Back From the Brink: How Ypsilanti is Surviving the Great Recession

By | February 29, 2012

 

Ypsilanti is no stranger to hard times. Since the 1980s, this post-industrial town has been slowly bleeding, wrapping its wounds and refusing to die. Now the housing crisis and the Great Recession are threatening to take what’s left. But don’t count Ypsi out just yet.

It’s five after five on a Tuesday afternoon and Ypsilanti Mayor Paul Schreiber is just getting to his mail. The stack is a good eight inches high, and even though he’s already five minutes late for our interview and I’m sitting five feet away from him waiting for our meeting, he goes ahead and opens every envelope one by one, assessing each one’s importance while doling out orders to the City Secretary. Finally, at ten past five, he turns to me and, with a smile, says: “Welcome to the Castle.”

“The Castle” is Ypsilanti’s 135-year-old bank-turned-city-hall—a brick and stone fortress that’s a lot prettier on the outside than the inside. Inside, it’s drab, utilitarian and probably hasn’t seen a renovation since the ‘80s. Schreiber leads me up a stairwell and down a hallway, introducing me to various staffers doing various things along the way, before sitting me down in his office and handing me some water in a little Styrofoam cup. There’s nothing sadder than a cold beverage in a Styrofoam cup. But Ypsi City Hall doesn’t care so much for glitz—this place runs on spartan efficiency.

“My favorite example is that the assistant city manager is also the director of human resources, the director of the building department, and the director of the planning department,” Schreiber says, laughing. “‘Fat’ in city hall is not something I hear people complaining about anymore.”

It’s not that everybody here wants to be wearing so many hats. Like the collapse of Ypsilanti’s manufacturing base in the 1970s and ‘80s, this is an economic reality that’s been thrust upon them. In the past decade, Ypsilanti has cut about a quarter of its staff—including police officers, firefighters, and its entire Parks and Recreation Department—in an effort to try and make up for sinking revenues that have been slowly bleeding the city dry. Most recently, as is the case in many places across America, it’s collapsing property values that are at the core of Ypsi’s problems. A house that sold in the city’s historic Depot Town district for $150,000 before the Great Recession isn’t moving for less than half that today. And lower home values mean less property taxes for the city, and less money to pay for the services that cities provide.

Ypsilanti Mayor Paul Schreiber is a busy guy. But so is everyone at Ypsi’s City Hall. After a decade of cuts, the city has become the model for lean government.

In this sense, Ypsilanti’s story is the story of thousands of American cities that banked on boom-time real estate values to make the books work. But Ypsilanti also doubled down on its bet that the good times would last. In 2001, the city embarked on a plan to remake a 38-acre parcel of its industrial past into a thriving residential and commercial district along Water Street, just east of downtown. Teaming up with an Ann Arbor developer, the city planned to transform old, empty factories, warehouses and acres of contaminated land into a New Urbanist dream of retail space and loft apartments that would remake Ypsi’s industrial image and launch the next chapter of its multi-chapter comeback story. Buying up all the land, tearing down the buildings and cleaning up the property came at a price, of course, and so to pay for it all, Ypsilanti borrowed $15 million with the idea that taxes from new businesses making a home on Water Street would pay for the bond. It all sounded good on paper. But then in November 2006, during the first month of Paul Schreiber’s first term as mayor, it all started to unravel: He got word the Water Street developer was backing out.

“We found out that the developer was going to reduce their exposure in Michigan because they could see—back in 2006—that the economy was starting to shrink, “ Schreiber says. “That left us holding the bag.”

A bad situation only got worse, then, when that developer’s premonition of an imploding U.S. economy became a reality in September 2008. Ypsi home values started collapsing and visions of Water Street lofts were replaced with predictions of multi-million-dollar deficits that could easily deal the final death-blow to a town that had been on chronically tenuous ground since the 1980s. Since 2008, the picture has only gotten worse, and in an effort to avoid drastic cuts to its already lean fire and police departments, and stave off an impending budget disaster—the kind which has ended in state takeovers by emergency financial managers in Pontiac, Benton Harbor and Flint—Schreiber and the city council now are proposing that Ypsi residents buckle down and pay their way out. As early as this spring, the city’s voters—whose property taxes are already among the highest in the state—will likely be asked to approve a city income tax and a special debt millage that would pay for the Water Street debacle, and thus begin a slow climb back from the brink.

