Gilbert rep: Bills could fund $3B in Detroit projects

Michael Gerstein, and Jonathan Oosting

Lansing — Quicken Loans Chairman Dan Gilbert is close to jumpstarting a legislative package of state tax incentives with the promise it could generate $2 billion to $3 billion worth of projects in Detroit.

A state Senate committee is scheduled to consider Tuesday a package of five bills that could help redirect state tax revenues to fuel redevelopment projects on “brownfields,” land tainted with lead, asbestos or other expensive clean-up contamination.

Projects would receive state money by “capturing” a portion of the sales tax or use tax within the property and income taxes paid by residents who live there, according to a Senate agency analysis.

Rock Ventures LLC is “part of a large and growing coalition of economic development leaders” supporting the legislation, principal Matt Cullen told lawmakers earlier this month in an initial hearing. The Gilbert company “would be prepared to move forward with $2 billion to $3 billion worth of projects” if the package becomes law, Cullen said.

The legislation could pave the way for a Gilbert redevelopment on Woodward where J.L. Hudson’s department store used to be and another development proposal to relocate the Wayne County Consolidated Jail project to Mound Road.

“As a state we don’t have the economic development tools we need to unlock the large-scale transformational projects that are going to truly move the needle in revitalizing our cities,” Cullen said. “The fact is that in many cases there continues to be a gap between the cost of development in our older cities and what you can get back in rent.”

A developer would still put up “all of the capital” and take “all of the risk” on qualifying projects, he said.

“And if that tax revenue does not develop, it’s on the developer,” Cullen said. “The state takes no risk and has no exposure. Likewise the local community takes no risk and has no exposure.”

A fiscal analysis said the bills would cost an unknown, “but likely significant amount, and would have an unknown impact on local revenue.”

Gilbert’s team “came to us with the idea” for the legislation, said Sen. Ken Horn, the Frankenmuth Republican who agreed to champion the legislation and sponsor one of the bills. Gilbert had private talks with Gov. Rick Snyder over the summer over jumpstarting development through tax incentives.

The legislation “is not a Dan Gilbert bill,” but a package with support from “all corners of the state” because urban areas need more options to encourage development for risky projects that might not otherwise be completed, said Horn, chairman of the Senate Economic Development and International Investment Committee.

“We are out of incentives,” Horn said. “Costly projects are just kind of sitting on the shelf right now.”

It is similar to a controversial proposal that state lawmakers approved in 2012 to help Detroit Red Wings owner Mike Ilitch finance the building of a new hockey arena in Detroit as part of an up to $1.2 billion entertainment district. It allowed the Ilitch organization to apply for Detroit’s Downtown Development Authority school property tax money that amounts to $12.8 million a year.

The Ilitch arena and entertainment district involve more than $900 million from private investors and the rest in public money by 2020, according to the Ilitch organization.

Urban developers have been complaining since the state Legislature in 2011 approved Snyder’s business tax reform legislation that eliminated key tax incentives — such as brownfield redevelopment credits — that most urban developers used to get deals done.

They got a key ally in Gilbert and his partners, who in the past five years have spent about $2.4 billion to acquire and rehabilitate property in downtown Detroit.

Supporters of the new tax legislation, such as state Sen. Steve Bieda, D-Warren, who sponsored one of the five bills, said it would help spur redevelopment in downtown Detroit and other areas in the state.

It would use a complicated legal procedure that would funnel state money for “transformational brownfield projects” and requires at least $500 million in private funding to receive any aid for such projects in Detroit, according to the legislation.

Bieda said he sees the package as “an important economic development tool” for projects across the state, and particularly helpful for removing blight in Detroit.

JoAnn Crary, president of Saginaw Future Inc., said Monday a major $25 million project could move forward in downtown Saginaw if the bills become law, but would not disclose further details because the project is “confidential.”

Even if the Legislature and Snyder pass the tax package, getting the tax revenue for particular projects would require local and state money comes with a few more strings attached. The board of the Michigan Strategic Fund — whose goal is to spur economic growth — would need to approve a project as well as the local board in a municipality applying for the brownfield tax funds.

The start-up capital requirements from private investors is determined by population, according to the legislation.

Projects in Detroit would need $500 million in private capital investment to receive any state assistance for the “transformational brownfield plan,” while cities with smaller populations would need to ante up smaller amounts of capital. Developers would need to commit $50 million for projects in 13 Metro Detroit communities with more than 50,000 residents but less than 100,000, such as Novi, Royal Oak, Dearborn and Livonia.

The Michigan Strategic Fund could approve a maximum of five such brownfield plans a year, but could waive minimum investment requirements and approve additional projects in many urban centers that have received federal “blight elimination program funding.”

“If the package makes it through both chambers, the governor will give it a thorough review before deciding whether to sign it into law,” spokesman Ann Heaton said Monday.


Twitter: @MikeGerstein