Potential Seventh District Contenders for Amazon’s HQ2

By Martin Lavelle

In September 2017, Amazon announced its search for a second North American headquarters location. Ultimately, 238 North American metropolitan areas submitted bids within the six-week allotted period, including several in the Seventh District (1). In this blog, I examine the potential Seventh District contenders based on some important criteria relating to logistics, business environment, and labor force.

Amazon’s request for proposals laid out its location preferences:
• Metropolitan areas with more than 1 million people
• A stable and business-friendly environment
• Urban or suburban locations with the potential to attract and retain strong technical talent
• Communities that think big and creatively when considering locations and real estate options

In the Seventh District, the metropolitan areas with a population of greater than 1 million are Chicago, Detroit (2), Grand Rapids, MI, Indianapolis, and Milwaukee.


The table below shows that each of the Seventh District’s metropolitan areas with more than 1 million residents fulfills most or all of Amazon’s other logistical preferences, though to varying extents.

Table 1: Seventh District MSAs and Amazon’s Logistical Requirements (3).

Chicago possesses the flexibility for Amazon to locate anywhere in its metro area because of the various modes of mass transit available to Chicagoland commuters. Milwaukee’s bus rapid transit lines offer some flexibility as well as to potential HQ2 locations. Chicago and Detroit provide an adequate number of air connections to Amazon’s most important North American metropolitan areas. In addition, O’Hare and Detroit Metro Airports are large enough to potentially adjust operations and increase connections.
Logistics also include freeway networks and the ability of employees to navigate freeways. The work/life balance is disrupted the longer one spends stuck in traffic. The table below shows how the Seventh District metropolitan areas with more than 1 million people rank relative to other major North American metropolitan areas with regard to how many hours one
spends in congested traffic annually.

Table 2: Select North American Metro Areas by Traffic Congestion (4)

While it may not seem like it, especially during road construction season, Seventh District metropolitan areas rank favorably on congestion, relative to population size. What Detroit and Indianapolis lack in mass transit, they compensate for with the number of freeway connections. However, according to the 2015 American Community Survey (ACS), Chicago and Detroit have higher drive and total commute times than the national average in each category. Per the ACS, the percentage of Chicago commuters that utilize some mode of mass transit is slightly above 10%, similar to that of Seattle.

Business Environment

Amazon’s second location requirements include a stable and business-friendly environment. States with more business-friendly tax climates tend to use their corporate tax structure as an incentive to attract new business. The table below shows how Seventh District states rank in the 2017 Overall and Corporate Business Tax Climate Index.

Table 3: Ranking of Select U.S. States in the 2018 Overall and Corporate Business Tax Climate Index (5)

Source: https://statetaxindex.org.

The overall rankings of the Seventh District states compare favorably relative to some states with sites that are considered top contenders for Amazon HQ2 such as Minneapolis, MN and Washington D.C., which are included in the above and remaining tables. Indiana and Michigan rate in the top half, helped by the fact they have the lowest flat individual income and corporate income tax rates among the Seventh District states (6). Illinois fell out of the top half in the most recent annual update to the rankings. Meanwhile, Michigan has moved into the top 10 overall.

Theoretically, business activity levels should increase if the state is relatively friendlier to business. One could surmise that a greater number of businesses would place their corporate headquarters in a state that ranks as more accommodating to business. The chart below plots a state’s corporate tax climate ranking versus the number of Fortune 500 companies headquartered in that particular state.

Chart 1: Corporate Business Tax Climate Index Ranking vs. Actual and Predicted Fortune 500 Headquarters

Sources: https://www.ceo.com/entrepreneurial_ceo/two-charts-showing-states-with-the-most-fortune-500-companies and https://statetaxindex.org.

As shown by the green trend line on the chart, there’s actually a slight positive relationship between a state’s corporate tax climate index ranking and the number of Fortune 500 companies headquartered there. The lower the state is ranked, the greater the number of corporate headquarters located in that particular state. That’s the opposite of what one would expect, which is the red dotted line on the chart above.

