Howes: Trust, economic calculation fuel Ford incentive package
Detroit – Ford Motor Co. is one step closer to securing the nearly $104 million in city tax incentives it wants to support renovation of the dilapidated Michigan Central Depot.
But the deal isn’t done. And neither will be the opprobrium from some City Council members and other critics charging that a corporate giant sitting on a cash hoard of roughly $17 billion is anything but impoverished.
That’s technically true. But it’s entirely beside the point as the Dearborn automaker undertakes what no one — including the station's longtime owner, Ambassador Bridge mogul Matty Moroun — tried over the past 30 years: to restore the vacant hulk and reshape it into a hub for the next century of automotive transportation.
Emphasis here on "no one" and "30 years." Not since the final year of the Reagan administration has the iconic train station generated a dollar of city income tax; has its soaring lobby housed a revenue-generating business; has its office tower, her top floors never fully finished, claimed anything but the occasional transient.
Development incentives aim to bridge competitive disadvantages, to drive economic activity and investment, to raise revenue that can help meet municipal needs ranging from education to infrastructure and pension obligations, and to reward risk-taking — all boxes to be ticked by Ford's train station rehab.
Something is better than nothing, people, and next-to nothing is exactly what Detroit collected from that gap-toothed hulk looming over Corktown. Pretending otherwise, as if the city has other options for the historic train station that it's refusing to consider, is the triumph of naive hope over history, experience and just plain common sense.
The income tax revenue alone generated by 2,500 Ford employees (which would not be abated under any existing proposals) far outpaces anything the site has generated for the city. And the increased revenue could help offset added burdens on city services and infrastructure the new development will deliver.
Add another 2,500 jobs from affiliated suppliers, tech companies and start-ups; new investment in shops, restaurants and bars; the virtuous circle of work-a-day economic activity commingling with nighttime and weekend traffic at many of those same places, much of them frequented by new residents occupying newly-built condos and apartments.
“I view the utilization of incentives as partnerships,” says Kevin Johnson, CEO of the quasi-public Detroit Economic Growth Corp. “Because the net benefit of everything we try to do is we want as many jobs for as many Detroiters as we can employ. That’s what this is about — it’s always about that.
"We have a real chance at creating, and re-creating, a new Detroit, a different Detroit. The tools this city is using have been paying dividends. It takes some real guts to take politics out of economic development. When you start to see trends going in a certain direction, attitudes change."
Funny how that works, when reality rises to meet the hype. Neighborhoods accustomed to clamoring for investment are beginning to see evidence of change: on and around the campus of Marygrove College at McNichols and Wyoming; around the new Flex-N-Gate plant on the east side and Sakhti plant in southwest Detroit.
And in Corktown, where the promise of Ford's investment already is improving the economic prospects of Detroit's oldest neighborhood. The word "transformative" is widely used these days — namely, Ford's Corktown bid, Dan Gilbert's roll-up of downtown real estate, the Ilitch family's District Detroit development — but it's an accurate description of cold, hard investment in the city America and most of Michigan gave up for dead.
Reality also has its challenges, especially for major investors looking to write their own piece of the Detroit reinvention. The city's real estate tax rate on commercial property is the highest in the nation, Johnson says. Its residential property tax rate is the third-highest in the nation. It levies an income tax on individuals that many rival cities do not. And auto insurance rates? Absurd.
That's why incentives are so often necessary: to equalize the investment disincentives embedded in the cost of doing business in Detroit. The question is not whether Detroit can afford to offer incentives — it's whether a city hungry for growth to meet rising obligations can afford not to.
"Everything being equal, if you didn't have these incentives it would be very difficult for companies to move in here," says Jimmy Settles, group executive of the city's Department of Neighborhoods and the former head of the United Auto Workers' Ford Department. "People getting the proper facts at the proper time will always make the right decision.
"This really is a benefit. Detroiters ... they've been beat up so. They've been promised things that didn't happen. Historically, Ford has always been in the community. People trust Ford."
And it's up to the Blue Oval to ensure that trust is not abused.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.