Helping his neighborhood move forward

Former NBA star Coleman assists city's rebirth

Thursday, December 27, 2007
Santiago Esparza / The Detroit News

DETROIT

Derrick Coleman remembers getting up at 5 a.m. with his cousins during the winters of their youth to shovel the sidewalks of family and neighbors.

Now a 40-year-old former NBA superstar power forward, Coleman still picks up a shovel to help clear walks and driveways in his neighborhood near Linwood and Clairmount, at the epicenter of the 1967 riots.

"We are still out there doing it," Coleman laughed. "Only now it is moving on to bigger and better things."

Coleman has purchased land on Linwood between Clairmount and Taylor and hopes to acquire more to Gladstone. He is building a pizza shop, cellular phone store and upscale barber shop to accompany the ultra hip Snyx Sneaker Studio built in a strip mall this year dubbed Coleman's Corner.

Next year he has plans for a farmer's market, laundromat and dry cleaner across from the strip mall.

"People here have to go outside the city to spend their money," Coleman said. "Hopefully in two or three years we won't have to go across Eight Mile to get the things we need."

As Coleman adds a new business, he hires people from the neighborhood, which he has never left, despite making millions of dollars playing professional basketball.

City officials praise Coleman's investment -- which he has made without any tax breaks typically requested by companies moving back to the city -- and say they hope it pushes other retailers to return. A recent city-sponsored report estimates that city residents spend roughly $1.7 billion outside Detroit every year.

"It shows (Coleman) believes that there is that kind of buying power in the city," said Douglass Diggs, the director of the city's Planning and Development Department.

Working to alter perceptions

His neighbors do everything from sell sneakers to paint walls to clear snow and even manage shops. Coleman said it is part of his efforts to get people living in the area to change their way of thinking.

"We are talking about setting a standard for what we do in the neighborhood," Coleman said. "It is all about changing the perception of where we are and where we are going."

Coleman wants his neighbors to expect quality products, good service and clean shops. Coleman said everything from crime to economics to dropout rates are impacted by the mindset of people in the area who do not yet believe the neighborhood can be better.

"It is a standard we accept," Coleman said. "That has to change."

To that end, Coleman has no bars or steel sheets to cover windows and doors at his businesses, unlike many other businesses, gas stations and shops in the neighborhood, because he said it makes people think the business is unsafe. Shoppers don't have to pay clerks through bullet-resistant plastic windows and visitors like Josie Wilkey are warmly greeted.

Activism inspires others

Wilkey, a 90-year-old resident of the neighborhood who watched Coleman grow up, jokes that she cannot keep up with him any more because he is so big.

"What he is doing doesn't surprise me," she said of Coleman's longtime activism. "I'm glad to see it."

So is her granddaughter Nakiya Hollis, 12. Nakiya remembers Coleman buying her first squirt gun. Last week, she waited patiently for Coleman to finish talking to visitors at his sneaker studio to share some business tips with him.

"I like some boy clothes," she said, looking around the studio. "But there could be more girl stuff; more purple and pink."

Nakiya said Coleman's work in the neighborhood is an inspiration for young people.

"It is good to know there is someone who cares about people here," she said.

Raymond Joyner, 35, also lives in the neighborhood. "I am part of the neighborhood struggle," Joyner said while preparing to paint at Coleman's cellular phone store. "Without him, the neighborhood would be a dead zone. There would be no hope."

Coleman admits what he is doing does not improve things for the entire city, but he said that is not his intent. He wants to improve the neighborhood in which he was raised.

He owns a Southfield clothing store and a Detroit restaurant, but he is not as involved with them as he is with the project in his neighborhood. For Coleman's Corner, he scouted the land, negotiated purchases and selected the businesses.

Coleman also wants the people living in the neighborhood to participate in its rebirth. Just lending his name or money will not be enough to get the job done, Coleman said.

"It's not like people treat me as Derrick Coleman the basketball player," he said. "I'm just Derrick. I can be myself, and people and kids can be around me. That is different than just supplying your name or writing a check. That makes a difference."

Keith Calhoun, Coleman's 36-year-old cousin, also still lives in the neighborhood. He ran a Christmas tree lot Coleman set up this year because area residents said they had nowhere close to go to buy a tree. The trees sold for $20 each. On Saturday, Coleman gave away trees and food to 250 needy families from the area.

"That's just how he does things," Calhoun said. "He has a vision. This is a bigger endeavor (than playing basketball) for him."

Coleman's changed, too

Tony McDuffy marvels at all Coleman has accomplished. McDuffy is a member of the Central Detroit Christian Community Development Corp. that operates in the same area as Coleman's Corner. And just as the neighborhood has undergone changes, McDuffy sees them in Coleman as well.

Coleman has had brushes with the law dating back to the late 1980s when he was in college. But that has helped to show youngsters that past mistakes don't prevent you from doing good things in life, McDuffy said.

"He got in trouble, but not only did he come back to live here (full-time after playing) he is making a difference. He is putting back into young people in the area. He is showing them that anybody can help a community be healthy."

Building blocks: Grit and spirit

DRIVING DETROIT PART 5 OF 5

Whether areas are flashy or rundown, residents are committed to staying put

December 20, 2007

BY BILL MCGRAW
FREE PRESS STAFF WRITER

Since he took office, Mayor Kwame Kilpatrick has called Detroit "God's city" and "a mosaic of dynamism." He once predicted Detroit would be "a major force in this new millennium."

In driving down all the streets in Detroit this spring, summer and fall, I failed to find the city the mayor was talking about. But I did find the neighborhood around Lenox and Averhill in the Jefferson-Chalmers area on the lower east side.

No one would mistake this neighborhood for a major force in the new millennium, but it seemed like a Detroit in miniature: Partly broken, partly palatial, partly imposing and partly being reborn.

And, like many neighborhoods in the city, it seems filled with people who revel in all of its funkiness and promise.

"I never want to live anywhere else," said Derrick Paden, 47, who moved to the Jeff-Chalmers area when he was 10 and lives on Eastlawn.

This neighborhood is a bit off the beaten track. It borders Grosse Pointe Park, south of East Jefferson, and the Detroit River. Residents live closer to Canada than to City Hall.

On one corner of Lenox and Averhill is St. Martin of Tours Catholic Church, which sits empty, its masonry cracking and windows breaking. "Jesus Christ is alive and well and living in Jefferson-Chalmers," proclaims a sign hanging behind the church's locked doors.

On another corner, across from St. Martin's boarded-up rectory, is Grayhaven Marina Village, a gated community that consists of middle-income townhouses, apartments and a harbor. The old Fisher Mansion is next door.

Before and after World War II, when Catholics dominated Detroit and jobs were plentiful, St. Martin anchored a thriving community of working-class and middle-class families. Former residents speak of their old neighborhood with a passion you rarely hear from people who grew up in the suburbs.

Anne White-O'Hara, a history professor at Marygrove College, lived on Marlborough -- which is partly paved with red bricks -- as a young girl. She recalled the foghorns of passing freighters lulling her to sleep. She called the neighborhood of her youth a "magical kingdom."

The neighborhood went from mostly white to mostly black in the 1970s and '80s. It also was hit hard by the heroin and crack cocaine epidemics, as well as unemployment, crime and the scandal surrounding the buying and selling of low-income Housing and Urban Development houses.

But former and current residents say the area has made positive strides in the past several years.

A lot of new housing at various prices has been built nearby. Most developments have received significant government subsidies, and some residents benefit from tax breaks, too.

Blight and luxury

In the neighborhood near the river, Lenox serves as a dividing line.

To the east, along Marlborough, Eastlawn, Newport, Drexel, Piper, Philip, Manistique, Lakewood and Ashland, you notice the well-tended colonials, bungalows and flats. You also notice every street has houses with a sagging front porch, or broken gutters, or a collapsing garage. Each street also has vacant homes, plus homes that have imploded from abandonment, fire, or both. There were large piles of garbage this fall at Avondale and Newport, Korte and Eastlawn, and in the 500 block of Marlborough.

In the city playground across from St. Martin, future pro Ralph Simpson shot hoops and future major-leaguer Jim Essian learned to hit a curve. This fall, the fence was broken, the grass was long and the kiddie swings had no seats.

Despite the scruffiness, there are numerous havens, such as Riverside Drive, a short street that dead-ends into a park along the river. It is covered in shade from silver and red maples and lined with a variety of well-kept homes.

Bennie Kemp, 68, who moved to Jeff-Chalmers in 1975, stood in front of her immaculate home on Riverside and said: "I have no complaints. I wouldn't go anywhere else."

Her friend, Annie Mason, 75, a 30-year resident who lives down the street, agreed. "I love it here," she said.

Turn the corner, though, and you enter a different world: A frayed garage on Scripps has a weed-like tree growing from its roof, and there was a disabled pickup in the driveway across the street. An abandoned house sits next door, on Lenox.

To the west, less than 100 feet away, just beyond the fence and the berm along Lenox, is another world: Workers are preparing Lenox Waterfront Estates, a gated subdivision of 7,500-square-foot homes that will start at $1.3 million. The developer is Jerome Morgan, whose other luxury neighborhood, Morgan Waterfront Estates, is several blocks to the west.

This is the real Detroit of the new millennium: Luxury homes built within sight of a tree growing on a roof. Proud homeowners on exquisite blocks. And proud homeowners on broken-down blocks, working to keep their neighborhood strong despite unlit streetlights, uncollected trash and calls for help to a revenue-starved city that often go unheeded.

True turnaround?

Driving the uneven streets east of Lenox, you wonder when the trickledown will arrive from the casinos and stadiums. You wonder why Roger Penske's privately financed cleaning crews couldn't take time off from the basically spotless streets downtown to tidy up the 500 block of Marlborough. You wonder if the $1-million downtown condos and new housing that has sprung up in many city neighborhoods is a harbinger of a real turnaround, or more of what has been happening in Detroit for half a century -- flashy development amid subtle decay.

Since the early 1950s, parts of the city have flourished while Detroit itself has been shrinking incessantly. Between 1950 and 1970, for example, Detroit tore down slums and built much of the freeway system, Medical Center, Cultural Center, Civic Center, Wayne State University campus, Lafayette Park and Cobo Hall. Yet the population dropped by more than 338,000, hundreds of factories shut down or moved and a devastating riot broke out.

