Since the Ilitch organization first unveiled its ambitious “District Detroit” plans in 2012, the project has generated controversy over the level of taxpayer incentives requested by the billionaire family and its partners to help fund it.

The latest vision for the district is drawing even more criticism over an additional $800 million in subsidies, but a BridgeDetroit analysis of the project finds that figure is only part of the picture.

The total value of all state and local incentives – including tax breaks, land deals and elimination of taxes – for each District Detroit building would soar to an estimated $1.8 billion if the project’s latest set of proposed plans with Stephen Ross’ Related Companies are approved by the state and it is completed as envisioned.

The deal would be among the largest incentive packages ever assembled in the country for a redevelopment project, and the government lift’s value would equal 64% of the approximately $2.8 billion in investment completed or proposed in the district.

BridgeDetroit’s analysis provides a comprehensive, first-of-its-kind look at the total investment and incentives for each District Detroit project completed, underway or proposed since 2012.

The figures raise fresh questions about the public’s return on investment, economists who reviewed the numbers say.

“With the costs associated, I have to question whether it will be a net benefit for the city and state,” said Michael LaFaive, senior fiscal policy director with the Mackinac Center for Public Policy, a think tank that analyzes Michigan’s corporate subsidies. “The track record for these kinds of projects is not great, no matter what type of incentive is used.”

The project’s supporters have defended the use of $1.8 billion in incentives. In statements to BridgeDetroit, spokespeople for Olympia Development, the Ilitch family’s development arm, and the Detroit Economic Growth Corp., which manages tax incentives for the city’s developments, touted what they characterized as a “massive” tax base increase, infrastructure improvements, and job creation stemming from the project. 

DEGC officials and Olympia did not dispute the investment or incentive figures in BridgeDetroit’s analysis, though they did contend that some incentives should not be included in it.  

“Our proposed future development with Related Companies would bring extensive benefits to the city,” Olympia spokesperson Ed Saenz said in a statement.

The Ilitch organization has proposed District Detroit in what are effectively two phases. The first, announced in 2012, included Little Caesars Arena as the centerpiece. Five lively mixed-use neighborhoods brimming with 700 housing units, retail, restaurants and nightlife would sprout around it by 2017, the Ilitches pitched to the public, and city and state officials. 

To help make that vision reality, the City of Detroit initially agreed in 2014 to a subsidy package worth nearly $400 million, but other incentives not typically counted put its value at an estimated $857 million throughout the arena’s life. While the arena was built, the mixed use developments largely were not. Instead, three parking garages and five office buildings were constructed between 2016 and 2022, and one mixed use development was completed only after the city compelled Olympia with a performance bond. 

In late 2022, the Ilitches proposed the District’s second phase – $1.5 billion in investment that would include office space, housing, retail, restaurants and hotels, along with a university building. This time, the Ilitches and co-developers have asked the public to contribute about $900 million.

The combined investment in each phase would total nearly $2.8 billion, while the public’s contribution is valued at nearly $1.8 billion. The numbers have not been publicly discussed because the Ilitch family and public officials have largely framed the conversation around the two phases’ subsidies in isolation from each other. 

The Detroit City Council approved $800 million in subsidies for the project’s second phase in March, and the Michigan Strategic Fund (MSF), a quasi-public economic development board that manages state tax incentives and is led by governor appointees, will provide the final vote on the subsidies at a yet-to-be-determined date.

The MSF and Whitmer administration did not respond to requests for comment. 

The Ilitch family is asking for more money in its second phase to build the type of housing and mixed use projects that were supposed to be a core element of the first phase, but were mostly never built. The “back-for-more” strategy is common among developers, said Neil DeMause, a public subsidy analyst and author of Field of Schemes.

“Once you get your foot in the door and shovels in the ground then you have the city on the hook,” DeMause said. “That’s how this becomes a gift that keeps on giving for developers, and it’s ‘In for a dime, in for a billion dollars.’”

Anatomy of an evolving deal

District Detroit’s $1.8 billion incentive package would be among the largest in history, according to a database of “mega deals” compiled by economic think tank Good Jobs First. 

By comparison, billionaire Dan Gilbert in 2017 received a tax break deal worth $618 million that at the time was proposed to cover nearly 30% of $2.1 billion he would invest to redevelop four downtown Detroit properties. Last year, the state approved $1 billion for General Motors Co. for $7 billion worth of investment in electric vehicle battery plants, or about 14% of the cost. 

In other states, taxpayers have covered at least 60% of stadium or arena projects, but the deals have not been sound public investments, DeMause said.

“It’s not to say that public money should not be put into development … but it is kind of amazing that it never gets to a price point where someone says ‘Maybe we should think this over twice,’” he added. 

In Detroit, that may partly owe to how the project came together over decades. Its roots reach back to the 1990s when shell companies for the Ilitches quietly bought up properties around the Cass Corridor. Those properties were often left blighted, which helped suppress surrounding property values and keep prices low, a strategy some critics labeled “dereliction by design.” 

Olympia and public officials have pegged the value of tax incentives for the first phase at nearly $400 million, which included breaks for the arena, parking garages and office space attached to LCA. 

But that total does not include other incentives or sacrifices by the government and public. 

The city eliminated an “amusement tax” on Red Wings tickets, souvenirs, parking, concession, and suite sales when the organization moved from Joe Louis Arena (JLA) to LCA. That tax revenue totaled about $3.5 million in 2010, had grown to $7 million by 2014, and likely would have continued growing throughout LCA’s estimated lifespan of 48 years. Olympia also paid around $1 million in rent annually to the city, which owned JLA. Though the Detroit Downtown Development Authority owns LCA, it leases it to Olympia for no charge. 

Conservatively, the city may lose out on $384 million in general fund revenue over the 48 years by no longer collecting the tax or rent, Bridge’s analysis found. 

