PIONEERING A BOLD URBAN FUTURE

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Our Moment of Obligation

The Kresge Foundation was born 90 years ago from a private entrepreneur’s belief that relatively small amounts of selectively deployed capital could help make the world a better place. Over the course of the intervening years, our institution has tested that belief, pushing and prodding, recalibrating and adapting, in an effort to be faithful stewards of Sebastian Kresge’s faith in the power of high aspirations and good intentions.

That path has led us to the view that we could make the most difference by connecting low-income people to opportunities in urban life.

The meaning and possibilities of this core belief have helped to transform the communities where we work – and we’ve been transformed as well.  

Today, informed by our experience in Detroit, we face a new moment of obligation with bigger stakes than ever before.

I’d like to share a story about Detroit. A story about the promise of urban America in an emerging 21st century. And a story about the new and unique role that philanthropy can play in reimagining urban life and inspiring a bold urban future for all of us.

I.

Three Forces of Change

There are three macro-forces of change that came into sharp relief during our journey in Detroit, and they frame a new reality for America’s cities as we look forward.

Any one of these trends is beyond what any single foundation can address on its own. And yet, it’s by seeing them as integrally interconnected that we can truly understand the promise of philanthropy in creating a bold urban future.

The first trend is the increasing urbanization of American life.

The second is the deep and persistent dynamics of poverty, race, and income inequality.

And the third is the increasing dysfunction of national governance that is shifting power away from Washington to state and local governments and redefining civic life.

Urbanization

So first, urbanization.

Some eight in ten Americans now live in urban areas.  And in our largest cities – with one million residents or more – growth is expanding at a rate of nearly 50 percent year over year since 2010.  

[See infographic in endnotes with stark difference for Detroit amidst this trend.]

Indeed, like never before, cities are the epicenters of our modern American life. Like no other force, cities are shaping our national identity, our social and economic realities, and the very possibilities of progress for society in an age increasingly defined by access to information, network capital and light-speed technological transformations.

How America faces the economic, social, and environmental challenges of this century will almost singularly be determined by what happens in our cities.

For the foreseeable future, our cities will be the catalysts for change, the laboratories of innovation, and the proving ground for progress.

Poverty, Race and Income Inequality

The second force that will shape our shared future is the persistent and destructive dynamic of poverty, racism, and income inequality.

To be clear, there has been important progress over the last 50 years. There is no question that more people have access to economic opportunity. And some of the most visible and brutal barriers of institutionalized racism and inequality are being dismantled.

And yet, while the stock market expands, wages are stagnant. While tech firms proliferate, upward mobility is elusive. While the finger of enlightened policy occasionally touches the lives of the disenfranchised, too many of our citizens are losing faith that the generations-long struggle for equal and fair justice has been won.

Today, in the United States, we have the highest level of wealth inequality in the world, with the exception only of Russia, Ukraine and Lebanon.   And over the past 30 years, the top 5 percent of Americans saw their real incomes increase 75 percent while the bottom 20 percent experienced a drop in real income of 12 percent.  [See infographic in endnotes]

And there are the less visible and often unspoken barriers – attitudes, perceptions, and even our unconscious behaviors – that still fuel a profoundly uneven landscape of opportunity for too many Americans.

From Detroit to Ferguson to Staten Island to Charleston, it seems that the horizon line of opportunity, justice and freedom for all Americans remains too far in the distance.

Although the realities of poverty and racism are deep, they are not impossible to change. But that change will require unprecedented strategic intentionality, collective problem-smashing skill, and moral tenacity.  Whether, and to what extent, we are able to summon these qualities will shape the arc of our future.

New Levers of Leadership

The third significant force of change has been the role that the federal government plays in our lives, with the attendant consequences for the respective roles played by business, philanthropy and non-profit organizations.

Since the 1980s, the fundamental idea of an active, progressive, and participatory national government that works in the broad interest of our American society has been fundamentally challenged.

From gerrymandered Congressional districts that further entrench party divides to the echo chambers of partisan media to the rise of unlimited and unaccountable political contributions, the result has been a federal government in tragic paralysis, where just staying solvent or minimally operational is celebrated as a sign of success.

For the world’s greatest democracy, it’s nothing less than tragic that only 1 in 10 Americans has confidence in the U.S. Congress.  And during the session that ended in 2014, Congress passed only 24 substantive laws, the worst record in modern history.

Even President Obama acknowledges the problem: "I am frustrated [and] you have every right to be frustrated,” he observed, “because Congress doesn’t work the way it should. Issues are left unattended. Folks are more interested in scoring political points than getting things done."

The problem, the President said, is that "incentives are built into the system that reward the short term, reward a polarized politics, [and] reward being simplistic instead of being true."