New attraction

The global economic forces that are battering Detroit seem far away from the quiet corner of the city where the Detroit River funnels into the brackish canals that have become the home of high-end cabin cruisers.

Across a canal from Lenox Waterfront Estates is Shore Pointe Village. It's a several-year-old development that continues to grow. Homes start at nearly $600,000. It's a joint venture of the Blake Co. of Grosse Pointe Farms and Pulte Homes Inc. of Bloomfield Hills and is reached by driving through two gates, or by boat.

Set on and around the former site of the famous Gar Wood mansion, it has 38 homes to date. The homes have hardwood floors, stainless steel double ovens, two furnaces, two fireplaces, thick granite countertops and an elegant, airy feel. Each home has a boat slip on the canal; some sit right on the river, across from Peche Island and the tip of Belle Isle.

One resident of the new neighborhood is Michael Dinwiddie, a Detroit native, playwright and associate professor of dramatic writing at New York University. He said he bought the home at Shore Pointe Village because he loves cities -- and Detroit.

"I've lived in Los Angeles, and I teach in Buenos Aires and New York. But Detroit is so special because of its spirit and its people," Dinwiddie said. "Living on the Detroit River is magical."

Dinwiddie's scenic street -- Keelson Drive -- is a long way from the downtown dream zone. The emergence of Shore Pointe Village, as well as those other upscale havens nearby, is evidence the city is spawning neighborhoods for people who once might have looked elsewhere.

Detroit needs a lot. Jeff-Chalmers needs a lot. It helps to have residents like Prof. Dinwiddie.

"I plan to retire there," he said. "And now that I have a dock, I have to learn to sail."

And it helps to have residents like Walt Williams, 50, a factory worker who moved to a modest bungalow on the corner of Lenox and Averhill when he was 16 and still calls Jeff-Chalmers home.

"This was a great neighborhood to grow up in," he said. "And we still love this neighborhood. We're not going to let it go down."

Surprise from the streets: Art!

DRIVING DETROIT PART 3 OF 5

Detroit is like a big canvas

December 18, 2007

BY BILL McGRAW
FREE PRESS COLUMNIST

Shards of glass arranged randomly on a wooden utility pole. A jaunty human body carved out of a dead tree, wearing a tire as a hat. Ceramic benches in a vacant lot. The face of an elf painted on the base of a streetlight. Elaborate graffiti in countless places across the city.

Art is one of the last things outsiders associate with Detroit. But drive the streets and you quickly realize the city possesses an energetic, grassroots creative class that not only spreads color, whimsy and provocation across the landscape, but also serves as an engine of redevelopment.

True, not everyone considers all of it art, especially when it comes to graffiti.

And the underground nature of some of the work helps keep it off the radar of many people, even art lovers.

But it's evident that the city's far-flung artistic community extends many levels beyond the Detroit Institute of Arts, which reopened in November after a $158-million renovation.

Last year, the Museum of Contemporary Art Detroit (MOCAD) opened in an abandoned car dealership on Woodward Avenue and received praise from the New York Times for its "guerrilla architecture ... that accepts decay as fact."

This year, the Contemporary Art Institute of Detroit (CAID) expanded in a variety of directions from its 3-year-old home in an 1889 grocery store-turned-billiards-hall-turned auto-parts-outlet in a deserted area of Rosa Parks Boulevard.

While a number of local artists seek their fame by moving to the coasts or Chicago, those who have stayed say they are attracted to Detroit because of its ample workshop space, cheap rent, creative community and the city's laissez-faire attitude toward street art that allows a wider range of freedom of expression than would be tolerated in the more tightly regulated suburbs.

The artists

Mitch Cope, 34, is a Detroit artist and curator. He and wife Gina Reichert run a Hamtramck store, Design 99, that sells quirkily fabricated household items. Collaborating with two German artists, Cope has made benches out of Detroit's ubiquitous tree of heaven, also known as the ghetto palm and ailanthus tree.

"When we talk to artists from out-of-town, we mostly talk about opportunities that don't exist elsewhere," he said. "You can come to the city, take over land, do whatever you want."

Aaron Timlin, CAID's executive director, added: "There's a pioneering attitude. There are so many things artists can do in Detroit because it is so spread out. Throw up a sculpture on a vacant lot. Performance art. Detroit is a big empty canvas."

The spiritual godfather of the grassroots art scene is Tyree Guyton, whose internationally known installation around Heidelberg Street on the near East Side attracts visitors every day. Guyton's artwork deals with how abandonment affects a neighborhood -- and decay is central to the work of a number of artists.

In Detroit, there are people who draw attention to abandonment by painting gutted homes orange or attaching orange traffic cones to them. There is Larry Zelenski, who produces greeting cards with lovingly enhanced photos of abandoned houses. And there is Kevin Joy, who paints cartoons, Mayan-style hieroglyphics and other wacky images on abandoned houses and in the windows of vacant downtown buildings.

Flamboyant artwork was one aspect of the popular Theatre Bizarre, an annual underground Halloween carnival near the State Fairgrounds that this year featured goth, punk and rockabilly music, a burlesque show and a skin-piercing exhibition.

The graffiti was so interesting and extensive on bridge abutments in the below-grade rail line east of downtown, known as the Dequindre Cut, that city officials decided to preserve the images as they transform the area into a greenway and recreation path that will open next year.

In dozens of locations, countless anonymous metro Detroiters have fashioned artistic-looking street shrines of candles, stuffed animals, liquor bottles, photos and written tributes that memorialize the dead -- mostly the victims of gun violence.

Artists also contribute to the city's revival, though their improvements are usually small scale and rarely the subjects of news conferences.

In October, for instance, Zi Walls, a 29-year-old graphic artist and musician, and two partners, cleaned up an abandoned store on Michigan Avenue near Tiger Stadium and opened Communique, a space for video, film, music, poetry and other alternative media.

Artists also have taken their galleries and work spaces to a variety of old buildings that might otherwise sit empty.

Among those outposts are the Pioneer Building, a former factory on East Grand Boulevard; the 4731 Gallery, a four-story brick building on Grand River and 15th, and, perhaps most notably, the Russell Industrial Center, an immense complex of seven buildings at Russell and Clay.

The art factory

With its dingy brick, uneven windows, bulky water tower and the rambling vastness, the six- and seven-story Russell Industrial Center looks like a throwback to Detroit's smokestack past. Passing it on the Chrysler Freeway north of East Grand Boulevard, you might not even be sure whether it's occupied.

But when you pull into its inner parking lot, you realize this is no ordinary old factory.

First indication: There are a lot of people walking around and considerable vehicle traffic.

Second indication: Walking through the hallways, you see bright lights and fat red elephant sculptures amid the sawing, hammering and eclectic music.

Third indication: The "no parking" signs are fastened to metal that is bent into whimsical humanlike shapes.

Chris Bell made the figurines.

By day, he is a mechanic for the Detroit Department of Transportation. After hours, Bell calls himself the "man of steel," and works on the third floor of Building No. 2, soldering and welding spare parts and sheet metal into the shapes of animals, people and things.

He's an artist, and the Russell is his home.

"This place is like a sanctuary," he said. "This is my family. I'm among like-minded people. There is nothing but positiveness."

The Russell is home to 120 tenants, about 80 of whom are artists, said Eric Novack, the center's leasing agent who writes novels in his spare time.

The tenants are attracted by an authentic industrial design of thick concrete and mammoth elevators, plus rents that run about $550 a month for 1,000 square feet -- considerably cheaper than in much of suburbia. The artists and others occupy about 650,000 of the Russell's 2.2 million square feet.

"You can do whatever you want as long as it's legal," Novack said. "We have two rules: Respect the community and respect the building."

The tenants are a diverse group with specialties like photography, music, painting, interior design, architecture, metal work, glassblowing, graphic design, cabinetry, clothes manufacturing, candle-making, posters and a company -- Sensitile Systems -- that makes acrylic material that reconfigures shadows and light.

The Salt-Mine Studio offers what it says is the only fine-arts foundry in the city. The Detroit Industrial Projects is a modest-size gallery that undergoes a total transformation for each show.

Designed by renowned architect Albert Kahn in the World War I era, the Russell was a busy manufacturing center of auto parts and bomber wings during Detroit's heyday. Home to some 130 print companies in the 1970s, it experienced financial problems in the 1990s, and Dennis Kefallinos, who owns Nikki's Pizza and other ventures, bought the complex in 2003.

Spreading the word

In September, the Russell held a one-day People's Art Festival that attracted more than 150 visual artists, performance artists, filmmakers and musicians from inside the building and beyond.

Novack said the fair was so successful plans are in the works for next year's event. He says the complex also will add a year-round screening area for videos and films.

The Russell event joins two other summer festivals in central Detroit -- Dally in the Alley south of Wayne State University and the Fourth Street Fair north of campus -- that are offbeat and focused on music and art.

"People from out of state say, 'There's nothing going on in Detroit,' " said Mark Arminski, who rents space in the Russell and is a well-known designer of posters for rock bands. "I tell them, 'Come here for a summer. Go to galleries and festivals. Even clubs. A lot of clubs are hanging art these days.' "

Said Jeannette Strezinski of the Detroit Industrial Projects: "If you're in the suburbs and you're only paying attention to the big galleries, you're kind of going to miss a lot."

Elite neighborhoods try to stay that way

DRIVING DETROIT PART 2 OF 5

2 of city's worst problems creep into some of its upscale areas

December 17, 2007
BY BILL McGRAW
FREE PRESS COLUMNIST

Palmer Woods never really looked like the rest of Detroit.

It has baronial homes, gently curving streets with such names as Suffolk and Argyle Crescent, and flourishing Norway maples and red oaks that cast a sun-dappled screen across much of the neighborhood.

That's why it was a shock to drive by the house at 1830 Balmoral.

It has sagging gutters, chipped paint and overgrown greenery. A wide-eyed doll lay across the crumbling front steps.

