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FIRG Seminar – Rip Rapson, Kresge Foundation

(fast paced piano music) – Well welcome everybody. It’s a pleasure to see you all here today. It’s a special treat to
welcome Rip Rapson back here. As many of you, Rip
has spoken here before. And what he has done in both
of his major foundation jobs that I know about and I’m
sure a lot don’t know about, has really been to focus
on making change in cities. First with the Knight Foundation
in Minneapolis St. Paul, where he led all sorts of
efforts to foster collaboration between the state government,
the city government, and the philanthropic sectors and created quite a reputation for himself in achieving things that made
a difference in the state. He may refer to some of those things, but that’s his choice if he like to. What he then moved, I think in 2006. – Yes. – To Detroit, to be the President and CEO of the Kresge Foundation, in which capacity, I’m
sure it maybe premature to describe it as a legendary foundation talking of what he did, but nonetheless it seems
to me it’s legendary, in the sense that he really did
struggle from the beginning. As those of you heard him speak before, have seen it step by
step on an annual basis, every two years or so he comes back, and tells us what he was
doing, what has happened. He illustrates it as you
can see from the slides in front of you with, I don’t
want to call them cartoons. – That’s generous. (all laughing) – But he comes by that honestly because his father was an architect. So he says that if his
father saw these drawings, he would be very upset. – Oh he died. – But nonetheless, we’ve all heard about the grant bargain,, which
a number of foundations and the city of detroit
and the state of Michigan agreed to, which put I think
somewhere I think about 800 million dollars, to enable
Detroit not to have to sell the art collection, the art institute. Well that was in a sense
something that happened along the way but before
the effort to create the grant bargain,, the
principal donors to which were the Kresge Foundation,
which actually gave a largest percentage of its
endowment of any of the gifts. Ford gave, I think put
up a 125 million dollars, but before Ford’s assets at that point ran 13 billion dollars, so you
can see the assets of Kresge were about three and half billion dollars, and they put up a 100
million dollars basically. And the Knight Foundation
was the third largest donor, and they put up I think
30 million dollars. But the point of the matter is, everything that’s a grant
bargain was able to do was they were able to do because
of all stuff that you all know, those of you who’ve heard
this before know that Kresge did in the building the base, in creating the partnerships
between government and foundations and non-profits
in getting cooperation from people who typically don’t cooperate with one another. When Rip was here before,
talked about the difficulties of getting the mayor
for example, of Detroit to sign on to the things
that needed to be done or the city manager or what have you. So it is an amazing legacy
about what can be done under the right leadership. Somebody who knows how to get things done and who people respect enough
to cooperate with one another in order to get the things done. So he’s gonna talk about now,
not about the grant bargain but he may refer to it a little bit. He’s gonna talk about what’s happened since the grant bargain. Grant bargain is now two years old, or is it three years old? – Four. – Four years old. Did we miss a year? No. – Mm-hm. – No? Okay.
– No. – I guess four years is
a good time to assess the consequences of all
the things that have happened since then. So in any event, that’s what
he’s gonna talk about today. And I hope you find it as
interesting as every one of his preceding presentations have been. So Rip the floor is yours. – Thank you Joel, it’s always
so humbling to be here. I don’t need to tell this group, but there’s only one legend
at this end of the table, and it’s sitting there and not here. (audience applauding) – No, thank you. – But it is a delight to be here. As Joel suggested, I
thought that what I would do would not be to take you
through the same material that some of you have heard. I realize not all of you
have heard sort of the build that what Joel described
from 2006 when I arrived through the grant bargain
and the immediate aftermath. I’ll refer to that briefly, but what I think might
be of greater interest particularly for those of
you who’ve become familiar with the Detroit story or have seen it is to talk about what
post-bankruptcy has looked like. I think what I’d like
to do is treat that less as an exercise in explaining Detroit than trying to excavate just
a bit philanthropic role. It just seems to me that the
seminar is really focused on how philanthropy can, should, will engage the really difficult issues of our time and I think there is actually
something to be learned from sort of the collective
work that philanthropy and Detroit has done. So I’m gonna focus a little bit on that, but do I have a clicker? Do I move things when
they should be moved? (participants talking off mic) Maybe it’s not on the screen. Are the slides on the screen? You have them in front of you, and while she is teeing them up, all sorts of disclaimers. I do not draw for a living. These are cartoons. I actually can write
in complete sentences. There is a bunch of disclaimers
that need to go along. But what I’ve found is that as sort of conversation starters sometimes these can be useful. And it is one of the hazards I think of looking at them unexplained
because they’re short hands and they’re simply points of departure for larger conversations. Do you want me to click? Great thank you. I’m happy to have you click it, but… – [Joel] Thank you Ryan. – Thank you so much. Thanks a lot, okay. So if I do that, that, that, okay. Let me just start with a
truly impossible drawing, which is the depiction of what
Kresge in its current form is what it does. I’m just gonna breeze
through a couple of these just to kind of ground
us just a little bit. This is simply to say that
Kresge has focused, as Joel suggested, on issues
of urban opportunity, urban equity, and over
the last number of years, we’ve tried to evolve our
foundation in a way that make sure that each and every
one of our bodies of work takes aim at advancing
opportunity and equity in cities. That’s still a very broad remit, but it’s not rural. It’s not any number of things. And we felt that it was really important to make sure that the centering
point of all of our work was that, it’s the result we
have both place based programs which tend to be in Detroit,
Memphis, New Orleans, a handful of places as
well as one or two things I’ll talk about. We have a suite of
national programs focused on human services, higher
education, health, environment and arts and culture. We have a very active
social investments practice. Those of you who know
this field know that this is really a hot topic and
immodestly I would say I think actually Kresge’s is
the finest social investment practice working in philanthropy right now very aggressive, very bold,
