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Case Study

What Works: Collectively, Midtown Anchors Spark Urban Renewal

Objective: Largely due to a multi-million dollar influx of philanthropic support, Midtown Detroit’s anchors began convening more than three years ago around a collective “Live, Buy, Hire” locally in Midtown effort. This case study highlights how Midtown Detroit, Inc. and its partners helped to shape this broad anchor strategy to spark economic growth within Detroit’s urban core.

Major Participants: Midtown Detroit, Inc.; Henry Ford Health System; Detroit Medical Center; Wayne State University; Detroit Economic Growth Corporation; The Hudson-Weber Foundation; U3 Ventures.

Background: Detroit’s story is well-known. It was once the wealthiest city in the world, per capita, but after the loss of auto manufacturing, the economy spiraled downward. Yet unlike the loss of industry, Detroit retains many if its institutional, fixed assets—specifically, a handful of world-class anchor institutions in the Midtown corridor. Together, the Henry Ford Health System, Detroit Medical Center and Wayne State University, all located in Midtown Detroit, spend $1.6 billion annually on operational expenses alone. If there was a way for local businesses to tap into this spend, it would create a ripple effect through the local economy.

David Egner, President and CEO of the Detroit-based Hudson Webber Foundation, drew on other anchor examples and found that Midtown’s anchors were focused more on their own projects than outward-facing strategies that would benefit the anchors’ neighborhoods. In 2010, when the Living Cities Integration Initiative (LCII) launched a multi-year urban renewal strategy in Detroit, Egner enlisted the support of Midtown Detroit and U3 Ventures to design an anchor strategy to incorporate into the LCII. Together, they piloted a “Live, Buy, Hire” Midtown strategy among the three Midtown anchors.

How it Works: Live Midtown provides employees of the three anchors with four different types of incentives to live and invest in Midtown homes. New homeowners are eligible for a forgivable loan up to $20,000 to purchase; new renters can qualify for a $2,500 allowance in the first year of living in their apartment, and an additional $1,000 the second year. Existing homeowners are eligible for up to $5,000 for exterior improvement projects valued at $10,000 or more; and existing renters are allocated a $1,000 allowance if they extend their leases. The program is administered by Midtown Detroit, but the anchors fund the program for their employees. Each anchor has various eligibility criteria.

Buy Detroit, later called “Source Detroit,” encourages the three anchors to increase their local spend. Each of the anchor’s chief procurement officials met with the Source Detroit program manager to identify strategic areas for local procurement based upon his/her anchor’s needs. Across anchors, selected areas rose to the top, including construction, food service and printing. Source Detroit worked with a list of local businesses provided by the state, and then identified which businesses had already worked with the anchors—these businesses were added to a pre-qualified vendor list. Trade Fairs were held to bring awareness to local procurement opportunities for other Detroit-based businesses. When new bid opportunities arose, Source Detroit would send out information to its listserv of local companies.   Source Detroit has also informed other city and state-wide procurement programs, such as D2D – Detroit Business to Business, a program supported by Detroit Economic Growth Corporation (DEGC). In an analysis for DEGC, ICIC found that D2D has the potential to support an additional 7,700 jobs and over $2.5 billion in firm revenue.

Hire Detroit is an effort among Midtown Detroit and Detroit Employment Solutions Corporation (DESC) to help local residents access employment at the Midtown anchor institutions. An initial pilot was launched with Henry Ford Health System (HFHS) in which the hospital identified certain categories of employment that had low barriers to entry. HFHS also helps to identify education certificates needed, if any, to fill those positions so residents can obtain those if needed.

Results for the Local Economy: In the first three years of the Live Midtown initiative, more than 2,000 people have tapped into $8 million in anchor resources to move to Detroit’s urban core. Live Midtown is considered the single largest driver of housing demand and value increases in Midtown. For the first time in ten years, demand is outpacing supply and the residential occupancy rate in Midtown has topped 97%. Midtown Detroit has since expanded the boundaries for the purchase component of the Live Midtown program and are expanding north through the North End to the historic Boston-Edison District—a neighborhood identified in Detroit Future City, Detroit’s comprehensive roadmap for a prosperous future, as a district in need of stabilization.

The Source Detroit initiative helped to transfer at least $16.5 million in anchor spend to Detroit-based businesses, a figure that could be higher because Source Detroit is unable to access all of the anchors’ data. The purchasing ranged in size and scope. For instance, Milano Bakery had over $280,000 worth of baked goods purchased by the three anchors; Allied Eagle Supply secured a janitorial supply contract worth $2.25 million and Avalon Bakery opened a retail location within Henry Ford Hospital that brings in more revenue than its original flagship location.

Hire Detroit has been the slowest of the three Midtown Detroit anchor initiatives to take off, in part because the skillsets in highest demand for the hospital are not always a match for local residents. Nonetheless, Henry Ford Health System (HFHS) was able to hire 100 local residents through the Hire Detroit initiative. The HFHS Human Resources department needed to vet more than 450 people for every 50 vacancies; tapping into the Hire Detroit program helped save HR teams significant time. HFHS would like to expand the pre-vetted pipeline to additional job categories in the future.

Remaining Challenges: There are different remaining challenges for each of the Live, Hire and Source programs of the anchor strategy. Land use around Midtown has been a challenge for the Live Detroit program; many of the area’s largest employers are tying up property to land bank it over time, leaving swaths of surface parking that make revitalizing the area a challenge. In terms of local procurement, Source Detroit struggled to compile data, as anchors are often unwilling to release contract information. Until this data is collected, it is hard to improve processes. Moreover, to have a meaningful and lasting impact, it is critical for the anchors to really rethink how they deliver procurement opportunities—Wayne State has been the most successful anchor to do this thus far. They changed policies and procurement practices. It is difficult to shift procurement culture, especially when buyers already have existing relationships with outside firms. With Hire Detroit, it remains a challenge to get other anchors to utilize the talent pipeline that Midtown Detroit and its Workforce Solutions partner have put into place.

Lessons Learned: The number one lesson learned around local procurement is that efforts are challenging and slow-moving: the RFP process can take time and many buyers are already locked into long-term contracts with other vendors. There are barriers to new policy implementation and institutional needs differ. Furthermore, habitual buyer behavior is hard to break. Buyers need the tools to make local spending easier, such as a supplier database tool. It has to be easy for the buyer – everything must revolve around the buyer in order to spark a change in buying habits. Otherwise, it’s more convenient for buyers to continue purchasing from its existing suppliers. The facilitator, in this case, Source Detroit, must do significant legwork to show the anchors the ROI created through local purchasing (both monetarily and the impact on the community).

Across initiatives, it has become clear that the linchpin organization, here, Midtown Detroit, must deliver real product and results in order to keep anchors interested in the initiatives. By showing tangible benefits, more anchors will be willing to invest in the surrounding community.

To learn more, visit Midtown Detroit, Inc.

 

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