Gilbert Scores $618 Million Brownfield Credit from MI Strategic fund

[Lowell]

Earned? Deserved? He has after all transformed Downtown Detroit but, sheesh, that's a lot of money--$60 for every man, woman and child in Michigan--maybe now more than Ilitch's total.

"The Michigan Strategic Fund on Tuesday approved about $618 million in brownfield incentives for $2.14 billion in Dan Gilbert projects in downtown Detroit.

It's the first time the state has approved such incentives, which were put into place following passage of a law enacted last year that allows the capture of certain taxes to help bolster development in Michigan communities.

• It's the first tax break awarded under the state's new transformational brownfield incentive law
• Incentives are for $2.14 billion in downtown Detroit projects
• Projects include Hudson's site, Monroe Blocks, Book Tower and building

Quoted from Crain's Detroit Business--Full article here. [<- Edit* broken link now fixed. Thanks Egrant]

[clubboss]

Earned? Deserved? He has after all transformed Downtown Detroit but, sheesh, that's a lot of money--$60 for every man, woman and child in Michigan--maybe now more than Ilitch's total.

"The Michigan Strategic Fund on Tuesday approved about $618 million in brownfield incentives for $2.14 billion in Dan Gilbert projects in downtown Detroit.

It's the first time the state has approved such incentives, which were put into place following passage of a law enacted last year that allows the capture of certain taxes to help bolster development in Michigan communities.

• It's the first tax break awarded under the state's new transformational brownfield incentive law
• Incentives are for $2.14 billion in downtown Detroit projects
• Projects include Hudson's site, Monroe Blocks, Book Tower and building

Quoted from Crain's Detroit Business--Full article here.

From a map perspective, courtesy of Channel 7. Monroe blocks is a nice chunk of land.

[313rd]

What I find interesting is how he receives the money.

"That partly has to do with how the transformational brownfields are set up. Businesses and residents who move into Gilbert's building will pay their income tax to Gilbert for the next 20 years."

[SammyS]

Link does not work but I will say I have absolutely no issue providing tax payer incentives to the productive class. If that makes me sound like an arrogant heartless shithead, then so be it. It was DG’s commitment and contribution to Detroit that moved me to invest just about every penny of mine in The D.

[EGrant]

Here's the working link.

I just want to understand this correctly; this is not an additional tax [[the $60 mentioned above), but rather a tax incentive, where instead of the state capturing various income taxes/sales taxes of people working on and in the buildings as well as construction material costs for 35 years, Gilbert/Bedrock will recapture that money in order to finance the buildings. Is that right?

It's very fair to argue the merits of this incentive, but [[unless I am wildly wrong), there will not be an additional amount paid in taxes by everyone in Michigan this year, or for the next 35 years to fund this construction. And also, this is not money that will be "taken away" from schools, roads, my cousin's neighbor's tennis court or whatever people are yelling about in comment sections.

[SammyS]

^^
Sort of

Quicken officials said that over the 30-year period in which the tax incentive package will be repaid, the incentives will have covered 15 percent of the projects' costs; meaning 15 percent will have come from some form of taxpayer money that would have ordinarily gone to schools, fixing roads and generally supporting state government departments.

But....

The payoff for the deal will be even bigger, state officials said Tuesday. Even with the tax incentive package, an economic impact study done by the University of Michigan says the state will get $596 million in new tax revenues over 30 years, state officials said. Another way to measure that is a little over $3 of new tax revenue will be created for each dollar of revenue that will go toward the tax incentive package, state officials said.

https://www.detroitnews.com/story/ne...ent/629505002/

[Lowell]

I'm supportive of Dan Gilbert. He has been the single-most important person in the turnaround of Downtown Detroit and, for the preservationists out there, the savior of several architecturally significant buildings that I assumed doomed.

And I'm not against him getting the break. It is legal, he went for it, he got it and, compared to many others at the same trough, he clearly deserves/has earned it the most. As the recipient of a few art grants I would be hypocritical to say otherwise. If those are the rules and one plays them and wins, so be it, that is how the game goes.

