May 14 (Bloomberg) -- Benton Harbor’s emergency manager is gone, its budget is balanced and the Michigan city of 10,000 is preparing for the Senior PGA tournament next week at its $60 million Jack Nicklaus-designed public golf course.
Among Michigan’s poorest cities, with a median household income under $18,000, Benton Harbor is testing whether a state-run restructuring can foster rebirth. As Detroit wrestles with a record municipal bankruptcy, Benton Harbor totters into stability after four years of state control.
“Stop calling us cash-strapped,” said Mayor James Hightower. “We have a surplus.”
Benton Harbor’s elected officials were first in Michigan to be stripped of their powers under a stiffened emergency-manager law -- enacted by the legislature in 2011, repealed by voters and reincarnated in 2012 by Republican lawmakers and Governor Rick Snyder. Its takeover, which ended in March, was singled out as an attack on democracy by unionists, MSNBC television pundit Rachel Maddow and activist Jesse Jackson.
Now, the Lake Michigan town, about 100 miles (160 kilometers) from Chicago, has a streamlined government under the watch of a state-appointed advisory board. With a half-billion-dollar private development -- anchored by the golf course -- plus cash from its largest business, Whirlpool Corp., Benton Harbor hopes to overcome its reputation for haplessness.
“My priority is to change the brand of the city, focus on public safety, deal with neighborhood recovery and development,” said Hightower, 60, a hospital executive who supported intervention and is facing a recall attempt as a result. “And we have to have more jobs.”
Benton Harbor mirrors Detroit’s decline from might to blight. As with Detroit’s riverfront and midtown districts, Benton Harbor’s boosters are banking on investment in a targeted area to revive the the 4.4 square mile (11.4 square kilometer) city.
The $560 million, 530-acre Harbor Shores plan features houses priced up to $1 million on a golf course with a spectacular view of Lake Michigan. Parts of the sprawling course -- its 18 holes take seven miles to walk -- were built on polluted factory sites. A dowdy beach was overhauled with $2 million from Harbor Shores Community Redevelopment, the developer.
Golf and water lure investors, said Jeffrey Noel, president of Harbor Shores and spokesman for home appliance-maker Whirlpool, a major contributor to the project. Whirlpool’s $18.9 billion in revenue last year made it Michigan’s fourth largest public company, according to data compiled by Bloomberg. Its stock rose 69 percent in eight years, to $151.52 yesterday, according to data compiled by Bloomberg and its hometown is benefiting.
“People who golf have money,” Noel said in an interview. “People who have money talk to other people who have money, who you hope, over time, will invest in Benton Harbor. A golf course is a way of telling the story.”
About 65 of the planned 500 homes, cottages and condos have been built, Noel said. A 92-room hotel with a marina is opening in time for next week’s tournament.
The development will be an island of affluence. Almost half of Benton Harbor’s residents are below the federal poverty level of $23,850 for a family of four, according to the U.S. census. Its population is half what it was 50 years ago. It’s divided by a river from St. Joseph, a resort town of 8,300 that has a median household income three times larger than Benton Harbor’s.
Then, there’s the racial divide. Benton Harbor is 90 percent black and St. Joseph is 88 percent white.
The state’s 2010 takeover was decried by some as a slap at black municipalities. When Detroit was placed under an emergency manager three years later, almost half of Michigan’s black population lived under state control.
Michigan emergency managers have sweeping power to restructure local government, nullify union contracts, and, as in Detroit, file for bankruptcy. Benton Harbor residents were left disconnected from an eviscerated municipal government and a golf course development that’s done little for them, said City Commissioner Marcus Muhammad.
William Dixon, 78, just wishes the city would cut down the rotting tree that dangles broken limbs over his front lawn. He said the takeover harmed services.
“Golf is making money but it’s not helping us any,” he said in an interview on his porch.
The takeover capped years of mismanagement that piled up a $4.4 million deficit, according to a state review.
The city’s first emergency manager, Joe Harris, canceled elected officials’ powers in 2011, and merged the police and fire departments. Tony Saunders II, 26 when appointed, replaced him in February 2013.
Saunders said the general fund had only $3,000 when he arrived. He said he cut health-care costs 74 percent and the work force has been cut to 75 from 105 in 2010. Unpaid bills were paid with a $2.7 million state loan and 17 parks are now maintained by a non-profit group, Saunders said.
Federal funds paid to tear down 310 buildings the past four years, according to city records. Over 500 housing units were built in the past eight years, and new businesses and lofts dot Main Street -- led by Whirlpool’s $85 million North American headquarters. The company also spent $28 million on a refrigeration technology center with 180 jobs, Noel said.
Whirlpool pays Benton Harbor $200,000 a year for public safety in return for a tax abatement -- a contribution that will rise next year to $300,000. In addition, the company has given the city $50,000 to $100,000 each year for a decade, Noel said.
“Now, it’s up to the city to decide how to build on its core services,” he said.
Less than a mile from City Hall, retiree Robert Whitfield, 63, took a break from planting flowers around his house. He said the city “needs people who know what they’re doing,” adding that he likes the mayor, Hightower.
The golf course, he said, might attract jobs and new residents.
“I think it’s for the better,” he said. “I think Benton Harbor is coming back.”
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