This week in the notebook:
- All the details on the Future of Health project
- Breaking down the tax breaks
- Affordable housing concerns
- Developers promise displacement protection
- Community investment dollar disputes
Welcome back. I’m still Malachi Barrett.
It was hard to shake the feeling of deja vu as the City Council was scheduled to vote on millions of dollars in tax breaks for a major development plan – and then didn’t.
A $3.2 billion project between Henry Ford Hospital, the Detroit Pistons and Michigan State University reignited unresolved debates on subsidizing development, whether affordable housing is affordable, corporate responsibility, workforce development, displacement and gentrification.
Henry Ford, the Pistons and MSU are seeking $296 million in tax subsidies for a $773 million investment in three residential buildings, a shared research facility and a six-story parking garage. A benefits agreement that secures a list of community investments is also on the table.
A $2.3 billion expansion of Henry Ford’s hospital campus is considered part of the overall project but doesn’t require tax breaks. The council is also considering zoning changes.
The Planning and Economic Development Committee advanced the deal package last week without a recommendation to approve it.
The council typically delays the first scheduled vote on controversial issues. Council members said there’s plenty of issues that need to be ironed out.
Large development deals have taken a similar path through the City Council. This latest deal left me thinking about how the council is a forum for public engagement and stage for political performances.
The day started with a morning rally outside near the Spirit of Detroit. Demonstrators with Detroiters for Tax Justice carried signs and repeated chants like “taxes for buses, not billionaires.”
Demonstrators said the goal is to strengthen the community benefits deal and make the council reconsider how development is done in Detroit.
A new report commissioned by the council argues tax incentives are needed so long as development costs are high and available income for housing is low.
I followed the group inside the city’s administrative building just as trade workers in orange safety vests filed into the lobby.
On the 13th floor, the Erma Henderson Auditorium was crackling with a tense excitement as residents signed up for a lengthy public comment session. The council heard from roughly 100 people with varying interests in the deal.
Activists said billionaires like Detroit Pistons Owner Tom Gores don’t need handouts to cover the cost of development. Seniors said tax breaks for wealthy developers are fundamentally unfair when they still haven’t been paid back after the city overtaxed them.
Union workers and construction firm presidents said the work will put food on the table for young families. City economic growth officers said the anticipated boost to the tax base is worth forgoing tax revenue in the short term.
Community organization leaders said they’ve seen a positive impact from partnerships with Henry Ford and the Pistons.
After nearly three hours of discussion, the tension deflated as Council President Mary Sheffield said there would be no vote on Tuesday.
Council members then spent two hours questioning the development team and working through concerns raised by residents.
The vote was delayed one week. How will the council use this additional time?
After the meeting, Council President Pro Tem James Tate said he’s focused on creating transparency on the financial details. Tate said many aspects are unclear to council members and the public.
“Out of all the major projects that have come before us, this one has me the most excited for what it brings,” Tate said.
“But you’ve got to be transparent with folks, because if I can’t trust your numbers it’s hard to trust anything will go the way it’s supposed to based on agreements we made.”
What page are we on?
Today’s notebook describes the Feb. 20 formal session. Council Members Scott Benson and Coleman Young II were absent.
Dig into the agenda, read Detroit Documenter notes or watch the recording for more details.
Find more information about your City Council representative here. Use this guide to learn more about participating in upcoming budget conversations.
Send me tips and suggestions at mbarrett@bridgedetroit.com or (313) 690-5343
Sheffield is hosting a gun buyback, expungement and job fair on 10 a.m. to 2 p.m. Saturday, Feb. 24 at The Icon Building, 200 Walker St. Detroit rapper Skilla Baby and 36th District Court Judge Tenisha Yancy are also scheduled to attend.
Breaking down tax breaks
The council is considering a package of tax breaks to support the “Future of Health” development plan in New Center. Here’s a basic outline of the deal.
The Pistons plan to build 662 apartment units on land leased from Henry Ford. Other aspects of the plan include new parking and a research facility shared by MSU and Henry Ford.
The council is considering $54 million in tax abatements that would reduce property taxes for 12 years on sites owned by Henry Ford and leased to the Pistons.
The council will also vote on a brownfield plan, which reimburses developers with $241 million in tax revenue over 35 years. Most of the subsidies would go toward the Pistons housing project.
The apartments are expected to create a 4.5% return on investment. Pistons Chief Operating Officer Rich Haddad said the rate of return is low. Without tax incentives, investors expect to lose money.
“I’ve heard some of the commenters talk about how this is just a project for us to make money and for us to get rich,” Haddad said. “I could walk down the street to Huntington and open a savings account that gives you a higher rate of return than that 4.5%.”
All of the properties being considered for the brownfield plan are owned by Henry Ford. No property taxes are currently collected on those sites because Henry Ford is a nonprofit entity.
Council Member Mary Waters said taxpayers need to understand why the Pistons housing project is connected to the hospital expansion.
Denise Brooks-Williams, an executive vice president for Henry Ford Health, said the hospital expansion won’t be successful without the housing.
“It’s been said repeatedly today that we can do the hospital without the rest of the project; that is not the case,” she said during Tuesday’s meeting. “We haven’t envisioned it as being separate because that is not what we think is transformational for the community and we don’t think that brings forward the best possible outcomes for Detroiters.”
Detroit expects to receive $118 million in new tax revenue over 35 years while the state receives $276 million.
‘Protect’ from displacement
The overall project is expected to create 702 permanent jobs with an average wage of $100,937 per year.
Roughly 35% of the jobs are expected to go to Detroiters, according to city documents.