and really fully explores the possibilities of
putting non-grant capital into play to advance
programmatic initiatives. We don’t have a social
investments practice just to have glossy,
fancy new instruments. They are there to advance
what we are otherwise trying to accomplish. In the wake of the 2016
election, we need to be political but we just felt that there
were enough assaults on some of our values that
we needed to create a short term fund to take aim
at some of the anti hatred… It was only about four million dollars. It wasn’t a big amount. But it was an opportunity
for us to try to respond in real time to some of
the threats coming out of Charlottesville and other things. And then underneath all of
this, the crazy machine, it actually works, if
you actually track it, you can actually put
something in it one end and it comes out the other. Never mind. I have no idea where I
came up with this machine. It’s the goofiest thing. It’s sort of a poor man’s
version of DAR Rivera (all laughing) in the art institute. But the importance here is simply that I’ve tried to advocate with our board that over the longer term,
how we work is almost as important as what you work on. You never wanna substitute
method for substance, but on the other hand,
the substance changes. Our environment program has changed. Our health program has changed with the Affordable Care Act. All of these bodies of
work end up morphing, but if you can work in
a way that is consistent and has sort of integrative integrity, that actually works to reinforce another. Whether it’s not being afraid to take some field leadership, working
across disciplines, using all of your tools
taking proportionate risk, and partnering with others
and we can come back and talk about all these things. So that in a nutshell
is sort of the Kresge we are working with and it’s been both a driver of and a reflection
of our work in Detroit, which is why I put it up on the screen, because I think how we
have worked in Detroit I think mirrors what we are trying to do in this drawing but it also works in the other direction as well. Let me scroll then back into
just a little bit of history. David this is one of the
drawings that I told you about. When I arrived in Detroit in 2006, we were in a period of enormous optimism. We had just elected Kwame Kilpatrick, a very hip, smart Bill
Clintonish in terms of just photographic memory
and facility mayor. And for the first two
years, it was clear that our role in Detroit
was largely to help the mayor be successful. Then 2008 came and we
get the Great Recession. You get the housing foreclosure crisis, which hit Detroit with a real vengeance. And then on top of that, we
had the auto bankruptcies which a lot of people tend to forget about that both Chrysler and
GM declared bankruptcy, and Ford was within
days of doing the same. And Mayor Kilpatrick was indicted, and there’s a whole another story that is just fascinating
actually for someone of that kind of talent to fall so far. It was both tragic and
monumentally disruptive to our political ecology and Detroit. And so we essentially
had the private sector in a bunker, because the
whole auto supply chain was just shut down. They couldn’t do charitable giving, they couldn’t do anything. So they were kind of in a bunker. The public sector was
essentially in the penitentiary, and then the non-profit
sector was just hanging on by a thread. It really felt philanthropy
as sort of the last standing sector to try to figure
out whether it really was prepared to do something. And in previous conversations here, we’ve talked a lot about
the sort of this drawing and how essentially we took
these nine bodies of work and sort of made work
plans out of each of them, but what this essentially
represented was a response to a sense that there was
no coherence in Detroit, there was no sense of strategy in Detroit, and people were sort of
scurrying in all directions. I think if there was
one emblematic moment, it was when in 2008-09, when I got a call from
the Obama administration, guy named Eric Douglas was
in the president’s office and basically said President
Obama just released us from a cabinet meeting. And in that cabinet meeting,
he said I will not permit Detroit to become the Katrina on my watch. So you got to be in
touch with those folks, figure out what’s going on. Well again, Kilpatrick is in jail. We’ve got three or four
mayors within a year, based on the kind of the
goofiness of our governance structure in Detroit. And he said, so we’d
love to be helpful Rip. What should we come and announce? And I thought that’s… (all laughing) I said, what would you
like to come and announce? (all laughing) Is there anything you have in mind? Money, whatever? He said, we really can’t
make any sense of it. We don’t know what’s there,
we don’t know what’s working, we don’t know the leadership structure. We don’t know if there are
investible propositions. So essentially this
drawing came out of that. And essentially what I
tried to do is to identify bodies of work that were being lead well by some entity or another
that were in motion, that were actually beginning
to show signs of promise that had a real capital a rate behind it, and which collectively
might add up to something. So you’ll see in this transit education, green neighborhoods, central
corridor development, small business development,
a whole suite of things. And when Joel refers
to the building blocks of the sort of the pre-bankruptcy period, this is really what it was. Because we took this, turned it sideways, and created work plans for
each one of those things, and just went about working the plan. And I think, I’m actually almost surprised when I go back and look at it, because every single
one of these played out. Every single one. I think there was this
level of intentionality but there’s also lots of other factors and I don’t mean to
overstate philanthropies. Lots of people came to the table, Quicken Loans, decided to move
its headquarters downtown. We now have 14,000 Quicken
Loans employees in downtown. So there are lots of other people who over the course of 2008-2013
contributed to this. But I say it just sort
of as a way of explaining what we then had in place to Joel’s point when the bankruptcy hit. Because then in 2013, Governor Schneider, after working pretty hard with
the successor administration to Mayor Kilpatrick, Dave being mayor, being served for four years and become elected, sort of
the finally elected president rather than interim appointee. After a number of difficult
months trying to work out with the City of Detroit how
it could avoid bankruptcy. It just became clear
that the city’s finances were too severely compromised
for anything consensual to work out. So Governor Schneider
appointed an emergency manager, guy named Kevin Orr, who had
run the Chrysler bankruptcy, transcendently gifted
guy, who not only was just a frustrated lawyer
and a frustrated sort of bankruptcy workout specialist, but also had family in Detroit. An African American guy
who had a different sense of what the possibilities
of Detroit could be having sort of seeing it
through his family’s eyes for many years, but essentially
I put this up because the normal story about
