Gilbert’s Bedrock seeks council OK for major tax breaks

Louis Aguilar
The Detroit News

An effort to win Detroit City Council approval for $250 million in new state tax incentives for Dan Gilbert’s Bedrock Detroit hit a minor setback Thursday and will remain in a council committee for at least another week.

Bedrock, which needs council approval to get the incentives for four “transformational” projects that could redefine downtown, was introduced Thursday to the council’s planning and economic standing committee. It was met with some public rancor over a billionaire’s need for tax money to help finance ambitious projects. And two of the three committee members opted not to move the proposal to the full council as Bedrock had hoped.

Bedrock is seeking quick approval as it aims to use part of the tax incentive to start construction next month on the former Hudson’s site, an estimated $909 million project.

Bedrock and city officials gave a lengthy, detailed presentation Thursday explaining how no general revenue taxes or money dedicated for the Detroit public schools would be used in financing the project. Further, the officials said, the city could see $673 million in new tax revenue.

But during public discussion, several city residents lashed out against the proposal, decrying it as unfair benefit for the wealthy.

The tax incentives, known as transformational brownfield tax credits, were created this year by the state Legislature after Gilbert played a high-profile role in a statewide coalition that lobbied for the legislation.

Councilman Scott Benson boiled down the issue of the tax incentives to one question. “You need to be able to tell me what I can tell ( my constituents) when they will inevitably ask me: ‘Are my tax dollars going to finance this development?’ ” Benson asked one legislative policy staff member who had analyzed the Bedrock proposal.

The staff member, Derrick Headd, had begun a lengthy answer when Benson interrupted and asked for a “yes” or “no” answer.

“The answer is no,” said Headd. But he then explained that potentially $74 million in future tax dollars of that $250 million tax break could end up coming from downtown residents.

Bedrock wants to apply the new state tax breaks on four downtown projects that it says are part of a $2.1 billion investment. The four projects include creating the tallest building in the city on the empty historic Hudson’s site; developing three acres of mainly empty space for the Monroe Block, renovating the equivalent of 7.2 football fields of interior space at the long dormant Book Tower and Building, and a major expansion of the One Campus Martius building.

According to the proposal, the bulk of the $250 million in tax incentives would come from state income tax generated by residents living in the new developments; state income tax generated by workers at the developments; state income tax on construction labor building the projects, and state sales tax on construction materials used to build the massive projects.

Further, the $250 million would be used to pay off bonds Bedrock will issue on the project and the tax money would be captured over a period of 30 years. Those taxes will come from revenues created from the new developments, which currently include building that have been empty or dormant for years.

Public comments on the project were split about the potential deal. Several union officials whose members would get jobs and members of a neighborhood advisory committee for the developments praised the deal. Others urged the council to deny approval.

“This is a very creative way of not going to the general fund because the money is coming straight out of workers paychecks and to the billionaire,” said Allison Laskey, a member of the Charlevoix Village Association neighborhood group.

Two of the council committee members said they need another week to review the complex proposal.

“I don’t necessarily support it as of today,” said Councilwoman Mary Sheffield, who voted to keep the proposal in committee. “I just need more time and information.”

Each of the four projects are estimated to take five years of construction to complete. Bedrock hopes to begin work on the Hudson’s site next month.

Twitter: @LouisAguilar_DN