As a consequence, the levers of leadership have shifted from the federal to the state and local levels where the simple realities of balancing budgets, delivering services, fostering innovation, and welcoming community participation are at the essence of advancing our daily quality of life.

At the same time, other sectors in our society are stepping into the void, dramatically changing the roles and expectations of business, philanthropy, and nonprofits in delivering economic growth and positive social impact – and reimagining the possibilities of civil society.  

II.

A New Role for Philanthropy

These three forces – rapidly increasing urbanization, devastating economic and racial divides, and the failure for our federal government to lead – call for a new era of urban philanthropy.

Indeed, to advance opportunities in America’s cities, we believe philanthropy must recalibrate its approach – thinking holistically, acting boldly, and providing a new kind of muscular leadership that can help pioneer an era of urban opportunity and renewal.

The philanthropic community is uniquely equipped to pioneer this progress, if we are brave enough to do so.

Why us? Because we are uniquely able to take the long-term view and act in the moment. We have the freedom to take risks and think of at least some of our grant making as social venture capital. And we can leverage a more multi-disciplinary and multi-dimensional set of tools to test, prove, and scale new strategies for solving persistent urban problems.  

For the Kresge Foundation, Detroit’s filing for municipal bankruptcy in the summer of 2013 was a defining moment that required us to think, create and act differently – with important implications for the future of Detroit, of America’s cities, and of philanthropy.

What Detroit Means for America

The Kresge Foundation’s commitment to Detroit is long-standing, deep-rooted, and formative to our identity. The investments we have made in Detroit over the last ninety years are among our greatest sources of pride. The major investments we have made in Detroit in the last decade, in particular, have been integral to the city’s hopes of resurgence – hopes cast in grave doubt as the city’s financial crisis became more visible and acute over the past three years.

Detroit’s bankruptcy stood out not only for being the largest – in terms of both Detroit’s size and the scale of its challenges – but also for appearing to be the most “intractable,” which doesn’t adequately convey the sense of pessimism and fatalism that attended the Detroit filing. We heard words like impossible, hopeless, irreversible. The numbers alone were jaw-dropping. The city’s debt was estimated at $18 billion, and it was projected that within ten years, about two-thirds of the city’s budget would be consumed just by the payment of retiree benefits.  

The way back to solvency seemed equally daunting. Reducing pension benefits appeared to directly violate Michigan’s constitutional protections, and the only significant assets potentially available to creditors were held in the art collection of the Detroit Institute of Arts.

Pursuing either option would have embroiled the City in lawsuits that ultimately could be resolved only by the United States Supreme Court, leaving the bankruptcy – and the City’s future – in perpetual purgatory.

Bringing the bankruptcy to a timely and consensual resolution became the animating purpose of the so-called “Grand Bargain” in which the Foundation community, the State of Michigan, and the Detroit Institute of Arts assembled a fund to protect the pensions and safeguard the DIA’s collection beyond creditors now and in the future.

And that is exactly what the Grand Bargain accomplished – the philanthropic infusion of some $370 million led directly to what the Detroit Free Press rightly called “a miraculous outcome.”

With the bankruptcy collaboratively resolved in the course of a single year, the story I am able to share is not a story of defeat, but a message of hope. The lessons of Detroit’s optimism and opportunity are fundamentally a story about the power of a style of visionary philanthropy unafraid to ask hard questions and take on great challenges.

It is about citizens from all walks of life, and from all across the city, pulling together to find solutions. It is a tale of tenacity and audacity that prevented a lost decade of bankruptcy litigation.

And it reflects a boldness of philanthropic aspiration that has been inspired by six core beliefs that have guided Kresge’s behavior, and the behavior of our many partners, for many years before the bankruptcy.

Kresge’s commitment to these core beliefs transcends our work in Detroit – they are the essence of our efforts to improve the bedrock economic, social, cultural, and environmental conditions in America’s cities and reimagine the possibilities for our collective urban life.

These beliefs inspire how we work with grantees and partners, pursuing strategies to improve the lives of low-income, underrepresented, and disadvantaged children and adults. Because it is only by creating more opportunities and unleashing the potential and possibilities of our residents, that we enable a bold urban future for all.

III.

Kresge’s Six Beliefs

So let me briefly describe each.

Belief #1:  Take risks commensurate with the challenge at hand.

First among our core beliefs is that philanthropy must be prepared to cut from its safe and secure moorings to embrace a level of risk that is commensurate with the magnitude of the challenges at hand.

The stakes of Detroit’s bankruptcy were so high and the risks of inaction so great that the practices of the past would simply not get us where Detroit needed to go. We had to tap our corpus for $100 million –our largest grant ever – not simply redirect money pre-allocated to rebuilding Detroit’s physical, social and cultural fabric.

