As Detroit emerges from municipal bankruptcy protection, the Motor City is dusting off the cobwebs of corruption, polishing its tattered financial image and courting new businesses and investors who can help jump-start its transformation into a thriving 21st century metropolis.
Speaking at this year’s Michigan Private Equity Conference on Oct. 17, former Detroit Emergency Manager Kevyn Orr and one of his key advisors, investment banker Kenneth Buckfire, president of Miller Buckfire, presented a scorecard detailing Detroit’s progress through its painful three-year restructuring process and their predictions for its post-bankruptcy trajectory. Their pitch to private equity investors gathered in the Michigan Union’s Rogel Ballroom was upbeat and optimistic.
“I believe there are tremendous financial opportunities to invest in Detroit,” Buckfire said. “The city’s challenge will be to convince you that Detroit is worth considering for investment.”
“The opportunities appear greater than I’ve seen in Miami, New York and Washington D.C.,” contended Orr, noting that those cities also experienced troubled times before undergoing a successful economic recovery. “Detroit has the same type of texture, but it’s got to wake up.” Orr, a 1983 Michigan Law School graduate, was appointed to his Emergency Manager post by Michigan Gov. Rick Snyder in March 2013 to restructure the city and shore up its finances. Four months later, in July, Detroit filed for Chapter 9 bankruptcy protection, becoming the largest city in U.S. history to do so.
With its financial and creditor-related roadblocks now in the rear-view mirror, Detroit is refocusing attention on the attributes that make it an attractive location for investment dollars, Orr and Buckfire said. These include:
- A strategic location along the Detroit River, a major shipping channel
- Proximity to Canada, one of America’s largest trading partners
- Access to fresh water needed for many manufacturing processes
- Low acquisition costs for real estate and companies
- 44,000 land parcels available for redevelopment
- Nearly 700,000 underserved residents who need new housing, retail outlets, financial institutions and other services
Making Detroit a safe place to live, work and invest has become a priority for state and local officials, according to Orr. Among the steps being put in place to achieve that goal are:
- Spending $150 million annually for the next 10 years on reinvestment in city services, especially public safety providers, such as police, fire and EMS
- Working with DTE Energy to restore street lighting throughout the city by next March
- Establishing a seven-person Oversight Commission, which would include the governor and Detroit’s mayor along with other state leaders and appointees, to oversee the city’s finances, budgets, debt issuance and revenue estimates for at least 20 years
- Promoting greater regional cooperation, including a proposal to create a Great Lakes Water Authority that would enable Detroit to lease its water system’s infrastructure to suburban communities and use fees and payments to finance an estimated $500 million to $800 million in bonds to repair the antiquated system
Encouraging signs of the city’s nascent turnaround, Orr noted, include the inflow of young people to the downtown area and the launch of several mega-projects scheduled for completion over the next three to five years. These projects include:
- The M-1 Rail project, a 3.3-mile circulating streetcar line along Woodward Avenue between Congress Street in downtown and West Grand Boulevard in the New Center area; it represents an unprecedented public-private partnership and a model for urban transit
- The new $650 million Red Wings hockey arena and sports-entertainment district on the northern edge of downtown orchestrated by the Ilitch family; the arena is envisioned as a springboard for five new neighborhoods that will transform the urban landscape
- The New International Trade Crossing bridge project, which would link Detroit and Windsor, facilitating the movement of goods between the U.S. and Canada; backers hope to see the new bridge open to traffic by 2020
In their parting shots, Orr and Buckfire emphasized that support from the business and investment community is critical for Detroit’s long-term recovery.
“If the city is able to maintain its credit rating and keep going, it will rise from the ashes and experience a renaissance,” Orr said. “But we need everyone’s help.”
“You cannot have a great state without a great city,” Buckfire concluded. “Detroit has a long and painful history, but we’ve closed the chapter on it.”
Entrepreneurs Notebook: Zell Lurie Institute, University of Michigan 