Opinion: Detroiters pay too much for economic development deals

John C. Mozena

Editor's note: This piece has been updated to clarify how much Grand Rapids spends on its economic development programs. 

In the name of "economic development,” Detroit’s politicians, bureaucrats and big-name businesses are decreasing prosperity and increasing inequality in the city. It’s time to pull back the curtain on what deals promising job creation and economic growth truly cost the people of Detroit.

Economic development incentives across the country are rapidly expanding, and it’s almost impossible for the average person to understand price tags in the tens or hundreds of millions of dollars — or beyond.

One way to address that challenge is to find comparisons that help people understand what else their governments could be doing with that money. The results are rarely pretty and often outrageous.

Quicken Loans founder Dan Gilbert, left, meets with Detroit Mayor Mike Duggan at the former site of the J.L. Hudson Co. department store, Thursday, Dec. 14, 2017, in Detroit. Ground was broken for a new 800-foot-tall, $900 million two-building project that will include a 58-story residential tower and 12-floor building for retail and conference space.

For example, Dan Gilbert’s skyscraper developments at the Hudson’s site and the Monroe Blocks project were approved for a reported $618 million in potential tax breaks and other government incentives from city and state agencies. Meanwhile, we now know thanks to the work of the Detroit News that while the proposals for those developments were being approved, Detroit’s homeowners paid an estimated $600 million in unjustified property taxes thanks to a broken property assessment system. The result of that property tax inflation was a cascade of foreclosures, blight, arson and other wounds inflicted on Detroit’s neighborhoods.

That comparison is not an attempt to argue that Quicken/Bedrock or any other single developer is responsible for the foreclosure crisis or any other challenge facing Detroit.

Plenty of companies have lined up for decades to take advantage of a long parade of politicians willing to mortgage Detroit’s future to fund press conferences and groundbreaking ceremonies today.

Detroit is certainly not unique in this, whether in Michigan or around the country. For example, Royal Oak’s reported $3.6 million in tax abatements could fund its parks & forestry, street lighting, engineering, elections and city clerk departments, combined.

Even Grand Rapids, supposed bastion of conservative fiscal responsibility, spent $38.4 million on its economic development programs last year — that's $7.6 million more than it took to run the Grand Rapids Fire Department.

These numbers keep getting bigger because the people who profit from them talk about benefits and hide the costs. Recently, the narrative around the FCA Jefferson North plant expansion has focused on the promised 5,000 jobs. Few people have the background to assess whether that’s worth the massive $422 million cost to the city and state.

Conceptual renderings of FCA expansion at Jefferson North Assembly Plant.  FCA announced that $900 million would be spent to modernize its Jefferson North plant which is expected to add nearly 5,000 new jobs in the city.

To simplify matters, we can focus on just one component of the deal, the $43.5 million Detroit reportedly gave Crown Enterprises to buy land the city then turned around and gave FCA for free. 

Meanwhile, the budget of the entire Detroit Health Department that year was $39.9 million.

I’ve shared that comparison with a diverse range of people in the city and around the state, from a wide variety of social, political and economic backgrounds. I have yet to find a single person who thinks it’s a good idea that Detroit’s politicians effectively spent more money to give Fiat Chrysler free land for an auto plant than they did to run the entire Detroit Health Department.

The fundamental problem we face in our efforts to create jobs and economic prosperity isn’t with any one deal, developer, city or state. It’s with the entire model that allows politicians to incur huge debts and make massive promises that last long after they’ll be out of office, while concealing the true costs from their constituents.

It’s a model that the Rev. Martin Luther King Jr. rightly criticized in 1968 as “socialism for the rich and rugged free-enterprise capitalism for the poor.” King was right, and it’s time we stopped letting politicians and their corporate cronies in Detroit and elsewhere pretend that these deals are good for anyone but themselves.

John C. Mozena is the president of The Center for Economic Accountability.