The history of the home's most recent occupants was splayed across the front and back yards: Golf clubs, canceled checks, prescription medicine bottles, toys, Scientific American magazines, birthday cards, an undated photo of the house looking lovely in winter and a fraternity paddle inscribed, "To Barbara, from Benny." A 1973 Lincoln with four flat tires sat in the street.

In Palmer Woods.

This is a 2 1/2 -story Tudor mini-mansion with a winding driveway and a 4-car garage in one of Detroit's most exclusive neighborhoods.

The owner, an elderly physician, lost the home to foreclosure, according to real-estate records and neighbors. She was evicted in November.

Hers is not the only vacant home in Palmer Woods.

And Palmer Woods is not the only elite neighborhood in Detroit that finds itself fighting an escalating battle with the kinds of cancers that rarely existed there before and, over time, have destroyed large swaths of the city.

Adjacent to Palmer Woods and only slightly less majestic are Sherwood Forest and the University District. Those neighborhoods, similarly, are battling blight and the pathologies that accompany it: crime, stripping, squatting and fires.

From North Rosedale Park on the west to East English Village next to Grosse Pointe on the east, Detroit's best neighborhoods are under siege like never before. Even the home in Russell Woods once occupied by Mayor Kwame Kilpatrick before he moved to the Manoogian Mansion has boards on the windows. The latest owner defaulted on his mortgage, records show.

Of 298 homes in Palmer Woods, 20 are empty, said Rochelle Lento, a neighborhood resident and attorney who specializes in housing issues. That's a small figure compared with most of the city, but unusually high for Palmer Woods.

"Our goal is to protect the assets here," Lento said. "We're talking about historical jewels in Palmer Woods."

Sherwood Forest has 30 vacant homes out of about 435 houses, said Lois Primas, president of the neighborhood organization.

"If one house is looking lost and deserted, it means the whole neighborhood is looking bad," Primas said. "It just hurts your heart."

South of Sherwood Forest, across 7 Mile Road, is the University District, with about 1,250 homes. As of September, 130 were vacant, said John Autrey, the neighborhood association president.

These communities are at 7 Mile and Livernois, one of the six areas selected for bolstering by Mayor Kwame Kilpatrick as part of his Next Detroit neighborhood revitalization initiative announced in May. Despite their problems, the elite districts continue to look stunning overall, featuring homes with distinctive architecture, remarkable size and memorable landscaping.

Some of the abandonment in these three neighborhoods stems from the mortgage crisis, which has left empty houses in its wake in cities across the region and nation. But most suburban neighborhoods are not as fragile as those in Detroit, where history shows a few empty houses can become havens for crime and ignite a decades-long downward spiral.

Of Palmer Woods' 20 empty homes, six to eight are because of foreclosures, Lento estimated. She isn't certain about the others, but said some homes simply have been for sale for years.

The house next door to 1830 Balmoral also is empty, having gone through two foreclosures in recent years. A large Dumpster sits on what used to be the front lawn. A blue tarp blows from the roof. There are weeds and junk in the backyard, and the entire first floor is in shambles.

"We're working with the city to condemn it," Lento said. "It's probably the only house in the neighborhood that needs to be demolished."

The plague spreads

George Galster lives in Palmer Woods. He's also an expert on neighborhoods and has a Ph.D. in economics from the Massachusetts Institute of Technology and is a professor at Wayne State University.

Galster said the housing crisis hitting Detroit in 2007 is "fundamentally different" from the long-term problem, which has occurred mostly in marginal areas of the city and which he attributes to metro Detroit building more housing units over the years than it can fill.

It's a regional problem, but Detroit's older housing stock bears the brunt of it, and the city is powerless to control the situation, Galster said.

He added: "It's like playing a game of musical chairs in reverse."

Instead of taking away chairs -- or houses -- "we keep adding chairs, so there's a whole lot of chairs that people are not sitting in at the end of each round."

Historically, the least desirable houses are the ones that nobody is living in. After the owner can't find anyone to rent or buy the house, he or she often simply walks away from it.

What's different now, Galster said, is that for the past couple of years "we're seeing the abandonment of some of the city's most desirable housing."

Palmer Woods has experienced problems with squatters and scrappers stripping homes of valuable metals from pipes and wiring.

Said Galster: "All of a sudden, neighborhoods that are well up the food chain in Detroit are subject to the same desperation, or desperadoes -- the insurance burning, the stripping, the mortgage scams, the occupancy by inappropriate individuals."

Neighbors in Palmer Woods have tried to fight back by researching real-estate records, reaching out to banks, pressuring the city to cite owners whose properties are violating ordinances and working with the Wayne County Prosecutor's Office over possible mortgage fraud on two or three properties. They've had a couple of success stories, including the sale and rehab of the city's only Frank Lloyd Wright house, on West 7 Mile.

One problem in Palmer Woods: Mortgages on the foreclosed homes are mostly held by out-of-town banks. Lento said Deutsche Bank, based in Frankfurt, Germany, owns four or five of the mortgages on the six to eight foreclosed homes in Palmer Woods.

Fighting back

About 4 1/2 miles southwest of Palmer Woods is North Rosedale Park, another refuge of sculpted bushes, distinctive homes and mammoth trees. But it, too, is struggling with abandonment.

On a stretch of Shaftsbury Road, neighbors are doing their best to maintain a handful of abandoned homes and provide security. They've even put up window treatments to make the empty homes look occupied.

"We, as a neighborhood, really don't know what to do with what is going on here," said Nacio Thomas, 43. "We're looking for answers."

Marsha Bruhn, 69, the retired director of the City Planning Commission, lives in an impeccable and unique Tudor revival that has elements of an English cottage. Next door is an empty home. The neighbors cut the lawn. Rick Revels, 53, has even put chlorine into the built-in pool. A dead tree hangs over the garage, overhead wires are hanging loose and a window at the rear of the house is broken and boarded.

"We really don't want to see our neighborhood decline," Bruhn said.

Neither do the residents of Palmer Woods, where the vistas include lawns lush as meadows and homes that remind you of castles.

As trash left from the eviction blew across the lawn of the house on Balmoral, a neighbor slowed his car and asked what was happening with the house.

Before long, an SUV stopped and a passenger got out and picked up a vacuum cleaner. She walked with it toward the vehicle, then suddenly decided it wasn't worth taking.

So she threw it on the lawn, and they drove away.

In Palmer Woods.

City's hope often trumps its troubles

DRIVING DETROIT/PART 1 OF 5

Neighborhoods transformed as new homes spring up among vacant lots, but plenty of work remains

December 16, 2007
BY BILL McGRAW
FREE PRESS COLUMNIST

Of all the streets, avenues and boulevards in Detroit, Buchanan comes across as one of the saddest.

And that is why, given all the neighborhood has endured, it is miraculous to see the progress along its quiet corners and weedy sidewalks.

Buchanan connects Livernois and Grand River, bisecting an area mostly southeast of the intersection of I-94 and I-96. The neighborhood is old and poor. Houses are rickety, and many are empty and rotting.

The lush and unruly landscape looks more rural than part of the 11th biggest city in the United States. Piles of mattresses, furniture and other refuse dot overgrown fields. Pheasants, hawks and barking dogs are common, and residents walk long distances in the streets to a store.

"Fifty years ago, when I moved in, it was beautiful," said Walter Martin, 83, who lives on Buchanan near 24th.

"Little by little, everything left. I stand here and I almost cry."

Gradually, though, you can see signs of change along Buchanan, and along 15th, 16th and 17th streets, Martin Luther King Jr. Boulevard and West Warren.

The reason for hope: Churches, nonprofit organizations and Habitat for Humanity are gradually transforming the neighborhood by building housing. There are hundreds of new units: Simple, sturdy single-family homes, senior-citizen centers, town houses and apartments. Next month, the University of Detroit-Mercy School of Dentistry will complete a long-planned move to the area.

In some places, you can hear the shards of a burned-out 19th-Century home flapping in the wind at same time as the mechanical groans of construction equipment preparing another site.

"I'm thrilled and fascinated with what's happening," said Marguerite Hite, 72, who lives in a cozy new apartment in the Alberta W. King Village complex, named after Dr. Martin Luther King's mother. "This whole area is changing. It's just mind-boggling."

Rebirth along Buchanan, though, has been painful.

For example: One of the new apartment buildings, at Hazel and Wabash, has burned-out homes on either side and a vacant lot covered with piles of junk across the street.

Homeless people were sleeping in one of the abandoned houses, and it caught fire at least twice within three weeks in May and June. Heat from one blaze was so intense it traversed a vacant lot and melted the siding on a new apartment building.

Willie Campbell, executive director of Core City Neighborhoods, which built that building and many others, said the organization tried to buy the abandoned home that burned, but the owner asked too much. The city has placed the home on its list of buildings to be demolished, but the process can take years because of bureaucracy and a lack of money for demolition.

James Canning, a spokesman for Mayor Kwame Kilpatrick, noted that the city has hired inspectors, cracked down on code violations and created a blight court to step up its battle against illegal dumping.

But some illegal dumps are so large that the city doesn't have the equipment to remove them, Canning said. He added: "We do everything we can do."

The situation on Wabash is emblematic of issues facing much of Detroit: Neighborhoods exist seemingly outside of the establishment's consciousness, held together by longtime residents who refuse to give up and are helped by grassroots efforts to keep them going. But all the while they face the harsh reality of a municipal infrastructure crippled by too little money, too few human resources and too large an area to oversee.

Eventually, inspectors showed up this fall and ticketed the new owner of the vacant lot across the street from the apartment building, and he hired a crew to cut the grass and weeds. The piles of refuse remain. One large pile is covered with broken cement barriers.

Kilpatrick has been a big supporter of the neighborhood, and local officials credit him with helping to kick-start the redevelopment efforts. The mayor launched his re-election campaign with an event in the area in 2005.

But Campbell and others also partly blame the local dumping on Kilpatrick's decision last year to cut back on bulk-trash pickups from 12 to four times a year because of city revenue shortfalls.

"That created a bigger problem," said Campbell, Core City's executive director. "And the city never did like to pick up tires and construction trash. So people look for places to dump that."