the bankruptcy was it was all about the pensions,
long-term health obligations the long-term debt. That was a huge nut to crack. It was a 21 billion dollar,
18-21 billion dollar problem and so we had to figure out
how to reduce healthcare obligations, how to reorder the pensions. That’s where the grant bargain came in. How to satisfy bondholders
who held all of this paper against the city and who were dead serious about foreclosing. There was just no question
that these were people who were not gonna think
kindly about the citizens of Detroit and sort of wait their turn. These are people who,
something called Sequora, I have no idea. I won’t even go there. They were tough people. They were the people who
were sort of seizing ships in the Atlantic ocean to
get their debts repaid. I mean they’re a tough group. – [Joel] Vultures. – Oh they were tough. The threat against the art was real. The threat the against other
city owned assets was real, and so that whole adjustment
was very complicated. But that’s what Orr did. And he did it well through
the aide of a mediator and getting us all to come to the table. But the second part of the bankruptcy was almost as elusive. And that was we simply couldn’t
put the books in balance. We just couldn’t get the
costs and the revenues of the city to balance out
for all sorts of reasons you may imagine. And this is what Governor
Schneider had worked with Mayor Bing to try to do, and they couldn’t do it. They entered into consent orders but union contracts, lack of tax payers, all of this sort of things
just sort of conspired. And this is really where Orr went to work. And he basically completely
restructured the balance sheet. Not just in terms of long-term balances, but the short term cost
revenue calculation and we can come back and
talk about any of this if you’d like. The real point of this
slide though is to sort of lead into the purpose of the
conversation this afternoon, which is the bankruptcy accord led by justice named Steve Rhodes. During the bankruptcy proceeding, essentially said I will trust
you to adjust long-term debt in a way that works, one way or another. And I will basically sign
off on whatever you can do if it’s at all consensual. I actually trust Orr
and the new Mayor Duggan to get the city’s costs
and revenues in balance, but what frankly, I’m not
sure I do trust the city to do is to put in place the
long-term building blocks of stability and health. Because if we reconcile the
debt and get the balance sheet right, we’ll be back here in two years unless you have in place a very clear plan for investing in the
city and making sure that the quality of life issues of all types, sort of work to stabilize this community and point it in the direction
of long-term health. So I was actually asked
to testify along with a guy named Roger Penske,
one of our leading corporate folks and Dan
Gilbert from Quicken. Judge asked Gilbert whether
he was really serious about maintaining his
investments downtown. Penske had had a 40 year
history of investing in the city including the rail project,
it was very helpful in getting off the ground, but they wanted to know from us, the judge wanted to know from me whether the kinds of building blocks that we had put in place
prior to the bankruptcy were simply a stabilizing scaffolding, or whether these were ways in which we perceived over the longer term we could be helpful to the city. So we actually during my
testimony drove Sequora nuts. Walked through a version of this drawing, I had much more complicated version. Because what I tried to suggest to the– – [Joel] Much more complicated. – This was really a crazy drawing. They put up the drawing and
Sequora immediately objected. They said what is that? It’s a drawing, Judge
Rhodes said to our attorney, Orr’s attorney, what is that? He said well it’s actually
a device to walk the witness through what’s going on. He said but what is it? You know they just couldn’t, so this is actually an exhibit
in the Detroit bankruptcy, this drawing, complicated
version of this drawing ‘cos it had all the annotations of all the things we had done. Anyway, but the point, I’m
sorry the point is that what I suggested to the
judge was that rather than the particulars of what
we had invested in, community lending, rail, whatever it was, that whatever I thought
from his perspective might be more important was to be assured that we would continue to
play a role that helped sort of balance the civic ecology. So we walked through these six roles and the lawyers sort of both asked me where we had been, and
then asked me to sort of project what that might
look like post bankruptcy. I think the last time I left you all, we had sort of scrolled
through lots of examples of what had happened
pre-bankruptcy along this frame, and I had suggested where we might go. What I thought I would
do for the time we have is talk a little bit about
what we actually have done and again back to that initial
drawing of the nine modules, I think the point is we
have tried to project out where we want to end, and there’s some fairly
big goals as you’ll see, but we’re actually beginning
to see things line up. Capital, infrastructure
capacity, problem solving capacity of the neighborhood level. What I’d like to do if
it’s okay is do that and again we can return to any of these or you can stop me on any of these and talk more. So the first role is the power
of philanthropy to table set. It sounds so basic, what does that mean? You get people together,
you can be involved. It actually involves trying to identify some of the most intractable
issues a community faces and simply is stuck on. So in the case of the
pre-bankruptcy era, it was land use. Mayor Bing could not talk
about all of the blight and the abandonment without
some related conversation about having to relocate people, about having to sort of
abandon neighborhoods, favoring some over the others. And so make a, I won’t
even tell the story. Essentially he came to us. We developed a process
that was both community up and expert down, that
sort of met in the middle. That created land use framework
that it has essentially endured to this day, but
post-bankruptcy what I suggested to you last time was that I
thought a similar table setting function to build out an early
childhood development system. Our early child development system in Detroit is non-existent. Headstart is sort of chaotic. Informal providers have no support. There is no quality certification. There’s no training. It’s really difficult. When you have all of these
kids arriving at the school house door, not ready to learn, you can imagine the
consequences for the K12 system, which is a zone problem. But we thought if we are gonna
enter the education space as a philanthropy maybe
this is what we could do. I didn’t know last time
I talked to you was that, oh this is a tough one isn’t it? If you look at your page,
it’s not quite so bad. What we have undertaken
is to work with the Kellogg Foundation, which
is based in Western Michigan and had really not done
a lot of work in Detroit. They had tried to be
helpful around the edges, the grant bargain and other things, but they had really not found
