Comparing the City of Brotherly Love with Motown: Reflections on How to Effectively Transform Urban Economies

By Martin Lavelle

When I think of Philadelphia, the following subjects come to my mind: Benjamin Franklin, Betsy Ross, the Liberty Bell, Independence Hall, the Declaration of Independence, and the Constitution. Also, being a sports fan, I think of what a great sports city it is: There’s quite a passionate fan base for its professional teams, as well as Big 5 college basketball at the Palestra. Admittedly, as someone who works in and studies Detroit, it doesn’t naturally occur to me to compare Detroit and Philadelphia like I would Detroit and Pennsylvania’s other major city, Pittsburgh, with its historical reliance on one manufacturing sector, steel. However, as I looked more deeply into Philadelphia’s history, I found myself drawing multiple parallels between the Motor City and the City of Brotherly Love.

On September 21–23, 2016, the Federal Reserve Bank of Philadelphia, other Federal Reserve Banks, and additional sponsors and supporters convened the Seventh Biennial Reinventing Our Communities Conference. The theme of this year’s conference was how to transform our economies. The conference’s sessions covered topics such as how to increase access to capital, how to supply a greater stock of affordable housing and address workforce needs, and how to make philanthropic foundations play a more effective role in communities’ economic transformations. This conference provided an opportunity for me to learn about initiatives in other communities and compare them with developments in Detroit. This will be the first of two blog entries in which I discuss the conference and some of my own analysis inspired by it. Here I will draw some historical and current comparisons between Detroit and Philadelphia. In my follow-up blog post, I will recap the conference and compare Detroit’s efforts to transform its economy with ongoing efforts occurring across the country.

Background

As part of my usual preparation for a conference (especially when a city tour is included), I did a statistical comparison of Detroit and Philadelphia. The table below shows the statistical similarities and differences I found most interesting between the two cities.

portland-chart-1

Note: MSA means metropolitan statistical area.
Source: QuickFacts Beta, U.S. Census Bureau.

The population figures stand out for many reasons. First, it’s easy to forget that back in 1950, when their populations peaked, Detroit and Philadelphia were similarly sized cities. Nowadays, just six and a half decades later, Philadelphia has almost two and a half times as many people as Detroit. Back in the middle of the twentieth century, the population of each city made up around 57% of its respective metropolitan area. But as of last year, Philadelphia’s population share of its metropolitan area (26%) was noticeably larger than Detroit’s population share (16%) of its metropolitan area. The fact that Philadelphia’s population increased over the past 15 years boosted the divergence in population trends. Over the period 2000–15, Philadelphia added almost 50,000 people, while Detroit lost 274,154 people. In terms of demographics, Philadelphia is much more diverse. Also, a higher percentage of Philadelphia’s population has attained a bachelor’s degree or higher—thanks in part to the University City neighborhood, anchored by the University of Pennsylvania and Drexel University, and the presence of many other institutions of higher learning within the city’s limits. Given the divergence in demographics, the difference in home values isn’t surprising, but it still jumps off the page.

Philadelphia’s Financial Challenges

Like Detroit, Philadelphia has encountered fiscal challenges. And like Detroit, Philadelphia’s financial problems simmered for many years before boiling over in the early 1990s. The City of Brotherly Love became the first U.S. city to impose an income tax when it did so in 1939. (1) Philadelphia’s income tax remained in a range of 1.0% to 1.5% until the 1960s, when it started to increase, eventually reaching 3.0% in 1970 and almost 5% in 1985. (2) The increase in the city’s income tax rate was one of the leading factors in city residents deciding to leave for suburban communities. Philadelphia’s fiscal crisis peaked in 1990–91 when a structural budget deficit of $154 million was revealed, with expectations of deeper budget deficits in future years. (3) The city received financial assistance in the form of the Pennsylvania Intergovernmental Cooperation Authority (PICA). PICA sold bonds on Philadelphia’s behalf. It also required the city to adopt a five-year financial plan that had to be approved in order to gain access to capital markets and state funding. (4) Led by Mayor Ed Rendell, the city followed its five-year plan while privatizing selected services, introducing more competitive bidding for city projects, and freezing wages for city employees, all of which helped lead to Philadelphia’s recovery in the late-1990s. (5) Philadelphia also began lowering its commuter tax in 1995, converging city and suburban residents’ respective tax burdens. (6) It has been estimated that increases in Philadelphia’s city wage tax cost the city 207,000 jobs from 1973 to 2003. (7) Two separate tax commissions created in the 2000s concluded Philadelphia’s tax system was outdated and needed to be reformed. (8) In 2014, the Greater Philadelphia Chamber of Commerce released a public/private collaborative plan with the aim of organizing growth-based activity in and around Philadelphia. The chamber’s plan called for improving the city’s competitiveness, producing a well-educated workforce, creating an environment for business growth, and enhancing Philadelphia’s infrastructure. Such efforts will have a familiar ring to Detroiters too.

