Bloomberg News

Snyder Embraces Detroit Recovery While Pledging No State Bailout

July 26, 2013

Michigan Governor Rick Snyder has a vision for tackling what he calls the largest challenge in the U.S.: resurrecting bankrupt Detroit.

His plan includes a city center filled with restaurants and hip, home-grown, artisanal manufacturing businesses. He sees tracts of Detroit’s 139 square miles (360 kilometers) cleared of blighted buildings and replaced by urban farms. Yet the 54-year-old former venture capitalist and chief executive of Gateway Inc., opposes an overarching state bailout.

The comeback of Detroit, a Democrat-dominated city with an 83-percent black population, may define the political career of the white first-term Republican who has avoided partisan warfare like that waged by party colleagues Scott Walker of Wisconsin and Sam Brownback of Kansas. Snyder’s ability to remake the biggest city in a state that led the U.S. in unemployment during the recession could provide a blueprint for cooperation on intractable issues.

“I do what I believe is the right thing, and I don’t get caught up in all the politics,” Snyder said in an interview at Bloomberg’s New York headquarters. “The state of Michigan is on the comeback path, in some measure I hope because of the good things we’ve done over the last three years, and Detroit is part of Michigan.”

Hipster Businesses

Snyder said he wants to rebuild the city, which has lost about 60 percent of its population since its peak of 1.8 million in the 1950s, starting from its denser downtown and Midtown and moving on to its far-flung and lightly peopled neighborhoods. He would foster economic development and begin spending $100 million within the next 30 days to bolster safety and remove blight.

“If people have better services, they’ll be in Detroit,” he said. Holding out his arm to show off a made-on-Milwaukee-Street Shinola watch, he described Detroit’s Midtown as “this environment where you have watchmakers, you have microbrewers, you have people living in lofts.”

Detroit, the birthplace of the automobile assembly line and a one-time symbol of industrial might, filed the biggest U.S. municipal bankruptcy July 18. Decades of decline had left it too poor to pay billions of dollars owed bondholders, retired cops and current city workers.

The city where officials struggle to provide public safety and even streetlights faces $18 billion of debt, an amount Snyder called “crushing.” He said Emergency Financial Manager Kevyn Orr’s decision to file bankruptcy was the city’s only option.

Young Trader

Snyder has been primed for finance since youth. He started trading stocks at 11 with $1,000 from his parents. His portfolio helped pay for college and a down payment on a house. He earned both an MBA and law degree by 23 at the University of Michigan.

After serving as chairman and chief executive officer at North Sioux City, South Dakota-based Gateway Inc., a computer company acquired in 2007 by Acer Inc. (2353), Snyder became a venture capitalist.

Since he was elected in 2010, Snyder has focused on Detroit, calling it the linchpin of Michigan’s economic recovery. He’s battled to build a bridge from Detroit to Canada, a span he says will boost commerce. Snyder tried to develop a close relationship with Mayor Dave Bing, a former Detroit Pistons basketball star, even going to a University of Michigan game with the Democrat.

Civic Amenities

The governor proposed having the state take over and repair Belle Isle Park, a 983-acre refuge on the Detroit River that has fallen into disrepair. Snyder proposed turning the site into a state park, which would have saved the city $6 million a year. The city council, which lost its power when Snyder appointed Orr, snubbed him.

Projects such as the bridge, a light-rail initiative and a new $650 million arena for the National Hockey League’s Red Wings will revitalize Detroit, Snyder said.

“I am committing state money, but I’m not doing it in terms of just paying a bailout to pay off debt -- it’s on focused projects,” Snyder said. “I view it as how we can put state resources toward better services to citizens, not simply debt service.”

“We are looking beyond simply this phase of the next 15 to 16 months,” the governor said. “We are looking at what needs to be done for a sustainable Detroit.”

Detroit’s Republicans

He has succeeded in a similar repair job on state finances, assisted by the federal bailout of the auto industry. Moody’s Investors Service and Standard & Poor’s this year both revised their outlooks on the eighth-most-populous state to positive, citing increased reserves and a resurgent economy.

Snyder and a Republican-dominated legislature have balanced budgets and rearranged taxes. They’ve cut education spending, business regulations, unemployment benefits and retirement health benefits for public employees. The governor also championed a new emergency manager law that critics called a power grab, yet one that has put him in the middle of the bankruptcy and the political jeopardy that comes with it.

Snyder isn’t the first Republican to be identified with Democratic Detroit, said Bill Ballenger, publisher of Lansing-based Inside Michigan Politics newsletter. In the 1970s, Governor William Milliken forged a relationship with Mayor Coleman Young, Detroit’s first black mayor and a fiery Democratic partisan.

That put Milliken at odds with party colleagues as state aid flowed to the city, Ballenger said. Michigan’s newest state park is in Detroit, on the riverfront, and is named after Milliken.

Snyder stands to gain if the public perceives Detroit as better off from bankruptcy, Ballenger said.

“For the time being, he’s getting the benefit of the doubt,” Ballenger said. “There are a lot of people in Detroit who support what he’s doing, but are afraid to speak up.”

To contact the reporters on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net; Chris Christoff in Lansing, Michigan at cchristoff@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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