The city has stepped up enforcement of dumping violations. Campbell knows that first hand: An inspector gave him a $3,500 ticket for trash dumped by an unknown person on land Core Cities owns and plans to develop. A judge dismissed the ticket.

There are other problems, too.

At Buchanan and 24th, you can hear the sound of water rushing out of a pipe in the basement of an abandoned hardware store. Neighbors said they have heard it for three years.

And the streetlights often don't work.

"It's black. Black like a blackout," said Martin's daughter Darlene, 45, who still lives in the neighborhood.

Despite the hassles, Campbell remains optimistic.

"This whole area is going to be totally renovated," Campbell said. "By 2021, there will be no more substandard housing."

Renewal spreads, as does decay

What's happening around I-96 and I-94 is happening across Detroit, from the area around Ste. Anne's church near the Ambassador Bridge to the corner of Mack and Alter, next to Grosse Pointe. New homes in every price range are rising. New neighborhoods are being born while some of the old ones are being resuscitated.

Some 5,000 units of housing have been built since 2000. According to a report by Comerica Bank, the development investment in Detroit from 1997 to 2007 grew to $29.5 billion. Most of that activity is located downtown, in Midtown and along the riverfront, but construction and renovation have become common in a number of neighborhoods.

Yet decay continues to spread, and the revenue-strapped city is struggling to perform basic city services, from answering police calls to picking up trash, and the mortgage crisis puts even more blocks at risk. A surprising number of corners were even missing street signs.

Here's another example:

When you drive down St. Jean Avenue, toward the Detroit River on the east side, you pass a chemical processing plant at Freud and see the old Detroit Edison plant.

Suddenly, a new subdivision appears -- Morgan Waterfront Estates, with big, luxury homes that start at $700,000.

When the developer, Jerome Morgan, a former plumber, dedicated the homes in September, the mayor showed up, underscoring the significance of someone reinventing a gritty industrial neighborhood.

Poignantly, right outside the gates of the new subdivision is a fire hydrant with a yellow sign hanging from its side. It reads: "Out of Service."

Travel the city and you will see plenty of evidence of the fresh, new Detroit bumping up against the old Detroit of decay and dysfunction: New homes with river views across the street from abandoned houses and wild vegetation; new casino hotels with expensive rooms within sight of broken streetlights and people sleeping under freeway bridges; insect-ridden piles of bulk trash stinking up neighborhoods of tidy old bungalows.

The city, in other words, is a supersized contradiction. Conditions can go from gilded to barren by turning a corner.

Some neighborhoods are undeniably stronger than they have been in decades: Southwest Detroit, energized by Hispanic immigration, has street life, a big-city feel and, with its carnicerias, supermercados, taquerias and panaderias, West Vernor has become the city's most viable commercial street.

Yet even in one of Detroit's most vibrant communities, there are problems with crime, poverty and gutted buildings.

The best known success story, of course, is the T-shaped area of downtown, Midtown and the riverfront. Next year, people will move into the historic Book-Cadillac Hotel's $1-million condos. The announcement in November that Quicken Loans would move its headquarters and 4,000 employees downtown emphasized the central business district's re-energized renaissance dreams.

The state of many neighborhoods, on the other hand, seems increasingly precarious, and blight appears to be creeping into new areas.

There were signs of distress -- like boarded-up homes -- in such classic, upwardly mobile neighborhoods as Palmer Woods, Sherwood Forest, the University District, Rosedale Park and East English Village. These communities find themselves struggling with a relatively unusual number of empty and deteriorating houses and the problems that accompany them -- crime, squatters, scrappers and fires.

"There are no pockets of stability left," said George Galster, a Palmer Woods resident and professor of urban affairs at Wayne State University who is a national expert on neighborhoods. "The middle and upper-middle-class neighborhoods of Detroit are being threatened much more in the last two years than in the past."

Reputation vs. reality

Detroit has a mythic reputation for reasons both good and bad: Its post-industrial bleakness, its music, its blackness, its spirit. Earlier this month, the New York Times put Detroit on a list of places to visit in 2008. In November, a report resurrected an old problem, crime, and anointed Detroit the nation's most dangerous city.

But there was nothing scary about the city I drove through. It was peaceful and almost like a small town.

I mostly saw people simply living their lives: Watering the lawn, unloading groceries, playing catch with a football and talking to neighbors. Many people smiled or nodded amicably as I rolled down their street.

Kids rode fancy bikes at Appoline and Pembroke one day. An older couple at Ashton and Curtis, played cards under a tree on one of summer's hottest afternoons. A family at Sussex and St. Martin put up a banner praising their graduating daughter, Jewel. A man on Mansfield painted his curb white.

Along an eviscerated stretch of Linwood, a middle-aged man lay on the sidewalk, his arms stretched upward, apparently drunk. Two women stepped off a bus and walked toward him. They helped him stand; they steadied him; they walked him south on Linwood, past graffiti that said, "One love."

On Cloverlawn near Cortland, a young man walked down the street with a heavy-duty dolly and jokingly tried to persuade a young woman to hop on. She reacted as if he was making a comment about her weight, and hit him with her purse, laughing.

While a few people offered to get me high, and occasionally scrappers boldly dismantled awnings and carried pipes down streets in broad daylight, I saw no major wrongdoing -- unless you consider it a crime to hang purple awnings on a traditional colonial, or place a statue of a baboon in your front window.

But I also saw the manifestation of concern about crime: Razor wire, bricked-up windows, Plexiglas shields, window bars, alarms, guard dogs and street memorials to victims of violence. Lots of residents, including Cardinal Adam Maida, live in private, gated communities; their homes surrounded by fences or elaborate barriers made of brick and wrought iron.

Vitality but also apathy

On some streets, I saw crowds of young men hanging around, killing time. They are southeast Michigan's black proletariat, the people Kilpatrick likely was thinking of in October when he said the city has plenty of jobs, but too few residents who want to "get off their porches" and take responsibility for their lives.

But I saw virtually no places advertising that they were hiring.

One hot afternoon, a woman on Mack Avenue licked her lips as I drove by. She wore tight pants and straddled a bike, so I took her gesture as that international symbol of friendship for money.

I kept driving. But when I looked in the rear-view mirror, I saw her pedaling furiously, chasing my company car.

I accelerated.

At-risk homeowners to get fed help

Move by Bush could freeze rates for 5 years on some adjustable loans.

Brian J. O'Connor
The Detroit News December 6, 2007

Reports out of Washington say the Bush administration today will announce a deal with large mortgage lenders that will freeze payments on some subprime home loans for five years.

Congressional aides who leaked details of the plan say it freezes payments on some risky, adjustable-rate loans, but only if the borrowers are up to date with their payments.

Some analysts say it could do more harm than good.

The plan could stem some of a feared wave of foreclosures poised to strike the real estate, housing and credit markets within months. But it also may tighten credit for home buyers, create more losses for investors and extend the uncertainty wracking credit markets, notes Greg McBride, senior financial analyst at www.Bankrate.com.

"It cushions the blow to the economy in the short term," McBride said Wednesday. "But it raises a lot of questions and potential problems."

The plan -- cobbled together by Treasury Secretary Henry Paulson and other banking regulators and banks, mortgage investors and consumer groups -- aims to forestall damage to the already weakening U.S. economy when payments on an estimated 2 million adjustable-rate mortgages begin increasing next year.

Reports from the Associated Press on Wednesday said the rate-freeze plan would apply to subprime borrowers who are current on loans made at the start of 2005 through July 30 of this year, with rates scheduled to reset between Jan. 1, 2008, and July 31, 2010.

The freeze won't apply to prime borrowers; those who can afford to refinance; and those who are past-due on their loans. The freeze would be limited to owner-occupied homes, to avoid bailing out real-estate speculators.

The strategy seems intended to let the turmoil in the real estate market subside so that home values can level off, allowing borrowers to refinance or sell. In many cases, homes purchased at the peak of the market now are worth less than the amount owed.

That makes refinancing impossible for many borrowers, leaving them to tighten their budgets if they can, declare bankruptcy or simply walk away rather than selling their homes at a loss. The result is more homes dumped on a glutted market, or consumers so stretched to make payments that they curtail other spending. Already Detroit's Big Three automakers say their sales are slumping because of the mortgage crisis. While the plan may create temporary breathing room for some homeowners, it's likely to drive lenders out of the sub-prime market and maybe out of mortgage lending altogether, Bankrate's McBride warns.

Only about 20 percent of subprime loans are in default now, he notes. That means a lot of borrowers are paying on time and might be able to keep paying when their rates go higher. But a blanket freeze on all subprime loans means investors will lose out on those profits. They'll think twice about making any more loans if they fear the government will jump in and rewrite the terms.

"We need more liquidity in the mortgage market, not less," McBride said. "The unintended consequences could be tighter credit and higher interest rates for everybody -- not just subprime borrowers."

Comerica Bank Chief Economist Dana Johnson said he fears other fallout from the plan. Besides driving out many subprime lenders, the move will prematurely patch the bursting real estate bubble in inflated markets such as California and Florida.

"Freezing the whole situation probably just delays those necessary adjustments," Johnson said.

The rate freeze also may just extend the uncertainty of investors who bought bonds and other instruments based on packages of subprime loans. Their concerns about just how many of the underlying loans will go bad roiled the international credit markets this summer and sent the stock market plummeting.

Fears that the loans that keep businesses and the economy running were drying up prompted the Federal Reserve to lower interest rates twice and infuse millions of dollars into capital markets to keep credit flowing.

Investors were facing a day of reckoning next summer, when they'd discover just how many loans would go bad and how big their losses would be. But a mortgage rate freeze means they could wait as long as another five years to get to the bottom line.

"What the credit market needs to sort out is, what is the value of these incredibly complex products and who's going to take the losses?" Johnson said. "This is not addressing that issue."

Also not addressed: The number of prime-rate borrowers who have adjustable-rate loans that could put their mortgage payments out of reach, too, as well as borrowers who have fallen behind but still want to make good before they lose their homes outright, says Harry Glanz, co-founder of Capital Mortgage Funding in Southfield.

"It's easy to help people who are current and have a great track record," Glanz said. "It couldn't hurt. But how many people are in that situation?"

