Detroit council approves $250M tax breaks for Bedrock
Detroit — The City Council on Tuesday approved $250 million in new state tax incentives for Dan Gilbert’s Bedrock Detroit.
Bedrock needed council approval to get the incentives for four “transformational” projects that could redefine downtown. The plan has been met with some public rancor over the billionaire’s need for tax money to help finance the ambitious projects.
The council voted, 7-1, in favor of the incentives, with Councilwoman Raquel Castaneda-Lopez voting no.
Castaneda-Lopez said she believes Bedrock has done a good job of reaching out to the community but believes the council has a limited understanding of the company’s true financial need.
“Fundamentally, I just struggle with the public subsidies that we give to larger corporations without a true fiscal analysis,” she said. “What’s an application look like that doesn’t have any of the abatements factored in?”
Bedrock sought the quick approval as it aims to use part of the tax incentive to start construction in December on the former Hudson’s site, an estimated $909 million project.
“We are very excited,” said Jared Fleisher, vice president of government affairs for Quicken Loans and the family of companies. “We very much appreciate the city council’s support. This is obviously a critical step for us in delivering these four transformational projects.”
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.
Bedrock wants to apply the new state tax breaks on four downtown projects that it says are part of a $2.1 billion investment.
Fleisher said that there is one final approval needed with the Michigan Strategic Fund, and that’s expected in December or early 2018.
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 buildings that have been empty or dormant for years.
Each of the four projects is estimated to take five years of construction to complete.
Some residents decried the incentives Tuesday as an unfair benefit for the wealthy. Others praised Bedrock as a partner, telling council the approvals will help bring jobs and upgrades to city communities.
Allison Laskey, a member of the Charlevoix Village Association neighborhood group, urged council to hold off on approving the plan during public comment.
“There hasn’t been enough time for due process,” said Laskey, who is worried about budget implications and job creation. “This is a very important piece of legislation, and it’s taking place on a short-time frame. Why rush this through City Council between the election and the Thanksgiving holiday?”
But others, such as Keith Stallworth, a representative for the Black Caucus Foundation of Michigan, touted the construction jobs that will be created at the sites over the next five years.
“We consider a good collaborator one that identifies a problem and is willing to sit with those that are interested in solving it,” he said.
Bedrock and city officials gave a lengthy presentation during a subcommittee session earlier this month explaining how no general revenue taxes or money dedicated for the Detroit public schools would be used in financing the project.
“There wasn’t a penny of city taxes captured under this (tax increment financing),” Fleisher said. “There’s no impact on the school district. It’s a very positive day all around for the city. This investment without any capture of city taxes will be an enormous positive impact to the city.”
Further, officials said, the city could see $673 million in new tax revenue.
Staff writer Candice Williams contributed.