any signature body of work in Detroit, and we agree about a year ago, shortly after our last
seminar that it would be really terrific if the two
of us could collaborate on a process to ultimately
evolve a framework to come at issues of
early childhood education in a much more systematic way, and begin the process
of feathering between early childhood years and the K12 system. And so we established a stewardship work, not particularly interesting
but it ended up being very political, very hard,
who sits at this board. Is it just foundations? No clearly not. It’s providers, it’s the public sector. It’s banks who are involved
in early childhood. It’s a 25% board deeply representative. We then kicked off a very
elaborate community process that lasted almost the
better part of a year. Kellogg is very good at
this kind of process stuff. They believe deeply in community empowerment and community voice. And they helped us structure
something that touched thousands and thousands and
thousands of folks in Detroit. Parents, young people, providers, funders, the whole works, out of
that created strategy teams, out of that it became the
sort of iterative process where we would come up with ideas, the strategy team would
come up with ideas. We then go back into the community. They’d react, come back, and
back and forth, back and forth. Ultimately we came up with this,
one, two, three, four, five six part strategy, and I
won’t walk you through it, but suffice it to say it
begins having the sort of the skeletal impact of what
a system should look like. It’s attending to the
physical infrastructure needs of early childhood providers. A lot of these facilities are
in desperate need of rehab and code upgrades,
building new facilities, doing training for the providers, trying to figure out networks
among the family care providers so that they can
begin learning from one another, creating quality programs. You guys in North Carolina
have actually done way ahead of us, and we talked
earlier about the possibility of our going to school
a little bit on what North Carolina has done
but we have already the little clouds on the
right of the investments we’ve already made. So we’ve really tried to
put this on full throttle, and began investing in a
number of these imperatives including we’ve set up
a revolving loan fund, for a facilities upgrades. A number of the providers
have already taken advantage of this, and
so far we’ve had sort of short term bridge loans,
we’ve had longer term more elaborate build outs. And as I’ll talk about
in a couple of minutes, we’ve also determined to
create the first very high quality early childhood
center in the city of Detroit as well as tying in Headstart
and all the other stuff. So that’s the first rule. Sorry to go through all of this so quickly but maybe not quickly enough. The second rule was trying
to strengthen civic capacity and again these things
sound like such buzz words and at some level, they are. But what I am trying to suggest
here is just strengthening the capacity of the community
to solve its problems. And it’s tough, and in the sort
of this pre-bankruptcy era, this was a municipal problem. It was a community
development finance problem. We didn’t have self help in Detroit. You needed the muscle to
deliver on the potential of all of this good
work going on community and sort of ramping it up. So we spent a lot of time
in the pre-bankruptcy investing and bringing CD05s into Detroit, bolstering community based
entrepreneurial infrastructure. Helping the mayor’s office
build up its capacity. And more than anything, the look forward I think is sort of a shorthand
for where I hope Detroit will go because we’ve got a
pivot into the neighborhoods. A lot of this work on the left hand side the pre-bankruptcy was just
getting the basics right. How do you get us to the
hall that can solve problems? How do you get CD05 community
that can solve problems? How do you place external
talent and mix it with long time talent to create
something more powerful but now the question is
really how do we make sure that neighborhoods really begin developing the kind of problem solving capacities that they need in order to be successful? And it’s a classic sort of
pivot to the neighborhoods. In many ways, the 2008-2013
period was stabilizing the core. It was making sure that
downtown, the central corridor, had tax space, had a real
estate market that would begin to make sense. And I think in the
process, there began to be sort of an emerging concern
on the part of neighborhood residents that the neighborhoods were just as an afterthought. That this was all about
corporations downtown and small businesses
along the major corridor and building rail lines
and all of this other stuff that we did. And so the next, please
don’t leave the room on this next drawing. This is (laughs). Think about this as sort of
an impressionist painting. Forget about the details. All I’m trying to, this
is actually the drawing for our Detroit team. This is their strategic plan sort of. They’re much smarter than that. But essentially what we tried to depict, I tried to depict on this
drawing was sort of the whole circle around of how community capacity, evidences itself and how we
might be supportive to it. So it’s everything from making sure that people working in early
childhood are better organized. How people working in the
arts are better organized. How block clubs and community
based informal organizations networks have the supports they need. And then over on the left hand side, in what is that blue, are sort of our more formal
programs that are taking aim more at community
development related capacity, community finance capacity,
community project building capacity, and what is happening I think is the realization that these
things are completely inter-connected, that if
you just piecemeal out this stuff and continue to piecemeal, you’ll drive neighborhood folks crazy. And so the possibility of
working the other side up. Working from neighborhoods up,
saying in your neighborhood are there ways in which arts capacity or community block club
organizing capacity early childhood capacity
can sort of be held in a more sort of
integrative holistic way. And I think we’re
beginning to make progress. This has I think been
an important signature of Mayor Duggan, our current mayor. I think he believes it’s
pivot to the neighborhoods, will define his success,
and I think this is our way of trying to be helpful. The third role that philanthropy
played pre-bankruptcy was to do classic risk remediation, trying to figure out
whether there were discreet transactions if the market
simply wasn’t prepared to enter. And in pre-bankruptcy
Detroit, it was everywhere. The markets just had
no interest in Detroit. It was just too hard. Residential markets, commercial markets, industrial markets, you name it. Small business lending, the whole deal. We went about trying to
peel away the first level of risk for a number of emblematic moves. So the first one, Woodward
Corridor Investment Fund, we had this long pipeline
of projects along the major arterial of Detroit that runs
all the way from the river, all the way up to the city
