Gilbert Leads Push For New Tax Incentives

**401don** · September-20-16, 03:23 PM

What do you think of this proposal? I don't see how the Hudson site qualifies as a brownfield. Has Gilbert been delaying developing the site for a couple of years, waiting for the right time to push for this? Would he not otherwise develop the site, which is supposedly the reason for the bills?

http://www.detroitnews.com/story/new...roit/90707890/

**mwilbert** · September-20-16, 03:31 PM

There's nothing wrong with the idea of brownfield credits in principle, but like most tax policy, the details are very important, and it is hard to know if this particular proposal is a good idea or not. Certainly if Gilbert thinks that the Hudson's project might qualify for such a credit, the prospect of its future availability would be a great reason to delay--it isn't as if he doesn't have other projects going.

**Bobl** · September-20-16, 05:09 PM

Per the brownfield designation, it could be argued that most of the city is a brownfield, with all of the asbestos used in the residences in most neighborhoods. With this much money at stake, though, any legal fiction will suffice.

**Atticus** · September-20-16, 07:16 PM

Originally Posted by Bobl

Per the brownfield designation, it could be argued that most of the city is a brownfield, with all of the asbestos used in the residences in most neighborhoods. With this much money at stake, though, any legal fiction will suffice.

I am kinda okay with it...

Looking at it from the perspective of, are we better off with or without this legislation, arguably we are better with it assuming the development will not happen without the tax incentive. Basically, one of Illitch's vacant lots isn't paying much taxes anyway, and the city would be better with the development even if they aren't cashing in tax wise.

The part I don't like is that there is no time cap [[that I am aware of). To me, there should be a 20 or 30 year time cap, after which time the property is then taxed like normal. That would be the one change I would push for.

For the Hudson's site in particular, I don't see how this could/should apply either. But I definitely see this legislation as being key for the fail jail to soccer stadium development. And I wouldn't mind it being used there either, to make that project viable.

**hybridy** · September-20-16, 07:29 PM

counterpoint link here:

Dan Gilbert-Backed Bill Would Allow Developers To Pocket Even More Public Money

**Jason** · September-20-16, 08:50 PM

The details of this are very important in understanding it, so it's hard to trust the reporting in the Detroit News article which describes the hockey arena district money as "school property tax money" which is incorrect and misleading.

The most interesting thing to me about this is that the size of the developer's investment is proportional to the population of the city the development is in. In Detroit a project would need $500 million of private investment before qualifying for the money. That's a huge amount of money and for Detroit it really does mean that Gilbert and maybe a handful of others have the money to ever qualify for this in the first place. For comparison the Book Cadillac was $180 million total.

While these $500 million+ projects are nice, I think that smaller infill projects and normal developments are the real broader policy problem. This type of policy is supposed to be something that addresses underlying and fundamental problems with urban real estate development and investment, not something that helps a handful of mega projects that were probably going to happen anyway.

I also think that if the government can spare hundreds of millions of lost hypothetical tax dollars to subsidize privately owned developments, it could just do the projects itself and then own the resulting investment. In other words if a project was determined to generate X amount of taxes, the government entity could just do the project itself, funded by the hypothetical tax money. And then it would own the investment and could use the additional money for whatever other purposes.

**middetres** · September-21-16, 06:46 AM

If the tax capture is more limited and made to expire, I'm all for it. Only verifiable remediation and site prep costs & up to 20% of other verifiable costs can be recouped through the tax capture. And only in the first 20 years after first occupancy. That would require that developers open their books to fine-tooth comb audits of expenses. Will they be willing to do that?

But as these incentives are currently being proposed, a developer can recoup all his investment and more. That's not right. It's just an unlimited tax grab that takes away any risk inherent in any development. Yes, it would spur huge projects, but possibly too many to be naturally and organically absorbed. Overbuilding can be a dangerous thing...

