Tax Incentives

 

Detroit welcomes businesses from around the world and around the block by offering a variety of tax incentives, including tax abatements and Brownfield plans. These programs are specifically targeted to inspire economic growth for relocating or expanding businesses.

Tax Abatements

A tax abatement is designed to incentivize investment by reducing tax payments for a company. Tax abatements can attract investment, increase employment, catalyze research and technology development, and drive improvement to less developed areas. Tax abatements can raise the overall economy by stimulating economic growth and tax revenue (after the expiration of the tax holiday/incentive period). Unlike grants or loans, which can help with need for immediate capital, a tax abatement is a way of offsetting or abating property and other taxes as an incentive to come to a city or expand existing operations within the city. Tax abatements allow business owners to use that savings to invest back into the business for a defined period of time.

All projects must demonstrate that “but for” this incentive the project will not occur and that the City will receive a net benefit from the investment. DEGC underwrites all projects and completes a fiscal impact analysis to determine if a project meets these qualifications.

DEGC’s Investment Services team can help you understand which abatement(s) are best suited for your project’s needs and estimate future tax payments with the abatement. These tax abatements have been utilized by many successful projects in Detroit:

Obsolete Property Rehabilitation Act

P.A. 146 of 2000, as amended

Incentive for the rehabilitation of obsolete commercial property

Neighborhood Enterprise Zone

P.A. 147 of 1992, as amended

Incentive for new construction projects, rehabilitation projects, or investments in existing homes that are located within an eligible district.

Commercial Rehabilitation Act

P.A. 210 of 2005, as amended

Incentive for the rehabilitation of commercial property

Industrial Facilities Exemption

P.A. 198 of 1974, as amended

Incentive for the rehabilitation or new construction of manufacturing and industrial property

New Personal Property Exemption

P.A. 328 of 1998, as amended

Incentive for the installation of new personal property

Commerical Facilities Exemption

P.A. 255 of 1978, as amended

Incentive for mixed-use commercial redevelopment in a qualified downtown revitalization district

Michigan Renaissance Zone Act

(Michigan Strategic Fund Designated Zone) P.A. 376 of 1996, as amended

Incentive to spur business development in the State of Michigan and prevent physical/infrastructure deterioration

Next Michigan Development Act

P.A. 275 of 2010, as amended. Renaissance Zones P.A. 376 of 1996

Incentive to spur business development in seven targeted regions; specific to companies utilizing two or more methods of transportation to move products

The Commercial Incentive District Information Lookup shows which areas of Detroit are eligible for:

  • Commercial Rehabilitation Act (PA210)
  • Obsolete Property Rehabilitation Act (OPRA)
  • Neighborhood Enterprise Zone (NEZ NR)
  • Opportunity Zone

 

The cover of the DEGC Tax Incentives How-To Guide

Tax Incentives How-to Guide

This resource will walk you through the tax incentive process from application to approval.

Brownfield Redevelopment Tax Increment Financing

Under the Brownfield Redevelopment Financing Act, Michigan Public Act 381 of 1996, a property  can qualify as a brownfield if it is determined to be a facility (contaminated), blighted, functionally obsolete or a historic resource. The higher cost and longer timeline associated with redeveloping brownfield sites compared to development of clean, undeveloped property or “greenfields,”act as barriers to redevelopment on these sites.

Tax increment financing (TIF) is a tool developed to promote the revitalization of environmentally distressed and blighted areas. TIF can be used to reimburse developers for eligible costs associated with new construction or rehabilitating buildings on an eligible property. The redevelopment of an eligible property results in an incremental increase in the taxable value of the property. The property taxes paid as a result of the incremental increase in taxable value are captured and used to reimburse the developer for the eligible activities performed on the site under an approved Brownfield Plan. 

The purpose of Act 381 is to level the playing field so that redevelopment occurs in places such as Michigan’s urban cores and traditional downtowns. The redevelopment of Brownfields can provide many benefits to a community, including an increased tax base, the creation of new jobs, the utilization of existing infrastructure, and the removal of blight. The removal of contaminants in the area also helps to protect human health and the environment.

Success Stories

Dakkota Integrated Systems was among the first to announce plans to support FCA with new operations in Detroit. The producer of modules, facias and suspensions for OEMs is building a $40 million, 300,000-square-foot plant on Detroit’s east side. Dakkota will follow FCA’s lead in giving Detroit residents priority for the 419 jobs it expects to offer. In addition to helping Dakkota acquire the needed land, DEGC also packaged incentives, including a 13-year industrial facility development tax exemption and a 15-year Detroit Next Michigan Development Corporation Renaissance Zone abatement.

Osi Art Apartments @ West End is a new artistically inspired mixed-use development is coming to Grand River’s West End Gallery District. The $6.6 million project will include 30 apartments, half of which are slated as affordable units. Located in the city’s Woodbridge neighborhood, this five-story development will include a 1,856-square-foot gallery and first floor retail. In preparing the site, the developer, 3820 West End, LLC, will remove contaminated soil and demolish the old building foundation on the vacant lot. Thanks to a brownfield plan that includes $360,000 in TIF reimbursement, DBRA is helping catalyze new construction that is hoped to inspire an even larger creative corridor in Detroit.

Construction of the FCA plant

A DBRA brownfield plan was at the core of the renovation and expansion of the current Mack Engine Plant into FCA’s new assembly plant producing the next generation of Jeep vehicles. DBRA assembled the land required for employee parking, finished vehicle storage, transport and stormwater facilities and obtained nearly $40 million in Tax Increment Financing to cover the $34.8 million in principal and interest on loans it secured from the city and state. In return, FCA has invested $1.6 billion in Detroit, creating thousands of jobs at its plant and at supplier facilities that will support the new factory.

A rendering of the TCF building at dusk

Chemical Bank (now TCF Bank) – Detroit’s main operating bank —  is moving its headquarters from Midland to Detroit. An empty 10-story building is being razed to make room for the bank’s new 20-story building, which will feature ground-level commercial space, parking and offices. The bank will transfer some 300 existing employees to the new site and hopes to add 200 local hires. Helping make the move possible was $25M in TIF reimbursement secured by DBRA.

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