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Rep: Tax cut failure slows Gilbert incentive push

Jonathan Oosting
Detroit News Lansing Bureau

Lansing – Action on a blight redevelopment incentive plan backed by Detroit businessman and billionaire Dan Gilbert could be delayed in the Michigan House following its rejection of a personal income tax cut proposal backed by Republican leaders.

“The policy makes great sense, but right now, let’s be frank, the optics are not great,” said Rep. Jim Tedder, R-Clarkston, chairman of the House Tax Policy Committee.

The “transformational” brownfield tax capture plan would allow qualifying developers to recoup a portion of state income and sales taxes generated by major redevelopment projects at blighted or contaminated sites.

The five-bill package sailed through the state Senate with bipartisan support on Wednesday, the same day the House began debating an income tax bill that ultimately failed early Thursday morning in a 52-55 vote.

That vote “made things more complex” for the incentive package in the House because majority Republicans are wary of handing out tax breaks to wealthy developers without also providing tax relief to working-class residents, Tedder said Friday during a taping of “Off the Record” on WKAR-TV.

“I think it’s hypocritical,” he said. “I’m not suggesting you can’t accomplish both.”

The incentive legislation is backed by a growing coalition that includes local business and government leaders across Michigan, who argue it could spur private investments in otherwise stalled major projects capable of revitalizing urban cores.

Gilbert remains the plan’s highest profile backer. His Bedrock real estate company has said the incentives could pave the way for projects in Detroit, including an ambitious proposal to build the tallest building in the city on an empty block where the J.L. Hudson department store once stood.

If the tax incentives are not passed, “It certainly will impact what happens,” Bedrock Vice President of Construction Joe Guziewicz said Wednesday as the firm unveiled new details of the Hudson’s site plan.

Local governments would have to nominate projects for tax incentive consideration. The Michigan Strategic Fund could usually approve up to five projects a year, but only one per city, guaranteeing the incentives could have an impact in multiple communities around the state.

The incentive program would be capped at $1 billion over 20 years. But the non-partisan Senate Fiscal Agency says the package would increase state revenues over the long term, assuming the qualifying projects “would not have occurred in the absence of the bill” and “did not shift economic activity from other locations in Michigan.”

Tedder said he may still call a hearing on the legislation, which was referred to his committee, but probably not in the immediate future. He said he is personally not ready to vote for the proposal, although he sees some merit in it.

“I believe what Gilbert and the MiThrive package seek to do isn’t necessarily our father’s form of economic development,” Tedder said. “He wants to put his money where his mouth is.”

Supporters say the incentives could unlock billions of dollars in private investment for difficult projects. Pontiac Mayor Deirdre Waterman argues it could spur redevelopment of the long-vacant Silverdome, which she said now functions as the world’s largest bird bath.

But critics have called it a form of corporate welfare and cronyism.

“Politicians and those looking for special favors love these programs because they can get away with saying the development could not have happened otherwise, but they cannot prove that,” said Michael LaFaive, fiscal policy director for the Mackinac Center for Public Policy. “If a development is worthwhile, it will take place. If it’s worthwhile, you shouldn’t be subsidizing it.”

Tedder said he is sympathetic to arguments the incentive plan would encourage developers to take on projects they may otherwise avoid because of a “government label” forcing expensive environmental remediation efforts at blighted or contaminated sites.

“If a government slaps a Scarlett Letter on a property, it certainly makes it more difficult for anyone to be enticed to develop,” he said. “So I think Mr. Gilbert’s plan warrants discussion.”