A second-half economic comeback for Pontiac, Michigan, a struggling auto town

PONTIAC, Mich.— When you first pass through this former auto town, it's difficult to imagine there could be good economic news to be heard from the community.

Blocks of homes are boarded up and abandoned, their walls plastered with city notices, their yards collecting trash. Schools sit tagged with graffiti months after having their doors permanently closed. Entire commercial buildings rest dormant, displaying huge "For Lease" signs in their dusty windows.

At lunchtime downtown, you don't see a rush of customers heading toward local restaurants, if you see any customers at all. Few people are strolling the city's streets. Businesses continue to struggle.

But behind the scenes, the vibe spreading in Michigan--most visibly through Detroit's proclaimed "comeback" this month after the automotive industry's 2008 implosion--has begun to reach small automotive towns like Pontiac.

Last November, when Yahoo News visited Pontiac before the Nov. 9 Republican presidential debate at nearby Oakland University, unemployment hovered around an estimated 33 to 35 percent--part of the continued aftereffects of the decision by General Motors to close four plants in the city. The state had appointed an emergency manager to control city decisions (removing all power from the mayor and city council) in the face of staggering deficits. Housing and joblessness statistics were continuing to decline.

Some of that hasn't changed—namely the housing statistics—but Mayor Leon Jukowski says some bright spots have emerged for the city and its 59,500 residents.

"The good news that we got about two days ago was that our income tax receipts have started going back up, which is wonderful," Jukowski told Yahoo News last week. "It means that at least a few people are working and that part of the picture has stabilized,"

Jukowski said that uptick is directly linked to the very company which largely abandoned them, GM, which this month reported record profits of $7.6 billion—the highest in the company's history. "That's undoubtedly had something to do with our income taxes picking back up, I'm sure there's a connection there," Jukowski said, adding that the entire economy's recovery has helped move the city in the right direction.

In addition to the income tax growth, Jukowski said some local business owners have been encouraged by a developer's decision to rehab an old Sears building in Pontiac's downtown and make it into a $20 million condo complex. "It's the first time in 30 years that we've seen investment in our downtown." That project is being partially funded with Neighborhood Stabilization Program federal dollars. A second apartment complex is being planned for the downtown. City officials also plan to foster the city's health care and technology industries and are hopeful that a deal will soon be solidified to bring a nursing school to the city.

Stories of Michigan's economic comeback are making national news this month as the Republican presidential candidates campaign their way through the state in advance of the state's Feb. 28 primary. All of the candidates remaining in the race reject the TARP auto bailout passed under the Obama administration.

"If we had just stayed out of it completely and let the market work, I believe the market would have worked," Rick Santorum told the Detroit Economic Club last week. "Would the auto industry look different than it does today? Yes, it would be. Would it still be alive and well? I think it would be alive and equally as well if not better."

Jukowski, who notes that the Republican presidential race is unlikely to generate much interest in this heavily Democratic town (where Obama stickers line shop windows in the downtown and an Obama for America office is open in the center of the city) also isn't quick to pin the economy's growth to the federal government. "Whether the federal government or the state government want to claim responsibility for that, I don't know," he said, adding, "I tend to think these things go through cycles and we're seeing the end of a cycle."

Pontiac's emergency manager, Louis Schimmel, who was appointed by Republican Gov. Rick Snyder, says Pontiac's current economic situation is mainly the result of poor local management and bad fiscal decisions. "I do believe that different people in management of the town could have managed the decline of GM," Schimmel told Yahoo News.

Schimmel touted his own efforts to help the city manage this decline and conceded that many outside entities are assisting the city's recovery efforts, including the federal government via the Department of Housing and Urban Development, which is contributing funds to demolish abandoned homes and boost housing.

Schimmel and Jukowski are under fire after the city closed its fire and police departments last year, choosing instead to outsource those responsibilities to the county and a neighboring town. (This is one reason voters are fighting to recall Jukowski this year.)

The common bond of the auto industry continues to connect Pontiac to its neighbors, including Detroit, which is why the city's health is so important to surrounding areas.

"If Detroit isn't healthy, it makes it harder for us to draw businesses to Oakland County and vice versa," Jukowski said. "We're all in this together."

But the days of total reliance on the auto industry have ended. Presidential candidates traveling to the state tout new industries like energy-related jobs. Mitt Romney has been talking about incentives for state entrepreneurs and local businessmen in addition to less regulation as ways to rejuvenate the economy.

"The one good thing, if you can call it that, about the economic downturn, is, you know people sort of got... thrown off of their autopilot and start thinking: OK, what can we really do-- if General Motors isn't going to have four factories in the city, what do we do now?" Jukowski said.

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