West Mount Airy: A Gift to Philadelphia from Detroit

The conference began with a tour of Philadelphia’s West Mount Airy neighborhood, one of the nation’s first intentionally racially integrated neighborhoods. The effort to preserve racial diversity within West Mount Airy was led by West Mount Airy Neighbors (WMAN). WMAN was founded in 1959 to deal specifically with the issue of racial integration. (9) One of the founders of WMAN was George Schermer, who tried to organize a similar effort in Detroit before coming to Philadelphia.

After Detroit’s 1943 Belle Isle uprising, Mayor Edward Jeffries formed an Interracial Commission and appointed Schermer as its director. (10) In the early 1950s, Schermer lobbied for an integrated housing development in Detroit’s west side. The development was to be called Schoolcraft Gardens. The Schoolcraft Gardens development attracted private funding and the United Auto Workers (UAW) as a partner. (11) Unfortunately, multiple forces prevented the integrated development from taking shape. First, the neighboring, all-white Tel-Craft homeowners association opposed the Schoolcraft Gardens development. Also, later on, a different Detroit mayor, Mayor Alfred Cobo, vetoed the approval of the development project. Soon afterward, the Interracial Commission was dissolved and replaced by the Commission on Community Relations, whose members would be appointed and could be removed without cause by the mayor. (12) Not surprisingly, when the City of Philadelphia offered Schermer the opportunity to head its newly created Commission on Human Relations, Schermer left Detroit. (13)

Under Schermer’s leadership, WMAN fought housing and education policies that advocated for segregation. WMAN and the neighborhood itself consisted of high-achieving, well-educated, progressively minded people, who were the demographic they looked to attract to the neighborhood. One might argue this allowed integration to work, whereas Detroit saw comparatively less educated groups across different races compete for similar jobs and economic standing, putting the groups at odds with each other.

Impressively, the commitment to diversity in West Mount Airy remains strong. Since 1980, at least 40% of West Mount Airy’s residents have been African Americans. (14) According to Sarah Zelner, who presented background information about West Mount Airy during the conference tour, the neighborhood has a strong LGBTQ presence, in addition to being diverse in terms of race and education. Efforts to maintain the neighborhood’s diversity and affirm its commitment to open dialogue include the long-running Mt. Airy youth baseball league and, more recently, monthly conversations about racial issues. In the evening of the day of the tour, the neighborhood’s main thoroughfare shut down and turned into a street fair that showcased West Mount Airy’s diverse restaurant community.

All that said, the neighborhood isn’t without its challenges. Between 1950 and 2010, West Mount Airy lost around half of its population. This loss in population has impacted the dynamics of the neighborhood in many ways, especially in terms of its educational offerings. The high school located in West Mount Airy closed in 2013—a direct result of the population loss, as well as more-affluent students enrolling in private schools in other neighborhoods. In addition, while the overall racial diversity of West Mount Airy has been maintained, African Americans have been clustering closer to the East Mount Airy and East Germantown neighborhoods, which are both predominantly black. (15) While traveling through the area, I noticed a contrast between West Mount Airy with its homes constructed of stone native to the area and East Mount Airy with housing stock of relatively poorer quality. To combat population loss and preserve the neighborhood’s identity, West Mount Airy is trying to attract more immigrants, highlighting the neighborhood’s cultural history and mixed small business community as selling points.

Gifts in Return from Philadelphia? Possible Lessons for Detroit

The background material I read on Philadelphia’s West Mount Airy neighborhood discussed housing density (as measured, for example, by homes per city block) and its correlation with racial integration. The material cited multiple studies that suggested lower housing density is more amenable to achieving greater racial diversity. (16) This might be one lesson from Philadelphia’s experiences that Detroit might want to apply as it remakes itself. The Motor City is seeking to create dense and diverse population centers within its borders, as it once had decades ago. Part of this goal is being achieved by removing blight. But as neighborhoods are reorganized, city officials may want to keep in mind how racial integration was achieved in Philadelphia and not make the housing density of newly configured neighborhoods too high. Striking the right balance between population and housing density to achieve better racial integration and higher-level services for all citizens than at present will be a challenge, but Detroit can look to some of Philadelphia’s neighborhoods for some examples to follow.