**Gistok** · September-21-16, 07:16 AM

Originally Posted by middetres

Overbuilding can be a dangerous thing...

... as we saw back in 1977 when 2.2 million sq. ft. of new office space downtown in the Renaissance Center flooded the market for it at the time for years!

**MikeyinBrooklyn** · September-21-16, 08:30 AM

I am for brownfield tax credits if the value of the credit is pegged to the cost of remediation of the parcel in question. If it's more it becomes unfair to other businesses or individuals. Also, the end goal should be threefold: get a site cleaned up, developed, and returned to the tax rolls. If it doesn't do [[or need) all three, it shouldn't be a brownfield tax credit. There are merits to other kinds of development tax credits [[for historic preservation, or to act as a catalyst in a chronically underdeveloped area), but they should be considered on specific merit, not lumped into the brownfield category.
I agree with the thought that the Hudson's site does not seem to qualify in any way for a brownfield tax credit. Perhaps it would had Gilbert had to take down the old building, but he has acquired rights to build on a ready-to-build base. Additionally, while being a large project, it is almost perfectly situated downtown for any kind of use. It should need less government incentive to develop than anything else downtown.

**southen** · September-21-16, 11:20 AM

Although I am not sure how the Hudson's site would fit in with this, it is interesting to now have some sort of idea of what the building will cost. If the threshold for these incentives is $500 million than we know that the building will be at least that, which is substantial. I am wondering if the delay in releasing info/renderings is because the project keeps getting bigger.

**Baselinepunk** · September-21-16, 12:09 PM

So very interesting that Republicans SCREAM about getting that darn Gubmit outta my life and get rid of those investment-killing regulations yet have absolutly no issue what so ever coming to Gubmit for a hand out.

How about Gilbert pull himself up by his own bootstraps and make it happen on his own without a Gubmit handout.

After all, being self-sufficient is supposed to be a Republican principle.

I say flush it; I'm sick and tired of my tax dollars going toward Republican projects.

**Atticus** · September-21-16, 04:07 PM

Originally Posted by Baselinepunk

So very interesting that Republicans SCREAM about getting that darn Gubmit outta my life and get rid of those investment-killing regulations yet have absolutly no issue what so ever coming to Gubmit for a hand out.

How about Gilbert pull himself up by his own bootstraps and make it happen on his own without a Gubmit handout.

After all, being self-sufficient is supposed to be a Republican principle.

I say flush it; I'm sick and tired of my tax dollars going toward Republican projects.

In fairness, it isn't the developer's fault the brownfield site is polluted. Somebody has to pay to clean up the mess, and good luck getting the actual polluter to pay up.

Second, if the redevelopment doesn't happen, then the tax dollars never materialize anyway. So it isn't like somebody is losing out on tax dollars.

This is why I am okay with it, as long as there is a time cap in place. The developer recoups their brownfield cost, and after 20 years the city/state can cash in on the tax generated by the project that wouldn't have otherwise happened.

**professorscott** · September-21-16, 06:34 PM

I'm not familiar enough with the details of the full proposal to get into the weeds, and I haven't time right now to familiarize myself, but I did want to comment on the word "brownfield". The usual definition is simple and broad: "a former industrial or commercial site where future use is affected by real or perceived environmental contamination". Unarguably, there was asbestos a'plenty in the old building, and God only knows what else. So I think it is very reasonable to consider the site a brownfield for the purpose of whatever legislation is under consideration.

**401don** · September-21-16, 07:26 PM

Originally Posted by professorscott

I'm not familiar enough with the details of the full proposal to get into the weeds, and I haven't time right now to familiarize myself, but I did want to comment on the word "brownfield". The usual definition is simple and broad: "a former industrial or commercial site where future use is affected by real or perceived environmental contamination". Unarguably, there was asbestos a'plenty in the old building, and God only knows what else. So I think it is very reasonable to consider the site a brownfield for the purpose of whatever legislation is under consideration.

