declines are more than 20% from the peak of the bubble.

    The greatest losses occurred in California, Florida, Arizona and Nevada (see note), where peak to trough house price loses exceeded 40% in all 12 metropolitan areas over 1,000,000 population except Jacksonville. These markets accounted for 70% of the gross housing value loss in the nation before the Lehman Brothers collapse. House prices were driven to unprecedented levels of up to four times historic norms by overly prescriptive land use regulations (“growth management” or “smart growth”) that makes land unaffordable.

    Average losses were more than $175,000 in the markets of these states, more than 10 times those in traditionally regulated markets such as Atlanta, Dallas-Fort Worth, Houston, Indianapolis, Kansas City and Cincinnati. These intense losses were beyond the ability of the mortgage industry to sustain and it is generally acknowledged that this precipitated the Great Recession.

    Smart growth had nothing to do with the Michigan price collapse. There, the strong economic downturn pushed prices down even as the state escaped without a housing bubble.

    The President’s program means that the nation is now paying twice for smart growth policies. The first payment was, of course larger, which cascaded into the huge household wealth losses in the Great Recession.

    Note: While Las Vegas and Phoenix are sometimes perceived as not having prescriptive land use policies, the Brookings Institution ranks both metropolitan areas as toward the more restrictive end of the regulatory spectrum. These overly prescriptive regulatory environments are exacerbated by the fact that in both metropolitan areas much of the developable suburban land is owned by government, and is being auctioned, though at a rate less than demand. These factors combined to drive auction prices per acre up nearly 500% in Phoenix and nearly 400% in Las Vegas during the housing bubble.

  • Michigration Revisited

    Only a few months ago, I admonished Michigan for its hysteria about brain drain. Given the recent news coverage concerning the exodus from the recession-plagued state, you might expect I’m ready to eat some crow. On the contrary, I’m here to report that Michigan has learned nothing from its past mistakes.

    Richard Herman, an advocate for increasing rates of immigration to the Rust Belt, posts on his blog the same critique I have aired about how Michigan addresses its talent crisis:

    However, the current focus on “brain drain” as the source of the problem misses the real issue.

    While no doubt the Midwest economy is causing college grads who might otherwise want to stay home to leave, in an ever more mobile society, moving out is a natural part of people’s lives. Indeed, if you read the typical account of how the elite global knowledge worker lives, you often hear about people flitting from place to place to place chasing opportunity.

    The real problem is not that too many people are leaving, but rather that too few are coming. It isn’t an outflow problem, it’s an inflow problem.

    The former urban industrial powerhouses of the United States all suffer from the same malaise. Every city is fixated on its local labor pool, asking institutions of education to staff the “factory.” The great irony is that economic growth doesn’t happen without immigration or domestic in-migration. There is no story of a great metropolis that successfully barred its people from leaving.

    The tortured metaphor for brain drain stems from private enterprise. But even in the arena of human resources, the concept of churn isn’t an anathema:

    The purpose of this article is to open your mind about the silliness of measuring only aggregate turnover. I can think of no better indication of a so-called expert’s lack of true understanding of employee turnover than when I read an article or a book on retention and the author invariably expounds on the need to keep everyone.

    The burgeoning narrative is that churn benefits both employee and employer. The same is true for resident and state. Fear of the outsider prevents all parties from making a rational choice and improving human welfare.

    Michigan should embrace its out-migration and aggressively seek new residents. I further recommend any reference to “retention” be abolished from official policy. Where, and how many, graduates go is largely immaterial. Instead of Cool Cities to keep Michigan talent instate; what would it take to get the next generation of engineers from Colorado schools or Asia to move to the Rust Belt?