A majority of the City Council signaled support Tuesday to provide a $60 million tax break to billionaire businessman Dan Gilbert’s downtown development, but postponed a vote to spend more time engaging with constituents about the tax incentives.
Bedrock Management Services, LLC, is seeking a 10-year tax abatement to help reduce costs for its $1.4 billion project at the former J.L. Hudson’s site on Woodward Avenue. If granted, the abatement would freeze the taxable value of the property for a decade, reducing the potential tax revenue collected by the city, Detroit Public Schools, the Detroit Public Library and others. The upside, according to the city and developers, comes when those entities start to collect increased tax revenue based on the boosted property value created by the new development.
More than a dozen Detroiters argued during the council’s formal session against the temporary tax break for Gilbert’s real estate arm. Residents who participated Tuesday in the meeting’s public comment period argued Gilbert – the richest man in Michigan – does not need a “handout.” Others said the city should focus investments in affordable housing, with some questioning whether residents will ultimately benefit from the Bedrock project.
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“Residents need this money far more than one of the wealthiest men in Michigan does,” speaker Annie Beaubien told the council.
Molly Sweeney, a resident in District 2, said Detroit schools and libraries need the full tax revenue over the next decade and asked the council to hold Gilbert accountable.
“We’re asking you today, as parents and students across the community, to reconsider any vote you’re taking for a yes vote for the Gilbert tax breaks,” she said,” and to work with us as a community to hold billionaires accountable to making sure they’re really investing in our community.”
Jared Fleisher, vice president of government affairs for Rocket companies, said Bedrock is supportive of the city taking time “to properly educate their constituents on the importance of the development.”
“Clearly, there is a great deal of misinformation surrounding how the PA210 abatement works,” Fleisher said in a statement. “The bottom line is that under the abatement, not a single penny is diverted from city services, schools or libraries. Instead, the only entity impacted is the Downtown Development Authority — nowhere else.”
The mixed-use project includes two structures on the 2.3-acre site; a 12-story “block” structure and a 684-foot tower separated by an outdoor venue. The development broke ground in 2017 but since faced a series of setbacks and redesigns that pushed its opening two years behind schedule. The price of the project also increased from $908 million to $1.4 billion. Once complete, the project will boast retail, restaurants, a hotel, residences and event space.
Five of nine council members expressed some support for the tax abatement: District 7 representative Fred Durhall III, District 3 representative Scott Benson, District 4 representative Latisha Johnson, District 1 representative James Tate and At-Large Council Member Coleman Young II.
Each of them also received campaign contributions last year from a Gilbert-funded political action committee, according to a Detroit Free Press report. The Rock Holdings Political Action Committee gave a total of $48,500 to council members who ran for office in 2021, including $14,000 to Durhall; $10,000 to Benson; $10,000 to Johnson; $7,500 to Tate; and $7,000 to Young.
Prior to delaying the vote, council members expressed a need to talk with residents about their concerns and address “misinformation” about how tax abatements work. Tate was the only council member to object to the delay.
“I understand the impact this (delay) would make for the developer and the impact it would make for the city, but I also understand the concerns of residents are real,” said District 6 Council Member Gabriela Sanitago-Romero, who introduced the motion. “They have real concerns. They have real fears. And us not engaging them in this process, I think will really damage trust.”
Gilbert acquired development rights to the old Hudson’s site after he announced his intention to move his Quicken Loans company downtown in 2007. The headquarters was ultimately built a few blocks away on Grand Circus Park.
Bedrock has already received state and local incentives for the development, including up to $618 million in property, income and state tax breaks for the Hudson’s site and three other downtown Detroit projects. The “Transformational Brownfield Plan” was approved by state officials in 2017.
A report from the Detroit Economic Growth Corp. notes that the Hudson’s project “would not be possible” without the $60 million abatement. Representatives with Bedrock said the same in a committee meeting last week. Officials with the DEGC could not be immediately reached Tuesday for comment.
District 2 Council Member Angela Whitfield-Calloway disagreed, saying she doesn’t believe the tax break is needed to finish the development.
“If we do not grant this tax abatement, I can assure you the project will go on,” she said. “Mr. Gilbert has more than enough money to complete his project. This is not going to benefit the average taxpayer.”
Benson said the tax break will ensure that the project is successful. He argued the city can’t drop the ball when developers ask for help to make projects financially viable.
“The call has gone out today that if you do not provide this incentive, the development will continue,” Benson said. “That may be true. But there’s a difference between a development that is completed and a development that is successful.”
Benson also pointed to jobs that are being created by the project. A DEGC report shows the project offers 7,500 temporary construction positions, 1,948 “tenant” jobs and 28 full-time developer jobs.
Whifield-Calloway said promises of job creation are used to “reel us in,” but she doesn’t think Detroiters are being hired on the construction site.
“Take a walk over there and tell me who you see: I do not see anyone who looks like me on the project,” Whitfield-Calloway said.
Derrick Headd, a fiscal analyst with the city’s Legislative Policy Division, said the abatement is a positive tradeoff that results in larger tax collections in the long-term. The property currently generates $620,461 in taxes each year, but this 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.
Here’s a breakdown on how tax revenues would be affected:
- The City of Detroit collects $207,812 in taxes annually from the site. This would increase to $209,812 during the 10-year abatement period and jump to $2.7 million once the abatement expires.
- Detroit Public Schools collects $214,314 annually, which would increase to $1.6 million during the abatement and $2.8 million after the abatement expires.
- Wayne County collects $57,509 annually, which would increase to $58,062 during the abatement and $754,617 after it expires.
- The Detroit Public Library collects $33,238 annually, which would increase to $33,558 during abatement and $436,146 after it expires.
- Wayne RESA collects $39,133 annually, which would increase to $39,510 during the abatement and $513,501 after it expires.
- Wayne County Community College collects $23,240 annually, which would increase to $23,464 during the abatement and $304,955 after it expires.
- The Detroit Institute of Arts collects $1,432 annually, which would increase to $1,446 during the abatement and $18,790 after it expires.
- The Wayne County Zoo collects $716 annually, which would increase to $723 during the abatement and $9,390 after it expires.
- The Michigan Department of Education collects $43,067 annually, which would increase to $565,115 during the abatement and remain the same after it expires.
The structure as planned will consist of 1.5 million square feet. This includes 401,909-square-feet of commercial space, 153,476-square-feet of event space, 225,120-square-feet for 110 condos, and 213,209-square-feet for 815 parking spaces.