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Small Business Smackdown

Detroit gets tough on city's 'underground economy' with its 'Operation Compliance' initiative

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These businesses are not well-financed franchises. They don't provide elaborate services with amenities or award cards. But across the country, from Camden to Compton and Detroit to Dallas, tiny, independent businesses provide services to Black communities.

Sometimes, the businesses are housed in nondescript buildings in neighborhoods. On main drags—Harper, Grand River and Gratiot avenues—they have rainbow-colored facades, hand-painted signs or paper signs plastered on windows. While not aesthetically pleasing, the hair salons, used tire stores, resale shops, rib joints, chicken shacks and auto repair garages play a vital role, providing low-cost, stripped-down services to local residents.

Critical components of a delicate, economic ecological system, the small businesses are the backbone of Detroit neighborhoods; the "underground economy." City officials say far too many have existed without paying taxes, acquiring licenses, building permits—or paying attention to appropriate zoning requirements. 

For years, Detroit's Buildings, Safety Engineering & Environmental Department tended to look the other way as these urban entrepreneurs popped up like mushrooms. Sometimes, they shut down and morphed into a completely different business with no regard for zoning use.

Not anymore.

Detroit Mayor Dave Bing's "Operation Compliance" initiative, which began in earnest at the beginning of the year, has been systematically targeting 1,500 illegally run businesses, especially those contributing to blight and crime. Turns out some businesses are illegitimate tire shops, scrap yards and second-hand appliance stores where issues of accumulated solid waste or significant property maintenance issues are prevalent.

In January, its first month, the initiative closed 70 businesses and recovered more than $100,000 in lost tax revenue. It could have an impact. A February Detroit News analysis of 200,000 pages of Detroit tax documents found $246.5 million in taxes and fees went uncollected in 2011.

The project is supported by the Detroit police and fire departments and slates 18 businesses for closure weekly. The buildings are padlocked, and inspectors seal the doors. Business owners breaching entrances of closed businesses are subject to $500-per-day fines and/or jail.

However, if proprietors are cooperative and seem willing to fix code and zoning violations, the city works with them. Unresponsive operators are met with official notices; shutdowns, giving owners minutes to get out.

Helen Broughton, a business advocate for the Detroit Buildings, Safety Engineering & Environmental Department, says more than 500 letters have been mailed to businesses with code violations.

"Out of that group, as of late April, we have gone out on 143 closure operations and padlocked the businesses."

The businesses have up to 14 business days to respond to city notifications before action is taken. "However, of the 143 that were padlocked, 57 of those business owners came to the city to request information on how to comply and are in the process of having their use changed," she says.

By city standards, the operation has been successful. Owners of 85 percent of padlocked businesses have met with city officials to make corrections.

Broughton says 121 of the 514 potential closures were postponed because people visited city offices of their own volition. The most common problem found is that businesses are not zoned appropriately and need to make structural adjustments to meet standards or receive a permission to rezone the property for different usage. The most egregious properties that inspectors closed down so far were:

A resale shop on West McNichols Road that was filled floor-to-ceiling with appliances, TVs and furnace parts. The situation posed a fire hazard, and they also were selling on the sidewalk, which is against the law. The building was not zoned for resale and did not have the required business license.

Property on Lyndon Street operating as a tire-recycling center that had 60,000 tires stored on site. After closure, the owner left the stockpile of tires, posing an environmental hazard. The Michigan Department of Environmental Quality and DPW are searching for grant funds to clean the site.

Owners of a tire store on East Seven Mile Road that used an open fire in a barrel as a rigged-up heater, which posed fire and safety hazards. Inspectors also found a rifle and a .357 pistol. Children ages 11 and 17 were running the business.

In a statement, Bing stressed the city's objective was to bring every Detroit business into full compliance: "Proper permitting and ordinance compliance is essential to operating a business in our city."

Nathan Ford, director of the city's Buildings, Safety Engineering & Environmental Department, puts it this way: "We are sending a message that if you are doing business in the city, you need to follow the law," he says. "We want the world to know that the City of Detroit is doing business differently and implementing programs that can assist the growth of business in the city."

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