Group calls for halt to Detroit tax abatements
Local chapters of a grassroots civil rights organization led by the Rev. Al Sharpton are calling for a moratorium on tax abatements.
In the wake of General Motors Co.'s restructuring announcement last week that would affect 14,300 workers and idle five North American plants, the Detroit and Michigan chapters of the National Action Network said they will focus their efforts on the city charter commission to ban property tax breaks for businesses — a move the city calls a "job killer."
The groups' leaders say the incentives have led to too many broken promises and that the community needs to figure out a better way to attract investments that will benefit the entirety of Detroit.
"Cities are being pimped and prostituted by corporations who've got billions of dollars in their coffers. It doesn't make any sense," said the Rev. Charles Williams II, president of the network's Michigan chapter. "I don't believe the city of Detroit should get on its knees and start begging General Motors."
The Detroit automaker said it will unallocate two plants in Michigan by the end of 2019, including Detroit-Hamtramck Assembly. NAN leaders said the plant received $440 million in tax breaks when it opened in 1985, but that was across GM's plant modernization plan announced in 1980, according to The New York Times. Detroit-Hamtramck was expected to receive $200 million in site assistance and at least $120 million in tax abatements across federal, state and local governments.
In 2017, according to city records, the plant contributed $220,475 in taxes to Detroit. According to the automaker, the plant's wages totaled more than $139 million and contribute state income tax of more than $25 million.
The futures of the plants GM will idle will be determined during negotiations with the United Automotive Workers next year.
GM's news came one day before the Michigan Strategic Fund approved a 30-year, $207 million tax break for Ford Motor Co. to build its 1.2 million-square-foot Corktown campus anchored by Michigan Central Station.
In total, the city of Detroit is offering Ford more than $103 million in tax abatements. According to the city, this tax break and others like it are worth it because of the new income taxes they provide. Ford's Corktown investment is expected to contribute $360 million in taxes over the abatement period.
Across seven community benefits-eligible projects that include the Ford, Hudsons and Pistons practice facility sites, the city is abating approximately $191 million in property taxes, but still expects to receive $656 million in taxes as a result of the investments.
Charity Dean, director of civil rights, inclusion and opportunity for the city, said companies must develop property and apply to the city to receive tax abatements. The process includes approval by the mayor's office, city council and her department.
A moratorium on tax abatements "is an absolute job killer," Dean told The Detroit News. "I point to projects like Flex-N-Gate that are creating real, permanent jobs for Detroiters in the neighborhoods. They would not have done so if it wasn't for the incentives."
NAN members said the tax breaks take away from education, fire, infrastructure and police.
"We have to start understanding that the trickle-down effect doesn't work nationally, and it doesn't work locally either," said Ryan Mack, president of Optimum Capital Management LLC. "What we're saying is the bill has to come due some time. It's no more giving these people these tax cuts, while the people have to pay taxes."
There are opportunities for some Detroiters to receive tax breaks, as well. Those living in Neighborhood Enterprise Zones can apply for discounts on city and county property mills. The city also offers property tax exemptions for low-income households.
Williams said when the City Council returns to session, it will encourage its members to reject tax abatements and sign an ordinance. If those efforts are unsuccessful, NAN will go to the people and seek to put an initiative on the ballot.
Initiatives such as the community benefits program that voters approved in 2016, Williams said, have proved to be a disappointment because the agreements between developers and community members lack enforcement.
Williams said the city instead should explore other ideas such as tax breaks in the form of loans that companies must pay back. He also proposed tax abatements for residents who pay their taxes for a certain amount of years.
"General Motors says they've made a good business decision and they have to do what they have to do," Williams said. "Thank you, General Motors, because you have now educated us. The city of Detroit has to make good business decisions, and we have to do what we have to do."
William Davis, president of the network's Detroit chapter who also leads the Detroit Active Retiree Association, said the tax abatements take away from former city workers.
"We've lost our insurance and our health care," Davis said. "Companies promise they're going to do this or that, but they frequently don't."