Jobs and the District Detroit Tax Capture Ripoff

By Mike Shane

The Detroit City Council recently approved $748 million in tax breaks for two billionaires for a $1.5 billion development project in District Detroit, an area that includes a portion of downtown Detroit. The joint venture is between the Ilitch family’s Olympia Development of Michigan/Ilitch Holdings with a net worth of $3.8 billion and Steven Ross’ Related Companies with a net worth of $7.6 billion.

On April 25, 2023, the Michigan Strategic Fund Board, a unit of the state government, approved $615 million. The remaining $133 million is subject to a different approval process that will be addressed in a final vote of the Detroit City Council later this year.

The total tax breaks received by District Detroit since 2012 amount to an estimated $1.8 billion. According to BridgeDetroit,

“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.”

The District Detroit proponents maintain that the subsidies are necessary because the banks and the bond market will not finance the project without subsidies. The rate of return without subsidies is estimated to be 2% and with subsidies 4.4%.

Libraries are closing due to shortage of funds while tax captures divert needed funds to corporate big-wigs
Libraries are closing due to shortage of funds while tax captures divert needed funds to corporate big-wigs. | Photo:

Schools and libraries adversely impacted

The tax breaks are known as tax increment financing (TIF) or “tax captures.” The tax captures confiscate a portion of the tax revenues raised by property, sales, and income taxes. The property taxes are approved by voters in millages that appear on the ballot from time to time. The most egregious tax captures impact the children of Detroit by taking money designated for the public schools and the public library system. In testimony to the Michigan Strategic Fund Board, Russ Bellant, the previous president of the Detroit Public Library Commission, stated that

“So much money is captured annually that the bond market will not sell bonds to the school district to upgrade its buildings and develop a capital fund because the city is taking so much of your millage that we don’t think you can pay us back.

The city is taking $4.5 million per year from the ‘special needs children’ millage. They plan on taking $22 million from special needs families to fund Mike Ilitch and Steven Ross over the next 35 years.”

District Detroit tax captures - Detroit Brownfiel Redevelopment Authority
District Detroit tax captures. | Source: Detroit Brownfield Redevelopment Authority

Jobs, but for who?

Proponents of the tax captures claim that 12,000 temporary construction jobs and 6,000 permanent jobs will be created once the projects are completed. They also promise to give at least 51% of the temporary jobs to Detroiters. A similar promise was made when tax breaks and free land were provided for the construction of Olympia Holdings’ Little Caesars Arena. City records, however, show that only 23% of the construction hours for the Arena went to Detroiters.

Currently, about 75% of jobs in Detroit are held by non-Detroiters, particularly the highest paying jobs. In all likelihood, most of the new permanent jobs created by District Detroit will also go to non-Detroiters.

The City of Detroit needs schools, libraries, and housing revitalized

The $768 million could have been used to upgrade Detroit’s public schools and libraries, revitalize Detroit neighborhoods, and repair homes. District Detroit claims that 645 rental units will be built, including about 140 units set aside for “affordable housing.” Detroit needs thousands of units of affordable housing, and the housing must be in the vast neighborhoods of Detroit. While District Detroit is only a few square miles in size, the city is almost fifty times larger at roughly 140 square miles.

It is imperative that the neighborhoods be revitalized. According to Peter Hammer, director of the Damon J. Keith Center for Civil Rights,

“The region is not only racially segregated, but economically segregated. Many parts of Detroit, particularly its neighborhoods, are no longer part of the regional economy. Many of Detroit’s neighborhoods are no longer even economically integrated with each other. Indeed, downtown Detroit is more tightly integrated with the regional economy than with its own neighborhood economies. A necessary implication of this is that any economic spillover or trickle-down effects of the money poured into District Detroit will redound to the benefit of the regional and not the neighborhood economies.”

The housing stock in Detroit is in serious disrepair. Many neighborhoods were destroyed by the Wall Street collapse of 2008 and the subsequent mortgage foreclosure crisis, which triggered a property tax foreclosure crisis and the illegal over-assessment of property taxes that exceeded $600 million. Tens of thousands of homes were lost to speculators or abandoned outright, left to be demolished. The remaining houses must be repaired. Many of these homes could probably be repaired for $80,000 to $150,000, based on conversations with Detroiters engaged in house repairs. Assuming an average house repair cost of $100,000 per unit, $600 million could repair 6,000 houses. This is considerably more than the 140 “affordable” rental units being offered by the District Detroit project. The remaining $168 million could be used to upgrade and repair the public schools and libraries. Plumbers, electricians, carpenters, roofers, and other workers would be needed.

Considerably more resources are needed to truly rehabilitate Detroit’s housing stock, schools, and libraries. More resources are needed to repair the water system. It will take a mass movement to demand that Wall Street pay reparations for their role in the destruction of Detroit and to take control of the tremendous resources that are created by the labor of working people.

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