We had to arc our actions to the dream of a city reborn, not simply measure the situation against fine-tuned program priorities. We had to condition our support on fiercely negotiated conditions, not simply create a pool of unrestricted capital. In short, we had to go big and actively lead.

Belief #2.  Embrace philanthropy’s fundamental interdependence.

We also believe in philanthropy’s fundamental interdependence. It’s only by shedding our territoriality and embracing the potency of partnership that we can create exponential change.

The partnership behind the Grand Bargain was built on a foundation of mutual support that we’ve been building for a decade.

In ever-changing combinations, some dozen very different philanthropic institutions have come together to act on a common agenda for our city. We pooled our capital to birth the New Economy Initiative in order to promote small business development and entrepreneurialism. We created the Detroit Future City land use framework to guide decision-making about how to convert underutilized land into productive use and amplify nodes of strength. We united players from every sector to focus community priorities through the Detroit Neighborhood Forum. And we joined together to invest in the vibrancy of the city’s arts and cultural ecology.

So when we were called together to provide the $366 million necessary to catalyze the Grand Bargain, the answer was clear. The fabric of trust and cooperation was in place. Kresge and Ford stepped forward to commit $225 million, and the other members of our coalition followed suit.

That act of mutual belief and intention created the mold of collective action that would draw all sectors of our community into the Grand Bargain – foundations, pensioners, Detroit residents, the Detroit Institute of Arts, state legislators and city government.  

The fundamental truth is that we can do things together that we could never do alone. And the success of each of us depends on the success of all of us.

Belief #3.  Harness the Wisdom of Community Voice.

We believe a city’s most precious asset is the faith, vision, and determination of its people – our neighbors, businesses, religious leaders, elected officials and civic leaders – acting in service of the community’s shared vision, hopes, and aspirations.

In 2011, when Kresge was asked by Mayor Bing to help create a roadmap for Detroit’s future, we had to navigate the deeply-complicated, emotionally-sensitive, and politically-charged issue of how to face down the challenges presented by the city’s vast stretches of vacant, blighted, and underutilized land.  

Our challenge was to integrate the highly technical aspects of land use planning with the profound individual and shared human experiences that illuminate the collective voice of our residents.

It was humbling. We had to reset a community engagement process that initially mis-fired. We had to continually re-calibrate the roles that city government, philanthropy, and the community played in reimagining a city whose population had shrunk from two million residents to 725,000.

We stayed the course over four years. And what emerged was Detroit Future City, a community-driven roadmap for jobs, civic health, asset-building, and stronger neighborhoods.

It’s more than just a plan. It’s a framework that provides a basis for decisions in every dimension of community life – from residential and commercial development to new innovations for urban farming, reforestation and even storm-water management.

Every step of the way, the ideas and wisdom of our city’s residents were integrated in the solutions, giving Kresge the necessary confidence to commit that every dollar of the more than $150 million we will invest in Detroit over five years will advance the recommended strategies within this framework and ensure that community voice will always be heard.

Belief #4.  Explore Beyond the Confines of Philanthropy’s Traditional Lane.

We believe in a new vision of philanthropy that doesn’t “stay in its lane,” but instead acts boldly as a creative catalyst for meaningful civic transformation.

The bankruptcy certainly illustrates this vision. But our seven-year journey of funding and advocacy for a regional light rail system in the city that put the world on wheels casts this belief in even brighter relief.

The M-1 Rail light rail project represented an important and historic point of departure for Kresge. Our goal was to enable seamless mobility within the metropolitan region and to bolster the confidence of large and small businesses to invest and grow along the Woodward Avenue corridor.

We committed the initial $35 million to launch what would become the nation’s only philanthropically- and privately-planned mass transit line. We became the project’s most visible public champion and leading advocate.  

And yet, the scale and complexities of bringing the project to fruition immeasurably overshadowed the magnitude of our financial commitment. A quick illustration.

Some five years into the project, support promised to the line by city government evaporated, precipitating a declaration by the federal Secretary of Transportation, the Governor, and the Mayor that the project was dead. Staying in our lane would have meant acquiescing to the decision. But that seemed clearly the wrong choice – terminating a project of such overriding benefit without exploring the viability of sensible alternatives would have been irresponsible.

So Kresge, together with its private sector partners from the Penske Corporation and Quicken Loans, brought together the Secretary, the Governor, the Mayor, and the Michigan congressional delegation to explore the possibility of completing the project without municipal support. The Secretary and Governor agreed to give the M1 consortium ninety days in which to satisfy some 90 preconditions – implicating engineering specifications, new legislative authorities, additional reserve funds, and heaven knows what else.

