$76B state budget would forgo tax relief, pour billions into struggling pension funds

Foes prepping fight over ‘transformational’ tax plan

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — Opponents of a $1 billion, 20-year redevelopment tax capture plan on the move in the Michigan Senate are keeping their powder dry until it reaches the Michigan House, where a similar proposal stalled out last year.

The five-bill package, backed by Detroit billionaire Dan Gilbert and a growing coalition of statewide supporters, seeks to spur “transformational” projects at blighted or polluted brownfield sites across the state by promising developers a portion of taxes they eventually generate.

The legislation sailed through the Senate Economic Development Committee this week with unanimous, bipartisan support and is expected to clear the Senate by early next month.

But former state Rep. Pete Lund, head of the Michigan chapter of Americans for Prosperity, said his conservative advocacy group strongly opposes the incentive package and plans to play a more active role when the legislation reaches the House.

“You’re better off taking that money and creating a flatter, fairer situation for all businesses and all taxpayers,” said Lund, a Shelby Township Republican. His group is pushing cuts “for all taxpayers, not certain ones who get benefits because they’ve got connected lobbyists.”

Advocates say the plan could revitalize Michigan cities by helping bridge funding gaps that have held up long-discussed projects, including redevelopment of the vacant and roofless Pontiac Silverdome, which Mayor Deirdre Waterman told legislators is currently functioning as the world’s largest bird bath.

But the proposal continues to face opposition from outside groups that have the ear of some House Republicans, including the Mackinac Center for Public Policy, which has blasted it as a form of “corporate cronyism.”

Republicans in the increasingly conservative state House, led by newly minted Speaker Tom Leonard of DeWitt, are aggressively pushing a separate plan to cut and eventually eliminate Michigan’s personal income tax despite objections from Republican Gov. Rick Snyder.

Leonard has not taken a position on the redevelopment tax capture plan now supported by Snyder but said Thursday he is “philosophically” opposed to picking winners and losers through the tax code.

“But I’m not going to take a position on this bill until I’ve had the opportunity to see it, read it, review it and understand it,” Leonard added.

Sen. Ken Horn, lead sponsor of the bill package, said Thursday the proposal would create competition, not pick winners and losers. A city could only have one qualifying redevelopment project a year, and the state would generally be limited to approving five projects across the state in any given year.

“We think we’re giving every community in Michigan a fair shot in the way we’ve structured this bill,” said Horn, R-Frankenmuth. “And even within cities, the developers have to compete. This isn’t about picking winners and losers, and this isn’t about tax policy, this is about fixing things.”

Horn said he is confident the package will reach Snyder’s desk this year. He noted members of the MIThrive Coalition, which includes local government and business supporters from around the state, have already reached out to House members.

“We think we have the votes on that side, but I still want to work with the speaker of the House to make sure we’re not sending him anything that his members can’t handle,” Horn said. “They certainly have been very busy.”

The plan would allow developers to capture up to half of the income tax revenues generated from any new jobs or residents at the completed site for up to 20 years. Project organizers would also recoup sales and income tax revenues generated on-site during the construction period.

The latest version of the bills would limit annual income tax captures from jobs and residents to $40 million per year and $800 million overall. Total construction-period tax captures would be limited to $200 million over the life of the bill.

The Michigan Strategic Fund could only approve a project if a third-party economic impact analysis shows it would have a positive net fiscal impact for the state, a measure designed to prevent projects based solely on in-state relocations.

“We absolutely take into account people moving from A to B,” said Jared Fleisher, vice president of government affairs Quicken Loans, the Detroit-based mortgage lender founded and chaired by Gilbert. “So if it’s a whole headquarters moving into a new building, you’re absolutely going to fail that test.”

Rock Ventures, a real estate and investment wing of Gilbert’s growing business empire, has said tax capture plan could pave the way for it to move forward with $2.5 billion in projects in Detroit.

The company’s redevelopment targets include the old Hudson’s site on Woodward in downtown Detroit and a major mixed-use project on a vacant two-square-block area in the heart of downtown known as the Monroe Block. Plans for the latter site include a 20-story office tower fronting Campus Martius, a 16-story residential tower and smaller buildings.

“We’ve unveiled plans for probably about a $750 million development along that whole block,” Fleisher said. “I mean a really cool kind of thing bringing us into the modern high-rise age — but not possible without this kind of tool.”

Despite Gilbert’s backing, Horn argued the legislation would not give him any distinct advantage over other developers in Detroit or other parts of the state who could seek to qualify.

“I’ve got two other developers other than Dan Gilbert that are interested in projects in Detroit,” he said. “They have to compete for this, and they have to demonstrate that these are indeed good projects and they meet all the tests that are provided in this set of bills.”