by Scott McClallen
The Detroit City Council postponed for a second time a vote on whether to give billionaire Dan Gilbert a $60 million tax break over 10 years after heavy resident pushback.
Gilbert, who Forbes says is worth $15.6 billion, says he needs taxpayers to fund a 10-year tax break to renovate real estate firm Bedrock’s Hudson building, which they claim will support 2,000 permanent jobs once finished.
John Mozena, president of the Center for Economic Accountability, a nonprofit organization for transparent economic development policy, says Detroiters should question why a billionaire can buy his way out of Detroit’s complex and expensive regulatory code while others can’t.
Mozena says developers don’t scramble to buy open plots in Detroit because of an overbearing local government, and that the benefit of cheaper land is overwhelmed by high tax rates.
“One of the most attractive things that Detroit has to offer developers is cheap land,” Mozena told The Center Square in a phone interview. “But when you put the nation’s highest tax rates on that land, and then you combine that with the city’s notoriously difficult and expensive labyrinth of zoning and land use and permitting, it quickly becomes a lot less attractive than it otherwise might have been.”
Mozena cited a report analyzing property taxes in 50 states and found four cities with effective homestead property taxes that are at least double the average – Aurora, Ill.; Newark and Bridgeport Conn.; and Detroit.
The report provides data to compare across city markets by calculating the effective tax rate, explained as the tax bill as a percent of a property’s market value.
For example, the report from the Land of Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence found that the average apartment property taxes for the largest city in each state was 1.61%, while Detroit’s was 3.6%.
The Detroit Free press reported five City Council members plus Mayor Mike Duggan have received campaign contributions from Gilbert-backed funds.
Bedrock says the project is only viable via the tax abatement because of high property taxes.
The Center Square has reported that the city of Detroit requires 77 steps to start a restaurant, as well as other expensive fees and permits. For example, an aspiring restaurateur must pay 15 different fees totaling $6,545 to get started – driven in large part by the need to pay nearly $1,500 for food plan reviews and permits.
Other Detroiters questioned whether the new renovation would happen without the tax break.
An Upjohn Institute for Employment Research study concluded between 75% and 98% of all subsidized investments would have happened without the subsidy.
– – –
Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.