So if a state’s overall business tax climate doesn’t impact where a corporation will locate its head offices, what variable does influence those decisions? Another example of a state with a business-friendly environment is one that offers incentives to help influence companies’ location decisions. The table below displays how the Seventh District states with eligible metropolitan areas compare with others in that dimension.

Table 4: Annual Business Incentives Per Employee

Source: Moody’s Analytics

By this measure, Michigan ranks highly relative to sites in states that many analysts think have major contenders to land Amazon’s HQ2 such as Austin, TX; Philadelphia, PA; Boston, MA; Portland, OR; Denver, CO; Atlanta, GA, San Francisco, CA; Raleigh, NC; and Salt Lake City, UT. Michigan is noticeably more generous with incentives than other Seventh District states. A major reason companies seek incentives is to offset tax liabilities. The Upjohn Institute created a database with national tax and incentive data, as well as state tax and incentive data for 33 states across 45 industries over the past 26 years. From the database, one can determine the magnitude of a state’s tax liability and incentive for a given industry as a percentage of that industry’s economic value-added. Then, by taking the incentive percentage (of its value-added) for a given state and dividing that by its tax percentage (of its value-added), one can determine to what extent a state’s incentives offset an industry’s tax liabilities in that specific state. The table below compares state tax liabilities and incentive offerings as a percentage of their respective value-added, along with the percentage of state tax liabilities covered by incentive offerings for some of the Amazon HQ2 contenders and the U.S. overall.

Table 5: Incentives and Taxes by U.S. and Select State, 2015 (7).

Source: Tables 10, 13, and 15 of http://research.upjohn.org/cgi/viewcontent.cgi?article=1228&context=reports.

Except for Illinois, the Seventh District states rank favorably relative to other states when looking at incentives as a percentage of state’s value-added and as a percentage of a state’s gross taxes. Having a greater percentage of its gross tax liabilities offset by incentive offerings would likely make a state more attractive to a business. Another takeaway from the table is that it doesn’t follow the previous table that showed incentives per job. Texas may have the highest incentive per job, but its incentive offerings constitute a relatively low percentage of its value-added. Conversely, Indiana possesses a relatively low incentive amount per job, but incentives offset almost 60% of its gross taxes. Lastly, Washington stands out for being a relatively high tax, low incentive state that lags significantly behind the other contending states.


Amazon has stated that it “will hire as many as 50,000 new full-time employees with an average annual total compensation exceeding $100,000 over the next 10-15 years, following the commencement of operations.” (8) In order to fill that many positions, Amazon will need to attract and retain highly skilled workers. That requires access to a college-educated population, including a substantial number with degrees in science, technology, engineering, or math (STEM) fields. The table below compares the Seventh District candidate metropolitan areas with other contenders on the relative education level of the adult population, as well as the percentage with a science or engineering background.

Table 6: College-educated Population in Select U.S. Metropolitan Areas

Source: 2016 American Community Survey, Seventh District locations are highlighted.

Among the group above, the Seventh District metropolitan areas don’t match up well. The Michigan metros don’t rank well when looking at the percentage of the population that possesses a bachelor’s degree. Grand Rapids ranks last when looking at the percentage of population with an advanced degree. Some of the areas known for their ability to retain and attract talent stand out in the table above. Washington D.C., San Francisco-Oakland, Raleigh, and Boston have world-class universities and globally renowned employers that require and need the best and the brightest.

Of course, not all STEM fields require a bachelor’s degree. Certain occupations in manufacturing and information technology only require a two-year degrees or specific certification. The table below shows the Seventh District candidate cities’ STEM employment relative the same group of U.S. cities listed in the previous table.

Table 7: Percentage of Employees in STEM (9) Occupations; Seventh District and Select U.S. Metropolitan Areas

Source: Author’s calculations based on data from the U.S. Bureau of Labor Statistics, Occupational Employment Statistics database, available at www.bls.gov/oes/tables.htm. Seventh District locations are highlighted.

