Tag Archive for Michigan

Bright Lights, Broke City: The Sad Tale of Allen Park, Michigan- Part 1

Recently the news has been filled with stories of towns, counties, and in some cases entire states being buried under debt.  Local and state governments have been scrambling to find ways to pay for basic public services since the economic downturn, but it seems like job creation, new taxes, and national bailouts haven’t done much to help.  Many towns are banking on a big investment to help bring them out of the red, whether they’re pouring money into buying local company stocks or throwing themselves into capital improvement projects American towns are putting their monetary hopes on big time investments.

Allen Park, a small Michigan city close to Detroit, hoped that a movie studio could bring some money into their community.  But after almost three years of problems the area is worse off than it was before.  Allen Park is now $31 million in debt, the situation is so severe that state officials are looking into taking control of the town.  Let the tale of Allen Park, Michigan serve as a reminder of the danger of all-or-nothing investments: placing all of your money and hopes in a single investment is sure to eventually lead to financial ruin.

The idea of a Midwestern town becoming a movie making hub may seem a bit laughable, but the state of Michigan has had some recent success in movie making.  Clint Eastwood’s hit Gran Torino was filmed almost entirely in the state, and the award winning 2011 movie The Ides of March had several important scenes shot around Michigan.  The state also has extremely lucrative incentive packages for film makers, Gran Torino received a whopping 42% tax credit from Michigan for filming there.

Impossible Dreams

It’s also important to note that at the time the project was proposed that Allen Park and the nearby city of Detroit were in dire need of economic revival.  The city had fallen on some hard times.  Their tourist attractions (they have the world’s biggest “tire” and host the World Series of Bowling) don’t attract many visitors, and the town’s biggest job providers were in economic ruin.  The metro area’s unemployment rate was at 15.9%, and the city’s two biggest automakers GM and Chrysler had recently declared bankruptcy.  So it’s understandable that Allen Park jumped at the opportunity to become a new film making Mecca when Jimmy Lifton came to town.

Jimmy Lifton was a Michigan native, but when he came back to his state to help the dying town of Allen Park he was a slick Hollywood producer through and through.  He had been working in film and television industry for several years, and he was determined to bring box office bucks to Allen Park.  Lifton came to city officials with his plan for Unity Studios, a $146 million and 750,000-square-foot studio that would bring jobs to the town.  Lifton also promised to let local unions and residents have first dibs on studio jobs, all 3,000 of them.  Unity Studios was to be majority owned by a small group of LA investors and Michigan, but Lifton would be the president.

Spending Money to Make Money

When residents first heard about the deal they were ecstatic, they were certain that their economic worries were over.  Business owners started to prepare for the anticipated influx of actors, directors, and industry insiders by revamping their buildings and adding “upper class” products to their merchandise.  Teamsters and union members were eagerly looking forward to steady work.  And Allen Park government officials were ready to finance Lifton’s economic dream.

After being swayed by Lifton’s vision and the excitement of residents, the Allen Park city council voted unanimously to sell $31 million in bonds to turn 104 acres of land into Lifton’s Unity Studios wonderland.  Lifton quickly got to work developing the land, and he soon opened an expensive movie school on Unity’s property.  Students could spend anywhere from $3,000-$13,000 to learn how to be script writers and stunt coordinators, and the tax payers ended up funding a lot of their education.  The state spent an estimated $871,000 on just 127 of the school’s students.

In the beginning of the project the future of the city was looking brighter than ever, but dark financial clouds were looming over the horizon.

 

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Should I Buy A House Or A Car?

You don’t have to be a journalist or real estate professional to know that home prices around the country have plummeted. Ever since the mortgage crisis in 2008, a number of state economies like Nevada, Arizona and Michigan have struggled to return home prices back to sustainable levels. But as the housing market begins to turn around, some striking figures have emerged. Financial reporters noted one especially egregious price disparity that showcases this struggle. According to online publication 24/7 Wall Street, there are now 10 US cities where it is cheaper to buy a house than to buy a car.

By comparing median home prices with moderately priced automobiles, the analysts at 24/7 have showed that even though home prices are on their way back up, the housing markets for some states still have a long way to go.

The list showcased the seriousness of housing markets across the state of Michigan. The Great Lakes State has the dubious distinction of five cities where a house is cheaper than a car, including the top two cities on the list, Detroit and Flint. In Detroit, the median home price has plummeted to $21,000, the same price as a base-level Chevy Malibu.

While the 24/7 list outlines the low price of real estate in today’s market, there is more to buying a home than raw price. The reason that many homes across Michigan have dropped in price is because of the departure of many industries and small businesses. Lowered property taxes means less successful schools and, without nearby jobs, a home purchase may not be the best commitment to make. While buying a home at a low price may be hard for many potential buyers to resist, buyers should have reason to believe they will see a strong return on investment. In short, while a car may depreciate from the moment you drive it off the lot, the depreciation is slower and more controlled than a home in a declining part of town.

For home buyers desperate for home ownership, however, the time may be just right. With home prices at record lows in some parts of the country, interest rates have also hit historic lows. The U.S. Commerce Department announced earlier this month that national average interest rates hit their lowest levels since records began in the 1950′s. If your credit is in order and you have a home picked out, affording a home has never been easier. Just be sure your property will continue to be worth the asking price one year, two years or five years from now.

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