Lansing — Detroit businessman Dan Gilbert urged Michigan legislators Tuesday to approve a $50 million tax incentive plan designed to spur large-scale redevelopment projects in urban centers across the state.
The proposal would allow developers, such as Gilbert, to recoup a portion of their initial investment for projects on contaminated or blighted “brownfield” sites through a complex system to “capture” sales or use taxes paid by new tenants.
A coalition backing the incentive legislation says it could trigger “transformational” projects in city centers around the state, spurring developers to act on tentative plans that would otherwise cost more than building on a clean site.
“This is about hope and the future, and I’m hoping that at this very, very critical time we’re going to deliver,” Gilbert told legislators in testimony before the House Local Government Committee, which is considering the package with less than two weeks left in the so-called lame-duck session.
“If we deliver, we’re going to have in Detroit alone probably $2.5 to $3 billion in new construction — and cranes and hope and optimism in the air — in a short period of time.”
The tax money “should come back to the state in multiples,” Gilbert told The Detroit News after the hearing, confirming a link between the legislation and his own redevelopment plans.
“You have to look at it through a different lens,” he 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.”
Gilbert controls more than 90 properties in downtown Detroit. He’s invested over $2 billion in the city.
Currently on the table are at least two massive projects within a few blocks of one another in downtown Detroit. Announced last week, Gilbert’s Monroe Block plan would overhaul a mostly vacant two-square-block area in the heart of downtown Detroit by building two modern towers of at least 20- and 16-stories.
None of the site plans or building designs for the project are finalized, but preliminary renderings show modern office and residential towers connected by at least 60,000 square feet of ground-floor retail space.
Those plans compound on pending development from Gilbert’s real estate company, Bedrock, for the former J. L. Hudson site downtown on Woodward, where Gilbert has said in the past he wants to build an “iconic” development, which reportedly includes a new skyscraper and other mixed uses.
Conceptual renderings for both projects show flashy buildings and development Detroit hasn’t seen in decades. And to become reality, the brownfield package needs to be approved, Gilbert said.
“We’re sort of in a holding pattern,” he said. “As soon as we know what’s going to happen one way or the other, we’ll look back and see what we can do.”
A week ago following the Monroe Block announcement, Bedrock officials warned the plan could be downsized if state legislators and Gov. Rick Snyder don’t approve the tax breaks.
“We do need these economic tools to build these transformational projects,” said Steve Rosenthal, a principal at Bedrock Detroit, after the DDA board approved the outlines for the development.
The redevelopment incentive proposal faces an uncertain future in Lansing, where both Snyder and House Speaker Kevin Cotter, R-Mount Pleasant, have expressed some concerns with the legislation.
“I don’t like the bills at all, but that’s just my personal view, so we’ll see where the body wants to take it,” Cotter said Tuesday, suggesting he could allow a floor vote if the bills advance out of committee.
The House panel adjourned Tuesday without a vote on the legislation but could reconvene Wednesday morning, according to Chairman Lee Chatfield, R-Levering. He told reporters his committee will not vote this year on a separate $250 million business incentive and abatement plan favored by the Snyder administration.
“I’m going to be in discussions with committee members about the Dan Gilbert package to see where they’re all at on these bills, and we’ll move forward from there,” Chatfield said. “I’ve been upfront from the beginning. I’m not at this point completely convinced it’s needed.”
Under the legislation, proposed projects would require a minimum investment size based on population, ranging from $500 million in Detroit to $15 million in small municipalities. A local government could identify one “transformational” project a year for the state to review.
The Michigan Strategic Fund would have the authority to approve incentives for a maximum of five projects a year, allowing up to $50 million a year in new annual tax captures.
The plan is “the wrong direction” for the state, according to Pete Lund of the conservative group Americans for Prosperity-Michigan, who noted Snyder and the GOP-led Legislature scrapped most of the state’s large-scale incentives as part of a 2011 tax code rewrite that reduced business taxes.
“I don’t want us to go back to the failed policies of the Granholm administration,” said Lund, referencing former Democratic Gov. Jennifer Granholm, who expanded tax credit programs to keep companies from fleeing the state during the Great Recession.
“Those type of programs didn’t get this state to turn around. What turned around this state was when we created a flat, fair business tax and when we got away from the idea of carve outs, picking winners and losers.”
But those pushing the new package say the state may have gone too far in its incentive purge, leaving it without enough tools to effectively encourage important projects that could draw more talent or business to the state.
“These are projects we’re looking at that are so significant they literally transform the community. They can change the way it thinks about itself and the way the rest of the world looks at these communities,” said sponsoring Sen. Ken Horn, R-Frankenmuth.
“These are big developments that we currently have no tools to work with.”
Gilbert, in his committee testimony, stressed the importance of keeping young professionals in the state, estimating the state loses between $800 million a $900 million a year in tax revenue from University of Michigan and Michigan State University who leave the state after graduation.
“As we move from a muscle economy to a brain economy, you know it’s all about making sure we capture those students,” he said, “and they’re overwhelmingly attracted to vibrant, existing, thriving urban cores.”