But don’t cry for Ypsi just yet. While the facts are grim, and grimmer still in places like Detroit—where the city’s been borrowing money and playing the stock market to pay bills—Ypsilanti has one rosy fact on its side. Like a little kid who squirrels away every $10 bill from every birthday card he ever got, Ypsilanti has been quietly saving for decades. Look at its books today and the city’s actually sitting on $9 million in cash.

“I don’t know any other city where you have millions of dollars in reserves and yet the mayor is talking about bankruptcy,” Schreiber says. “We’re looking way far ahead.”

So while Detroit may go bankrupt by April—a fact that Mayor Dave Bing only let residents know in November—Ypsilanti isn’t projecting any red ink until sometime in 2014. In a bold move, and one that perhaps runs counter to many Americans’ savings-light, credit-heavy spending habits, Schreiber is now proposing that Ypsi residents take a seemingly absurd action in this era of short-sighted planning: raise taxes on themselves to help ward off a financial crisis that—even by dire estimates—still might be several years down the road. But that’s not the really shocking part. The shocking part is that Ypsi residents seem ready to do it.

The following Tuesday, I’m back at the “The Castle” for the weekly city council meeting, ready for all hell to break loose. Paul Schreiber and council members are set to put the wheels in motion for a May vote on an income tax and debt retirement bond—the new taxes that could save the city. In the lobby, just outside of council chambers, a full house is picking up handouts that show the numbers behind Schreiber’s supposed doom-and-gloom scenario. But the spreadsheet is too confusing to even know if anyone should be scared.

For more than an hour, that guy who’s the assistant city manager/director of human resources/director of the building department/director of the planning department stands at the podium, explaining every number line by line, as well as budget intricacies like the difference between “real property tax” and “personal property tax.” Next to me, my girlfriend is already regretting she came. But the 50 or so Ypsi residents at the meeting all have their eyes glued to the far wall where an overhead projector is making the already big problems on that ledger sheet look even bigger. The room is way too calm.

More presentations follow, and the people just keep listening. No one from the crowd is shouting out of order about how they don’t want their taxes raised. In fact, a good two hours in, nobody from the public has said anything. Even more shocking, no one’s left. And then at about nine o’clock, it’s finally time for public comment—the opportunity the crowd’s been waiting for to set the room ablaze over these new taxes.

But the firestorm never happens. One by one, a dozen or so Ypsi residents make their way to the podium to give their support to the new proposals. The first resident to speak, a 30-something who owns a home on the city’s south side, is only concerned with the fact that both proposals being on the same May ballot might jeopardize the passage of both. A soft-spoken woman follows him—not to raise hell—but to actually thank the commission for coming up with this plan and to pledge that she’ll talk to all her neighbors about it. A diminutive older man with a soft voice encourages Ypsi residents to “suck it up, and do what’s right.” In fact, out of everyone to speak, only one resident—a newcomer—speaks in opposition to any of the proposals.

It’s worth mentioning that just five years ago, before everything went to hell, Ypsilanti residents shot down an almost identical income tax proposal. The problem then was not so much shrinking revenues as rising costs. But those were the good old days when Ypsi staffers weren’t doing three jobs. When the public could count on eight more police officers and one more firefighter. When luxuries like a Parks and Recreation Department weren’t such distant memories. Times have changed. In fact, four of the city council’s current members opposed the income tax five years ago—one of them even led that anti-income tax fight. But today they all think it’s necessary.

“I don’t see as much emotional bile this time,” Schreiber says. “And I think it’s because it’s happening all over Michigan and all over the country. There are cities that are having to cut. People see the cuts here too and understand it.”

Even the symbol of Ypsi’s boom-time dreams gone wrong—the Water Street project—is looking less desperate these days. Thanks to a recent grant, all the old factories and warehouses have been demolished and the soil has been cleaned up. It’s now ready for development, should the economy ever start to pick up. To jump-start the process, the city is considering giving Washtenaw County part of the parcel for a new recreation center. As a public entity, it won’t be bringing in any tax revenue, but for Schreiber, it’s an anchor development that could set the tone for how they want to remake the area. In contrast, the last real stab at landing a business on Water Street was a year or two ago when Burger King wanted to move in. Holding out for something better and more long-lasting, City Council rejected that plan unanimously.

