A Manhattan Project for Failing Cities

A Manhattan Project for Failing Cities
Posted by Ryan Holeywell, October 2, 2012
Governing

In the 1940s, the military launched an audacious effort to unlock some of science’s greatest secrets as part of a push to develop nuclear weapons. Thousands of scientists -- drawn by a combination of patriotism and the desire to work with some of the greatest minds in their field -- banded together to join the cause.

Eventually that effort, known as the Manhattan Project, developed the atomic weapons that played a critical role in ending World War II. But the knowledge developed through the project, as well as the network of laboratories established to conduct the research, remains part of the project’s legacy today.

Fred Leeb says it’s time for the government to consider a Manhattan Project for America's failing cities.

Lately, Leeb has been making his case for an initiative he calls "Think BIG" (the BIG is for business, innovation and growth) to anyone who will listen. After all, he knows more than just about anyone about the devastation facing some American cities and the seemingly insurmountable challenge of bringing them back from the brink.

In 2009 and 2010, Leeb served as the first emergency financial manager of Pontiac, Mich., a city in such dire financial shape that it was essentially taken over by the state, which then gave Leeb and his successors wide-ranging powers to enact reforms.

Leeb, like most of the state’s emergency financial managers, was popular with neither voters nor elected officials. That’s no surprise, given his task of closing a budget deficit that, at the time, measured either $7.1 million (according to the city) or $12 million (according to the state).

Cutting deficits means cutting costs, and Leeb eventually left Pontiac under less-than-sanguine circumstances. Today, Pontiac is still facing challenges. The city was projected to end the FY 2012 fiscal year with an $8.4 million deficit, according a recent report by Leeb's successor.

While working on Pontiac, Leeb was confronted by a problem facing just about anyone trying to fix a broken city: You can't cut your way to prosperity.

Pontiac, a boomtown in the first half of the 20th century, saw its population decline along with the auto industry. In 1970, it had 85,000 residents, but it's down to 60,000 today. Now, more than a third of residents live in poverty, including almost half of all children. Its unemployment rate is the second worst among Michigan cities, topping 25 percent.

Pontiac, like just about every other financially distressed city, faces a conundrum that seems almost impossible to address. When businesses leave town, so do residents. Both those losses mean less revenue for a city, which translates into cost-cutting. But a city that’s pulling back on services only drives more people away and has an even greater challenge recruiting new businesses and residents.“ To have a strategy where you cut and cut and cut, it only means more cuts are necessary later," Leeb says.

Eventually, cities enter a sort of death spiral, and the only residents who remain are the ones who are too poor to move out. “People live there because they don’t have the means to go anywhere else,” Leeb says. “Everybody else has voted with their feet.”

It’s a spiral that Leeb says cities often can’t solve, even when they turn to drastic steps. His solution: Think BIG.

Leeb wants to see a program, similar to the Manhattan Project or NASA in which the federal government would give a few billion dollars to the country's top minds in order to collaborate on a monumental project. But, in a twist, they'd have to live and work in one of America's struggling cities.

Maybe they’d develop a new form of low-cost housing. Maybe they’d tap into a new source of renewable energy. Whatever they worked on, it would start with hiring some of the top-ranking officials from the country’s preeminent high-tech companies and then giving them the authority to hire hundreds of bright employees. “They’d want to come because they’ll be with their best and brightest peers working on a challenge that will change the country,” Leeb says.

The project would create a solution that would serve a broad, national interest. But just as importantly, their mere presence in the distressed city could help turn it around by giving a tax base to the city as well as customer base to new businesses who would want to be near such a large cluster of smart, creative people.

“You can’t attract one person at a time,” Leeb says. “You have to have a way of bringing a group together, all at once.” Leeb says his idea was developed by conversations with his own son, a recent college graduate, who said he wouldn’t consider looking for a job in Detroit. When Leeb asked if he’d participate in a project like the one he outlined -- even if it meant less money -- his son said absolutely.

It's an idea worth considering. In Michigan alone, the state has given itself authority over seven cities facing significant financial problems. Since 2010, there have been seven cities and localities nationwide that have filed for bankruptcy.

At a time when the federal government is pulling back on spending, an idea like Leeb’s could face serious challenges. But he says even a few billion dollars would be a bargain if it would save an American city. “Spending a couple billion on Detroit? That’s a drop in the bucket compared to what’s already being spent to get nowhere,” Leeb says.

Leeb says that his idea is more likely to succeed than a stimulus program. While a stimulus program can give work to existing residents, it’s not going to do anything to convince new people to move to a city. In Pontiac, for example, millions of dollars spent on road projects would be unlikely to help the city get new residents or new businesses.

The other traditional idea of economic development embraced by cities -- throw tax credits at retailers in hopes that they’ll build a store within your jurisdiction -- isn’t going to fix a place like Pontiac or Detroit either. Businesses are savvy, and incentives aren’t going to convince them to build a store in a place with an eroding customer base.

Essentially, Leeb argues, a struggling city like Pontiac or Detroit needs a lot of new residents at once in order to get momentum heading in the right direction. Traditional models of economic development are ill-equipped to address that need. “There has to be a way of bringing people with means and intelligence and creativity,” Leeb says.

In Detroit, there’s already some evidence that something like Leeb’s vision could work. In 2010, Michigan businessman Dan Gilbert brought the offices of his company, Quicken Loans, from the suburbs to downtown Detroit. Since then, a total of 10,000 new workers are now operating in downtown Detroit, including 6,000 from his businesses and 3,000 with Blue Cross Blue Shield of Michigan, according to the Detroit Free Press. Many of them are reportedly renting apartments and buying condos downtown.

Last year, New York City announced that Cornell University and Technion-Israel Institute of Technology, a school in Israel, won city land and $100 million for infrastructure improvements in order to build a high-tech engineering campus on Roosevelt Island. The hope is that the campus spins off companies that become economic drivers in the city, helping the city diversify its economy that is largely driven by financial services.

Leeb believes Detroit -- with its combination of urban blight, high unemployment and an abundance of open space -- could be the perfect case study for his Think BIG idea. “The economy is not doing poorly because of a lack of money,” Leeb continues. “The economy is doing poorly because we don’t have the creativity and the education and the investments in people that we had previously."

Ryan Holeywell

Ryan Holeywell is a staff writer at GOVERNING.
E-mail: rholeywell@governing.com

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