boundary at eight mile. – [Joel] You might say a word yours role in building that Carter. – Yeah, okay let me come
back to that in just a moment because of this is sort
of related to that. The Woodward Corridor Investment Fund was exactly what Joel suggested. We had all of these pipeline
projects that couldn’t close. They had 13, 14 different
sources of capital. And there were still gaps. And unless you began sort
of stabilizing the quarter with projects that actually made sense and began signaling to the market that there was a market there, and you actually could bridge
sort of the deep subsidy needs and sort of got a flywheel going, we were stuck and we got a
lot of criticism for this. Why are you so focused on this inner city and the businesses but you
needed to start somewhere. You needed to kind of get some traction and begin the market coming back. So part of this was the investment in the rail line Kresge took– – [Joel] The whole story. – Yeah whole story will
get me all side tracked in Pearly Walter, but it became clear that having a regional transit
system was essential. I’ll talk about that in just a second. But that the first leg
of that had to be again starting somewhere and it was
to try to run a street car from the base of Detroit all the way up to the midtown area, because
it wasn’t so much that that would relieve traffic
congestion along Woodward. There weren’t very many cars on Woodward ‘cos there weren’t very many businesses and weren’t very many residences, but that it would become
the first step in a regional transit system and as you all know, I don’t need to tell you, it’s an enormous land use play. The minute you have fixed rail in a system look at any city in America,
the investment has followed, and in the time since the
rail has been introduced we have had 13 billion
dollars of investment along that corridor. It’s phenomenal. It raises all sorts of
questions about displacement and gentrification and all that stuff that we can talk about, but it did what it was intended to do. And similarly access to fresh
food was a huge problem. There were no fresh food grocery stores in the entire city of Detroit. Or there were a couple of predatory ones that were just really dreadful. So Whole Foods came to us. And asked if we would
be willing to subsidize one right in the center of the city because they couldn’t pencil it out. We agreed to do that sort of
through a green grocery fund with the idea that wasn’t
just a subsidy to Whole Foods. It was again getting the
flywheel going to demonstrate that you actually could
make sure that fresh food at affordable prices, Whole
Foods is not so affordable, but affordable prices to
the residents of the city and actually the great good
news story out of this was that I got a call from Walter Robb the cofounder of Whole Foods,
three months after Whole Foods opened, and he said in
the first three months, we have surpassed our two
year revenue projections. He said it is one of the
most successful Whole Foods in the United States. They’ve then since moved it
to the south side of Chicago, same model, and into New Orleans. So again it’s actually, and
I said, well that’s great. So that means the loan we
gave you, you will pay us back and he said, not exactly. (all laughing) Anyway, I’m sorry that was
more time than I intended. But that the point was
that taking a first layer of risk on transactional
things to get things going struck us during this building era, as a really important thing. What I suggested last time
was that the pivot here, would be take that same
sort of predisposition to try to derisk transactions
to neighborhoods, to entire neighborhoods
to say, markets don’t work in neighborhoods either. So whether it’s an educational market or a commercial corridor
market or a housing market or an open space market,
these are all seen as too risk to invest in,
so how would you do that? What has happened over
the last year is that we have really build out
one strategy that applies in a neighborhood in Northwest Detroit. This is called Livernois
Six Mile District. It’s a very complicated part of town. It sits right next to some
of the most affluent homes in the city of Detroit. But it is largely consists
of a residential stock that really is right on the edge. It’s not the kind of abandonment you see in all the photo journalistic
essays of Detroit, but it’s tipping. It’s clearly gonna go the
old avenue of fashion, which was the great African
American shopping center to the north and to the
west of this district, had been disinvested in
over 20, 30, 40 years, on and on and on. But there is stable housing stock, and what we basically said
is why don’t we try to aggregate as many resources,
as many different kinds as we can in this geography
and see if we can build out a neighborhood of opportunity. There are lots of assets
in this community. People well organized in block clubs. You have something called the
University of Detroit Mercy on the east side of this area. Marygrove College on the west side. A new open space park in the middle. A program to stabilize
neighborhood housing out of the mayor’s office, that’s the Fitzgerald, on and on and on. But the story I wanted to
tell you quickly here is of Marygrove College. Because I think it becomes
emblematic of what it might mean to sort of take a risk,
which is sort of larger than just our Whole Foods or even our Woodward Corridor Loan Fund. I was approached about two years ago by the president of Marygrove College. And Marygrove College is
a 100 year old institution run by the Sisters of the
Immaculate Heart of Mary. They’ve run it for a 100
years and for a 100 years it’s been the cornerstone
of this neighborhood. For all practical purposes, it’s an HBCU. It’s not formally an HBCU but most of their students
over the last 40 years have been African American women who either are going into
nursing or into teaching. And she said, we’ve gone
through a tough time. I’d love to get the
foundation community together, ‘cos we really need your
help in bailing us out and giving us some bridge
money to a new business plan. Our enrollment has gone
done from 1800 down to 600. We can support, on and on. So we said, she made a presentation that was focused mostly
on trying to use their graduate courses, online graduate courses to be an easy revenue generator. The point though was is that, we agreed to provide them
some quick stabilization money to get them through
the next couple months. While we took a look at their books and just tried to understand what is that we were dealing with. (laughs) Oh god, it was just a nightmare. Oh my gosh, it’s just a nightmare. The more we peeled, the
more it became clear that this was completely unsustainable. There was no way in the
world that this could work. They had an eight million
lien on the real estate by virtue of having made
a really ill-considered entered into a really ill-considered loan with one of the banks. They had a federal
department of education lien. They had the, Sisters
themselves had pledged their pensions against
some of these debts. Oh my god, it was horrible. So we sort of were faced with a choice of is this too horrible or not. And we concluded that it
