Weeks of debate over a proposed $60 million tax break for the Hudson’s site development downtown ended with Detroit City Council narrowly approving the deal after Bedrock committed to more community benefits negotiated by council members.
Dozens of Detroiters weighed in during Tuesday’s formal session, with representatives of labor groups arguing the incentives would help keep the $1.4 billion project moving and preserve construction jobs while grassroots organizers opposed what they characterized as a taxpayer-funded handout to a company owned by billionaire Dan Gilbert, the richest man in Michigan.
Council President Mary Sheffield voted in favor of the deal after Bedrock committed to the community benefits initiatives she pushed for, like increasing housing units for middle-income Detroiters and dedicating funds for small businesses, neighborhood improvements and digital inclusion programs.
“I’ve arrived at this point after careful research, looking at the merits of the deal, and I also take into account the sentiments of all stakeholders in the best interest of Detroit,” said Sheffield, who represents the downtown. “The residents of the city do deserve to have a wonderful lively downtown area to enjoy. However, when considering tax abatements, it is our duty to ensure that all Detroiters benefit from the proposed development, and that is why, in that vein, I went back to the table to secure additional community benefits connected to the passage of this abatement.”
Besides Sheffield, others supporting the deal were At-Large Council Members Mary Waters and Coleman A. Young II and members Scott Benson and Fred Durhal III.
Council President Pro-Tem James Tate voted against the tax abatement, along with Council Members Angela Whitfield-Calloway, Latisha Johnson and Gabriela Santiago-Romero. They argued residents weren’t given enough notice that a vote was planned for Tuesday – it was walked on to Tuesday’s agenda by Young – and the council didn’t have a chance to review the revised community benefits agreement.
The council voted on the measure and an updated benefits agreement near the end of a nearly 7-hour meeting before taking a summer recess until Sept. 5.
“This has moved very quickly, and because I haven’t been able to obtain the information that I need to be comfortable in supporting this project, I have to sit back,” Johnson told Bedrock representatives . “I appreciate the work you all have done and having the conversation with my colleagues about providing more, offering more. I still have reservations.”
Santiago-Romero said she appreciates the additional commitments made by Bedrock, but the council should focus on reforming a broken tax system that makes those incentives essential to financing development projects in the city.
“I am in opposition with this tax abatement because this is a symptom of a larger tax issue,” Santiago-Romero said. “This is a systemic issue that we’re facing. Detroiters pay some of the highest taxes in the state. It is incredibly difficult for us to do development in the city. But it’s not at the fault of the city alone. We need to change our tax system and that starts at the state.”
Young, who described himself as a “son of labor,” said he’s supporting the project to protect 7,500 temporary construction jobs created by the development. The project is expected to create 1,976 full-time jobs when finished.
“In a time of inflationary times, where gas and groceries are too expensive and guns and ammo are too cheap, in a time of oncoming recession, I think it’d be irresponsible to not do everything we can to keep those young men and women working,” Young said. “ Those are our mothers, our sisters, our brothers, our fathers that are working there. They have sacrificed everything for this opportunity. For us to take this away from them without any real replacement is just wrong.”
The council’s vote was delayed three times, once at the request of Bedrock, to give more time for officials to gather public feedback and broker a stronger community benefits agreement.
Steve Ogden, senior vice president for government affairs at Rocket Companies, said the changes were made based on feedback from residents, members of the council, business leaders, and other stakeholders.
Approved amendments to an affordable housing agreement and community benefits agreement include:
- Increasing the proportion of units in Bedrock’s housing portfolio to be set aside as “affordable” from 20% to 30%
- Changing standards to make units affordable for Detroiters earning 60% of the area median income, which amounts to $37,620 for a single person and $48,360 for a family of three. Affordable units previously were to be based on 80% area median income, which is $50,160 for a single person and $64,480 for a family of three.
- Dedicating 20% of rentable space to Detroit-based small businesses and community programming
- Providing $1 million to support the growth of Detroit-based small businesses operating in the completed Hudson’s site
- Providing $5 million for the city’s neighborhood improvement fund
- Supporting technology skills development by partnering with the city and local schools and creating a call center for people looking for online educational opportunities
State law allows the City Council to revoke the tax deal if Bedrock does not proceed in good faith to complete the project.
The Hudson’s project consists of two structures separated by an open space that will host outdoor events. A “block” building will include commercial space for offices, retail, restaurants, events and concerts. A “tower” building, slated to be the tallest on Detroit’s skyline, will contain apartments, a hotel and space for events, food and beverage options. The project also includes 815 parking spaces.
Development on the 2.3-acre site started in 2017, but the project faced a series of setbacks and redesigns that pushed it two years behind schedule. The tower shrunk from 800 feet tall to 684 feet and the overall price tag grew from $908 million to $1.4 billion. The project is expected to be “substantially complete” by the end of 2024, according to city documents.
The tax abatement approved Tuesday kicks in on Dec. 31, 2024, and expires at the end of 2034. It allows Bedrock to forgo a portion of its property taxes over 10 years totalling $60 million, in order to help the company secure a $400 million loan to complete the project.
Jared Fleisher, a lobbyist for Rocket Companies, said $1 billion of the project’s cost is being covered by equity and the remaining amount will be borrowed. He said denying the tax abatement would squash Bedrock’s chance of obtaining the bank loan.
The property generates $620,461 in taxes each year, but that would increase to $2.6 million during the 10-year abatement and jump to $8.1 million after the abatement expires, according to city documents. Supporters of the tax break said Detroit will benefit from the increased tax revenue generated down the line, even if it means giving up the full amount that could be collected for 10 years.
Sheffield said a fiscal analysis by the council’s Legislative Policy Division estimated the tax abatement will create a net benefit of $71 million for Detroit and $17 million for other taxing authorities.
“In a perfect world, we would not need to offer tax abatements to developers to attract projects to the City of Detroit,” Sheffield said. “Unfortunately, as member Santiago-Romero mentioned, Detroit has one of the highest tax rates in the nation amongst other major cities, putting us at a competitive disadvantage.”
While some residents expressed concerns that the tax break would affect schools and libraries, Waters said tax revenue from the project goes to the Downtown Development Authority, which captures a portion of property taxes and reinvests it in downtown projects. Waters also directly responded to criticism from residents, saying the vote has “been on my heart,” but she believes Bedrock’s commitments will create positive outcomes for the city.
“For some of you all who make statements like ‘you’re selling your soul,’ that is not true,” Waters said. “I really don’t even want to hear that phrase again. There is not a single person on this council, that I’ve experienced, that’s willing to sell their soul. For real. We cannot think like that. We need partnerships.”
Bedrock received financial incentives from the state in 2017 when the Hudson’s site was bundled with three other projects to qualify for a “transformational brownfield plan.” Approval from the Michigan Strategic Fund allows Bedrock to recoup a portion of the total cost of the four projects by getting a 20-year reimbursement of state income taxes collected from residents and employees as well as exemption from the state sales tax for construction materials.
A previous iteration of Detroit’s council voted in 2017 to create a neighborhood enterprise zone at the site, the first step to qualify for the tax break ultimately approved Tuesday. Bedrock representatives and supporters argue that the previous vote represented a commitment to approve the tax incentive.
Durhal, who represents District 7, said it’s incumbent on the city to “honor our commitments” by approving the tax break, but he acknowledged it was a difficult decision. Durhal said the inclusion of more community benefits commitments helped sway him.
“There is no perfect solution,” Durhal said. “You will not please everyone all of the time, but one of the things that I like about this that I see today, is that something came out of that.”