Council members worry the new developments will drive up housing costs in the majority-renter community.
“We want to see development, we want people to have nice places to live but we want people to remain here,” Waters said. “We need developers to help us protect them.”
Haddad said the housing units would actually prevent displacement and gentrification by giving new employees a place to live.
“With the jobs this is going to generate, we could see how that could result in displacement,” Haddad said. “We’re delivering the housing to protect against that and make housing affordable and achievable for all Detroiters.”
Developers expect occupants will have a $71,138 average income. Roughly a third of the residential units are expected to be occupied by new residents, according to city documents.
Median income is $34,201 for residents living within a five-mile radius of the surrounding neighborhood, according to a market study commissioned by the Pistons.
Tate said it’s misleading to suggest rent costs won’t rise in the area.
“The rents are going to go up,” Tate said. “It’s just the nature of things.”
Affordable housing guarantees
The Pistons plan to rehabilitate Henry Ford’s administrative building and construct two more buildings east of the Lodge freeway in New Center.
Residential buildings include a mix of “micro,” studio, one-bedroom and two-bedroom apartments. The Pistons plan to include a restaurant or retail space on the ground floor of the retrofitted office building and set aside 11 units for short-term rentals.
Reduced rent is being offered at 20% of the apartment units for 30 years. Affordable rates are based on federal income guidelines.
Out of the 133 discounted units:
10% are meant to be affordable for a couple earning under $53,000
80% would be affordable for a couple earning $37,900
10% of units would be affordable for a couple earning $22,740.
What counts toward community benefits
Large development projects that seek tax breaks from the city must complete a community benefits agreement with residents in adjacent neighborhoods.
City Council members are taking the opportunity to make adjustments to the deal, which fell short of what residents asked for in some key areas.
Lynda Jeffries was chair of the neighborhood group that negotiated the benefits deal. She said the agreement addresses many of their top priorities.
“We do believe this agreement does include fair, equitable and tangible benefits for the impact area,” she said.
The Planning Department valued the Future of Health benefits deal at $604 million. Tuesday’s meeting featured a lengthy discussion on what should count toward the total.
A report from the Legislative Policy Division said conflicting views of the community benefits process haven’t been resolved.
Some believe benefits are a financial contribution, the report said, while others view the project itself as a benefit.
Roughly half of the total ($310 million) comes from the increased cost of treating uninsured patients. Henry Ford is more than doubling its emergency room space and will take on more uncompensated care expenses.
Tate said this wasn’t negotiated by residents and shouldn’t count as a benefit. Henry Ford would take on more uninsured patients regardless of the benefits agreement, he said, since it’s a result of expanding the emergency room.
Benefits should go “above and beyond” what would already result from the development, Tate said.
“It makes it a little difficult for me to go out and talk to my constituents about why I believe those numbers are legitimate,” Tate said.
Another $90 million in benefits is tied to operations at the research facility, which also had Tate question whether it should be included since it is part of the development plan.
Developers plan to spend $30 million on public green space improvements and $55 million on infrastructure, streetscape and road improvements in the area.
The agreement also tallies $10 million for creating space for contractors to park during construction, and a $1.25 million partnership to explore options for MoGo bikes in the area.
How developers are investing in Detroit
Dollar values attached to other investments in the agreement weren’t questioned.
The Pistons agreed to donate $2 million to a home repair fund for nearby neighborhoods and put $500,000 into a rental assistance fund.
However, those donations can be used to offset fines Henry Ford would receive if it fails to meet local hiring requirements it volunteered to follow.
The Pistons also agreed to provide $300,000 in grants for community organizations and $200,000 to build a community space.
MSU will provide 50 full-ride scholarships to seniors at University Prep and Northwestern High School worth $3.75 million.
Henry Ford agreed to dedicate space in its expanded hospital for urgent care and behavioral health care, direct resources to infant and mother mortality care and hire a community health worker to engage seniors.
Henry Ford plans to create a redevelopment plan for the blighted former Fairbanks School building, valued at $1.3 million.
All three agreed to “make reasonable efforts” to spend 30% of its development costs on Detroit-based businesses and spend $100 million in contracts with disadvantaged and women-owned businesses.
The three entities also plan to host job fairs, partner with Historically Black Colleges and Universities to hire students and create apprenticeship programs.
A small window for stronger benefit
Cassandra Floyd, director of the West Grand Boulevard Collaborative, said the deal is not a “fair exchange” for tax incentives.
She was among a group of residents near the development that have pushed for larger investments in the community. Floyd said Henry Ford should donate 10 properties it owns in the area to the community, including Fairbanks school.
Council members are also making suggestions for changes. Haddad said the Pistons will add $1.5 million into the city’s Affordable Housing Trust Fund after Sheffield pushed for a $3 million donation.
Council Member Latisha Johnson asked for a $5 million donation to a community land trust and another $5 million for a housing downpayment assistance program.
Floyd said the community benefits process stacks the deck against residents who are ill-equipped to secure impactful investments. She said developers are creating “little kingdoms” in the city.
“We are 100% against the apartments Tom Gores is trying to provide for the little neighborhood he’s developing,” Floyd said. “We’ve been here in the city and it’s being oppressed by giving money to developers. There has to be a movement to get this ordinance redone. It’s unfair, it’s undemocratic.”
Tate said the additional time creates a tight opportunity to add more provisions to the benefits agreement.
“It’s all up to the developer and the administration if they’re willing to have those true conversations, provide transparent information,” Tate said. “We have seen a little movement from where it was before, but I’m hopeful.”