That said I am uncomfortable with the system of competing municipalities and states getting into the games of poaching, bidding and throwing money at for-profit companies--the Amazon HQ2 freak show being the epitome. I suppose there is no way around it short of some constitutional amendment but I would like to see some way out of this mess or at least of limiting it.

[archfan]

Here's the working link.

I just want to understand this correctly; this is not an additional tax [[the $60 mentioned above), but rather a tax incentive, where instead of the state capturing various income taxes/sales taxes of people working on and in the buildings as well as construction material costs for 35 years, Gilbert/Bedrock will recapture that money in order to finance the buildings. Is that right?

It's very fair to argue the merits of this incentive, but [[unless I am wildly wrong), there will not be an additional amount paid in taxes by everyone in Michigan this year, or for the next 35 years to fund this construction. And also, this is not money that will be "taken away" from schools, roads, my cousin's neighbor's tennis court or whatever people are yelling about in comment sections.

I don't think that's entirely right. Here's the breakdown:

• $256.3 million in state income taxes on workers expected to be employed in the new properties;
• $229.6 million in tax-increment financing, which is the increase in property tax value expected to be caused as a result of the new developments;
• $60.6 million in state sales taxes exempted on construction materials;
• $51.7 million in state income taxes on residents living in the new buildings;
• $18.2 million in state income taxes on construction workers building the projects;
• and $1.7 million in city income taxes from the Hudson's site project, which are being given back to Detroit through a community-benefits agreement approved by City Council.

At least two items - the sales tax exemption for construction materials and the construction workers' state income tax - are things that would normally go to the state fund.

In addition, the residents' income taxes would have gone to state coffers, if they lived somewhere else. Unless every resident moves to Detroit from out of Michigan, the state fund will be out their taxes. The same thing applies to the people working in the building - the state is out their money, unless they moves their business in from out of state.

Either way, the state gets less money, because it's paying off Gilbert's bonds. The hope is that the economic impact of the new buildings will offset the cost of the bonds.

[coracle]

Isn’t that the same figure we’re subsidizing DPS debt with; but achieving zilch?

[EGrant]

Thanks, archfan, that's what I was looking for.

[DetroiterOnTheWestCoast]

Any way it’s sliced and diced, it’s a massive tax giveaway to a massively wealthy billionaire.

[Bham1982]

Link does not work but I will say I have absolutely no issue providing tax payer incentives to the productive class.

This is a pretty funny comment. There probably hasn't been a $3 million+ project built within Detroit city limits over the last 40 years that hasn't required some form of taxpayer subsidy. Detroit proper is, easily, the least economically productive corner of the region.

And why would you support taxpayer incentives in the most productive areas? That doesn't even make sense. You think Birmingham should subsidize its core, while Highland Park should be sink or swim? Manhattan and Silicon Valley should get all the taxpayer incentives while rural Mississippi and West Virginia should rot?

[DeLemur]

Why should government give money to Dan Gilbert's wildly successful business? I have no idea. Government should be in the role of ensuring a level playing field for people, not as a ladder for a property owner who already controls the downtown market.

He's invested in Detroit to make money in Detroit. Make no mistake about it. It's a fair trade, as that's what business is and it's good for the city. Dan has done this in a responsible manner IMO. That doesn't mean we should be buying brand new buildings for him.

Public funding for building stadiums has largely been a negative for the public. The returns haven't been there. Good reason to be skeptical of making SE MI "more competitive." That's the second part here, is this even a catalyst project?

Anyone have the UofM economic study referenced in the Det News. I couldn't find it.

[Lowell]

I would like to know about the sausage-making of a deal like this. Is there an advocate for the public side who tries to knock down the price? How many meetings and hours does the entire process consist of?