RESIDENTIAL RECYCLING: Taylor program will put foreclosed HUD houses back on the market

December 2, 2007 Detroit Free Press

BY SUZETTE HACKNEY
FREE PRESS STAFF WRITER

The Downriver city of Taylor is getting into the real estate business.

On Wednesday, the city took possession of 11 houses previously owned by the federal government. The price tag: $1 each.

In the "Taylor Cares" program, 11 houses will be rehabilitated and then sold to low- to moderate-income individuals or families.

The federal Department of Housing and Urban Development's underused dollar program enables local governments to purchase for $1 homes that have been on the market for at least six months. Most of the HUD homes have been acquired through foreclosures.

"We wanted to combat blight, revitalize the neighborhoods and reduce the number of vacant homes in the city," said Jon Belanger, Taylor's community housing coordinator. "Our plan is to sell them at a low market rate and not hold on to them for very long. Our goal is to help people become proud homeowners."

Open to nonresidents

Anyone can apply to purchase the Taylor homes, although there are restrictions, including that one person in the family must have had a full-time job for at least two years. Being a current Taylor renter or homeowner is not required.

Last month, the city also applied to purchase eight more homes. The appraised value of the 19 homes: $1.6 million. The ultimate goal is for the city to take possession of all the estimated 70 empty HUD homes within its boundaries. The two- and three-bedroom houses are scattered throughout the city.

"It makes the community a better place to live, said Taylor resident Marilyn Staten, 53. "We need to have those houses filled up instead of sitting there for crime to happen. It's a great idea for people to be able to buy them at a reasonable rate. The way things are going in Michigan is really terrible right now. We have so many foreclosures, and people losing their homes. Anything that can help get us out of this situation will be helpful."

The first wave of homes will be refurbished and likely available for purchase by early spring. The Taylor Housing Commission cut the government a check for about $13,000 last week to cover closing costs and some back taxes. The city plans to sell the 19 houses for about $30,000 each, pocketing a profit of about $570,000. That money then will be put back into city coffers for community development and the continued rehab of HUD houses as they become available.

Putting locals to work

Local banks and real estate agents will be used to complete the transactions, Belanger said. City officials also want to use Taylor contractors, or those from the metro area, to refurbish the homes, he said.

"They all need work, some of them need more than others, but they're all livable," Belanger said. "If we come across some homes as we go that don't make sense to rehab, our plan is to demolish them and either create green space between existing homes, split the lot between neighbors or somebody can buy the lot and build a new home."

Of the 20,000 homes in Taylor, 900 are vacant, many because of foreclosures that have nearly crippled the local and national housing market.

Metro Detroit and Michigan continue to be among the leaders in the country in the number of foreclosures, according to figures released Thursday by RealtyTrac.

With 13,415 foreclosure filings reported in October, Michigan documented the nation's fourth-highest foreclosure filing total and the sixth-highest foreclosure rate -- one foreclosure filing for every 334 households. The Detroit area was ranked No. 5 in foreclosure filings among major U.S. cities, with one filing for every 131 households.

Belanger said the city also has partnered with the National Faith HomeBuyers, a Detroit-based nonprofit that offers potential homeowners credit score education, financial literacy, homeowner workshops, down payment assistance and tips on how to pay mortgages on time.

City officials also hope to institute another federal program that would allow low-income individuals living in Section 8 housing to apply their federal assistance rental payments toward owning a home.

"This is just a start," Belanger said. "This is our first attempt to revitalize some of our neighborhoods, and we're very excited about it."

Many Subprime Borrowers May Be Able to Refinance

December 3, 2007 WSJ
By RUTH SIMON

Many borrowers with subprime mortgages have reasonably good credit and may be able to refinance into a less costly mortgage by taking advantage of government programs, Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a speech this morning.

Pulling from research conducted by members of the bank's staff, Mr. Rosengren noted that 55% of subprime adjustable-rate mortgages, where the owner occupied the home, hadn't missed a mortgage payment in the past year. That translates to about 1.2 million borrowers.

"These subprime borrowers may meet the credit standards required for FHA [Federal Housing Administration] guarantees or for similar state programs, with potentially a significant savings," Mr. Rosengren said in his speech, delivered in Boston at a breakfast sponsored by the Massachusetts Institute for a New Commonwealth. In addition, half of borrowers nationally -- and 71% of those in New England -- had "reasonable credit scores" of above 620 when they took out their mortgage. (Read the full speech.)

FHA is a division of the U.S. Department of Housing and Urban Development that insures loans originated by banks and other companies. FHA was designed to provide insurance for first-time homebuyers and low- and middle-income borrowers, but the program became less popular as subprime and exotic mortgage products developed over the last decade. Mr. Rosengren suggested that lack of knowledge of these programs may have kept borrowers away.

Moreover, Mr. Rosengren said research by the Boston Fed shows that 20% of borrowers with subprime ARMS nationally -- and 26% of these borrowers in New England -- should be able to "relatively easily" refinance into a prime mortgage or a loan guarantee program. At the time they took out their original loan, these borrowers had credit scores above 620, at least 10% equity in their homes, provided full documentation of their income and assets and said they planned to live in the home.

The analysis by the Boston Fed looked at loans that were packaged into securities and sold to investors.

Mr. Rosengren's speech comes among increasing concern about borrowers who face higher monthly payments because the rate on their subprime adjustable-rate mortgage will rise -- or reset. As much as $362 billion in subprime home mortgages with adjustable interest rates are due to reset at a potentially higher rates in the coming year, according to Banc of America Securities. The fear is that many of these borrowers won't be able to afford these higher rates and will be unable to refinance because of tighter lending standards and falling home prices.

Government officials are pushing mortgage companies to freeze interest rates on certain subprime loans. Details of that plan still are under discussion. Mr. Rosengren declined to comment on the specifics of the administration's plan, noting that it hadn't been finalized. But in his speech, he urged lenders to extend the teaser rate "or refinance borrowers into fixed-rate loans wherever possible."

Mr. Rosengren also called on lenders to expand their efforts to refinance these subprime borrowers and to take a "fresh look" at the FHA program. "Banks may not have viewed this market as an engaging opportunity when mortgage brokers were aggressively going after the business, but banks may now find profitable lending opportunities in the current environment."

In addition, Mr. Rosengren said that it "probably makes some sense" for FHA to raise the maximum amount it will finance in certain high cost markets above the current $363,000 level for single-family homes and called on the agency to streamline its appraisal and approval process and beef up outreach to borrowers and lenders. He also suggested that state programs, which have traditionally focused on first-time home buyers, should increase their efforts to refinance borrowers with subprime loans.

In an interview, Mr. Rosengren urged borrowers to seek out lenders who offer FHA loans. "Part of the problem is that it is not that straightforward to find a lender that is an FHA lender," he said. "Borrowers do have to look around." In many cases, borrowers who received a subprime loan "may have been better off with an FHA product," where rates are often two percentage points or more below the rates on subprime loans. The FHA program provides for financing to borrowers who have as little as 3% equity and doesn't require a minimum credit score.

Many borrowers with subprime ARMs were paying relatively high mortgage rates even before their loan reset, Mr. Rosengren said. Nationally, the average rate on a so-called 2-28 loan, which carries a fixed-rate for two years and then resets annually, was 8%.

Article in October 2, 2007 Detroit Free Press

Kilpatrick steps up retail recruiting

Mayor cites report's findings that Detroit's quality of life is better than people think.

David Josar / The Detroit News

DETROIT -- Touting new statistics that claim the quality of life in Detroit is better than many believe, Mayor Kwame Kilpatrick on Monday said he's renewing his bid to lure retailers from large stores to small specialty shops to the city.

Also on Monday, Kilpatrick released an update on steps his administration has taken to bolster six neighborhoods as part of his Next Detroit Neighborhood Initiative. The improvements, which started in May, have included road resurfacing, more code enforcement and Detroit police blitzes to remove abandoned vehicles and crack down on prostitution.

The glowing statistics, contained in a report released by the nonprofit Social Compact, claim Detroit has 933,043 residents, nearly 62,000 more than 2006 Census estimates. The report also claimed each resident spends a third of all their retail dollars outside the city -- roughly $1.7 billion in buying power that new Detroit businesses could capture.

Social Compact officials said they based their findings on a data collection method that includes tax assessments, credit card purchases, building and renovation permits and utility bills. Private groups paid for the $150,000 study.

"Accurate market information is the first step to attracting retail and other investment in our neighborhoods," Kilpatrick said.

Still, the 933,043 tally is down from the 951,000 residents the U.S. Census estimated in 2000.

City development officials will take the report and use it to reconnect with a number of retailers they've been trying to convince to open shop in Detroit.

"We'll go back to the people we've been talking to and show them this data," said the city's chief economic officer, George Jackson.

Since Kilpatrick took office, he has been stymied by efforts to draw retail to the city. He regularly champions his success in convincing Home Depot to open a store at Seven Mile and Meyers, but there have been few other success stories.

In the six months, Farmer Jack has shuttered the last of its Detroit stores, but in one instance, the Kilpatrick administration was able to convince an independent grocer to move into the vacated store at Seven Mile and Livernois. The new owners promise to include a deli and bakery when they open.

The report concludes Detroiters not only have plenty of spending dollars, but they live closer together. Six times as many people per square mile live in Detroit than elsewhere in the region -- a retailers' dream, said John Talmage, CEO and president of the Washington D.C.-based Social Compact.

Social Compact has done similar reports for eight other communities including Oakland, Calif.; Cleveland; and Jacksonville, Fla.

"Whoever comes here first will do very well here," Talmage said.

He notes the success Starbucks had when it opened its first store in Harlem in 2002, which led to a rash of other new business.

To back up his claim, he noted that major grocery stores need to have roughly $355 in business per square foot of store space. The party stores that dot Detroit do $855 per square foot.

Social Compact will continue studying trends in Detroit and complete other reports that could boost development in the city, Talmage said.

While Irma Raskowicz, who operates a beauty parlor and supply shop on McNichols west of Woodward, likes the numbers the mayor quoted, she noted that running a business is not as easy as finding a place with lots of people who have money.

