House Republicans in the new legislative session are having as much trouble as did their predecessors in passing a plan to boost urban redevelopment in Michigan.
This time, a brownfield incentive package that passed easily through the Senate last week is apparently going nowhere in the House because leaders are worried about the “optics” of providing tax breaks for economic development projects after failing to pass a personal income tax cut.
The bigger risk is appearing as a policy making body that allowed its fear of being accused of corporate welfare prevent it from passing sensible legislation to support a resurgence — driven by the private sector — in the downtowns of Detroit, Flint, Grand Rapids and other Michigan cities.
The current five-bill incentive package has been reworked from the one that failed in last year’s lame-duck session to take in some of the concerns expressed by GOP lawmakers. Its passage in the Senate received bipartisan support.
It would allow developers of tainted urban sites to recapture the tax revenue from the project to offset the higher costs and lower returns associated with investments in city cores. In Detroit and other older Michigan cities, rents are still not high enough to fully offset construction costs without incentive packages.
What’s on the table is a highly targeted and limited plan. Local governments would have to nominate projects for tax incentive consideration. Five projects could be approved each year by the Michigan Strategic Fund, but no more than one in any city.
The program would be capped at $1 billion over 20 years.
The limits would prevent this program from becoming a massive giveaway program for billionaire investments, as Republicans feared in defeating the last version of the package.
Instead, it would serve to get some exciting new projects up and going.
The bills are backed by Dan Gilbert, who has pledged to use the incentives, among other things, to build the tallest building in Detroit on the site of the former J.L. Hudson department store. A ground-up development of that magnitude could help Detroit reach the next stage of its downtown revival.
But it’s not just Detroit legislation. Pontiac, for example, is hoping the incentive package will stir interest in redeveloping land where the abandoned Silverdome sits.
It would not take a current dime out of state coffers, since the bills would recapture new revenue generated by the project. But it could boost overall tax collection if the developments attract spin-off investments, as they should if properly planned.
Rep. Jim Tedder, R-Clarkston, chair of the House Tax Policy Committee, is sitting on the bill, expressing concern that handing out tax breaks to wealthy developers while denying an income tax to individuals would be insensitive.
But a strategic tax policy that helps revive the cities where many taxpayers live would have broad benefit. And the developers don’t have to plant their money in high-risk urban areas.
Michigan has neglected its large cities; state policies over the decades, including cutbacks in revenue sharing, were partly responsible for their decline.
This is a relatively low-cost way for the Legislature to assist the promising comeback of Michigan’s downtowns. And it has the support of Gov. Rick Snyder.
House leaders should stop worrying about optics and instead do what they can to aid progress.