Moody’s: Boost non-downtown tax base
Detroit — While downtown development is fueling Detroit’s recovery, the momentum must continue by strengthening the tax base in other parts of the city, Moody’s Investors Service said in a report released this week.
The rating agency attributes downtown Detroit’s surge in employment and tax revenue to the arrival of affluent residents and large-scale developments. Since 2014, Detroit’s rating has gone from B3, to Ba3 stable, which is considered a stable outlook.
“The trends, coupled with savings achieved through bankruptcy, have led to marked improvement in the Motor City’s financial position and credit quality,” Moody’s wrote in its 12-page report.
The rating agency’s affirmation of the city’s outlook was released in advance of the city of Detroit’s issuance of about $115 million in general obligation debt by the end of the year.
John Hill, chief financial officer for the city, said he agrees with Moody’s assessment, noting that it’s about emphasizing the movement that the city has made.
“It’s a work in progress,” he said. “The city is coming back from a very hard bankruptcy, and everyone is actually surprised that we’re as far along as we are in getting out of oversight and making improvements in our credit rating that we have over the years.”
The core downtown has seen a positive trend in terms of population growth with the addition of more than 1,000 residents since 2010, according to Moody’s. The greater downtown area has seen a 28 percent increase, about 9,000 residents, during that time.
Moody’s notes the “thriving downtown” makes up only seven of Detroit’s 143 square miles. The trend in the downtown area is not stemming the city’s overall population decline as the greater downtown area’s 41,000 residents account for only 6 percent
of the city’s population of 673,104.
The report predicts that due to numerous businesses relocating to the city, growth downtown will likely to continue fueling rising income tax collections if there isn’t any wider state or national economic downturn.
Noted in the report are the city’s two most prominent redevelopment projects, Ford Motor Co.’s $740 million plan to redevelop the Michigan Central Depot and several nearby properties in Corktown and Bedrock’s $1 billion development on the former site of Hudson’s store in downtown.
The report lists ways that the city has expanded development including: the Strategic Neighborhoods Fund, service improvements, removing blight and providing economic development and business incentives.
Hill said he believes the Strategic Neighborhoods Fund will “bear a significant amount of fruit.”
Through the fund city will invest more than $100 million, from a combination of financing through city, state and philanthropic arms, into 10 neighborhoods to improve redevelop parks, strengthen commercial corridors and rehabilitate housing.
“The city is moving forward very well and making its own investment, but I think the larger community, both the business community and the philanthropic community, is making huge investments in the future of the city that impact neighborhoods as well,” he said.
Moody’s considers one hindrance to the city’s revitalization the Detroit Public School Community District and its inability to address its capital needs. The district received a $617 million state aid package in 2016. The district is dealing with elevated lead and copper levels in drinking water in buildings and has no path to address significant capital needs, the report said. In June, the school district released a report that showed it would cost $500 million to repair its buildings.
“Absent state support, or sizable philanthropic donations, the deteriorating facilities could become an increasing drag on the city’s revitalization efforts,” the report said.
Because the school district is a separate legal entity, there really isn’t any action the city can take, Hill said.
“What we have been able to do in the past, the city has taken vacant school buildings and helped to remove them as blighted areas,” he said. “That’s helped the school system to not have to maintain some of those vacant properties. So the city has been able to help.”
Noted in the report are the city’s two most prominent redevelopment projects, the Michigan Central Depot and the former site of Hudson’s.