I'm surprised I'm not hearing blowback from the Michi-ssippi areas of Michigan, those impoverished predominantly Republican counties, small cities and towns that have an outsized voice in the legislature and a long-held disdain for Detroit. I suspect Duggan being mayor, for a reason I don't think I need to explain, has softened attitudes on Detroit.

[SammyS]

Any way it’s sliced and diced, it’s a massive tax giveaway to a massively wealthy billionaire.

Not limited to billionaires. NEZ has proven successful in attracting average outsiders to move back into Detroit. You don’t like it? Then provide solutions that will reverse the exodus.

[DeLemur]

I would like to know about the sausage-making of a deal like this. Is there an advocate for the public side who tries to knock down the price? How many meetings and hours does the entire process consist of?

I'm surprised I'm not hearing blowback from the Michi-ssippi areas of Michigan, those impoverished predominantly Republican counties, small cities and towns that have an outsized voice in the legislature and a long-held disdain for Detroit. I suspect Duggan being mayor, for reason I don't think I need to explain, has softened attitudes on Detroit.

I too am surprised by the lack of anger from Republican constituents. Its a strange lift from the State and the GOP controlled bodies. Very surprising and Duggan said as much.

[Bham1982]

Why should government give money to Dan Gilbert's wildly successful business? I have no idea.

Because this building wouldn't have a chance in hell of being built without lavish taxpayer subsidies, and if anything goes south, the taxpayer takes the hit.

Both parties are complicit and all civilizations, since the beginning of time, has liked shiny monuments, so we're probably stuck in an endless cycle of "revitalization" that requires bigger and bigger subsidies.

[DetroiterOnTheWestCoast]

Not limited to billionaires. NEZ has proven successful in attracting average outsiders to move back into Detroit. You don’t like it? Then provide solutions that will reverse the exodus.

The NEZ’s are not quite $618,000,000 to each individual.

[DetroiterOnTheWestCoast]

I too am surprised by the lack of anger from Republican constituents. Its a strange lift from the State and the GOP controlled bodies. Very surprising and Duggan said as much.

On the other hand, it’s consistent with the GOP Trickle Up theory of shoveling tax dollars to the already wealthy

[masterblaster]

This is a pretty funny comment. There probably hasn't been a $3 million+ project built within Detroit city limits over the last 40 years that hasn't required some form of taxpayer subsidy. Detroit proper is, easily, the least economically productive corner of the region.

And why would you support taxpayer incentives in the most productive areas? That doesn't even make sense. You think Birmingham should subsidize its core, while Highland Park should be sink or swim? Manhattan and Silicon Valley should get all the taxpayer incentives while rural Mississippi and West Virginia should rot?

Your attempt at trolling falls flat. Everyone knows Detroit is the least productive "region" of the metro area. Just look at the state of our public schools, the % of population that have earned a college degree, and the rampant crime.

Over half the storefronts and warehouses in Detroit are vacant.

[SammyS]

The NEZ’s are not quite $618,000,000 to each individual.

Collectively, it’s a lot more. City Modern alone will likely amount to about $30,000,000 in NEZ tax breaks over 15 years. What’s the difference?

[Lowell]

Because this building wouldn't have a chance in hell of being built without lavish taxpayer subsidies, and if anything goes south, the taxpayer takes the hit.

Exactly.

It is why there should be provisions where, let's say, a public-subsidized property is developed, then five years later is sold for five times its cost. In such a case the public should be able to to recover, let's say, 150% of the subsidy it provided. I know that's simplistic but the point is that the public should share northside in all deals.

I am for the Gilbert deal because he actually building something new, or reviving something long-empty with no future, and adding significantly to the long term revenue base.

On the other hand stadium subsidies in Detroit were payment for moving an existing business from one place to another. Little new was added to the long term revenue base or even to employment. The move also gave up the naming-rights, likely worth around a quarter of the subsidies, to the Ilitch's. IIRC that was $66 million from Comerica. The Little Caesars' roof has to have a marketable value of double or triple that.