The politicians in attendance at the groundbreaking ceremony for Dan Gilbert’s new Detroit skyscraper on Thursday bought their tickets to that event with your money.
They took credit for promised “economic development” and “revitalization,” but Detroit’s seen plenty of big projects with big promises that never panned out. All we know for sure is that the real estate developers on the stage will be the recipients of hundreds of millions of dollars that could be supporting schools, police and fire departments and other services that benefit the community as a whole.
To the politicians and businesspeople who squeezed into the groundbreaking photos, this is a great deal. Politicians got to do what they like best, which is taking credit with voters for something done with someone else’s money. Businesspeople get what they like best: free money. What’s not to love, as long as you’re on the stage looking out rather than outside looking in?
The Hudson’s site project is especially notable as it’s the primary beneficiary of new laws passed earlier this year that expanded the number of ways private developers can take tax dollars for private benefit instead of public service. Those laws, unsurprisingly, were lobbied for strongly in Lansing by the same political and business “leaders” we saw on the stage and in the crowd in Detroit.
But one big change these laws make that didn’t make the speeches is that for the first time, private businesses have a claim on Michigan income taxes paid by their workers and customers. When politicians, developers and union officials talked about the construction jobs, they didn’t mention that as much as half of the income tax withheld from those workers’ paychecks will end up in a real estate developer’s bank account. When city officials talked about the people who will be living in apartments or condos in the building’s glittering residential tower, they didn’t note that the landlord will be getting up to half of those tenants’ income tax payments for up to 20 years.
There was discussion about the value of the construction materials that will go into the building, but nobody mentioned the new law that lets the construction contractor purchase those materials without paying their fair share of the 6 percent sales tax that is the primary funding mechanism for public education in Michigan. While a vocational school principal talked about job training at the event, representatives of all the other schools whose classrooms will not be receiving that money were not invited to speak. Nor was any other contractor in the region who’ll be paying sales tax on their own project’s materials this week because they’re not big or politically connected enough to get an exemption.
Supporters of these new laws argue that they’re necessary to spur “brownfield redevelopment.” That’s a fancy marketing term for “building something where an older building used to be,” which is what human beings have been doing since we stopped being nomads and invented cities.
It’s also what businesspeople used to do in Detroit with their own money. In fact, the building that will be supplanted as the city’s tallest when Gilbert’s project is complete, the Renaissance Center, was built with private funding by corporate and individual investors. The RenCen also was presented to the city in the early 1970s as an engine for economic development and urban renewal – hence the “Renaissance” in the name – but the civic-minded developers and investors led by Henry Ford II didn’t get tax dollars in return. (They did, at least, get a plaque.)
What a difference 40 years makes. This past September, Dan Gilbert told local media, “We have to compete and the only way to compete is through public/private partnerships working together. It feels to me the best it’s ever felt in Detroit and the state of Michigan for that.”
Maybe it’s the best time ever for the people on that stage. But for the rest of us that never got the invitation to the groundbreaking party but still got stuck with our share of the bill, it’s time to question whether or not we can afford much more of this kind of celebration.
John C. Mozena is a marketing and communications consultant and a free-market advocate.