Who Benefits
Last week Dan Gilbert received the largest tax subsidy in Michigan history to support his private developments. The board of the Michigan Strategic Fund in Lansing approved $618 million for four linked projects that are estimated to cost $2.2 billion. For perspective consider that the Little Caesars Arena cost $863 million, of which $329.1 million was in subsidies. Or consider that the city gave Belle Isle to the State because it could not afford the $6 million in annual upkeep. Or the $7.8 million the City Council approved for Homrich Wrecking to shut off the water.
RJ Wolney, vice president of finance for one of the Gilbert companies involved, Bedrock, said that “the incentives are needed to create catalytic developments to help fill the funding gap of building such projects that can't be made up with current rents for downtown commercial projects.”
This is the central question. Is the public responsible to underwrite private development? Why? For whose benefit? What is the public good from such private ventures?
Dan Gilbert obviously thinks he is owed public money to achieve his private vision. He has been working on putting the legal structure in place to allow such tax subsidies for several years. In 2016 he was behind a series of bills, brownfield tax subsidies, that were so blatantly pushed by him they were informally dubbed the “Gilbert bills.” At the time even some Republicans thought it was too much to ask of Michigan taxpayers. Then Speaker of the House, Ken Cotter (R-Mt. Pleasant) said, “If he can’t make a deal work without state aid then it is not a deal worth doing, and Michigan taxpayers should not be forced to invest.”
But taking a page from the DeVos and family playbook, Gilbert went back at the legislature with changes in the legislation that spread some of the potential benefits around. The Detroit News reported: Public campaign finance records showed that various Quicken Loans employees gave a total to $35,975 to state House members' committees in 2017. Of those 56 lawmakers, 48 voted yes on the main bill in the brownfields package.
This is the legal framework for transferring taxes that would have supported schools, universities, roads, parks, police, art, and health care.
The practice of using public money to support private business ventures is not new. What is new is the scale and extent of these public commitments. We are all on the hook for Gilbert’s plan for the next 30 years. We are told that given this long-term view, we the citizens will actually benefit from the process.
This is highly debatable. A recent study by the Texas Organizing Project explored similar claims in Houston. The study found “the city was failing miserably at the task of making these programs work for the public… from job creation to setting and achieving equity goals to workforce development and community engagement.” They concluded, “From a community-based perspective, we argue that if economic development tax breaks are not addressing a community need in the service of advancing equity, then they deserve to be called out for what they really are—a windfall for the private sector and a drain on our city’s cash-strapped budget.”
Gilbert, along with the Detroit Chamber of Commerce, the Mayor, and the Downtown Development Authority, did all they could to ensure that Detroit would not have a serious community benefits agreement. A strong agreement would demand that questions of the public good, public priorities, and mutual responsibilities be discussed and decided in open, transparent ways.
Developing a city requires a great deal more than big plans and giant tax breaks. This new deal is nothing for Detroiters to celebrate. It is a call to reinvigorate community benefits and restore vigorous public discussion about the direction of our city.