Bedrock is seeking to slim its tax bill by $60 million over the next decade at the former J.L. Hudson’s site downtown after it completes construction on the $1.4 billion development.
Representatives with Bedrock, the real estate arm of billionaire Dan Gilbert, discussed the details of a proposed tax break during a Thursday City Council committee hearing. The council will likely vote next week on whether to approve a 10-year tax abatement, but city officials said the project’s financial viability relies on the temporary tax cut.
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The project broke ground in 2017 on what was then proposed as a $900 million development, but costs rose as it faced delays and redesigns. Construction is slated to end in 2024, reactivating a hole near the center of downtown on Woodward Avenue once occupied by the Hudson’s department store. In its place, if all goes according to plan, will stand Detroit’s tallest building and the second-largest skyscraper in Michigan.
If approved, the abatement would freeze the taxable value of the property for 10 years, essentially cutting a fraction off the tax bill for a decade. Once that period expires, the taxable value jumps back up. All entities that collect property taxes would lose out on full revenue during the abatement period, which includes the city, library, schools and others.
Governments use tax abatements to help developers cover the cost of construction, expecting to ultimately benefit from the increased tax revenue that comes after a project is finished and the new taxable value kicks in. The property yields $620,000 in taxes each year now, but could generate $2.6 million when the abatement expires.
Bedrock has already received state and local incentives, including $618 million in property, income and state tax breaks for the Hudson’s site and three other downtown Detroit projects. Still, officials with the Detroit Economic Growth Corp. said more help is needed.
“The project has thin operating margins, where this development would only be possible with the help of this tax abatement,” said Nevan Shokar, an associate director with the DEGC. “Large-scale developments such as this don’t make financial sense in the near term, you have to look at the project holistically and with a long-term viewpoint.”
Detroiters who called in during the public hearing expressed concerns about whether the end result will be accessible for long-time residents.
Jared Fleisher, vice president of government affairs for Rocket Companies, said 30% of the units will be considered affordable “by and large” for people earning between $28,000 and $30,000.
“Our projects are priced and made available at an affordability level that is tailored to Detroit, not the region,” Fleisher said.
Council President Pro Tem James Tate and Council Member Latisha Johnson voted to advance the proposal to the full council for consideration, with a recommendation for approval.
However, Tate expressed some concern about how the project could add to how “horrifically challenging and expensive” it can be to find parking in downtown Detroit at night. The development will draw more people to the area, and Tate asked how Bedrock plans to address the anticipated strain on parking capacity.
Fleisher said the development includes 800 parking spots open to tenants of the building and members of the public who don’t live there. He also teased an announcement on additional parking spaces included in Gilbert’s Monroe Blocks development, which broke ground in 2018.
The lobbyist described Bedrock’s redevelopment as having the potential to “transform the skyline of Detroit,” placing it within the pantheon of other classic architectural landmarks like the Fisher and Guardian buildings. He called the Hudson’s Site a “100-year investment” in the city.
Plans call for two structures separated by an outdoor streetscape plaza, with a total of 1.5 million square feet. The larger structure will stand 685 feet tall. The project will include a luxury hotel, apartment units at varying price points, retail businesses, event space and offices.