A simple rule of mathematics holds that any number times zero equals zero.
That would be useful to remember as the state Legislature moves ahead this week with a package of bills to allow developers to capture incremental municipal tax revenues. The goal: to help finance big “transformational brownfield” projects like Dan Gilbert’s vision for the J.L. Hudson’s site downtown, among others.
Without the investments — required by the legislation to be at least $500 million in a city the size of Detroit — and the anticipated “incremental” uptick in sales and income taxes, the logic behind the bills assumes there would be no additional revenue for municipalities to collect.
That’s not an unrealistic assumption in towns like Detroit, Flint, Pontiac and Saginaw. Each in their own way have been hit by decades of deindustrialization, eroding tax base, population flight and complications associated with blight and environmental remediation — all of which make redevelopment riskier, more costly to complete and harder to generate returns on investment.
The brownfield legislation aims to help close the cost gap with new sales, income and use-tax revenue that otherwise would not be generated without the new development. Risk would remain parked with developers; they would lose if a project fails to materialize, not taxpayers.
Still, the bills backed by Gilbert, the chairman of Quicken Loans Inc., and a statewide coalition of economic development agencies and chambers of commerce may prove a tough sell. The legacy of costly Granholm-era tax credits, and Gov. Rick Snyder’s antipathy to perceived giveaways, does not change the harsh fact that under Republican control the state’s economic development apparatus has mostly unilaterally disarmed.
The bills are an effort to reverse that trend, widely decried by economic development executives across the state. They say Michigan struggles to compete with states like Texas, Ohio and the Carolinas who are willing and able to marshal cash, incentives and building funds to close deals — and that streamlining programs for urban reinvestment inside the state cut too deeply.
Republicans philosophically predisposed to opposing most anything that smacks of crony capitalism, or government “picking winners and losers,” or repeating the mistakes of massive tax credits for Detroit’s automakers, are likely to balk. And so might Democrats wary in an election year of being seen to be granting “tax breaks for millionaires and billionaires,” as Vermont Sen. Bernie Sanders might put it.
Michigan lawmakers should take a longer, more economically enlightened view of the state and the weight of its own history, much of it not good. If lawmakers think the state’s job is to “create the environment” for business investment, this could be a smart way to do it: recognize that giving away something you wouldn’t otherwise get probably is a price worth paying to encourage new development.
The idea being advanced by Gilbert & Co. and a state Senate committee chair is an opportunity wrapped in a fiscal challenge. It should not be missed amid the kind of economic enthusiasm Detroit, and this state, has not seen in a very long time.
Representatives for Gilbert say the downtown impresario is prepared to move ahead with projects totaling between $2 billion and $3 billion should the bills become law. That’s effectively double what Team Gilbert has so far invested in acquiring and renovating some 80 buildings downtown.
That’s not all. Six years into its recovery, Michigan is approaching an intersection of inflection points: the revival of the hometown auto industry’s core business is being challenged by emerging opportunities in the so-called mobility space that are attracting the likes of Google and Uber to the talent and expertise embedded in southeast Michigan.
Downtown redevelopment is gaining momentum not just in Detroit, but in Flint and Pontiac — all three minority-majority cities emerging from emergency manager oversight. Developers and those who would be, from major players like Gilbert to individuals rehabbing abandoned firehouses in Detroit, are reinvesting in core cities in ways few would have thought possible just five years ago.
Simply put, the intersection is a Michigan reckoning with its past and future at the same time. It’s happening now: how, whether and how much state government should reshape its policies to facilitate urban reinvestment. Or what Lansing can do to become at least the North American hub for testing, developing and producing mobility hardware.
Speed matters. And so does remembering that zero times something equals zero if the status quo never changes.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.