Widening the focus back to the entire city, I think the topic of city residents’ tax burdens should be explored in greater depth. As mentioned previously during my review of background material on Philadelphia and as discussed somewhat during the conference, Philadelphia has reformed its tax system in order to have the tax burden of its citizens be more similar to that of residents in the surrounding suburbs. This is yet another lesson Detroit officials might learn from Philadelphia in order to draw more people to reside within its borders. Indeed, Detroit may want to look to reform its tax system as well. When studying the tax burdens of the largest city in each state and Washington, DC, (17) the total tax payments expected from Detroiters as a percentage of their income rank in the top five. (18) When breaking down tax payments by category, Detroiters’ income tax burden ranks near the top for families making $50,000 or more, and their property tax burden is the highest among the states’ largest cities and Washington, DC. (19) While Detroiters’ sales, use, and gasoline tax burdens rank relatively low, significantly high auto insurance premiums more than make up for it. Detroiters pay more than twice as much as the next city (New Orleans) and over three and a half times more than Philadelphia, which ranks tenth. (20) Current Detroit Mayor Mike Duggan has proposed legislation that would create an auto insurance product specific to Detroit, though this proposal has its critics. (21)

Following what initiatives are and aren’t working in other cities and informing city officials and stakeholders about the results of those different initiatives is important to Detroit’s rebound. This is one of the main reasons why I attended this year’s Reinventing Our Communities Conference. The Detroit Branch of the Federal Reserve Bank of Chicago serves the function as information gatherer for the mayor’s Post-Bankruptcy Working Group, as well as the city’s group that works on affordable housing efforts. Efforts to strengthen communities in Detroit and elsewhere through philanthropic, private, and public partnerships have become more widespread in recent years. The Federal Reserve—especially the Detroit Branch of the Federal Reserve Bank of Chicago—has played a major role in bringing different types of organizations together generate solutions that will benefit those communities for years to come.

Read my next blog entry to get more details on the conference panels that I participated in.

References
(1) See p. 3 of http://economyleague.org/uploads/files/783716581668902685-the-sterling-act-a-brief-history.pdf
(2) Ibid.
(3) See p. 5 of https://www.philadelphiafed.org/-/media/research-and-data/publications/business-review/1992/brso92rl.pdf?la=en.
(4) See p. 1 of http://www.picapa.org/docs/SRFYP/SRFYP_FY16FY20.pdf.
(5) See http://www.nytimes.com/1994/05/22/magazine/mayor-on-a-roll-ed-rendell.html.
(6) See p. 31 of http://www.philadelphiafed.org/research-and-data/publications/business-review/2003/q2/brq203ri.pdf.
(7) See p. 27 of http://www.philadelphiafed.org/research-and-data/publications/business-review/2003/q2/brq203ri.pdf.
(8) See p. 15 of http://www.centercityphila.org/docs/CCR14_employment.pdf.
(9) See p. 42 of Barbara Ferma, Theresa Singleton, and Don DeMarco, 1998, “Chapter 3: West Mount Airy,” Cityscape: A Journal of Policy Development and Research, Vol. 4, No. 2, pp. 29–59, https://www.huduser.gov/Periodicals/CITYSCPE/VOL4NUM2/ch3.pdf
(10) See p. 1 of https://libdigital.temple.edu/pdfa1/Oral%20Histories/AOHWMPJZ2015030001Q01.pdf.
(11) See p. 76 of Lloyd D. Buss, 2008, “Chapter 2: City Influences Religion’s Response,” The Church and The City: Detroit’s Open Housing Movement, University of Michigan, PhD dissertation, https://deepblue.lib.umich.edu/bitstream/handle/2027.42/61748/ldbuss_1.pdf?sequence=1&isAllowed=y.
(12) See Buss (2008, p. 77).
(13) See Ferma, Singleton, and DeMarco (1998, p. 42).
(14) The share of African Americans residing in West Mount Airy was 41% as of the 2010 U.S. Census.
(15) See http://philadelphiaencyclopedia.org/archive/mount-airy-west/.
(16) See Ferma, Singleton, and DeMarco (1998, p. 41).
(17) See pp. 12-21, 24 of http://cfo.dc.gov/sites/default/files/dc/sites/ocfo/publication/attachments/2014%2051City%20Study.final_.pdf.
(18) This ranking does not apply when examining families making less than $50,000 per year. A family is assumed to be made up of two income earners and one school-age child. See p. 13 of http://cfo.dc.gov/sites/default/files/dc/sites/ocfo/publication/attachments/2014%2051City%20Study.final_.pdf.
(19) See pp. 16, 31 of http://cfo.dc.gov/sites/default/files/dc/sites/ocfo/publication/attachments/2014%2051City%20Study.final_.pdf.
(20) See https://www.nerdwallet.com/blog/studies/expensive-cities-car-insurance/.
(21) See http://www.detroitnews.com/story/opinion/2016/03/23/detroit-insurance-cut-rate-policy/82194396/.

