Detroit — Long-delayed plans for what will be built on the site of the former J. L. Hudson Department store in downtown Detroit may be pushed back again after a proposed bill quietly died in the Michigan Legislature on Wednesday.
The bill would have given tax breaks to developers working on urban “transformational” redevelopment projects around the state — projects like the empty, block-long Hudson site on Woodward Avenue. The proposed legislation was being promoted by billionaire developer and entrepreneur Dan Gilbert, along with a statewide coalition of economic development officials and businesses.
In lobbying for the tax breaks Tuesday in Lansing, Gilbert told legislators, “If we deliver, we’re going to have in Detroit alone probably $2.5-$3 billion in new construction — and cranes and hope and optimism in the air — in a short period of time.”
But House Speaker Kevin Cotter, R-Mount Pleasant, said the legislation ran afoul of the state’s new system that has created hundreds of thousands of jobs and higher incomes by letting the best businesses compete “on a level playing field, instead of relying on the state to pick winners and losers.”
“Dan Gilbert has done great things for Detroit, and he has shown that he is a competitor and a winner,” Cotter said in a late Wednesday statement. “If he can’t make a deal work without state aid, then it is not a deal worth doing, and Michigan taxpayers should not be forced to invest.”
The size and scope of the Hudson site development, and at least one other Gilbert-affiliated project in Detroit, depended on the tax incentive package. Gilbert said: “I’m not going to say that nothing happens (without the state incentives), but I think you have a chance of it being more substantial, of taking more risks with this kind of state support.”
But on Wednesday, the House Local Government Committee adjourned its final meeting of the year without voting on the legislation. The bill called for a complicated tax “capture” mechanism to help developers recoup part of their investment in contaminated or blighted properties.
The proposal would have been a sharp change in policy for Gov. Rick Snyder and the Republican-led Legislature, which scrapped most major incentives to developers in 2011.
Gilbert said in an email late Wednesday that the House committee’s decision to let the bill die without a vote was “puzzling.”
He cited the support by various politicians and the need for significant investment to attract and retain a college-educated workforce in Michigan. He also cited his own company’s significant investment in Detroit so far.
Gilbert said he hoped a vote could still take place this legislative session: “...We ask our legislators to do the right thing for Michigan and allow a vote.”
Developing the Hudson site has become one of Gilbert’s most elusive goals in Detroit. The name refers to the famed department store that closed 33 years ago. Opened in 1911, the Hudson flagship store eventually grew in size to more than 2 million square feet and 32 floors. At one point, it was the tallest department store in the world. The structure was demolished in 1998.
An entity linked to Gilbert’s Bedrock Detroit company gained development rights to the city-owned Hudson site in 2010. That’s the year Gilbert, founder and chairman of Quicken Loans Inc., moved his companies downtown. He has since built a Detroit real estate empire, amassing more than 90 properties and investing more than $2 billion.
Early designs released last year for the Hudson site show a swooping glass-and-metal structure that looks like nothing in Detroit now. The development agreement between the city and a Gilbert entity outlined 250 residential units, 225,000 square feet of mixed-use commercial or retail space, as well as a “programmed civic space,” according to city documents. That civic space makes financing the deal more challenging, Bedrock officials have said in the past.
At the moment, there is a Dec. 31 deadline to reveal full plans for the Hudson site. Construction was slated to begin April 1, 2017, according to the development agreement. The goal is to have the site finished by 2020.
Bedrock officials have been vague for more than a week on whether that Dec. 31 deadline will be met.
The Monroe Block is the other development that could be scaled back by the absence of tax breaks. Those plans, released last week, call for a mostly vacant two-square-block area on the edge of Greektown to be overhauled with two new modern towers for office and residential use, and space for stores and restaurants.
A price wasn’t put on the potential development, but the announcement did come with a cautionary warning by Bedrock officials that the plan could be downsized if legislators didn’t approve tax breaks.
While Bedrock has successfully bought and renovated dozens of Detroit buildings, one of the major differences for the Hudson site and Monroe Block is that they involve extensive new construction, said Matt Cullen, a principal at Gilbert’s Rock Ventures LLC. Without tax breaks, many big urban projects that involve new construction “don’t make economic sense,” Cullen said last week.
The proposed legislation that Gilbert seeks may not be entirely dead, said Rep. Lee Chatfield, a Republican from Levering who chairs the committee that killed the bill Wednesday. He anticipates the discussion will continue in the new legislative session that starts next year, “but at this point, I don’t think it’s the best direction for us to go.”