Making Sense
This week the Michigan State legislature passed a series of bills to expand the brownfields development fund under the guise of using public funds to encourage the development of affordable housing.
Michigan’s Transformational Brownfield legislation is a bad idea. Expanding it by attaching it to affordable housing does not make it any better. We need to stop these tax-based policies that consistently take public money away from needed programs and transfer it into the hands of wealthy developers.
These policies are the direct result of the evolution of racialized finance capital that is consistently inventing new ways to convert public money into private wealth. In the early 2000s it was “innovative” Wall Street thinking that created the infamous swaps deals that contributed to the drive to city bankruptcy. In a scheme touted by Wall Street and encouraged by insurance and finance agencies, Detroit ended up paying 5% of its entire operating budget to bank loans.
The Brownfield legislation is also likely to be disastrous.
First, the idea was initiated by Dan Gilbert as a way to leverage public dollars to support his efforts at Downtown development. In 2017 when the legislation was first introduced, Gilbert was so intent on its passage that legislators referred to the collection of laws as the Gilbert bills.
Rather than granting direct subsidies to corporate developers, these bills “encourage” the development of polluted or blighted areas by allowing developers to collect the taxes generated within the project area. In most cases this is a process that spans decades, giving away 30 years of property tax captures and 20 years of state income taxes from workers employed or living in the development sites. For example, a recent analysis of the One Campus Martius expansion projects that Gilbert will garner $65 million by 2042.
The theory behind these schemes is that developers won’t invest if they do not get incentives beyond the profits they would generate. But does the developer’s vision of our city benefit most of our citizens? If we use the Gilbert/Ilitch initiatives as examples, troubling questions emerge. First and foremost is the question of what creates a healthy city. Does the vibrancy of a city come from office buildings, stadiums, and parking lots? Are there better uses of public funds that would contribute to our quality of life?
A fair argument could be made that the very problem of the lack of affordable housing was caused by the kinds of development schemes Gilbert and Ilitch championed. Many of the small, older hotels downtown have been destroyed or “renovated” into upscale development by their efforts. The result has been the displacement of hundreds of people on limited income and living with disabilities. What if we had invested our tax dollars directly in upgrading buildings, encouraging responsibilities among landlords, and providing better community support services? What if we had said public money should support people, not developers’ profits?
Instead, we have gone down the path of encouraging these large-scale developments. Thus far, their record of accomplishment is poor. Last year Gilbert requested an additional $60 million in local property tax abatement for his Hudson’s project. While strongly contested by community groups, the City Council supported the effort on the promise of jobs for Detroiters.
Many of these schemes rest on the collection of future revenue, but the legislation enables funds to be transferred during the construction process. This money often comes from looting monies dedicated to schools, special education, libraries, parks, and the kinds of public services that would enrich neighborhoods. Under the Gilbert-backed legislation about $800 million of public tax dollars could be directed to development. Under the new legislation, this figure would be doubled to $1.6 billion. This new legislation jumps the allowable tax captures up to $80 million each year, from the current limit of $40 million.
The housing crisis we face is a predictable product of the development strategies of Downtown Development and its backers. To now give them more public money to solve the problems they created makes no sense at all.