After my interview with Mayor Paul Schreiber of Ypsilanti, I’ve had to temper my enthusiasm over the city’s Master Plan.
The city of Ypsilanti admitted in the Master Plan that it is indebted $31 million alone from a redevelopment plan that went awry. That and a revenue base that has shrunk over the years make the capital improvements discussed in the document appear somewhat improbable.
I don’t know that I would call the Master Plan overly optimistic, and don’t mean for my analysis to be pessimistic, but I worry about how the city plans to pay for any of its amelioration efforts.
The city is also, in its own words “landlocked,” and lacks vacant land for which mass new development can occur. Because of the financial and economic concerns, the city was correct to cite its goals as sustainability rather than robust growth. With that said, the city is not doomed like the city of Detroit, and promising redevelopment and zoning regulation reforms (form-based zoning code) were offered in the Master Plan.
But aside from the form-based zoning code, I am concerned by the other means the city has tried to attract development. I am very skeptical of tax incentives offered by municipalities to businesses.
That skepticism is drawn from my own research and a subsequent article that appeared in this newspaper, and the research of far more learned economists like Donald Marron of the Tax Policy Center.
There is even more reason for concern about the use of tax abatement in the city because
“Approximately 40 percent of the city’s land area is used by non-profits.” Non-profits are tax-free enterprises – this leaves the city with an already diminished tax base.
With a down real estate market, which translates as lower property tax revenue, the use of tax abatement is fiscally irresponsible – doubly so in a city like Ypsilanti with its level of indebtedness.
Tax abatement should be used in the most limited manner, if at all. Council members should be very suspicious, since the efficacy of such incentives is dubious and can cost the treasury much needed revenue. Municipalities rely far too heavily on tax abatement to retain and attract new businesses.
If the city were flush with cash, there would be more effective alternatives that I would advocate for.
A minority business development agency could be helpful in adding vibrancy to the local economy.
“The city has a sizable African-American population, comprising about 31.9 percent of the city’s population as of the 2010 Census,” according to the Master Plan. Given this data, the city could form a Minority Business Development Agency of some kind, a local incarnate of the federal agency.
Such an agency would likely help the city with this focus: “In adjusting to the shift from a manufacturing economy, Ypsilanti has focused on small business development, especially within the centers.”
“The city has worked to maintain low barriers of entry for new businesses, and encourages entrepreneurs to startup businesses.”
And an expansion of microcredit could reinforce what is already performed by the state (Michigan Pre-Seed Capital Fund Micro Loan Program) and county (Eastern Washtenaw County Microloan Program). In the Master Plan, the city mentions that it has many local businesses and a devoted consumer base, and it should look to foster continued growth of small and independent businesses.
The Center for an Urban Future conducted a study of small businesses in New York and discovered many did not use technology in their business operations. “The challenge for small business owners is not to become technology mavens, but to learn enough to become an informed consumer of technology,” said the report.
Unfortunately the city does not have the means to carry out these ideas, let alone the proposals enumerated in the Master Plan. To be clear, the Master Plan was not a waste of time. As Mayor Schreiber said in our interview, the city has to prepare for the investments that will hopefully be made over the decade.