It's a real stretch though to apply for a brownfield credit on a site where the gov't already removed all of the contamination years ago, including the entire building which contained it, and replaced it with a new usable concrete garage. Re-reading the Det News article, no gov't official or Cullen are actually quoted as mentioning the Hudson site. I wonder if the writer took the liberty of including it just because it's a big Gilbert project which is still pending.

**professorscott** · September-21-16, 10:15 PM

Originally Posted by 401don

It's a real stretch though to apply for a brownfield credit on a site where the gov't already removed all of the contamination years ago, including the entire building which contained it, and replaced it with a new usable concrete garage. Re-reading the Det News article, no gov't official or Cullen are actually quoted as mentioning the Hudson site. I wonder if the writer took the liberty of including it just because it's a big Gilbert project which is still pending.

Right you are, Don, but for the word "perceived" in the definition I provided. So a brownfield doesn't have to be contaminated; it just has to be thought of as contaminated. That is a loophole big enough to drive a, oh, let's say, a streetcar through

Agreed the site wasn't mentioned but it's a reasonable speculation. No idea if true.

**ABetterDetroit** · September-23-16, 10:29 AM

It is impressive what Mr. Gilbert has acomplished in his 5 1/2 years in Detroit and I wish him nothing but more success.

Unfortunately the overall problem of not being able to close the gap between construction cost and taxes vs. rent or sale prices is effecting the ability to develop underutilized property city wide and is not just hurting the "needle moving" large projects but all of them, small and large. Obviously the property in the premium locations is now beginning to overcome this issue some but it not enough alone to get the whole city back on its feet.

To continue to only reward the biggest of the big with extra tax credits makes little sense to me. What is needed is more devolopment and the job creation that comes with it everywhere not just the choicest locations. This pile of tax credits would be far better spent reducing the tax burden for everyone in the city rather than a select few.

**Gistok** · September-23-16, 11:30 AM

Well the Hudson's underground parking was strong enough to handle a 15 story building. If Gilbert has loftier visions for at least part of the site, then there may be some validity for site remediation if taking foundations down to bedrock brings up other "brownfield" surprises.

But otherwise, I can agree with folks about only helping the deepest pockets is not fair to everyone else who wants to develop.

**Bham1982** · September-23-16, 01:49 PM

What a shocker that Gilbert wants even more subsidies. The public apparently needs to foot the bill for his real estate adventures and Bedrock's loss-leader retail forays.

If downtown is truly a desirable urban center, with real, sustainable demand, then obtain regular bank financing like practically every other developer on earth, and build. The city won't get in your way; on the contrary they'll meet your every need. But stop begging for even more public dough.

These are the best of times in Metro Detroit. Downtown is supposedly revitalizing. The local economy is quite strong. The Hudsons site is the best located development site in the city. If you can't build a damn thing now absent subsidies, you're all talk.

**Bham1982** · September-23-16, 01:56 PM

Also, downtown this morning on business, noticed two things:

1. How can that Hudsons garage be so deteriorated after 15 years? It looks like you could film a slasher film down there with the dripping water, peeling paint, broken elevators and sketchy characters. And you can't pay without getting out of your car and going to a ticket booth? What is this, 1970?

2. Gilbert has done a good job at street level, generally speaking, but needs to knock it off with the cheesy piped-in music everywhere. Downtown isn't a mall. Very annoying to be assaulted with Miley Cyrus "Party in the USA" all over downtown.

**dtowncitylover** · September-23-16, 02:58 PM

Originally Posted by Bham1982

2. Gilbert has done a good job at street level, generally speaking, but needs to knock it off with the cheesy piped-in music everywhere. Downtown isn't a mall. Very annoying to be assaulted with Miley Cyrus "Party in the USA" all over downtown.

YES. YES. YES. YES. It's so effing stupid. If I wanted to listen to music downtown, I'd go find a music venue or listen to my Spotify.

"Listen to the music of the traffic in the city..."