may have been too horrible. But this was too important
that having this kind of anchor in the community of
deep symbolic importance to the community, faculty at Marygrove live in the neighborhood. Kids have gone through
this institution for years. And it sits in the heart
of this larger effort to restabilize this critical
neighborhood in Detroit. A long, long, long,
long, long story short. This is where having a
social investments practice comes in handy. We grabbed the guy who used
to do all of the complex transactions for JP Morgan
Chase who’s on our staff. And he just began doing workouts. He got on the phone with Comerica Bank and started hammering away, trying to see if we could get their loan down. We posted a letter of credit
for the Department of Education so that they wouldn’t freeze
all of the scholarship money. We took out the lien that the county had. So all in just to stabilize, we put in about 16 million
dollars in the course of less than a year. It was really fast because
things were not working well. – [Joel] Your staff did this. – Yeah we did all this, yeah. Again this is part of maybe
a larger conversation. The speed with which
everyone needed to move was so fast and the complexity
of these relationships with banks and the federal
government and county was so complex, we didn’t
feel that it would’ve been right to draw in our foundation colleagues and frankly they weren’t equipped to help. I don’t know what we could’ve
done to ask them to help. In a moment, I’ll tell you
why I think going forward that’s different, but in
the moment it was just too much, too fast, too hard. And so anyway we ended up
working out all of these debts, taking on the debts ourselves. And then creating a conservancy,
a non-profit conservancy to essentially hold the
land and essentially remove the possibility that any
of these lien holders or creditors of the institution could come and sweep in, this is
about a 55-acre campus. And put a call center or something in. We had all sorts of
proposals for what to do. I mean people wanted to put
another Whole Foods up there. They wanted to use it as a call center. They wanted to have it
be a distribution center for someone or other. What we’ve felt very strongly was is that for all the reasons we felt
it was important to stabilize we felt it was important
to sketch a vision for the future that was
consistent with the legacy of the institution. So we worked very closely with Marygrove and with the Sisters to say
what might that look like. And what we came up with was a construct that is
essentially what we call P20. Pre-K all the way through graduate school, and whether we might assemble
those functions on campus. It became pretty quickly clear, it became clear pretty quickly that Marygrove as an undergraduate
institution couldn’t survive. It’s just that market
was moving away from it. There was just, we couldn’t
do much about that. And that is obviously
the plight of so many smaller arts colleges. So they closed and we helped
do all of the severance payments to the faculty. We made transition plans
for every single student. So every single student was
placed in another institution. I’m sorry I don’t mean to
be self-righteous about it. But it was just complicated. It was really hard. But it was really important. These were real faculty, real staff, real students who they
didn’t contribute to this. And so it was important. So if you took that out of the equation, the question was how
do you use this campus and it’s a beautiful campus. It looks just like a Duke wannabe. It’s beautiful, old turn
of the century buildings and grounds that have been
reasonably well maintained. Lot of deferred maintenance
as you might imagine. And so we began going to work on that. The first thing we knew
we could do would be to take the early childhood
work that we had knew had to be done to creating
a new center sort of for those of you who know sort
of an Educare kind of model. Wraparound services, family engagement, community connection, and located here. Build a new one here. Very expensive, very complicated, but there’s no reason in
the world we couldn’t do it. Make sure that Marygrove’s
graduate program had enough breathing spae to be successful but then what was in the
middle of the K through 12. And there we spent a lot of
time but I think the solution is potentially for
Detroit earth shattering, which is we were able to get
the Detroit public school community district to
partner with the University of Michigan or vice versa to create a K12 school
that will essential be the locus of the University of Michigan’s education teaching curriculum. They’re gonna move big chunks
of their education school from Ann Arbor on to site. And essentially what they’re gonna do is create sort of a medical residency model in which their graduate
students will have three year tenures and cycle through the same way a medical school graduate would. At the same time they’re
teaching undergraduates how to be teachers and
presumably there will be sort of a continuous flow throughout. The School of Education is led
by this truly visionary dean Dean Moji, and I think this
sort of nothing short of a minor miracle, because then the Detroit Public Schools
because it was so compelling, and the University of
Michigan really has no big presence in Detroit. It has lots of little
presences in Detroit, and President Swizel
basically viewed this as his, not his, I don’t mean to
personalize he viewed it that way but a huge legacy move on the part of the University of Michigan to
contribute to the revitalization of the City of Detroit. And because that was
such a compelling case, the Detroit Public Schools
ended up sort of throwing out all of their normal regulations. Principal selection, staff selection, the ability of local kids
to attend the school. Normally this would have
to be open to anybody in the city, which creates
a creaming problem. You just get all the most
talented kids across the city. This is going to be a neighborhood school. It really ought be on us. We’re gonna start in the
fall, a year from now with K and nine and then we’ll move up. So we should have it being
fully functional within three or four years. Sorry to take quite so long on this. But it seems to me this is a huge risk. I mean when you think about
a loan to Whole Foods, it was important actually. It sort of unleashed all
of this other energy. But this is a big, big bet. Our board at first was very uncomfortable. I must tell you. I have an unbelievably
sophisticated board. This was harder than the rail project. And this was harder than the bankruptcy. No question about it, because we are not school operators and nor will we be, fortunately. But there was a lot of
concern about whether we have the competence to pull
something like this off and at the very front
end, it was not at all. No one dreamed that
Michigan and public schools would get together. Would you have a charter, would
you have, what would this be and so to their enormous credit, as we began building this out, stabilizing the campus, turning
it over to the conservancy, I think their confidence grew that we actually could figure this out and they’ve give us a commitment
of up to 75 million dollars to put into this over
