Senate panel OKs tax break bills for developers

Michael Gerstein
The Detroit News

Lansing — A state Senate panel unanimously approved legislation Tuesday to funnel tax money to certain development projects such as those planned by Quicken Loans chairman Dan Gilbert in Detroit.

The Economic Development and International Investment Committee approved the five-bill package in a 7-0 vote with no debate. Passage could jump-start development projects worth $2 billion to $3 billion that Gilbert has planned in Detroit.

Supporters of the legislation may still have an uphill battle, however, because of concerns from Gov. Rick Snyder, who may take issue with the hit to the state budget that might result from the tax breaks. A fiscal analysis says the legislation would cost an unknown “but likely significant amount and would have an unknown impact on local revenue.”

“I’m not taking a position opposing it, being for it,” Snyder told reporters after an event at the Capitol. “But I have a series of concerns that I’m happy to share with legislators — and that’s the normal legislative process that they can look at those issues. I would think many of them have similar concerns.”

Snyder approved $1.65 billion in tax cuts in 2011 by eliminating the business tax.

The latest tax legislation would redirect state tax revenues to redevelopment projects on “brownfields” — land tainted with lead, asbestos or other contamination that’s costly to clean up.

The projects would “capture” a portion of sales tax or use tax generated by the property and income tax paid by residents who might live in new condos or apartments built on brownfields, under the legislation.

It could specifically help Gilbert go forward with a redevelopment project his company Rock Ventures LLC, has planned on Woodward where J.L. Hudson’s department store used to be and another development proposal to relocate the Wayne County Consolidated Jail project to Mound Road.

The package now goes to the Senate for consideration. The full Senate, House and Snyder would still need to approve the legislation to make it law.

If the Legislature and Snyder approve the package, getting the tax revenue for particular projects would come with further requirements. The board of the Michigan Strategic Fund — a state board meant to spur economic growth — would need to approve a project as well as the local board in a municipality applying for the brownfield tax funds.

Private investors would have certain start-up capital requirements determined by population, according to the legislation. For example, projects in Detroit would need $500 million in private capital investment to receive any state assistance for the “transformational brownfield plan.”

Cities with smaller populations would need smaller amounts of capital. Developers would need to commit $50 million for projects in 13 Metro Detroit communities with more than 50,000 residents but less than 100,000, such as Novi, Royal Oak, Dearborn and Livonia.

Supporters say the legislation would help get projects off the ground that encourage economic development and which might not happen without tax breaks from the state.

But critics argue that the legislation applies to companies that don’t pay business tax anyway. So padding their bottom line with tax revenue that would have otherwise gone to the state might be considered unfair to some.

Assuming the development projects were built without the tax breaks, the tax revenue generated would go to a state fund not earmarked for anything in particular, and could be spent on whatever lawmakers choose, from education to prisons or roads.

Supporters of the legislation argue the projects would not be built without the state aid, which would encourage “transformational” projects for cities.

The main bill sponsor, Republican Sen. Ken Horn of Frankenmuth, said “people from the Gilbert team” came to him with the idea for the legislation, which is meant to jump-start Gilbert’s projects “when it gets right down to it,” Horn said Tuesday after the committee he chairs OK’d the package.

Horn said the tax breaks would apply to other companies, not just Gilbert’s.

“We’re seeing a pent-up demand for some kind of tools in every corner in the state of Michigan,” Horn said. “I’m getting telephone calls from small communities that ... have a project that could be very transformational for their communities, large or small around the state.

“So yes I think this could easily ... set the table for some of the projects that are happening in Detroit,” Horn said. But “everybody is gonna have a crack at this.”

Twitter: @MikeGerstein