"Do the stats account for the high cost of insurance? Do they include the theft and the crime and finding good workers?" Raskowicz, 49, said. "I'd love to see more retail too but Detroit has problems that make it tough to operate here."

But Colin Hubbell, a developer of several loft condominium projects who lives in East English Village, said he hopes the report will bring the sort of retail that proliferates in the suburbs.

"This should make a difference," said Hubbell, who noted he and his neighbors are miffed that, despite their buying power, they have to drive to the suburbs to do much of their shopping.

Article in October 1, 2007 Detroit News

Report may boost Detroit's image

Social Compact survey hopes to use community data to attract new retail business to the city and improve life.

David Josar / The Detroit News

DETROIT -- Mayor Kwame Kilpatrick today will unveil the findings of a specially commissioned study from the nonprofit Social Compact that city leaders hope will boost retail development and improve the quality of life.

Social Compact, which is based in Washington, D.C., and began doing the studies in 1999, has spent the past six months crunching Detroit statistics that range from new building permits to utility bills as it uses its "Drill Down" approach to paint an economic picture of Detroit. The group concluded its work in the city last week.

Social Compact has done the studies in eight other cities and the results are invariably identical: population in the particular city is higher than U.S. Census estimates, crime is leveling off and the buying power of residents is more than suggested.

"People are going to be amazed at what was found," said Matt Allen, Kilpatrick's press secretary. "It's going to change some perceptions."

The group will send researchers to do more intense surveys over the next few months, Allen said.

The Detroit survey is the largest the group had conducted, although Social Compact has done segments of Chicago and New York City.

The mayor today also will deliver the first update on the NEXT Detroit Neighborhood Initiative, a strategy Kilpatrick's staff launched in May that will focus on improving six specific neighborhoods in areas ranging from police presence to improving housing stock.

The Social Compact report, which cost about $150,000, was paid for by the Kresge Foundation and the Community Foundation for Southeast Michigan, two of Kilpatrick's key partners for the Neighborhood Initiative.

"We need something that can get the city to a tipping point where you will have some retailers come in hopefully this might make some difference," said Rip Rapson, president of the Kresge Foundation.

City officials hope the report will boost the city's image and the data can be used to entice new businesses. In the eight other cities where the report has been completed, that goal has a spotty record.

A study in Harlem, N.Y., resulted in a few new ATM machines and two Fleet Bank branches; in Cleveland, Key Bank opened a branch in a blighted shopping center; and in Houston, a 750,000 square foot new mall was built; and in Chicago, it helped lure in a Home Depot store.

In Cincinnati, their study, which was released in June, pegged its population at 378,259 and not the 332,252 the U.S. Census estimated.

"We need a tool that more accurately shows who we are," said Cincinnati Mayor Mark Mallory, who is formally challenging the census figures.

In selling its reporting, Social Compact boasts on its Web site how it will make the data look rosier for whatever community hires it to do its report: "Poverty and deficiency data are replaced with business indicators of market strength. Outdated census and modeled data is enhanced with current economic and demographic information."

The group's managing director, Ryan Sullivan, said there is an "information gap" between the traditional types of data used to gauge a city's health and information potential entrepreneurs want who are making the business decision on where to locate a new store.

"Traditional data can tell you about single-parent families who get federal aid, but it can't tell you about something that resonates in the business community. We want to reframe the data in a way business people can relate to.

"We want to change the discussion away from focusing on challenges and negatives to looking at opportunities in the community," he said.

In Detroit they've been looking at the amount of predatory lending, the number of new housing starts -- a statistic where the city has been the leader in the state for several years -- and utility payments, which Sullivan gives a more accurate view of how many people are living in the area.

Researchers have been visiting the city monthly during the project, he said.

Both Allen and Mallory used "unique" to describe some of the findings in Detroit.

Neither Allen nor Mallory would comment on how the rash of foreclosures, which has affected thousands of households in Detroit, would factor into the findings.

Last October, the group released a 32-page report titled "Downtown Detroit In Focus: a Profile in Market Opportunity." The group found that the average downtown household income was $59,300, and 83 percent of residents in that area had at least a college education compared to a nationwide average of 26 percent.

Detroit economic leaders have been trying to use those numbers to draw retailers downtown, a stiff challenge as most retailers have scoffed at whether the number of downtown residents is enough to work in their business model.

Article in Aeptember 26, 2007 WSJ

What Happens in Detroit ...

Will Draw Conventioneers,
Or so MGM Mirage Hopes --
Despite Local Economic Woes

By TAMARA AUDI
September 26, 2007

DETROIT -- The 17th floor luxury corner suite of the MGM Grand Detroit, MGM Mirage's new casino hotel, features sleek decor in chocolate tones, a 15-inch plasma screen television embedded into the bathroom mirror and a panoramic view of a wounded city: deserted streets; an abandoned baseball stadium; a once-grand train station plainly rotting in the distance.

Much harder to see is why MGM Mirage would spend $800 million to build a one million-square-foot luxury hotel and casino smack in the middle of a region plagued by a continually struggling automotive industry and a collapsing economy.

The answer: Gambling companies have historically proven they can turn profits in sluggish economies like Atlantic City and the Gulf Coast -- and Detroit is no different. Since its opening here in 1999, the MGM Mirage's existing casino -- which will close as the other opens -- has made money. Even as the city's population dwindled and the state's unemployment rate climbed to 7.4%, the current MGM Grand's revenue rose to $489 million in 2006 from $366 million in 2001.

And the company hopes to draw additional revenue from another source: the conference-and-convention business.

For Las Vegas, conventions and conferences have become industry pillars, helping to fill casino hotels and restaurants midweek. Harrah's Entertainment Inc., for instance, saw its Vegas conference-and-convention business boom after a company initiative to woo conference planners with speedier and upgraded services.

MGM's Detroit property is an attempt to build on its conference business outside of Vegas, using its vast customer database to tap its clients closer to where they live, like the eastern seaboard, said MGM's president and chief operating officer, Jim Murren.

Still, in Detroit, some hurdles stand in MGM's way. As workers put finishing touches on the massive art deco-style complex -- set to open on Oct. 2 -- Michigan legislators continue to consider an Oct. 1 shut-down of all three of the city's casinos because of a $1.75 billion state budget deficit that could make it impossible to pay state employees, including gambling regulators. Without state regulators, city casinos cannot legally operate. Adding more possible reason for concern: Monday, General Motors workers walked off the job in a contract dispute with the auto maker.

Just days before the opening, however, MGM officials were oozing optimism, pointing out the wall-length fireplace in the hotel's art-filled hotel lounge, the bunches of fresh-cut lilies at the check-in desk and the no-expense-spared penthouse furnishings.

"You have to exceed expectations, and that's what we've wanted to do here," said MGM Grand Detroit's executive vice president Tony Brolick, sweeping his hand through a sleek Wolfgang Puck restaurant with blanched deer antlers suspended from a sky-high ceiling.

The new property is a striking departure from MGM Mirage's current Detroit property, a smoky gambling den filled with retirees parked on dingy furnishings, operating in a former Internal Revenue Service building. The existing casino, which doesn't maintain a hotel, will be closed two days before the new MGM Grand opens to allow officials time to transfer employees and operations to the new property.

The city of Detroit, for one, will be rooting for the MGM Grand. Casinos are a billion-dollar-a-year business in Detroit, steadily plowing tens of millions into state and city coffers. Casinos pay a 24% revenue tax, or about a million dollars a day, split evenly between the state and city.

But the city also stands to gain jobs, tourist dollars and a momentum with the addition of three 400-room hotels. Each of the city's three casinos agreed to build a hotel once Detroit worked out permanent location sites. After the hurdles were finally cleared, MGM began building its new property in 2005.

MotorCity Casino, owned locally by Marian Ilitch, 74 years old, who with her husband, Mike, owns the Detroit Red Wings hockey team and Little Caesar Enterprises Inc., is completing a $275 million expansion and hotel project. The hotel is expected to open this year. The Greektown Casino, owned by a tribe of Chippewa Indians in Michigan, will spend $200 million on its hotel-and-expansion project, scheduled to be complete in 2008.

Nearby Windsor, Ontario, a five-minute drive from Detroit, boasts a massive, brightly lit riverfront casino-hotel that markets heavily in the Detroit-area. More competition comes from American Indian casinos dotted across the state.

But the market at issue, as MGM Mirage sees it, includes a 300-mile radius of potential overnight clients across the region, stretching into Ohio and Illinois.

"When analysts come in they look at the backyard and they don't look at the full market," says Mr. Brolick.

A decision was made early on, MGM Mirage officials say, to introduce a new property that would far outdo anything in the area and establish MGM Mirage dominant in the region.

Well-known designers were hired; alabaster was ordered. The MGM property is built in the style of the "new" Vegas, which has sought to remake itself in a less-cheesy image, dropping theme-park development and loud color schemes in favor of cutting-edge architecture and subdued luxury to attract a higher income business and leisure crowd. A swank nightspot attached to a poker room has a bar made of solid ice, taking its cues from a bar in Vegas's Mandalay Bay hotel, also owned by MGM Mirage. The three main restaurants -- one by Wolfgang Puck and two by Michael Mina -- boast private features like dining rooms with chilled glass walls that double as wine racks.

MGM Mirage officials hope all the amenities catch the attention of conference planners on the East Coast and across the Midwest. They are marketing the MGM Grand Detroit's 30,000 square-feet of meeting space as an affordable alternative to pricier cities. They plan to allay concerns about limited activities in the city by selling the property as an all-inclusive resort.

But MGM and city officials also note that Detroit, despite its problems, is in something of a development boom, with new luxury hotels and condos going up in the city's downtown area, and recent success as host of the 2006 Super Bowl and World Series.

To look at all the casino expansion in Detroit "you'd never know Detroit was in a recession," said Leon Paesani, a card dealer and union steward at MGM Grand, where dealers belong to the UAW. "This is a perfect industry. They do well when times are good, and they do well when times are bad."

Article in September 14, 2007 Detroit News

Downtown Detroit businesses open, expand
Restaurants, bars, independent shops capture creative spirit

Greg Tasker / The Detroit News

DETROIT -- From the outside, the faded brick and graffiti-sprayed building on Gratiot Avenue across from Eastern Market stands as another ghostly reminder of Detroit's once-bustling commercial past.