Are Baby Boomers and Millennials Moving Back into Michigan’s Cities?

By Martin Lavelle

Currently, the two most often talked about demographic groups in the U.S. are baby boomers, those born from 1948 to 1964, and millennials, those born from 1981 to 1999. Even though they’re separated by Generation X, baby boomers and millennials have at least one thing in common: their increasing desire to live in cities. Some baby boomers who are also empty nesters feel the best way to stay active is to partake in city life where there’s always something happening. Many millennials prefer city life for the chance to live near a large group of young singles, in effect continuing their college experience.

Michigan offers three urban experiences that rival any in the U.S., with each experience unique in its own way. Detroit is in the midst of looking more like a typical U.S. big city with a light rail line and entertainment district featuring the new Detroit Red Wings arena set to begin operation next year. Also, the construction of additional bikeways, especially popular with millennials, should complement the city’s riverwalk, thriving restaurant scene, and historically renowned Eastern Market.

On the other side of Michigan lies Grand Rapids, whose comeback is a little further along. The transformation of Grand Rapids’ abandoned furniture plants into apartments helped persuade people to relocate downtown, allowing ventures like the city’s ArtPrize competition to succeed.

Finally, there’s Ann Arbor with its blend of unique restaurants and boutique shops located around the University of Michigan. The university’s reputation of drawing young talent has helped persuade nascent entrepreneurs and firms to locate in the area, leading to a building boom that has significantly increased Ann Arbor’s downtown residential inventory.

Is the renewed interest in Michigan’s downtowns, specifically from baby boomers and millennials, translating into population increases in those three cities? A recent blog by Kolko showed that since 2000, baby boomers and millennials have been moving back into downtowns in significant numbers. This blog will look at how the characteristics of the aforementioned cities’ populations have changed recently.

Population Changes

This analysis will compare population changes using Census data from 2000 and 2014. During that time, if we look at the central city area, Ann Arbor saw a small increase (3.3%) in its total population, while Grand Rapids saw a small decrease (-2%); Detroit suffered a substantial decline (-28.5%) in its total population. Looking at each city’s greater metropolitan area, Ann Arbor (1) and Grand Rapids (2) showed double digit increases of 10.5% and 10.4%, respectively, while Detroit (3) experienced a 4.1% decrease in its population. Given the changes in overall population, can we say that baby boomers and millennials (and groups that share their characteristics) are moving back into the cities?

In the chart below, population by age group, we see that young adults (15-24) make up an increasing share of Ann Arbor and Detroit’s population. At the other end of the age spectrum, in all three places and in their respective metropolitan areas, the baby boomer and silent (aged 75+) generations experienced increases in both of their population shares.

Chart 1: Change in Population Share by Age Group, 2000-2014: Ann Arbor, Detroit, Grand Rapids

Chart 1: Change in Population Share by Age Group, 2000-2014: Ann Arbor, Detroit, Grand Rapids
Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

As the next chart indicates, 20-34 year olds (millennials) now comprise a greater share of Grand Rapids’ central city population, the opposite of what’s occurred in the Grand Rapids metropolitan area. Ann Arbor’s population share that consists of millennials registered a small increase, also the opposite of what’s taken place in Washtenaw County. Meanwhile, 55-74 year olds (baby boomers) moved back into all three cities (and metropolitan areas). Ann Arbor and Detroit now have a higher percentage of those from the silent generation within their city borders.

Chart2: Change in Population Share by Demographic Group, 2000-2014: Ann Arbor, Detroit, Grand Rapids

Chart 2: Change in Population Share by Demographic Group, 2000-2014: Ann Arbor, Detroit, Grand Rapids
Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

The next chart looks at changes in population by education level. Grand Rapids saw a small increase in those with some college experience and a substantial increase in college graduates. In contrast, Washtenaw County saw a modest increase in those with some college experience and a significant increase in its college-educated population, the opposite of what occurred in the city of Ann Arbor. In Detroit’s central city, there were declines in both categories, whereas the Detroit metropolitan area saw a significant increase in those who had at least obtained their bachelor’s degree.

