A Tale of Two Cities: The Death of Detroit, The Rebirth of Miami

by Andrea Billups and John Bachman
September 18, 2013

Less than a decade ago, Miami’s inner city was mangy. The tropical city could have become the next Detroit.

When businesses, law firms, and government offices downtown closed, few people remained in its seedy core, fleeing to suburban Miami-Dade and Broward counties for their gated, manicured subdivisions and soccer fields, or to the glamorous nightlife across the causeway in sleek South Beach.

But that’s all changed. Miami is booming again. Construction cranes dot the skyline as a new wave of baby boomers, international residents, and businesses converge on the city.

Call it the tale of two cities: Detroit sought to fix its urban blight with high taxes, heavy regulation, and big salaries and pensions for government employees.

Much of the credit for the transformation of Miami falls to the city’s mayor, Tomas Regalado, who decided to take his city on the opposite path, one of lower taxes and economic growth.

Regalado, a Republican born in Havana, Cuba, was elected mayor in 2009 and soon after, set out on an ambitious path of improving city finances, cutting taxes, and welcoming new businesses with a regulation overhaul.

He is running for re-election this November.

“This coming budget, we are proposing to reduce taxes, maintain the level of services, and hire more police officers. Why? Because property values are coming back,” Regalado told Newsmax TV.

After forcing concessions from city workers, there is room in the budget for tax cuts, he said. And following a series of lawsuits from public unions that ended in the city’s favor, Regalado was also able to trim Miami’s budget without eliminating jobs.

City employees making more than $40,000 saw salary cuts, but those earning less did not have to share the pain. The plan kept all city workers employed as the city implemented tough reforms.

“I didn’t want to kill a city to save a government,” Regalado said, defending his choices, which included slicing his own salary by 36 percent.

“We broke all the contracts with the union, created [new] contracts with salary reductions, and capped the pensions at $100,000, because in the city of Miami, you had [young] people retiring with $150,000, $140,000 per year for life. [In Miami] … firefighters and police officers retired young,” Regalado, a former broadcast journalist, says of the bitter fight and lawsuit he weathered.

He said topping pensions at $100,000 helped to “reduce the deficit and taxes. The reason I proposed to reduce taxes was because the foreclosures were affecting Miami. Miami was ground zero,” Regalado said.

“I thought that by reducing taxes, you would bring new investment into the city of Miami and it happened. People are moving back. The message is very clear: You reduce taxes, people will come because it’s a good investment.”

Regalado also cited tax enterprise zones and Business Improvement Districts — where business people in a geographic area tax themselves and decide which projects to fund — as programs that helped turn the city around.

Today, the city once known for its “vice” in a hit TV show now reflects Regalado’s opportunistic message: chic high-rise condos, an emerging crop of world-class restaurants, high-end hotels, a growing expanse of luxury retail stores, and a burgeoning cultural scene.

“I’ve been in this position for five years now. When I first got here, the condos were 62 percent occupied,” says Alyce Robertson, executive director of the Miami Downtown Development Authority. “We are at 95 to 97 percent occupancy now.”

The inner city, she adds, has become “its own destination,” making it an easier sales pitch for civic leaders seeking jobs for the city beyond those created by a service and tourism industry.

The city vigorously courted financial services companies from New York and Connecticut, tech industry jobs for the city’s South American Internet hub, and art groups seeking a friendly home.

“By the year 2025, we envision in our master plan a very vibrant, culturally diverse, walkable, livable downtown,” Robertson said.

After being hit hard by a foreclosure crisis that still lingers — about 41 percent of mortgages are still underwater in the Miami-Dade County region — real-estate experts say trendy areas like Miami Beach and Regalado’s downtown are flourishing with housing prices reaching levels last seen during the 2000 boom. Miami Beach is a separate municipality from the city of Miami.

The Miami arts scene is also in full tilt. In November, the world-class Perez Art Museum is set to open its doors alongside the premier Patricia and Phillip Frost Museum of Science.

Other chic construction projects in the works for the Downtown-Biscayne corridor include an architecturally spectacular convention center and Marriott hotel with 1,800 rooms on the site of the old Miami Arena, adding to a changing landscape that also includes the elegant Adrienne Arsht Center for the Performing Arts, the state’s largest facility of its kind.

Miami still has its share of urban problems such as homelessness, income inequity and, according to National Science Foundation data, the lowest science and engineering workforce for major cities in the nation.

But a coalition of business and education leaders is focused on changing that.

“I think there is a renewed spark of energy and it is palpable in this community,” says Robin Reiter, the interim president of Miami’s The Beacon Council, a public-private nonprofit organization that helps increase economic development and facilitates job creation.

“I think you see it in the day life as well as the nightlife. I think you see it in the vibrancy of all our downtown communities,” Reiter said. Other Miami-Dade County cities like Aventura, Coral Gables and South Miami have their own booming downtown areas.

“I think the real estate market is recovering,” Reiter adds. “The pendulum here swings once again. The price of housing is going up. There is a thrust to build more rental units to accommodate those who don’t want home ownership … Yes, we’re still seeing a high level of homes in foreclosure, but we’re seeing them move off the market very quickly.”

Broader international interest in Miami is also heating up the market, Reiter says.

“We have folks from all over the world buying property here,” she said, noting that delegations from China and Taiwan have recently visited to examine possibilities in the area.

“We have a huge influx of businesses from across the globe who view Miami as the gateway to the Americas and as such, our business is booming,” said Reiter.

Reiter points to the metro area’s thriving Miami International Airport and its bustling seaport and cruise ships as crucial economic touchstones that are driving growth.

“There isn’t a locale around the world that anyone can travel to and from that, you can’t get to and out of Miami with great ease. That has been a tremendous bonus.”

