For immediate release
Contact: Lanard Ingram, 313-303-8869
- Projects include Commercial Office, Mixed-Income Residential, Hotel and Retail Projects
- $1.5B investment would generate $751M in tax revenue for City of Detroit over 35 years
- City would commit or abate $0 from general fund to support projects
- Developers will not receive public support until projects are under construction and operating
Detroit – [January 10, 2023] As a part of the Community Benefits Ordinance process already underway for the District Detroit, the Detroit Economic Growth Corporation (DEGC) today released information outlining projected fiscal benefits to the City of Detroit generated by the planned developments.
The District Detroit development – led by Related Companies and Olympia Development of Michigan – consists of 10 projects that would deliver new first-class commercial office space, 695 mixed-income residential units including 20% at deeply affordable rents, as well as retail and hotel space. The areas where the proposed projects would be constructed – including currently underutilized parking lots and vacant buildings – currently generate approximately $250,000 in annual revenues for the city and include a pair of parking lots that are currently tax-exempt.
By pledging a portion of new state tax revenues and other real property tax revenues generated by the projects, this strategic investment by the public sector is projected to generate the following financial impact over the next 35 years:
- $751 million of net new tax revenues to the City of Detroit
- $1 billion of net new tax revenues to the State of Michigan
- $394 million of net new tax revenues to other taxing authorities
“Incentives are only recommended for approval after a thorough financial review and a determination that the project would not be able to proceed without that form of public support. The developer receives nothing upfront and must put up the upfront costs of their development themselves,” said Kenyetta Hairston-Bridges, Executive Vice President of Economic and Development Services at the DEGC. “Ultimately, these incentives are discounts on the future taxes they’d be paying on these developments, which will generate far more revenue than the value of the incentives.”
To advance the project, the developers are seeking to utilize an innovative public-private partnership that will pair nearly $1.5 billion in up-front private investment with public programs including the state Transformational Brownfield Plan (TBP).
Under this plan, no Detroit General Fund revenues would be pledged, captured or abated. Instead, the City will receive the full benefit of new income tax and utility user tax revenues unlocked by these developments. TBP capture and abatements will instead impact revenues that would otherwise go to the
State of Michigan and the Downtown Development Authority (DDA). With its TBP program, in addition to the capture of property tax increment revenues (TIF), the State authorizes capture of certain State tax revenues – principally, one-half of new State income taxes — to enable transformational development investments that benefit the Michigan economy.
Since 1976, the DDA has captured incremental property tax revenues from within its boundaries to reinvest in new downtown development that drives City income tax revenues – a strategy conceived and implemented by former Mayor Coleman Young. No City income tax revenues are captured.
Only after the new developments commence construction, the developer could receive reimbursement from a portion of those new revenues that would otherwise be received by the State of Michigan. Once the projects are operational, the developer could receive the full benefit of the TBP capture, including the incremental property taxes. Because the DDA would have captured any incremental property tax revenues otherwise payable to the City of Detroit, no reimbursement is made using would-be City property tax revenues.
The proposed development plans depend on Related and Olympia attaining suitable financing. As previously announced, the developers have applied for the Transformation Brownfield Plan (TBP), a Michigan state law specifically designed to drive large-scale private investment in development projects that will have a transformational impact on local economic development and community revitalization through brownfield redevelopment, growth in population, commercial activity, and employment that will result from the investment.
The development will include nearly $1.5 billion in private financing. In addition, the developers are seeking the following incentives, all of which are subject to further approvals by the Detroit City Council, Michigan Strategic Fund, Detroit Brownfield Redevelopment Authority, and/or DDA, as applicable:
- $616M in TBP reimbursements over 35 years
- $133M in tax abatement value of revenues that would otherwise largely be owed to the DDA
- $48M in DDA funding to support the construction of deeply affordable housing and public infrastructure. The developer has pledged to reserve 20% of the 695 total residential units (139 units) for individuals earning no more than 50% of the area median income (AMI), which is about $31,000 per year for an individual and $45,000 for a family of four. This additional financing allows the developer to go well beyond the standard requirement for projects receiving similar incentives to reserve 20% of the units for residents earning up to 80% of AMI.
Incentives are performance based
The TIF and abatement incentives would only be received as the ten projects – including 695 mixed-income residential units at 50 percent of Area Median Income, 1,200,000 square feet of commercial office, 100,000 square feet of retail and 467 hotel rooms – are constructed and begin providing jobs and a positive economic impact to Detroiters. $23.7M in DDA support for affordable housing comes in the form of forgivable loans with obligations that extend the 34-year term. Up to $25M in DDA support for public infrastructure reimburses the developer for costs after construction is completed.
“The DDA is taking an unprecedented step to create more deeply affordable housing units in the DDA boundaries by creating this tool to help make sure we have a downtown for everyone,” said Hairston-Bridges. “This is a program that will be available to other developers with qualifying projects for years to come.”
Assuming private financing and the needed public incentives are secured, work is expected to begin on the office building at 2200 Woodward as soon as the third quarter of 2023.
If fully built as proposed, the project will ultimately support nearly 6,000 permanent jobs within the City of Detroit and more than $500 million in wages on an annual basis. The construction work generated by the project is expected to support an additional 12,000 temporary jobs in construction and more than $800 million in wages.
The Community Benefits Ordinance (CBO) process for the developers to engage with residents from the project’s impact area remains ongoing, with Neighborhood Advisory Council (NAC) members having recently been selected. The DEGC will be presenting their economic analysis at the CBO meeting taking place this evening.
At the center of future plans for The District Detroit is the previously announced Detroit Center for Innovation (DCI). The DCI will be anchored by a world-class estimated $250 million, 200,000 square-foot research and education center operated by the University of Michigan. Programs will focus on research and innovation, with the goal of supporting the economic development of Detroit and the state with a pipeline of talent. The DCI will also include a technology incubator, housing and green space, while providing a critical skills pathway for students from Detroit Public Schools Community District and beyond.