Chart: Change in Population by Educational Attainment, 2000-2014: Ann Arbor, Detroit, Grand Rapids Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

Chart 3: Change in Population by Educational Attainment, 2000-2014: Ann Arbor, Detroit, Grand Rapids
Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

The next chart focuses on the number of families presently living in cities. Grand Rapids saw a small influx of families with no children while that number remained relatively similar in Ann Arbor. Both metropolitan areas witnessed robust increases in the number of families without children. Detroit witnessed a massive outmigration of families with children of all age groups from both its central city and metro area. Ann Arbor and Grand Rapids saw significant, but less severe, declines in families with children. In their metro areas, Grand Rapids experienced small increases in families with older children and families with young and old children, while Ann Arbor experienced a moderate increase in families with older children.

Chart: Change in Number of Families by Family Type, 2000-2014: Ann Arbor, Detroit, Grand Rapids Source: Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

Chart 4: Change in Number of Families by Family Type, 2000-2014: Ann Arbor, Detroit, Grand Rapids
Source: Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

The next chart looks at population share by race. All three cities saw increases in their Hispanic population, the largest occurring in Detroit. In contrast, all three cities saw decreases in their White population, though Detroit’s was small compared with the decrease in the metropolitan area’s white population. More recent census data suggests that Detroit’s White population increased in 2014 for the first time since the 1950 Census. (4) The Asian-American population grew in Ann Arbor and Detroit, while the African-American population increased in Grand Rapids.

Chart 5: Change in Population Share by Race, 2000-2014: Ann Arbor, Detroit, Grand Rapids Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

Chart 5: Change in Population Share by Race, 2000-2014: Ann Arbor, Detroit, Grand Rapids
Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

The final chart looks at household income. Since 2000, the population in Ann Arbor and Grand Rapids has increasingly comprised middle- to high-income earners. At the county level in both metro areas, the income distribution has shifted even more toward the higher end. Meanwhile, Detroit’s population still consists of mostly low- to middle-income earners. Comparatively, the counties that make up Detroit’s metropolitan area (5) have seen their income distributions shift away from the middle income brackets toward the low and high ends.

Chart 6: Change in Population Share by Income Decile, 2000-2014: Ann Arbor, Detroit, Grand Rapids Note: 1 is the highest income decile (greater than $200,000); 10 is the lowest income decile (lower than $10,000). Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

Chart 6: Change in Population Share by Income Decile, 2000-2014: Ann Arbor, Detroit, Grand Rapids
Note: 1 is the highest income decile (greater than $200,000); 10 is the lowest income decile (lower than $10,000).
Source: Author’s calculations using data from 2000 Census and 2014 American Community Survey (ACS).

Conclusion

There is some evidence that three of Michigan’s most attractive and best-known cities are successfully attracting millennials and baby boomers. By age group, baby boomers and multiple segments of the millennial cohort now comprise a higher share of the populations of Ann Arbor, Detroit, and Grand Rapids. The picture becomes less clear when looking at changes in population by educational attainment and income, with Grand Rapids and Ann Arbor drawing a higher-skilled citizenry.
The most telling chart for me is the one concerning changes in family structure. The number of families with no children grew slightly in Grand Rapids, stayed the same in Ann Arbor, and significantly decreased in Detroit, though at a lower rate than the overall population decline during that time. While those trends are somewhat encouraging, the trends describing changes in the number of families with children are discouraging. Families with school-age children moved out of each of the three cities at relatively high rates, and we saw increases in families with children in the Ann Arbor and Grand Rapids metropolitan areas. The presence of families in cities signals an acceptable standard of living to those considering moving into cities from suburban areas, providing opportunities for cities to grow their populations and thrive.

———————————————————————————————————-

Footnotes:

(1) Ann Arbor’s metropolitan area consists of Washtenaw County.
(2) For overall population and population by race figures, the Grand Rapids metropolitan area consists of Barry, Kent, Montcalm, and Ottawa counties. Otherwise, the Grand Rapids metropolitan area consists of Kent and Ottawa counties because of the availability of data.
(3) For overall population, population by race, and educational attainment figures, Detroit’s metropolitan area consists of Lapeer, Macomb, Monroe, Oakland, St. Clair, and Wayne counties.
(4) See http://www.detroitnews.com/story/news/local/detroit-city/2015/09/17/detroit-white-population-rises-census-shows/72371118/.
(5) For household income, Detroit’s metro area consists of Macomb, Oakland, and Wayne counties because of the availability of data.