The Movie Flop PROJECT That Sank a Michigan Town”
The United States was in the middle of an economic crisis in 2009. One of the states that was battling to survive the financial crunch was Michigan. The Detroit metro area had an unemployment rate of 15.9%. GM and Chrysler in declared bankruptcy in mid-2009. The Detroit suburb of Allen Park was frantically searching for a way to stimulate their local economy and shrink unemployment.
At the time, the state of Michigan was offering the film industry a generous tax credit in an attempt to convince them that Michigan was where they should be making movies. Then Detroit native Jimmy Lifton appeared. He was the president of an audio and video post-production company in Burbank, CA. He approached the city and promised to propel them into the film industry. He promised Allen Park that this project would generate 3,000 jobs for the city. It seemed as though this was just what the city had been searching for to spark their struggling economy and get their citizens back to work.
Allen Park, with a population of about 30,000 people, embarked on a massive project to buy and develop a 104-acre tract of land that would become a film studio. The city council was unanimous in their vote to sell $31 million in bonds to finance this project. Lifton opened a movie-making school on the property so that workers could be trained to work in the film industry. The state of Michigan contributed an estimated $871 million under a job re-training program. After clashing with the city over lease agreements in 2010, Jimmy Lifton closed the school and moved away. The city had signed a hold-harmless agreement with Lifton and he left the city without paying back anything. The city is now in an emergency financial crisis. The U.S. Securities and Exchange Commission is investigating the bond sale and the state of Michigan is conducting a financial review and may take control of the city.
In their haste to find a way to stimulate job growth and the local economy, Allen Park selected a project that resulted in catastrophic long-term consequences. Had they utilized a project selection process, this project may have never made it out of the project selection funnel. Some of the methods of evaluation that would have been helpful to the city include financial analysis, SWOT, and real options and decision trees. The city council could have used a force-field analysis to identify the driving and restraining forces before voting to approve the project. The city of Allen Park failed to recognize the cause for the economic crisis they country was experiencing and as a result, they continued the trend of reckless fiscal policy. They embarked on a project with only an initial plan and goal in mind but failed to realize that this was a multi-phase project that would require review and reconsideration throughout the process.
QUESTION: What processes do you feel the city should begin utilizing to make better decisions regarding potential future projects with its Stakeholders?
Reference
Christoff, C. (2012, August 23). The Movie Flop That Sank a Michigan Town. Retrieved from Business Week: www.businessweek.com