Seth Gordon, who runs Seth Gordon Initiatives, which advises global businesses on how to become productive in Miami, praises new inner-city projects as giving the area “a heartbeat.”

When he moved to Miami in the 1970s, the city “had no life, no pulse.” Now restaurants and businesses are leaving the beaches for the Brickell Avenue corridor, where the new energy is pushing development.

“It’s become like a horse race to see how quickly you can buy up empty lots and fill them with very expensive buildings,” he said of the growth.

The area’s international cache, Gordon adds, is growing. “You see people from Argentina, Brazil, Colombia, Venezuela, and also Russia, even New York. A lot of them don’t live here year-round, but this is one of their homes. They just want to have a place here,” and are willing to spend $2 million to $3 million on a pricey vacation spot.

For the wealthy, “it’s become one of their checkpoints,” Gordon observes.

But the challenge remains on how to create an economy that supports jobs for those who aren’t ultra-wealthy.

In terms of space, even as the city center explodes, Gordon said, “we’ve got another 95 percent of the county not exploited or built out yet: inland. We’ve got room to do whatever we want to do if people ever want to do it.”

Gordon adds, “There’s a huge opportunity for expansion, maturity and for growth — and all that comes with that. The last 10 years have been a good peek into the future of just what we can do. We’re on the right track now. We just have to keep doing more.”

Regalado Makes Case for Second Term

In the interview with Newsmax TV’s John Bachman, Mayor Regalado makes a strong case for re-election on Nov. 5, saying he helped bring the city back from a feared fiscal collapse.

“Miami is the poster child of what happens if you reduce taxes, reduce expenses, if you live like any other family in the United States,” says Regalado. “In bad times, you don’t spend what you don’t earn. In good times, you only spend what you have.”

“People will understand that this is the model for any city,” he says.

Regalado has done what many of the nation’s other big-city mayors have not had the courage to do: push back against costly union deals to stave off fiscal collapse and create a business climate favorable to private investment.

“I know that politicians always, always are really scared of unions because the unions do have great power, political power. They have the resources to go out and help you or hurt you,” Regalado says.

After a market boom from 2004 to 2006, property values were hot in the tropical mecca. But by 2008, the bottom dropped out of the housing market and foreclosures skyrocketed, leaving revenues sagging and city leaders searching for new ways to close the gap.

“The combination of having a lot of unemployed people, property values going down — which is [lost] taxes — and the fact that we overspent by giving unions huge increases in 2007 made us almost bankrupt,” said Regalado, describing the situation he says he inherited when he took office in 2009.

Regalado says Miami wasn’t fully into a fiscal emergency like Detroit, but the city was headed on a road to “fiscal urgency.” Thus, his need to make some difficult choices put him at odds with police and firefighters, whose union pension costs were cutting large slices of city funds.

Regalado said the growing pains of Miami can be an example to cities like Chicago, where mayors must wage similar union fights over pension and healthcare costs after years of fiscal malfeasance and high taxes.

“They only need the courage to do it,” Regalado tells Newsmax. “I know it’s difficult to fight unions. And in my case, I became persona non grata with the unions.”

Regalado said winning the battle with the unions was the key to the city being able to stave off a tax increase, instead allowing for tax cuts.

“We would have made people leave Miami because of high taxes. And I thought that by reducing taxes, you would bring new investment into the city of Miami and it happened,” Regalado said. “The idea that you have to increase taxes to keep services is wrong.”

Such successful reforms will likely bolster the political future of Regalado, who until late August faced a serious challenge in his re-election bid from Francis Suarez, who was well-financed but dropped out of the race amid a series of miscues by his staff. He said the campaign was creating too much stress on his pregnant wife.

In his own life, Regalado was married for 37 years to Raquel Ferreiro, who died in 2008. He is the father of three and the grandfather of four, and lives in the city’s Little Havana neighborhood.

Regalado said that when he was elected mayor in 2009, “[it] was the worst economic time for the United States and for the city of Miami, especially.”

“Unemployment was like 13 percent,” Regalado said. “The construction boom had ended but we had 20,520 empty condo units in the downtown corridor, which is five, six miles. All these buildings, they were empty.”

Regalado recalled “at the time, you looked at the skyline at downtown at night and it was dark. Today we have 98 percent occupation. People are buying, people are renting, people are moving back, and that has helped the revival of downtown.”

With new restaurants in places far from South Beach, many are reconnecting with the new lively downtown area.

Regalado praised the growth in other areas of the city as well. In Overtown, once the site of riots, a new wing of the University of Miami has brought an improved landscape and 500 new jobs.

“They’re doing medical research, [with] doctors that specialize in care,” Regalado said.

In Wynwood, the center of the city’s arts district renewal, technology has been invited as an emerging partner to bolster the growth.

“We have a lot of technology companies in old warehouses that house hundreds of small companies … Technology, it is the future of Miami,” he said.

Soon, search engine powerhouse Google will announce a partnership with the city’s parks, he said. “We believe that if we train children after school in programming and in computers, more companies will come to Miami,” Regalado says.

Tourism and the potential of new citizens and foreign investors are an important part of the success equation, Regalado added.

“We have more than 20 flights a day from Miami direct to Europe directly feeding tourism, but there are [also] a lot of business people coming to invest here,” he said.

He said the city has applied to the Department of Homeland Security to be “certified as an investor visa regional center,” where a foreign national who invests $1 million in certain businesses can obtain for themselves and some family members a “permanent green card if they create 10 jobs.”

Tax enterprise zones and a healthy Business Improvement District also have played a role in allowing private enterprise drive the economy of the city, Regalado says.

“They decide how to spend that money, either in lighting, more police presence, or in infrastructure, and it’s working spectacularly because the fact is, these people know better,” Regalado said. “Usually government doesn’t know better.”

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