By this broader measure, the Seventh District metropolitan areas compare more favorably with their peers. Detroit, Indianapolis, and Milwaukee have higher percentages of employees in STEM occupations than the U.S. average. Of the group of metro areas listed above, Detroit ranks behind just five of them.

An important factor in attracting talent is a relatively low cost of living. The next table examines the gross median rent in the Seventh District metro areas and select U.S. metros. Also, the table lists the gross median rent as a percentage of median household income in each metro area.

Table 10: Median Rent and its Percentage of Median Household Income

Source: Author’s Calculations Using Data from the 2016 American Community Survey. Seventh District locations are highlighted.

While there’s a noticeable disparity in the monthly rents among the metro areas, the range considerably tightens when looking at the percentage of household income that is devoted to rent. Detroit has one of the lowest monthly rents, but it comprises a relatively high percentage of household income because of Detroit’s relatively low median household income. Meanwhile, the Washington D.C. metro area, known for its relatively high housing costs, has a median rent almost twice that of Detroit, but it comprises a lower percentage of the metro’s median household income because the metro area has a higher median household income. Among the Seventh District metro areas, rents in Grand Rapids make up the lowest percentage of household income.

Potential Amazon Sites in the Seventh District Cities

Do you have an eight million square foot piece of land to spare in your metro area? That’s what Amazon is asking for their HQ2 site. Amazon requires an initial space of 500,000 square feet that can expand to as large as eight million square feet in order to accommodate the number of employees they plan to have working at their HQ2. Where would Amazon place their HQ2 in each of the Seventh District’s large metro areas? Potential Seventh District contenders have suggested particular sites that could accommodate Amazon’s HQ2.


Chicago proposed ten sites that could accommodate Amazon’s new headquarters. They were revealed to the public and can be viewed here. A couple of the sites stand out for different reasons. The Downtown Gateway District site, which includes the old Post Office building, contains move-in-ready buildings, but would also allow Amazon to design its own headquarters. Outside of Downtown, the River District site would also give Amazon some autonomy in designing its headquarters without having to undertake the kind of massive redevelopment effort that some of the other proposed sites would require.


The executive summary of Detroit’s Amazon proposal offers few surprises. Dan Gilbert, Chairman and Founder of Rock Ventures and Quicken Loans, was appointed to lead Detroit’s bid for Amazon, which includes Windsor, Ontario, Canada, just across the Detroit River. Gilbert owns 95 Downtown Detroit buildings, giving Downtown Detroit flexibility to move things around if it were to be chosen by Amazon. One potential complex is the now open space that was supposed to have Wayne County’s new jail, and then was bought by Gilbert with much talk surrounding a soccer stadium. With the old jail site on one end and Gilbert’s proposed skyscraper on the old Hudson’s department store site on the other, this location could be attractive. Of course, Detroit doesn’t have a shortage of vacant space that Amazon could build to use. However, Detroit doesn’t have the extensive mass transit system that would allow relatively easy access to some of the larger vacant sites.

Grand Rapids

Grand Rapids hasn’t given any clues publicly as to where it has proposed Amazon would locate within the area. However, the relatively small size of the metro area means it only takes 15-20 minutes to drive from any corner of Greater Grand Rapids into downtown. The metro area includes plenty of space around Holland, only a 35 minute drive from Downtown Grand Rapids, and Grand Valley State University in between.


Indianapolis didn’t make their Amazon bid public either. Indianapolis may arguably have the most shovel-ready location that would not just fulfill Amazon’s initial 500,000 square foot requirement, but go a long way toward hitting the eight million square foot target. The site used to have a General Motors stamping plant, which it was demolished in 2013. It is located in Downtown Indianapolis on the White River, just across from the central business district and IUPUI, and has relatively easy access to the city’s freeway system. The old GM site has been talked about publicly by city stakeholders. (10) As with Detroit, in Indianapolis, a less extensive mass transit system limits where Amazon could go.


