Editorial: Shaking down developers will slow rebound
Responsible development benefits a community such as Detroit with economic opportunity, jobs and tax revenue, as well as by adding to the vibrancy and quality of life in the city. You only have to look at the turnaround of downtown Detroit and some adjacent neighborhoods over the past five years to see the evidence.
Attempting to extract additional payments from those who are investing in a city with a still uncertain future is a risky strategy that could throttle the pace and breadth of the city’s comeback.
That’s what Detroiters should keep in mind as they decide between two so-called community benefits ordinances that will appear on the Nov. 8 local ballot.
While both are bad, one — Proposal A — is worse than the other.
Both proposals demand that developers with major investments in the city, or who seek certain tax subsidies, guarantee to provide added benefits to the community, such as jobs or affordable housing. Proposal A is an initiative from the activist group Rise Together Detroit and would require developers to provide additional benefits if their projects have a public and/or private investment of at least $15 million and they’re seeking at least $300,000 in tax breaks.
It’s a very low threshold that will capture a lot of smaller projects that are being put together on a shoestring. No other major city imposes community benefits mandates on developments of that size. It will shut a lot of smaller developers out of the market and make Detroit less competitive for investment.
Already, getting financing for Detroit development work is a challenge. Adding costs that don’t improve the return on investment will make projects in the city even less attractive to banks.
The second proposal was placed on the ballot by the Detroit City Council in hopes of countering Proposal A. It is less onerous, setting the kick-in limit at $75 million and/or tax breaks of at least $1 million. The proposal with the most votes will pass.
Unfortunately, Detroit has now locked into a community benefits agreement ordinance. And while Proposal B is more palatable, it will still add costs to projects without improving return on investment. That means the developers will have to charge more for the commercial and residential space once it’s built.
There were better options, and Detroit should have explored them.
It seems pointless to require contractors working on projects within the city to commit to hiring a specific percentage of Detroit workers when the city’s workforce is not trained to do the work. The city should have focused on getting the neglected Detroit Public Schools vocational centers up and fully running to turn out electricians, carpenters, brick layers, welders and other skilled tradesmen who are so much in demand.
Reviewing the wisdom of providing generous tax incentives in a rebounding Detroit is also warranted. Currently, entire zones of the city are exempt from certain state and local taxes, a measure taken to stir interest in living in the city. But with demand for downtown housing and other space outpacing supply, it may be time to end those sweeteners.
A lot of steps could be taken to maximize the benefits the community gets from development. Unfortunately, Detroit chose the worst approach.