But inside, the same team that put Corktown on the culinary map with Slows Bar BQ has been busy renovating the old Detroit Candy Co. building into four upscale lofts. Brothers Ryan and Phil Cooley are taking the same great pains in design and decor that they did with Slows, creating a clean, modern feel with interesting elements such as Brazilian cherry wood from a sustainable farm and handrails crafted by local metal workers.

"Detroit is filling up with interesting, creative young people -- not all of them want to live in a hovel. It's probably time to start giving Detroiters more credit." Ryan Cooley said.

The Cooleys are not alone in either their outlook or their efforts.

They're among a small number of business owners in or near downtown who continue to show great faith in the city by opening or expanding businesses, despite the dismal economy.

It's visible at places like Park Bar and Bucharest Grill in the emerging tavern district along Park Avenue. It can be seen in Midtown with the opening of the Bureau of Urban Living, a home-goods boutique, and the planned expansion of Avalon International Breads bakery. Then there's Mezzanine, a contemporary design store on Broadway, and Asian Village, a food and entertainment venue on the riverfront just east of the Renaissance Center.

"It's clear there is a market for creative, thoughtful and quality stores, restaurants and products in downtown," said Eric Larson, president and CEO of Larson Realty Group in Bloomfield Hills and chairman of the Detroit District Council of the Urban Land Institute. "And that really is driven by resurgence in urban living. It is a very telling time in the city's life when people are willing to take a risk on things that are less mainstream, less common and, in effect, more trendy. It's a very good sign."

Attention to details

For the Cooleys, the loft project was a natural to follow Slows, which opened in September 2005. In the case of Slows, the pair and their partner Dean St. Souver, a Corktown woodworker, rehabbed two 1880s buildings on Michigan Avenue into one. They created an open, contemporary eatery with exposed brick walls and tables and floors made of sturdy wood salvaged from the original buildings and others in the neighborhood.

It's a pattern the Cooleys and partner Pat Deegan are following with the 1,500-square-foot lofts. They've created the same modern aesthetic and interesting design elements, including maple kitchen cabinets, hand-poured concrete countertops, and custom light fixtures, made from recycled wood. They are wrapping up the two-year project this week.

"We could go into these places and update them with the bare necessities, and it would definitely be a lot easier and a lot cheaper," said Ryan Cooley, who moved to Detroit from Chicago three years ago to open his own real estate office. "But we're committed to creating something more interesting than a cookie-cutter space."

Bustling Park Avenue scene

With its circular bar and 17-foot high windows, the Park Bar is the newest of the classy establishments on Park Avenue. The street --just west of Woodward in the shadow of the Fox Theatre -- also is home to Centaur, Town Pump and Cliff Bells.

Owner Jerry Belanger and a team of workers spent 16 months renovating the 1920s building, long vacant and a reminder of the city's decay. To create a distinctive, contemporary look, Belanger tapped the talents of Motor City artisans and purchased materials from Detroit companies.

"For people coming down here from the suburbs, I wanted them to feel like they were in someone else's city," Belanger said. "I wanted them to feel like they were in Detroit."

Home goods store fills void

Looking to fill a major void in the downtown retail scene, Claire Nelson and Francis Grunow opened the Bureau of Urban Living on Canfield in Midtown.

"We both studied architecture, design and planning and we wanted to come back to see what we could do to make Detroit a better place," said Nelson, who met husband Francis when both were architecture students in New York.

The 600-square-foot homes good store evokes the ambiance of a general store, with shelves stocked with modern, affordable items -- everything from dinnerware and coffee mugs to towels and kitchen gadgets.

Christopher Arvanites, a downtown resident who works in real estate, is among the Bureau's regular customers.

"Boy, things have changed," said Arvanites, who has lived in the city for six years. "I used to ride my bike only for exercise but now I ride it to the bank and other places that benefit my everyday life. There's this notion that people who live in Detroit don't have access to everyday things. That's no longer true. There's a lot of activity now and I have more choices."

Independent stores thriving

Across town, the city's changing vibe convinced Joe Posch to relocate his home decor shop from Ann Arbor to the Merchant's Apparel Building in Harmonie Park. The store sells moderately priced and upscale furniture, lights and ceramics by designers such as Marcel Wanders and Jonathan Adler.

"City officials are pushing for chain stores and national retailers, but what I'm seeing is the opening of these little independent stores," Posch said. "These are individuals who live in the area and see the potential. These are stores you'd expect to see in thriving neighborhoods in Chicago, San Francisco or New York. But you're seeing them here."

Next door, the Motor City Brewing Co. will soon open a small kitchen to serve organic pizza, a nod to an expanding and discerning customer base.

"What is taking place with some of these new businesses are the personalities behind them," observed John Linardos, owner of Motor City. "These people are passionate about their buildings and what they're doing."

Ann Perrault, who along with her partner, Jackie Victor, opened the Avalon bakery on Willis Street a decade ago, has noticed the new wave of businesses.

"It's starting to come into our city and it feels good. I live down here because I don't like the consumerism, but it's nice to have choices," Perrault said. "What we all have in common is that we are independent businesses."

Phil Cooley, a former model who moved to Detroit because he was impressed by the city's rich history and strong people, believes it's more than that.

"I think there is a younger generation coming up with different ideas on urbanism and ideas of being in the city," he said. "It's exciting to see. There's a different perception of the city. We're building a sense of togetherness."

Article in September 12, 2007 Detroit Free Press

Southwest Detroit businesses will pay to bring in shoppers
Tax increase for improvements is first approved in state

September 12, 2007

By JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

In a first for Michigan, business property owners in southwest Detroit have approved the state’s first Business Improvement Zone, more commonly known as Business Improvement Districts.

In a BID, businesses approve a small tax increase to pay for such services as security, cleanup, marketing and parking in their district.

Kathy Wendler, president of the Southwest Detroit Business Association, said about 200 property owners controlling about 300 parcels will be included in the district. The owners voted over the past 30 days, and the BID passed with 67% of the vote, Wendler said.

The district covered includes West Vernor from Clark on the east to Woodmere on the west, and Springwells between Vernor and the I-75 service drive.

”It’s not rocket science, “ Wendler said. “Keep it clean and safe and comfortable and people shop there.”

The extra tax amounts to 2% on top of the normal business property tax bill.

BIDS are widely accepted elsewhere, but antitax advocates and other critics in Michigan have managed to stymie approval of BIDs here. Windsor has nine separate BID districts, and New York and Los Angeles have approved about 50 each.

Advocates of BIDS hope the approval in southwest Detroit will encourage the creation of BIDS elsewhere in the city.

“Everyone is very interested in how we did it, are we successful,” said Theresa Zajac, program director for the new district.

Article in September 14, 2007 Detroti Free Press

Region's economy gets cash infusion
$100 million to ease transition from autos

September 14, 2007

BY JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

The massive effort to turn around metro Detroit's ailing economy is getting a big boost.

Civic leaders announced Thursday the creation of a $100-million fund that will support metro Detroit's transition to an economy less dependent on auto manufacturing.

Known as the New Economy Initiative, the fund has drawn support from 10 foundations in varying amounts, including the Ford Foundation, W.K. Kellogg Foundation and the Kresge Foundation, each of which donated $25 million, and several others donating $1.5 million to $10 million each.

One of the few such locally targeted initiatives in the nation, the goal will be to support metro Detroit's shift to a knowledge-based economy that relies more on entrepreneurial activity than on manufacturing.

"We've got to help turn this economy around," Mariam Noland, president of the Community Foundation for Southeast Michigan and one of the leaders of the effort, said Thursday.

"Philanthropy all together can't make up the losses and the needs that we have here," she added. "We can't replace the public dollars. What we can try to do is help move this economy forward."

Steve Hamp, brother-in-law and former chief of staff to Ford Motor Co. Chairman Bill Ford, will chair the new effort.

The new fund is the latest of several efforts by civic and corporate leaders to help in metro Detroit's revival. Others include the One D initiative headed by the Detroit Regional Chamber and the Road to Renaissance headed by the corporate leadership group Detroit Renaissance.

All these efforts come in reaction to the serious long-term challenges facing the regional economy. After depending on the major automotive companies for jobs and civic leadership for nearly 100 years, the local economy now faces the reality of a permanently smaller automotive base with less money and clout.

"Part of what philanthropy can do is provide some leadership," Noland said. "There are good things happening, good plans in place. ... Those and other activities need money. Money's tight. We can bring some flexible dollars, which will help those move faster."

Among other things, the initiative would support workforce training, individual entrepreneurial start-up firms and programs to translate promising new technologies into profitable companies. Hamp said more specific goals and programs would be announced in coming months.

An 18-member governing board will oversee the new organization. Ten members will come from the foundations contributing money. Among the other eight will be Hamp, businessman Jim Nicholson and Ahmad Chebbani, former chairman of the American Arab Chamber of Commerce.

Article in September 12, 2007 Detroit Free Press

Suburban firms to move in downtown
Compuware, Ilitch welcome neighbors to Campus Martius

September 12, 2007

BY TOM WALSH
FREE PRESS COLUMNIST

In a boost for downtown Detroit, two growing suburb-based companies are planning to move their headquarters and more than 100 employees each into the new 10-story One Kennedy Square office building at Campus Martius.

Marketing Associates LLC of Bloomfield Township, whose majority owner is Edsel Ford II, and Health Plan of Michigan, the state's third-largest Medicaid HMO, each will occupy two floors of the lime green tinted-glass building. By the end of this year when the moves are expected to be complete, the building's office space will be fully leased.

A news briefing is planned for Thursday to announce details of the Marketing Associates move, which is expected to take place in the last week of October. Mayor Kwame Kilpatrick, Edsel Ford and Mark Petroff, president and CEO of the 140-person firm, are expected to attend.

Dr. David Cotton, president and CEO of Health Plan of Michigan, told me Tuesday that he expects to move his 110 employees from Southfield to their Detroit offices by Dec. 20.

Two ground-floor retail spots, on either side of the building's entrance, have yet to be leased, although developers are said to be close to a deal with a high-end restaurant for one.