Milwaukee’s bidding group didn’t reveal its Amazon bid publicly. However, according to the local press, two sites in Walkers Point were included.(11) Walkers Point lies immediately south of Milwaukee’s central business district, contains old industrial sites, and provides access to freeways and Milwaukee’s bus rapid transit system. In addition, one would expect potential locations to be identified in the vicinity of Milwaukee’s airport, which is south of the central business district.


If Amazon were to choose a Seventh District location for HQ2, where would it be? Looking at all of the variables, the most likely Seventh District metro area to attract Amazon would seem to be Chicago. However, if Amazon wanted to transform a community, then Detroit or Milwaukee might be more appealing. If Amazon preferred the most shovel-ready site, then Indianapolis could merit greater consideration. Grand Rapids could emerge as a candidate if Amazon were to place greater weight on its ability to work with local stakeholders, as well as having their employees enjoy a relatively low cost of living. Amazon plans to make an announcement sometime in 2018. (12)

Foot Notes

1 – The Seventh Federal Reserve District serves a five-state region, comprising all of Iowa and most of Illinois, Indiana, Michigan and Wisconsin.
2 – Although Detroit submitted a joint regional bid with Windsor, Ontario, Canada, the statistics I cite here are for the Detroit MSA.
3 – See Information on Airport Hub Size Type from the FAA, number of Direct Flights from October 24, 2017 using the By Route tab at http://www.panynj.gov/airports/flight-status.html?view=DEPARTURE&apt=EWR. Airport data includes all commercial metropolitan airports, i.e., New York consists of Kennedy, La Guardia, and Newark airports. Seventh District locations are highlighted.
4 – Population data from the U.S. Census Bureau, Traffic data from inrix.com/scorecard. Seventh District locations are highlighted.
5 – The overall ranking of the State Business Tax Climate Index is derived from five components: state income tax, sales tax, corporate tax, property tax, and unemployment insurance tax. The corporate tax has the third heaviest weight of the five components at 19%. The corporate tax subindex is divided into three of its own subindexes. The first subindex revolves around the structure of a state’s corporate tax rate, its level, and how many brackets and how quickly does a corporation’s tax liability reach the highest bracket. The second subindex examines variables related to the corporate tax base, such as the caps and number of years allowed for carryback and carryforward, gross receipts tax deductions, and whether or not the state has an alternative minimum tax. The final subindex studies the size and effectiveness of tax credits. Seventh District locations are highlighted.
6 – See p. 59 and p. 64 of https://files.taxfoundation.org/20171016171625/SBTCI_2018.pdf.
7 – Table reports present value of incentives, gross state and local business taxes, and net business taxes after incentives, all calculated as percent of present value of value-added. All incentive and taxes are weighted average, using value-added weights, across all 31 export-base industries, for a new facility starting up in 2015. Table also reports the state’s share of private value-added, which is used to create national averages across these states. Incentives as a percent of gross taxes are simply ratio of the two other columns. All present value calculations use 12 percent real discount rate, and consider facility with life of 20 years. The U.S. incentive percentage is weighted by a state’s gross state product. Seventh District locations are highlighted.
8 – See p. 2 of https://images-na.ssl-images-amazon.com/images/G/01/Anything/test/images/usa/RFP_3._V516043504_.pdf.
9 – The criteria to define STEM- and non-STEM-related occupations were taken from the U.S. Census Bureau. See www.census.gov/people/io/files/STEM-Census-2010-occ-code-list.xls.
10 – See https://www.indystar.com/story/money/2017/09/28/if-amazon-chooses-indianapolis-heres-where-h-2-q-should-go/685599001/.
11 – See http://www.tmj4.com/news/local-news/making-a-pitch-possible-locations-for-amazons-hq2-site.
12 – See p.1 of https://images-na.ssl-images-amazon.com/images/G/01/Anything/test/images/usa/RFP_3._V516043504_.pdf.

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.


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.


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.

(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).


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.



(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.