Of course, the public’s early lovefest over the new tax proposals may not translate into the passage of either or both come May. The voters as a whole will still ultimately have to decide whether they’ve got the money—and will—to invest in yet another Ypsi comeback story. But Schreiber thinks the mindset may have fundamentally changed here—and maybe everywhere—since the Great Recession.

“It’s not just Ypsilanti. The problems are all over,” Schreiber says. “People here understand we’re not alone.”

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Lou Blouin is co-founder of Found Michigan.

 

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10 Comments

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Tom Steinkellner on March 4, 2012 at 2:32 pm.

I fully support and encourage others to support this measure. The economy is coming back and Ypsilanti has attracted many new concerned citizens. I personally interact with these people daily. We came from OAK PARK Illinois about 15 years ago and see many steps being taken to turn Ypsilanti around…the most important is attracting positive people willing to invest in the community.

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Greg on March 4, 2012 at 7:48 pm.

“In fact, out of everyone to speak, only one resident—a newcomer—speaks in opposition to any of the proposals.” Those crazy newcomers…luckily, if the tax proposals pass, there won’t be any more of those to have to deal with.

Attending one meeting and seeing 50 out of the 22k residents is far from a quality sample to base an opinion on whether it will pass or not. And it seem illogical to romanticize the downsizing of the city government and people having to wear multiple hats. Remember the saying about multi-tasking, instead of doing one job well, you are doing multiple ones poorly.

I want to support Ypsi and I love the old downtown, small business feel of the town. But a community that turns down businesses that want to move to Water St. (BK), no matter if they are a chain or not, is only going to continue to economic nightmare the city is facing. And then, to add salt to the wound, they give away part of the land to a recreation facility? So now, not only do we not have any businesses on the land, as well as the precedent set that the city will turn down chain businesses that it doesn’t like, we now have some of that land locked up in perpetuity without any tax generation? How is that a logical way to run a city?

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James Andrews on March 5, 2012 at 2:26 pm.

The income tax will be the biggest mistake we will ever make in this city. (yes bigger than the Water Street). If the water street was located in any other city around us, Ann Arbor, Saline, Canton etc. it would have been no problem. New people do not want to come to live here. They prefer areas around us where the schools are better, safer and the taxes are lower. Let’s not kid ourselves! An income tax will drive all the decent people left in this city out.
Employers will not find employees because they will drive a block up to work in the township. Businesses will be lost when good people leave this city. Try to police this city then.. We will become more of the hub of the low income and the goverment supported housing.
Eastern Michigan University will not be able to atract talented professors to work here, let alone live in Ypsilanti.
It is a shame that we are even talking about a city income tax at times when people are loosing their homes and can not find work. We have tons of space available for manufacturers to move in. They are not coming in with all the tax breaks and the $5 a square foot lease. They are going to the neighborhood cities for $25+ . Do you know why?
It doesnt make business sense to them to be here. Imagine if they and their employees have to pay income tax….
NO INCOME TAX. WE HAD ENOUGH!

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Michelle on March 6, 2012 at 4:10 pm.

“But a community that turns down businesses that want to move to Water St. (BK)”

-And how, on what planet wold another burger king in Ypsi do us any good in the long run? Because it provides such great jobs for our residents? Because it will put back into the community and help us to become a more healthy and sustainable city?
I think the majority of the residents in Ypsilanti have bigger better plans that won’t give us a heart attack by age 30.

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Greg on March 6, 2012 at 5:03 pm.

What company is swooping in to buy the entire parcel, in line with how Ypsilantians want it to be run? Its been almost a decade and that company has yet to surface. So you seem to propose the city sits on the land, passes the debt onto you in the form of a property tax increase, and you just wait idley by until this unnamed company comes in and saves the day?

“And how, on what planet wold another burger king in Ypsi do us any good in the long run? Because it provides such great jobs for our residents? Because it will put back into the community and help us to become a more healthy and sustainable city? I think the majority of the residents in Ypsilanti have bigger better plans that won’t give us a heart attack by age 30.”

What are those plans? People keep saying that there are plans, but what are they? No one has them outside of waiting for some company to swoop in and save the day. Sure, no one wants another fast food grease pit, but no one else wants that land (well outside of the county). So where is this magical company you seek? Costco (one of the top companies in the US to work for)? Nope, they’re moving into Pittsfield and we didn’t even try to get them. Whole Foods? We already have 2 in the area, I doubt they would put one here?

