Fred Leeb: Detroit Must Take Advantage of Being the Nation's Poster Child

Fred Leeb: Detroit Must Take Advantage of Being the Nation's Poster Child

Fundamental Structural Changes Needed -- No More Band-Aids
Yes, Detroit must make huge reductions in expense, operate more efficiently, work cooperatively with its neighboring communities, sell off assets and borrow additional amounts wisely, but all of these actions are mainly for the short run and are likely to be inadequate. They will be necessary, however, to buy the additional time needed for new plans to be designed and implemented that will enable fundamental structural change. Detroit's problems are too deep to be resolved by using just the standard turnaround techniques. Detroit needs a huge amount of new investment and at least tens (more likely, hundreds) of thousands of new people and businesses who can pay taxes. They will not be attracted to the city by the wind down of services due to necessary cost cuts in public safety, roads, schools and other fundamental departmental areas. They must have something that is clear, tangible and positive to look forward to; they will be attracted by a long-term plan for success.

Detroit: In the Eye of the Storm

Detroit Must Take Advantage of Being the Poster Child and Utilize All of its Resources
In order to obtain the huge amount of resources necessary for a credible plan to implement fundamental structural changes, Detroit must take full advantage of being the national poster child for major cities that need revitalization and new jobs. National news organizations like the Washington Post, Bloomberg, the Wall Street Journal and the New York Times already are following Detroit's story very carefully. People in Illinois, California, New York and many other states have a spotlight on Detroit because Detroit was hit first and more severely. Leaders of many other big cities know that their problems are very similar to Detroit's and that they are not far behind in the need to fix their own problems. The rest of the U.S. is looking to Detroit for ideas and examples of how to overcome its tremendous financial problems because they know they will eventually need to do the same thing.

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Fred Leeb: Detroit's Old Games Are Over

Fred Leeb: Detroit's Old Games Are Over

Detroit Has "Hit the Wall"

Those of us in the turnaround world have been waiting for decades for the City of Detroit to be in its current dismal financial condition with no easy way out. This is called "hitting the wall" when there is no cash available any longer to continue business as usual. We have been waiting for this because it is finally the time when people must step up and take positive actions -- there are no alternatives. When you are about to hit the wall, the old games are over. People are not impressed any longer with:

• Speeches full of promises,
• Macho tough-guy tactics,
• Elaborate analytical studies,
• Infinite variations of blaming others,
• Fancy job titles and sound bites from celebrities, or
• Refusing to compromise and being negative without proposing workable solutions.

Leaders must make drastic cuts in costs now but they also must develop and implement new far-reaching but practical strategies. They must take the personal risks necessary to take action or they must get out of the way. Turnaround professionals know this is the most critical and precious time to bring forward new ideas, settle on new short and long term strategies, organize teams, and implement change. A tremendous amount can be accomplished when all the stakeholders finally recognize that they are in the same boat, that the boat is in a severe storm, and that they all most row in the same direction if they are to have any chance of success in saving themselves.

Fred Leeb: Detroit Can Be Great Again

Fred Leeb: Detroit Can Be Great Again

Fred Leeb

Former emergency financial manager for the City of Ponitac

Detroit Can Be Great Again

Posted: 12/14/11 03:31 PM ET

Detroit City Finances , Detroit Economy , Detroit Emergency Financial Manager , Detroit Emergency Manager , Detroit Finances , Detroit Financial Crisis , Detroit News

 

I was the first emergency financial manager in Pontiac from March 19, 2009 through June 30, 2010 and I believe my experiences could be very applicable to Detroit. I know that, even though I have been a turnaround consultant for over 20 years, I learned a tremendous amount from actually going through the process.

We made some mistakes but we also achieved many successes as a result of listening to the city's staff personnel, respecting their expertise, encouraging new ideas and then enlisting their support to take action and implement the changes.

We didn't just create more reports or studies that went on someone's shelf. We were able to generate, even under the old Public Act 72, over $115 million in multi-year benefits for the city, upgrade the city's bond rating and generate two years of surpluses in a row after many years of deficits.

Virtually all the recent discussions about Detroit have focused on how much power either the mayor, the city council or an emergency manager could bring to bear to cut costs immediately. It is true that in a financial emergency the only controllable factor initially is expense so that must be addressed first. But cutting expense alone is overly simplistic and shortsighted. To be successful, Detroit must cut expense and increase its revenues. The major sources of city revenues are from property taxes and income taxes. These will increase only if more people and businesses, who are able to pay taxes, live or work in the city.

Detroit must have a plan to cut expense without drastically reducing services and to attract taxpayers to the city. Creativity and teamwork on the part of all stakeholders involved will be absolutely essential if Detroit is to both cut expense and attract major new taxpayers who are being courted by virtually every other community in the country. Detroit must compete for these taxpayers with a clear-cut turnaround plan.

The first step in the turnaround planning process is to stop all forms of denial. This is not to criticize or blame, but to understand the depth of what must be done. [Nobody should assume that any one person will be given a magic wand to cure-all Detroit's problems quickly.] Just a few statistics can help to begin the process to understand Detroit's competitive position and that its resources already are severely limited. For example, Detroit is now only the 18th largest city in the country based on 2010 data from the U.S. Census Bureau.

It is no longer in the top 10. Detroit also was ranked 522, of 540 cities listed by the U.S. Census Bureau based on per capita income of $14,213 (based on 2009 data). For comparison purposes, per capita income of Dallas, the 200th highest city, was $25,941, 82 percent above the level of Detroit. Detroit also had the lowest per capita income and the second highest level of individuals in poverty (at 36.4 percent, only better than San Juan, Puerto Rico) of the 50 largest cities in the U.S. (based on 2009 data). Despite these statistics, Detroit needs at least tens of thousands of additional people and/or businesses who can pay taxes.

We are now very late in the timeline to be able to be successful. Detroit cannot wait any longer to pull together and implement programs such as Detroit Works in order to increase the quality of services at a lower cost to a more concentrated community. If additional precious time is lost through continued infighting and tax revenues continue to decrease, the city's downward spiral will speed up and the city will never be able to cut its way to success. On the other hand, if the city, the county, the region, the state and the federal government have a workable and attractive plan for the future and pull together, Detroit can be great again.