the next number of years. – [Joel] Is this the board of (mumbles)? – I’m sorry, the Kresge board. Excuse me, Kresge board, pardon me. I should’ve been clear. So that was a huge lift for them. And again, I’m sorry
to take quite so long. I can come back to any and all of this if you would like. – [Joel] What’s the role of
University of Detroit Mercy? – See that’s a very interesting question. Detroit Mercy sits a mile
to the east of Marygrove. Years ago the nuns were very uncomfortable with the boys being
over here and the girls being over here, and so
there are no through streets. They won’t let any streets
run all the way through. It’s very funny actually. I love the symbolism. One of the things we’ve done, you see that little green thing? It’s sort of a commons project. We’ve actually created a
sort of a pathway through between the two schools. It’s surrounded by housing,
a new park and the like. But it would’ve made all
the sense in the world Joel for a Jesuit institution
to work with the Sisters to figure out joint programming and we spent a lot of
time early on in this trying to make that happen. Couldn’t make it happen ‘cos I think largely ‘cos Detroit Mercy is also having its problems
and this is all they wanted is another headache to
be allowed a struggling school for women. And its not just women I should say. Marygrove was coed. It was predominantly women. I’ll keep flipping through fast. And we can come back all right? And then this one I can’t do more quickly even though this is complete heartburn. The idea of serving as
a guarantor of value is a fancy way to say
could we as a foundation invest in the kind of
public infrastructure that would signal to the private sector that this was a place to invest? So the riverfront Kresge
put in the first 50 million dollars of a 250 million
dollar river walk reclamation over the course of 10 years. We did the same thing with the rail. We put the first 50 million dollars on a 200 million project. And those are the kinds
of things that permit Quicken Loans or Blue Cross
Blue Shield or even GM to say this is a place where
our employees want to be, where there can be vitality. And this was a hard one
to convince the court of because they said these
are such major players. How do you sort of take
this to the next phase, and there the answer was
what I talked about earlier, was the connection of the
rail line to this larger regional system and indeed
as part of the federal government support for
the street car line, they basically required
that we create a regional transit authority with the
ability to tax and govern a regional transit system, but it had to be done
through the approval of all four counties involved and the city. We created a board with
two representatives apiece from Wayne County which is Detroit, Oakland County which is a very affluent suburbs to the north. Macomb County which is
sort of more working class to the east, Washtenaw County,
which picks up Ann Arbor and the city of Detroit. And so we almost immediately
after the bankruptcy began working on what a
regional transit system would look like. We were approached a year ago again. I think this is all since I last saw you, by the Wayne County executive who said I have met with my, and these
are the chief executives of the entire county. I’ve met with their colleagues. There seems to be an
appetite for solution. Let’s go for it. I’ve skipped over that. We actually did take a
plan to the voters in 2016, and it was just smothered
by the Trump wave in our northern suburbs. It ended up losing by a
tenth of a percentage point. But it was too much to overcome. I think a sort of conservative
way that sort of rocked Southeast Michigan. So we thought because that was close and because we are in sort of a new era, let’s go back, let’s find out
what people’s concerns were. Let’s do it better and take it back. So the Wayne County executive said to me, I think if we tweak this
plan that almost passed, we can get it passed and my
colleagues think as well. Can you give us some support to go out and essentially do community meetings, figure out what the inputs would be, figure out how to rejigger the system to meet some of the concerns. And we did that. So we gave Wayne County three
quarters of a million dollars and they took on nation’s
leading transit planners and they developed a whole new plan, which is actually on the right here. Again please don’t
worry about the details. It’s too hard. That actually is the
plan that we developed. It’s a combination of
bus rapid transit along major arterials. I’m sorry, it’s one more Joel. That one, that one. And basically we felt that with this plan, we had when they brought it back, each of the county
executives representatives, we had a working group of
the executives assistants. Each of them signed off. And so we thought we were good to go. That this is terrific. We’ve got the county executives, who had been a little bit
lukewarm, the first time around, onboard to a plan that
was quite different. Much more flexile, anticipated
next generation technology scope down, sort of the fixed
rail, fixed line issues. We thought we had covered the bases. And then woke up to a press
conference shortly thereafter from the Oakland County
executive El Brooks Patterson. I’ll just not say anything more. Really dreadful guy. (all laughing) Basically saying no,
we’re not gonna do this. And the Wayne County executive,
guy named Morgan Evans really fine county executive, said what? I thought we had an agreement. We didn’t have an agreement with me. We had an agreement with
your chief of staff. Well not with me. Then the Macomb guy who doesn’t
have independent thought, this is on tape isn’t it? Who is also problematic,
sort of went along. All of a sudden, we were
faced with a situation where we could not force through the Regional Rail Authority
placing this on the ballet. And so this is a failure. We have not been able to deliver on that. I don’t think ultimately
it will be a failure. I think this plan coupled
with new leadership in the county means that
it will get deferred for a year or two or three. But it comes with all sorts of complexity. The authority of the regional
transit authority expires. We’ll have to renew it. It costs money to keep the
region transit authority going. We are the only source
of support for that. But I wish I could put
on the board something that was sort of another
one of these really feel-good results. This is not one of them. This is just ridiculous
that this region of three to five million people cannot figure out how to do public transit. It’s a disgrace. – [Joel] What are the
consequences of that? You said we are a failure. – One consequence is that
you’re not even competitive on the Amazon bed. And they told us that. They said there’s actually
a lot about Detroit that was very attractive. You’ve got the University of Michigan, you’ve got Michigan state. You’ve got this interesting talent base. It’s sort of this
dynamic sort of (mumbles) a lot of young people want to go there. You’re on the border. You’re right across the border
from Windsor and Canada. It’s the largest international trade call. They actually said, you guys
