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America’s Suicidal Cities
Detroit refuses to take its medicine.

Neighborhood in Detroit

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John Fund

Despite clear evidence that the city council isn’t interested in viable solutions to Detroit’s finances, pie-in-the-sky talk is still rampant among its members. Council member Kwame Kenyatta claimed at this week’s council meeting: “There are other activities that you can have on Belle Isle that will generate revenue and create jobs.” One potential investor who has come forward with an intriguing proposal has seen it roundly dismissed by city officials. Rod Lockwood, a real-estate developer and former president of the Michigan Housing Council, has published a bold plan to revitalize Belle Isle by having the city sell it for $1 billion to investors who “believe in individual freedom, liberty, and free markets.”

The investors would be given freedom to set up an “enterprise zone,” which would have self-governing commonwealth status with the U.S. much as Puerto Rico and the Northern Mariana Islands have. The new Belle Isle would have a top rate of 10 percent on income taxes, and no taxes on capital gains, dividends, investments, or estates. Lockwood predicts the island would be attractive to finance, insurance, and investment companies, and no factories would be permitted. Former Chrysler president Hal Sperlich, who has endorsed the idea, says the economic dynamism the area would generate could turn it into a “Midwest Tiger” with spillover benefits for Detroit as a whole.

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Of course, Belle Isle isn’t going to become an “enterprise zone,” given that Detroit’s leaders can’t even bear the thought of having the state government manage it for free. Out-of-the-box ideas like Lockwood’s are dead on arrival. So Detroit appears doomed to continue to sink until something radical is done. The most likely course is bankruptcy, which would void the city’s contracts with its 18 municipal-employee unions.

“I think . . . off and on, that [bankruptcy] wouldn’t be a bad idea,” former Ford chief financial officer Allan Gilmour, now the president of Detroit’s Wayne State University, told Reuters this month. “Let’s clean this out once and for all.”

Other failing American cities have a chance to rescue themselves before things get that bad. But if present trends continue, dozens of American cities will find themselves on the bankruptcy operating table if they continue to reject effective fiscal medicine.

— John Fund is national-affairs columnist for NRO.



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