To give you the twitter version: We satisfied each and every condition, and the project moved forward. Not without Kresge dedicating our top staff person to the project for six months. Not without Kresge coming up with an additional $15 million and raising another $30 million from others. And not without choreographing the passage of an eight-part transit package through a legislature that had rejected mass transit legislation some 40 times in the last 40 years.

The collective effort to successfully pull all these threads together was as breathtakingly audacious as it was vital to Detroit’s future.

The tracks are largely laid. The cars are in production. The region is gearing up to build out an integrated transit system. The first riders will board a year from now. Residential and residential projects all up and down the avenue have begun generating what will become upwards of $300 million in critically needed property tax revenue for Detroit’s schools and essential services.

By fighting for light rail, we offered a new vision for philanthropy that not only takes high-stakes, high-visibility risks, but also navigates the porousness of the boundaries between philanthropy and the public and private sectors.  

Belief #5.  Unleash the power of place.

We believe cities thrive when we love where we live, live where we work, and create our own unique communities together. At its best, philanthropy can find the key acupuncture points that trigger the power of places to reflect community identity and create the map for vibrant, equitable civic life.

Kresge has a long history of investing in public spaces. It’s more than just enhancing a location. It’s about creating an essence – identifying, elevating, or assembling a collection of visual, cultural, social, and environmental qualities that imbue a location with meaning and significance.

When we’re able to connect to a city or a neighborhood through the experience of its public spaces, there’s a magnetic pull. You want to stay committed. You want to invest. You want to build a future. These are the preconditions for civic transformation.

Kresge’s signal investment of this kind is the $50 million we put on the table more than a decade ago to help create the Detroit Riverwalk, which now draws millions of residents and visitors each year.

We’re also proud to be part of transformative investments that have accelerated the pace and increased the scale of development all along Woodward Avenue in the Downtown and Midtown districts . . . that have amplified  Eastern Market’s role as the regional hub of an increasingly robust food economy . . .  that have fostered entrepreneurial energies along long-neglected neighborhood commercial corridors . . . and that have opened new possibilities for the conversion of blighted and abandoned land to productive residential, ecological, and artistic activities.

These investments highlight how, together, we can transform our city into a place to live, work, own, love, play and thrive.

Belief #6.  Prioritize Pathways of Opportunity for Low-Income People.

All of these beliefs converge in the overarching  moral imperative for Kresge to act in ways that will improve life opportunities for low-income people living in America’s cities.

When all is said and done, it was that imperative that propelled our investments in the resolution of Detroit’s bankruptcy. We needed a clear path to begin facing down the paralyzingly difficult challenges of disinvestment, structurally imbalanced ladders of economic opportunity, and racial division.

Below the surface of those challenges lay a unique and complex mosaic of hopes, ideas, skills, and assets that created the conditions for innovation and re-invention. Diverse subcultures ricocheting and re-combining in unpredictable ways to unleash diverse expressions of creativity.  Historical legacies and future aspiration colliding in infinitely varied and imaginative ways to redefine and recast stubbornly persistent problems.

Our experience in Detroit shows that it is possible to overcome the profound challenges of change while retaining a community’s essential identity . . . to reinvent essential functions without sacrificing the primacy of resident voice . . . to explore new principles of civic sustainability without dismantling the richness of community traditions, beliefs and cultural institutions built up layer by layer over time.

You start from the ground up. Every neighborhood . . . each community . . . all of the block clubs. . . all the schools . . . each of the businesses . . . all of the informal networks of mutual support . . . help form our city’s identity, contribute to innovation, and ignite sparks of hope for a better future.

IV.

The Courage to Change

Shakespeare writes in The Tempest that “What’s past is prologue.” With debt loads recalibrated, creditor claims satisfied, and structural deficits eliminated, Detroit is ready for the next act.

We can now contemplate how best to invest collectively in our future. We can set to work on changing the trajectory of civic ambition. We can amplify the patterns of engaged and effective partnership that we have begun to build among residents, businesses, the public sector, nonprofit organizations and philanthropy.

There is resonance in these lessons and beliefs for so many other American cities. We all seek to understand whether, and how, it is possible for post-industrial America to chart a course of inclusive, balanced, and sustainable economic recovery and social opportunity.

At the end of the day, the future of America’s cities depends on policies and practices of a higher order – forged with an attitude of objectivity, an openness to new and different perspectives, an ability to step outside of one’s immediate experience, and a fundamental respect for the process of unbridled civic discourse.

Detroit doesn’t have all the answers – each community will necessarily construct a path based on its unique history, culture, and capacities. But the day has come and gone when Detroit was easily dismissed as America’s emblematic problem-child. It is indeed a new day.  And, like never before, we are ready to pioneer a bold urban future for Detroit and all of America’s great cities, together.

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