Dan Gilbert gets state OK for $618M in tax breaks for Detroit projects

John Gallagher | Detroit Free Press

As fully expected, the Michigan Strategic Fund on Tuesday approved $618 million in tax incentives to help businessman Dan Gilbert build four of his major projects in downtown Detroit.

Gilbert's total investment is estimated at $2.15 billion, so the tax incentives approved Tuesday will nominally cover about 29% of his costs. However, since the tax incentives are spread out over 30 years, the actual value of the incentives will be about 15% of the project costs.

The projects are expected to create 7,261 permanent jobs and add up to 3.1 million square feet of new office, retail, residential, hotel and civic space to the downtown core.

The so-called transformational brownfield incentives are the most generous ever awarded by the state's strategic fund. The size of the incentives was made possible by the passage in Lansing in 2017 of MIthrive legislation that created such incentives for projects of a size and importance to transform a downtown.

The incentives are needed, according to the strategic fund's briefing material, because "market rents in the city are insufficient to support the costs of complex, high-quality, large-scale, high-rise construction."

In addition, the dedication of extensive space within the four projects to "public and civic uses and architectural excellence" drives up the cost.

The four projects include the site of the former Hudson's store, where Gilbert's Bedrock real estate arm broke ground last December on what promises to become Detroit's tallest building; the nearby Monroe Block, where Gilbert hopes to break ground soon on a series of mixed-use buildings; an addition to One Campus Martius, the former Compuware building; and the renovation of the Book Building and Book Tower on Washington Boulevard.

In a statement, Gilbert said of his four projects: “These landmark developments are a milestone representing Detroit’s credible new era of hope, optimism and growth.

“This process has been an outstanding example of collaboration between multiple levels of government and private industry that will unleash billions of dollars of investment, resulting in transformational impact to Detroit, the region, and the entire state of Michigan.

"Governor Snyder and the Michigan Strategic Fund were instrumental in getting these monumental projects to the finish line. I want to thank the Governor, MSF, and all of our local and state partners for their strong support and commitment to Detroit and the state’s transformation.”

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The incentives will come in a variety of forms, including sales, income and property tax incentives. Some will be reaped during construction and some only years after the projects actually open. Final amounts are tentative until all costs are known.

Although Tuesday's approval by the strategic fund was expected, the size of the package is likely to renew the debate on whether tax breaks ought to be created for projects such as Gilbert's Hudson's site building or for the Little Caesars Arena, which also benefit from extensive incentives.

Of the four projects, the Hudson's site building broke ground last December and is expected to open in 2023. Some preliminary work has begun on the Book project, while the Monroe Block work and the addition to One Campus Martius should be underway by late this year or early next year.

The Bedrock team also released statements from Mayor Mike Duggan, who said, "The Michigan Strategic Fund's approval of the MIThrive financing represents a major step forward for Detroit and other Michigan cities that are rebuilding. Thanks to this new tool, we will be able to make sure these projects realize their full potential to create thousands of new jobs in our cities."

And also in a statement released by Bedrock, Mike Jackson, executive secretary-treasurer of the Michigan Regional Council of Carpenters, echoed that.

“MiThrive poses an incredible opportunity for carpenters and skilled tradesmen across the state,” he said “Bedrock’s four projects represent thousands of jobs for our union members, as well as tremendous opportunities for young people looking for a rewarding career in the trades.”

Contact John Gallagher: 313-222-5173 or gallagher@freepress.com. Follow him on Twitter @jgallagherfreep.