When construction began in April 2005 on the office tower across Campus Martius Park from the Compuware Corp. headquarters, automotive supplier Visteon Corp. was slated to be the building's primary tenant. It had planned to put its contract information technology workers there. But as Visteon's financial problems mounted, the firm decided to sublet its space in the building.

Accounting and consulting firm Ernst & Young now occupies the top three floors, while construction firm Walbridge Aldinger moved its headquarters staff into the second and third floors in July. Marketing Associates will occupy floors four and five, and Health Plan of Michigan will move into the sixth and seventh floors.

Petroff is full of praise for his soon-to-be neighbors, especially Compuware CEO Peter Karmanos Jr. and Christopher Ilitch, president and CEO of Ilitch Holdings, the umbrella firm for Little Caesars Pizza, the Fox Theatre, and Detroit Tigers and Detroit Red Wings sports teams owned by the Ilitch family.

Compuware has offered Marketing Associates workers access to the fitness center and child care facilities in Compuware's building. And on July 20, Petroff said, Chris Ilitch provided 300 tickets to a Tigers game for the company's workers and family members. Compuware hosted a reception for them before the game.

When Petroff first told his employees about the decision to move to Detroit, he said "it went over like a lead balloon among some of our people, especially the ones with long commutes from northern Oakland County." But the outreach and support from other downtown businesses "created a real shift in attitude," he said.

"It's a real community taking shape down here. We'll be part of the new creative corridor," said Petroff, a U.S. Naval Academy graduate who was a nuclear submarine officer before he earned his MBA from the University of Michigan.

Marketing Associates, until recently, was primarily focused on helping automotive companies with direct-mail and other traditional marketing campaigns. But after an investor group led by Edsel Ford bought the company out of bankruptcy from Lason Inc., the firm expanded into a range of interactive marketing services, ranging from e-mail blasts to archiving digital video assets and helping manage online contests and rewards programs.

Petroff, who joined the firm in early 2006, said he expects the staff to grow to 225 people by 2010.

Cotton, former chief of obstetrics and gynecology at the Detroit Medical Center and Wayne State University, formed Health Plan of Michigan by buying and merging several managed care plans in the late 1990s.

The company has been growing at a rate of 31% annually since 2000, he said.

He, too, was full of praise for Compuware's good-neighbor efforts. "They took time to walk our people all through their building and answer questions about working downtown."

Petroff said he looked at other locations in Southfield and Troy for Marketing Associates but decided that moving downtown fit the rapidly changing nature of his business.

Even though office space was plentiful and lease rates attractive in the suburbs, Petroff said the new office tower's location in a Renaissance Zone provided a tax abatement that helped offset the costs of parking and the City of Detroit income tax. Marketing Associates is paying for parking and giving employees a raise to cover the tax bite, he said.

"One Kennedy Square is now filled to capacity, which is further proof that the business community has confidence in our ongoing efforts," Kilpatrick said of the firms.

Detroit development officials, with help from Karmanos, Ilitch and downtown business leaders, are still trying to persuade Livonia-based Quicken Loans and Rock Financial, along with other companies, to move into the city.

Article in September 12, 2007 Detroit Free Press

Detroit-area job market may grow
Quarter of firms to hire employees

September 12, 2007

BY MARGARITA BAUZA
FREE PRESS BUSINESS WRITER

Two surveys released on Tuesday suggest that the job market in metro Detroit is likely to improve in the last three months of the year.

A Manpower Inc. survey showed a favorable job market is expected for Wayne County during the fourth quarter. From October to December, 25% of the companies interviewed plan to hire more employees, while 13% of the firms expect to cut payrolls.

Another 42% expect to maintain staff levels and 20% are uncertain of their hiring plans.

Employer confidence about hiring is stronger than a year ago, said Manpower spokeswoman Laura Reed.

For the fourth quarter of 2006, 17% of companies surveyed planned to boost staff levels and 19% expected to reduce payrolls.

Also, the Robert Half Technology IT Hiring Index and Skills Report showed that 14% of information technology firms in the Detroit area expected to hire IT professionals in the fourth quarter.

"It's been cyclical in IT," said Christine Lucy, senior regional vice president of Robert Half International. "There's been attrition of talent. When an economic struggle appears, people go elsewhere for opportunities.

"But there is a continuing surge for new technologies, and it's impossible for one person to be an expert for all types of technologies."

The results are based on interviews with 200 information technology officers from a random sample of companies in the Detroit area with 100 or more employees. The survey also queried 1,400 executives nationally.

The surveys were conducted by an independent research firm and developed by Robert Half Technology, a provider of IT professionals on a project and full-time basis.

Robert Half Technology has been tracking IT hiring activity in the United States since 1995.

Because competition for candidates has intensified, organizations are accelerating hiring, increasing salaries and offering work-life balance benefits, said Katherine Spencer Lee, executive director of Robert Half Technology.

Article in September 11, 2007 WSJ

Auto Makers Pile On Buyer Incentives

Many Are Offering Generous Rebates and Below-Market Rates
To Clear Crowded Lots; 2.9% Financing on a Honda Odyssey

By JONATHAN WELSH
September 11, 2007

The home-mortgage mess is hitting the auto business, as interest rates on car loans creep upward and many people find it hard to qualify for credit to buy a new vehicle. But for consumers with good credit, it's deal time.

Auto dealers are eager to clear out a growing number of leftovers as 2008 models arrive. Some have more unsold current-year models than usual in stock, reflecting an industrywide sales picture that worsened through the year. Total U.S. auto sales could fall below 16 million vehicles this year, according to analysts -- the lowest in a decade. To clear up the glut, some car makers -- especially the Big Three U.S. companies -- are using perks like rebates and low financing rates to attract interest.

Buyers can get $500 cash back on Ford Motor Co.'s new-for-2007 Lincoln MKX, and Chrysler LLC is offering a $4,500 rebate on its 2007 minivans. Even the notoriously incentive-stingy Honda Motor Co. is offering below-market 2.9% financing on its popular Odyssey minivan. All told, the percentage of transactions involving rebates grew to 49% this summer from 42% a year ago, according to Power Information Network, a unit of researcher J.D. Power & Associates. In certain cases, buyers don't even have to settle for the outgoing model: Some 2008 models also carry surprising incentives. Chrysler's Jeep Commander, for example, offers a $3,000 rebate.

Difficulties in the subprime-mortgage business and the broader decline of home prices in many markets have hurt other parts of the economy, but car makers, dealers and others in the auto industry are still assessing their effect. The housing market has a big impact on consumers' ability to afford a new vehicle, and many are buying less-expensive cars with fewer luxury features or putting off purchases altogether.

The result has contributed to the retail auto sales slowdown. The National Automobile Dealers Association had predicted earlier this year that 2007 sales of cars and light trucks in the U.S. would total about 16.5 million, roughly the same as last year. Now the trade group says sales could fall as low as 16.1 million.

At the same time, 24% of auto financing and leasing transactions in July and August had interest rates lower than 5%, compared with 33% in the year-earlier period, according to J.D. Power. In August, the average rate was 7.3%. Fuel prices also remain high, and a weak dollar continues to make certain European models expensive.

The National Automobile Finance Association, a trade group that represents subprime lenders, says the mortgage crisis and changes to federal law that make it more difficult for consumers to file for bankruptcy protection have driven up the number of car-loan delinquencies. The group says nearly 12% of subprime vehicle loans reported by its members were delinquent last year, up from 6.5% a year earlier.

Savvy consumers have known for years that autumn is the best time to shop for a car. The pending flood of new models in October and November drives dealers to more aggressively market vehicles from the outgoing model year in the fall.

In the past 20 years or so, however, manufacturers have increasingly sought to set their new cars apart by bringing them to market at other times of the year. The practice has blurred the lines somewhat between this year's and next year's models. Manufacturers favor the approach because their vehicles tend to get more attention from consumers who aren't distracted by the regular introduction of several competing models. For dealers, it's a way to bring people into their showrooms during what would otherwise be slow periods.

British off-road vehicle maker Land Rover, a unit of Ford, rolled out its LR2 compact luxury SUV in April as a 2008 model. The early introduction placed it ahead of similar models expected from rivals. The car maker's finance arm, Land Rover Capital Group, offers a 3.9% finance rate—on the low side for a new model. But consumers can often find attractive rates through banks and credit unions, so a car company's so-called captive finance businesses often use lower rates as a way to draw more customers who would otherwise arrange loans elsewhere.

Christopher Marchand, Land Rover's vice president of retail operations, says the 3.9% finance rate on the LR2 is "middle of the road" when compared with what buyers might find at a bank. Still, consumers who have watched finance rates increase lately are likely to find the rates attractive, says Paul Taylor, chief economist for the National Automobile Dealers Association.

"In an increasingly more difficult credit environment, a range of 3.9% to 7.9% is looking pretty good," Mr. Taylor says.

The well-reviewed Kia Sedona minivan, a product of Hyundai Motor Co., is offering buyers $3,000 cash back on 2007 models. General Motors Corp. is dangling a huge rebate -- as much as $7,500 -- on its high-end Cadillac XLR, which lists for $78,335, and is offering 5.9% financing on the just-released 2008 Buick Enclave.

Chrysler's Sebring, a midsize sedan that competes with top-selling models like Toyota Motor Corp.'s Camry and Honda's Accord, was redesigned about a year ago and is now available with 0% financing or a $1,500 rebate. Such deals are often advertised and relatively easy to find when researching cars on the Internet. However, there are other incentives that manufacturers dole out locally for dealers to use at their discretion.

Toyota rarely offers incentives on its best-selling Camry sedan or most of its other models, but a Toyota spokesman says the company does use so-called dealer incentives "for tactical purposes," or on a case-by-case basis to attract customers.

And they do attract customers, even to vehicles that might seem unappealing. Though sales of gas-guzzling large pickup trucks like the Ford F-150 and Dodge Ram are down 2.2% for the year, Mr. Taylor says, there was an upswing of 9.1% in August sales thanks to "vigorous incentive competition" among makers like GM, Ford and Toyota that included rebates in some cases of several thousand dollars.