The DEGC and Olympia say the elimination of those taxes and revenue do not count. A DEGC spokesperson noted “the city had no legal entitlement to future rents or revenues” from the Red Wings beyond 2017, and Saenz said the Ilitch organization does not “view this change as a loss [or] subsidy.” 

However, the amusement tax is common across the nation: the Chicago Blackhawks pay a 9% tax, while that paid by the Dan Gilbert-owned Cleveland Cavaliers contributed to $22 million in revenue generated for the city by the tax in 2019. 

The city and DEGC, which is funded with property taxes, also gave the DDA and Ilitches 39 parcels of land on which the arena was built for $1 in 2014. Though it is difficult to pinpoint the land’s market value at the time, the Ilitches previously purchased 56 parcels in the area for a combined $50 million, or nearly $1 million each, which would put the value of land given to the arena project at an estimated $35 million. 

The $400 million figure also does not include other subsidies secured later in the first phase. Though only one of five neighborhoods the Ilitches proposed for the area around LCA partially materialized, the family did redevelop or build three stand alone office buildings – 2715 Woodward, the Little Caesars headquarters, and Women’s City Club. Olympia also completed one residential project in the Hotel Eddystone, has another in the works with co-developers in the United Artists Building and contributed to Wayne State University’s Mike Ilitch School of Business. 

The public investment for those projects total approximately $38 million, bringing the public’s contribution to the first phase to about $857 million. The Bridge analysis does not factor in several projects proposed for the district, including a hotel next to LCA and a housing redevelopment, because their subsidies are not yet in place. 

The piecemeal assemblage over multiple years highlights the willingness of cities to continue handing out high levels of public money for redevelopment projects, even after real estate markets rebound, said Greg LeRoy, director of Good Jobs First.  

“For any city, the question is ‘How do you take your foot off the gas pedal?’” he said. 

The project’s second phase includes the construction or redevelopment of 10 buildings for which the Ilitch family and Ross have requested about $900 million in taxpayer funding.

The state in 2021 approved $100 million appropriation of taxpayer money for the district’s University of Michigan Detroit Center For Innovation, which Ross had lobbied for. The Ilitches have separately asked state and Detroit officials for a variety of incentives that total $800 million. 

The larger subsidy package speaks volumes about the system the Illitch family has exploited, argues resident Francis Grunow, who lives near the project and worked on a community liaison committee between Olympia and the public during the first phase.

“I don’t hope that these things don’t happen, I just wish there was more accountability,” Grunow said. “It’s not about this particular project – these are systemic issues, and the problems with the way that we give out tax relief for developers goes far beyond the Ilitches. 

“They’ve just become masters at utilizing it.” 

A sound public investment?   

Though the Ilitches have completed some significant projects, much of District Detroit remains a redevelopment deadzone, but the picture is much different just outside the neighborhood. 

Condos now filling the once desolate Brush Park neighborhood just across Woodward were built by Dan Gilbert and other developers, and list for as much as $1.3 million. On all sides of the district, buildings large and small not owned by the Illitches have been redeveloped. 

Witnessing the city’s organic regeneration around District Detroit with far lower levels of public funding is “infuriating,” Grunow said. 

“How long are we waiting for that part of the city to flourish and for this spark to happen so it can grow?” he asked.

BridgeDetroit sent its analysis and requests for comment to Mayor Mike Duggan’s office and each city council member. Council members either did not respond or declined to comment, and a spokesperson for Duggan forwarded questions to the DEGC. 

In response to the criticism, Olympia touted its community benefits package valued at $167 million as the largest commitment ever under the city’s community benefits ordinance. It would fund affordable housing, job training programs, education, local business development, greenspace, arts development and provide other benefits.  

Supporters also pointed to figures developed by the Ilitch organization and DEGC that projected $735 million in new tax revenue and the creation of thousands of jobs. 

During his 10th State of the City speech last month, Duggan defended the use of tax breaks to spur development. The mayor stressed abatements and incentives remain a “central part” of the city’s strategy to compete for business. The tools, he said, promote development that otherwise wouldn’t happen due to Detroit’s high property taxes and construction costs. 

Duggan used the planned District Detroit project as an example. Once complete, the 10 projects are expected to create $21 million in annual tax revenue, he said. 

“That is the money we can put into police and parks and community programs,” Duggan said during the speech. “It will be there for the General Fund, and that’s why we are pushing so hard. This is going to be a great project for the city’s future.” 

DEGC spokesperson Lanard Ingram also claimed “City of Detroit taxpayers have not and will not put a single dollar in subsidies or incentives” for District Detroit. 

However, Detroiters’ state taxes will help fund the project via brownfields and other incentives used on the project. Though the city argues  its general fund revenues have not been affected by District Detroit, the now-eliminated Red Wing’s amusement tax and rent revenue went to the general fund. 

Economists also questioned the city’s job and new tax revenue claims. Studies of comparable incentive projects in Michigan and elsewhere have found that they rarely meet the job creation and tax revenue figures pushed by public officials and incentive recipients. 

Even if the projects are completed, the return on entertainment investment, a key component of the Ilitch vision, is especially questionable because the projects largely generate money that would be spent elsewhere on entertainment if the new arena or restaurants did not exist, LaFaive said. He characterized it as “robbing Peter to pay corporate Paul.”

Despite the debatable returns, DeMause said politicians are often willing to hand out money to developers because of what he called the “edifice complex,” in which elected leaders “can point to the skyline and say ‘I did that.’” Such projects are viewed as a political win, he added, more so than “less sexy” ways of spending public dollars, like reducing kindergarten class sizes or bumping funding for community colleges.

“Another huge piece of it – [the Ilitch organization] has much better lobbyists than kindergarten students,” DeMause said.