For Jim Kokus, co-owner of Opus One, a restaurant in downtown Detroit, this year’s Super Bowl already was a big win well before the game’s official kickoff Feb. 5. Like many Detroit business owners coping with the city’s declining population, he's seeing a major windfall from the influx of out-of-town visitors.
“For us, for this time of year, it’s pretty monumental,” he said. “We’ve actually turned away business."
After years of struggling through lean years, Kokus says business is up fivefold from catering corporate hospitality suites to customers renting out the restaurant for private parties. Along with many of Detroit's business and political leaders, Kokus is hoping the weeklong party will spotlight the city’s recent revitalization efforts and help sustain the Super Bowl spending boost long after the last fan and television crew has packed up and left town.
“When (visitors) see what has been done, not only for the Super Bowl, but what has been done with the streets, with the new buildings and with the greater business population downtown, it is going to help,” he said.
Whenever the Super Bowl comes to town, host cities expect to see a short-term economic lift, as corporate sponsors spend lavishly on parties and high-rolling fans spread money around in the days leading up to the game. Detroit officials estimate this year's event will add some $300 million to city business coffers.
But after decades of decline, Detroit is betting on a whole lot more. Some in the city have high hopes that those Super Bowl dollars, along with the city’s moment in the national spotlight, will be the catalyst that finally begins to mend the battered local economy.
Some $3 billion has been invested in major downtown projects over the past five years, according to Tammy Carnrike, executive vice president of the Detroit Chamber of Commerce. The list includes everything from new road projects to the construction of Ford Field, where Sunday’s game will be played.
The city has added 3,000 new housing units, rebuilt Campus Martius Park in the heart of downtown and invested hundreds of millions dollars to renovate the riverfront. City leaders point proudly to the arrival three years ago of software services provider Compuware, which moved some 4,000 employees into a new headquarters building downtown, at a reported cost of $350 million. The building includes 60,000 square feet of retail space occupied by stores like Borders Books and the Hard Rock Café. Dozens of new downtown restaurants have opened.
“Detroit has an image,” said Carnrike. “We want to change that image. We’re looking forward to having a lot of visitors come and see Detroit and see what's happening in the downtown and the region.”
Detroit desperately needs to keep the momentum from this week’s Super Bowl party going. For the past three decades, the manufacturing base of the city, along with the region and the state of Michigan, has steadily eroded. Last year, the city's unemployment rate topped 14 percent, nearly three times the national average.
As the city’s economy has weakened, people and businesses have fled. Since peaking in the early 1950s at about 2 million, the city’s population has fallen below 900,000, the lowest level since 1920. As the population continues to decline, the tax burden to support city government falls more heavily on those who remain, prompting more people and businesses to leave, and creating a vicious circle.
“Their basic problem is that they continue to lose people,” said Jane Ridley, a credit analyst with Standard & Poors, which recently downgraded the city's bond rating. “As the population numbers have gone down, you’ve got what was a big-sized government not being supported by as many people.”
For Mayor Kwame Kilpatrick, who began his second term earlier this month, the choices are stark. Cutting city services could accelerate the flight of residents and businesses. But after scrambling to plug budget deficits in the past three fiscal years, the current level of spending isn't sustainable. Last fall, Detroit's auditor general said that the city was headed toward insolvency.
One big reason for the budget squeeze: The city faces a growing burden of pension and health care costs for city workers that a shrinking tax base won't support — much like the auto companies whose declining fortunes have hit Detroit hard.
“Pensions and health benefits costs are rising beyond our control,” Kilpatrick said in his inaugural speech earlier this month. “They will literally eat us alive if we don’t change them now."
The hope is that attention from the Super Bowl will showcase the city's rebuilding efforts and spark the beginning of a turnaround. But Detroit’s recovery still relies heavily on forces beyond its borders, most notably those battering the automotive industry. Carmakers — and the hundreds of feeder businesses that supply them — remain the largest employer and biggest generator of tax revenues for the city and the region.
Now with GM and Ford, along with parts makers Delphi and Visteon, losing billions of dollars and struggling to regain their financial footing, the state’s economy is at a crossroads, according to David L. Littmann, former chief economist at Comerica, Michigan's oldest and largest bank. For at least the past decade, he said, the state and cuty have benefited from low inflation and low interest rates that have helped finance a boom in car buying. But they can no longer count on those forces to sustain economic growth.
“The tail winds are no longer with us,” he said. “The headwinds have begun to blow and interest rates will rise — they’ll continue to rise — and we won’t even have the real estate market, which has been with us up to this point, to fan the growth.”
Similar forces weighing on the state's economy have forced cuts in state funding for the city. The result is a widening city budget deficit — recently projected at $139 million for fiscal 2006. The major credit rating agencies, which have downgraded the city’s bonds to just above junk status, are watching closely for signs of any "Super Bowl bounce."
“If those Super Bowl-related businesses survive after the game, it should be a major support for the city's economy," said Ridley, the S&P analyst. "But if they go away that, to us, would be an indication that the revitalization we think we may see happening here is not happening."
Meanwhile, unless new industries move in, the fate of local business owners will continue to hang on the fortunes of the automotive industry, said Kokus, whose restaurant is just a block and a half from GM's headquarters.
“We’ve been taking it on the chin, and it’s not gotten better,” he said. "We've had little blips here and there. But we just can't sustain anything."