Howes: Gilbert spearheading talks for new economic development tools
Mortgage mogul Dan Gilbert is pressing Gov. Rick Snyder for state aid to help complete some of his most high-profile redevelopment projects planned for downtown.
The private talks, reported first by the MIRS news service, are part of broader discussions underway within the state economic development community. They come as representatives for Gilbert’s Rock Ventures LLC unit continue meeting with Wayne County to relocate its stalled jail project to Mound Road — and as the Ilitch family makes progress in its District Detroit development, funded partially with public dollars.
That’s not so easy to replicate today. The decision by the governor and the Republican-controlled Legislature to eliminate many urban development incentives — and replace them with a comparatively small, centrally controlled fund — is complicating efforts to tackle big projects in both suburban and urban centers across the state.
“There are a number of us having conversations,” says Birgit Klohs, president of The Right Place Inc., the economic development arm for Grand Rapids and the surrounding area. “How do we play and compete? Our tools could be more robust when compared to our competition. When we pitch a company today, if it’s a fairly large deal, we can’t play there.”
Take note, GOP lawmakers. Alarm over the massive tax credits owed to Detroit’s automakers, awarded during the financial collapse, and an overly optimistic belief in the fundamental competitiveness of the Michigan economy instead are making the state increasingly uncompetitive, experts say.
In Cleveland for an event with delegates to the Republican National Convention, Snyder declined comment Thursday on any specific proposals from Gilbert. But he did not deny the chairman of Quicken Loans Inc. is seeking state assistance for economic development projects, including those backed by Gilbert.
“People are always interested in growing jobs in Michigan and I’m always open to hearing what people think are the best ways to do that,” the governor said. “I’m always trying to grow jobs in Michigan. I always want to do it in a financially responsible way.”
The problem is two-fold. The move by Snyder and the Legislature to kill many of the state’s economic development tools is hampering Michigan’s ability to compete with a $400 million closing fund in Texas, tax abatement programs in Ohio totaling some $800 million, and South Carolina’s penchant to finance new buildings for corporate relocations, to name three examples.
Second, the slow revival of Michigan’s urban centers — even a Detroit turbo-charged by Gilbert’s real-estate roll-up — means many projects still struggle to deliver a positive return for developers who cannot afford to take big risks. One strategy under discussion proposes to split incremental tax revenue between developers and the taxing authority — revenue that otherwise would not be collected without new development.
“We like it,” says JoAnn Crary, CEO of Saginaw Future Inc. “We’re not” proposing to take “the tax base on the tax rolls already. It allows the development to go forward and fill the gap. Other states are doing this. We’re so far behind in our urban areas.”
In theory, the risk would be borne by developers, not taxpayers. If a project tanks, developers would shoulder the losses; if it succeeds, the localities would reap the majority of incremental property, sales and income tax revenue and developers would pocket the rest to ensure a positive return on their investment.
“In order to accelerate economic development in the State of Michigan and continue to move the state forward, we need new tools to support transformational large-scale development projects,” Gilbert’s Rock Ventures said in a statement. “This is what we’ve been working on with our partners and discussing with various government officials.”
A source close to the situation says “no one” is suggesting “writing a check” for Detroit. What is being discussed: maintaining the momentum powering Gilbert’s downtown play, the enthusiasm reacting to it, a reinvigorated and restructured City Hall under Mayor Mike Duggan, and a hometown auto boom that got another big boost Thursday from record earnings at General Motors Co.
For the past five years, Gilbert’s downtown acquisition and rehab spree totaling some $2.4 billion has largely been self-financed with cash and a larger than usual appetite for risk. But as projects on the drawing board grow more ambitious — think the entertainment-and-soccer district on the site of the county jail eyesore, or the signature building on the Hudson’s site — the need for multi-source financing grows, insiders say.
That’s as true in Saginaw, Flint or Grand Rapids as it is in Detroit. There, billions in private investment are steadily reviving the downtown core, offering new housing and drawing new residents and businesses.
The discussions are unlikely to yield anything before Election Day. Any ask from the Gilbert organization, which has made private funding a hallmark of its redevelopment efforts, is likely to encounter resistance after the summer recess or in a lame-duck session of the Legislature or both.
Even though the talks do not envision any direct commitment of existing taxpayer dollars, and even though the benefits would accrue to municipalities across the state, skeptical lawmakers are likely to cry “Detroit fatigue.” Credit bailouts tied to Detroit Public Schools and the “grand bargain” in the city’s Chapter 9 bankruptcy.
The talks are likely to expose limits to the state’s ability to help. So-called “Brownfield Redevelopment” programs, historic tax credits and MEGA grants are no longer available to assist projects like Gilbert’s — unless he already has existing ones that could be extended. Generally speaking, he does not.
Additionally, a push by the governor to assist Gilbert, implicitly burnishing Snyder’s legacy in Detroit, could have negative implications: Snyder and Republican leaders in the Legislature could be seen as more motivated to help a billionaire than speed assistance to Flint’s lead-tainted water system.
Probably so. But that doesn’t mean the governor, the GOP leadership and business leaders shouldn’t push to reverse a competitive slide that affects a lot more people than those doing the talking.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.
Staff Writer Chad Livengood contributed from Cleveland.