are actually a lot closer than you think, but we can’t go somewhere where there is no regional transit. We simply can’t. There are probably other
reasons in philadelphia or Austin ultimately
will be too attractive, but that’s a very tangible
consequence it seems to me. And even when you think
about the ability to attract talent over the long term, what
young person or any person, but what young person
wants to be in a region where you have to own
a car to get anywhere? And we’ve actually seen
that with the M1 line, that a lot of young people don’t own cars. They live downtown. They Q-line, it’s called the Q-line, they Q line down to their job centers. It’s common sense and every
other region in the country has figured this out, except Detroit. So that’s why we are gonna keep at it and we’ll make it work. – But in terms of the
other things you’ve been talking about, to what
degree does this really make it more difficult to
achieve the other things that you’ve outlined that
are working at this point or seem to be. – I think the biggest consequence
is the inability to fully connect inner city
residents to suburban jobs. We have buses but I don’t
know if you all may remember a couple of years ago,
there was the Walking Man who was the focus of
a number of scenarios. This is a guy who walked 13 hours a day to get to and from his job. He slept three hours and
he had an eight hour shift, and he walked 13 hours. It was crazy. It doesn’t even seem possible. But it was again symptomatic, emblematic of how hard it is to get
from the Livernois Six Mile neighborhood up to a Best
Buy or to a health system up in the burbs. You’ve got to do two or three transfers. The suburban system
doesn’t come into the city. City can’t go into the suburban system. The connections are goofy
which is why the red lines and the deep blue lines are so important. You just got to create these connections. So I think that is the
single biggest consequence is that we’ve got to figure out, you can’t employ all Detroiters
in the city of Detroit. No region works that way. We can do more and we are doing more but you’ve got to make sure
that they’re connecting particularly in a region
so dominated by these big auto and defense contractors
and they’re all sprinkled in the northern burbs. So you’ve got to figure
out a way to do it. Plus you can’t, any of you
who’ve been to Detroit lately, how was the train ride
from downtown Detroit to the airport? (all laughing) There is none, it’s crazy. – There’s none. – There’s none. You got to take a cab that
costs gazillion dollars. It’s nutty. There are lots of sort
of small tissue things that are hard and then there
are lots of things that are really big, and I think the
big one is the connection of Detroit residents to jobs. And vice versa. We don’t just have a region that flows. – You want to finish up. – I have got to finish up don’t I? – We’ve got about 15 minutes left. – I will just suggest
what’s in the other slides, without going through them. Let me give you the two second version. Again I’m happy to talk
more if you’d like about it. The fifth piece was sort of
acting as seller pre-bankruptcy we just felt it was really
important to get talent resources, attention, into this city. Post-bankruptcy to some
extent trying to get Detroit to become part of
a national conversation about the future of urban America. So what have we learned? What have other places tell us and we’ve actually launched a project that I think is quite interesting in which we’ve been able to convince
the urban institute, the Brookings Institute
Aspen and Living Cities to join with us to go into
communities across the country, ask them what they’re
working on that is hard. And whether national
resources, technical resources, policy, research, whatever it might be, might be helpful to them and we are right in the middle of that. Actually this is not a bad
slide if you want to read it. I think it’s an interesting example of how we can increasingly serve as
a platform for some of these national resources to land in place a little bit more effectively. And then the final one, I
can do this really quickly is that I think one of
the sort of most venerable of philanthropy roles is
just helping steward fragile colleges the things that
are simply not supported by the market, no matter how
much we would like them to be. Arts, food systems, human service systems. This is a classic philanthropic role we spent a lot of time
building up the arts ecology. Pre-bankruptcy, I had
projected that maybe the human development system in
regional food systems might be the next generation and this is again another
complicated slide, but this is our human services strategy which is increasingly
focused on economic mobility. We are trying to both identify emblematic human service organizations
working in multiple dimensions to help people advance into
the economic mainstream and increase in the generational mobility. And we’re also trying to figure out how constellations of organizations working at the grass roots level
can sort of work together to make sure that people have the supports they need to be viable. And we’re gonna try to
land this in Detroit. We do this nationally. We try to land at Detroit. Anyway I’m sorry to take quite so long. But those were the sort
of the six bodies of work and I guess I just think
again the takeaway is I think sometimes
intentionality doesn’t work but often it does. If you are just really clear
about where you want to head and what your capacities are and each one of these
has partners I should say each one of these. We’re working with the city. We’re working with other foundations. We’re working with a private sector. So you got to get comfortable
with working across lines and across particularly sectoral lines. So I’ll stop there. – I have a certificate
with which to present him. It says certificate of appreciation presented to Rip Rapson, President and CEO The Kresge Foundation
in recognition of your important contribution
for the past six years to the foundation impact research group presented on the 10th day
of October in the year 2018 and signed by me. (all laughing) (audience applauding) – I need to say that this is
Joel’s very polite diplomatic way of saying I am not
inviting you back anymore. – No it’s not. (all laughing) Hardly, we’ve got future (mumbles). The truth of the matter
is you can all see why I found it so interesting to have Rip come and keep us posted on what they’re doing. It’s a major urban experiment going on in the United States at this moment. Starting from the bottom
and trying to figure out how to make it work. And being kept posted
every two or three years on what’s going on, struck
me as being something that we would all benefit
from to see how it gets done. It probably never ends. But the fact of the matter is there’s progress along the way, and you can see it in what Rip has taught you today. We want you to keep coming back as long as I’m here.
– That’s very nice, thank you. – You’re gonna continue to get invitation and I hope you won’t turn this down. So thank you very much. It’s just absolutely fascinating. (audience applauding)

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