To be honest, if they are going to shoot down the BK idea and there is no one beating down the doors to buy a large parcel of land next to a community rec center (if it gets built) in an area that has Detroit-like real estate prices, then they need to put the city’s, and in return yours, money where their words are. Sell the land to Ypsilanti businesses at a massive discount. Only allow local businesses to move in their and create an extension of downtown (almost like a Kerrytown). Add in a food truck area like Marks Carts in A2 or small restaurants, small stores with local goods, a dedicated farmers market area, almost like an outdoor mall for only local businesses. There are state monies to clean up the river, which could be turned into a “river walk” area. There is potential if someone thinks outside of the box to solve it instead of just waiting…..and it might also bring up the areas around it.

You will still have a large extra tax burden put on the people, but you will get the local businesses you want. Maybe you can lure the Ypsi entrepreneurs out of Ann Arbor and the townships and back to the city since they will be the only ones willing to put up with the increased tax rates.

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Anonymous on March 6, 2012 at 4:56 pm.

The income tax is a great idea. Tenured professors are captive to this. They aren’t going to quit a good job just to not pay the tax. And I doubt that in these desperate times that anyone would turn down a job at EMU because of it. However, it makes no sense to charge Ypsi residents a HIGHER income tax rate (1.0 vs 0.5). You are essentially penalizing those who work in Ypsi for living there, when you should be incentivizing it if you want to increase the tax base. EMU should chip in on this, too, with some kind of small bonus for workers who chose to locate in Ypsi.

I don’t think Ypsi should really be given a pat on the back for having so much in reserves. From what I have heard, Ypsi residents are charged a relatively high rate in property taxes, services keep getting cut, and the reserve is just to pay back the Water Street bond holders.

Now its being painted as good news that voters will have to cover less of this:

http://www.annarbor.com/news/ypsilanti/ypsilanti-city-council-reduces-amount-of-taxes-it-will-ask-voters-to-approve/

The idea behind Water Street was visionary, but it was a gamble that didn’t pay off. It is unfortunate that Ypsi residents are largely the ones holding the bag.

At least they are building a new Rec Center there. I think its something positive for the community that COULD attract development. Anyway, its better than nothing:

http://www.annarbor.com/news/ypsilanti/plans-for-a-proposed-water-street-rec-center-take-a-step-forward/

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Michelle on March 7, 2012 at 3:18 am.

If you are involved in the Ypsilanti community, then you are already noticing our local and healthy approach to moving forward.
Absolute negativity certainly isn’t going to get us anywhere.
Local non profit organizations and small collectives are making huge strides and it is in those people with those missions that we will find our way forward, not by buying into the corporations that eat a town whole and then leave it in the dust.
That all being said, the offset in housing costs, etc…. manages to keep us afloat with young new people, who manage to keep coming to the city and loving it.

“You will still have a large extra tax burden put on the people, but you will get the local businesses you want. Maybe you can lure the Ypsi entrepreneurs out of Ann Arbor and the townships and back to the city since they will be the only ones willing to put up with the increased tax rates.”

What makes you so sure that this is a fact not just your personal opinion?

:)

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Greg on March 7, 2012 at 2:58 pm.

My main point, and sorry for the jab about the tofu (steak sounds good), is that it seems that the city defaults to taxation. There seem to have been weak attempts to sell the land (check out the city website and the couple year old pics…not the way to sell the land), but it does not seem to be a top priority. I just want someone to come in and think outside of the box, to not default to taxation and fees (stormwater levy should follow the tax increases), and actually try to kickstart the city.

These tax increases are going to stifle the lesser income home owners in the city and, if it doesn’t force them to want to move, it may just force them out of their homes. An extra grand in income and property taxes to someone on a budget can be pretty hard to overcome.

It should be pretty interesting to watch and enjoy your steak….

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Michelle on March 7, 2012 at 3:17 pm.

Having read thru all of the proposals and looking at what is happening at other cities, I am having a hard time thinking of a grand new scheme to pull us out myself. Realistically I know it is just another huge financial burden on myself as well as many others, quite unfortunate. :(
I just don’t think a “quick fix” will help us in the long run, I see it biting us in the rear quite quickly with no real forward movement.
If someone came up with a better plan then I would happily support it!
mmmmmmmmm A-1……

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