Apr 5, 2023 - News

Detroit's downtown development debate heats up

Illustration: Brendan Lynch/Axios

Downtown's development boom is generating more tax revenues, but calls are getting louder to overhaul the distribution of those taxes to benefit more residents.

Driving the news: City Council President Mary Sheffield joined the chorus last week after Council's 8-1 approval of of hundreds of millions in tax incentives for billionaire developers of the District Detroit.

  • Sheffield — who cast the lone "no" vote — tells Axios that she's exploring the dissolution of the Downtown Development Authority (DDA), which has collected $228 million in downtown property taxes since 2018 and reinvested it back into several real estate developments, such as Little Caesars Arena.

The other side: A DDA spokesperson tells Axios the authority's dissolution is "legally impractical" because it would need to satisfy all of its outstanding bond debt obligations, which extend to 2048.

  • The DDA works closely with community groups and city leaders to ensure that development is inclusive and creates jobs, the spokesperson added.

Catch up quick: The DDA was established in 1976 under former Mayor Coleman A. Young to reinvigorate downtown during an economic decline.

  • Under a new state law at the time, the DDA was given the power to borrow money by issuing bonds to benefit private downtown development.
  • When those developments result in increased property values downtown, the DDA captures taxes paid on the size of the increase, which is measured from a baseline value set when properties are added to the DDA's downtown boundaries. Those boundaries have gradually expanded since the DDA's inception.

What they're saying: Sheffield says her interest in dissolving the DDA is part of a broader effort to help residents benefit from downtown's growth, not just wealthy developers.

  • "This model of developing our city has been the norm over the last 40 years and we've seen nothing but the proliferation of poverty, the loss of population, the obliteration of Black businesses and the systematic exclusion of Detroiters with respect to ownership and equity," she said in a statement explaining her District Detroit vote.

The intrigue: The perspective from Sheffield, a rumored mayoral candidate, is in contrast to Mayor Mike Duggan's resurrection of decades-old arguments for tax incentives in his recent State of the City speech.

  • Duggan invoked Young's support for the DDA, explaining that it has helped grow the city's income tax revenues to $395 million this year by attracting new businesses.
  • "Forty years later, we continue to benefit from a mayor who put the community first in spite of the criticism," Duggan said.

Yes, but: Young pushed for the DDA while property taxes were declining. Now that downtown is on the upswing, property tax revenue increases go to the DDA instead of the city.

By the numbers: More than $111.7 million of the $228 million in downtown property taxes captured by the DDA have gone toward LCA since 2018. The project has since been roundly criticized for its empty promises.

  • The rest goes into the DDA's general revenue stream, which historically has supported development projects such as the Book Cadillac Hotel renovation and business relocations.

What's next: Sheffield's memo seeking more information about the DDA, and its possible dissolution, is expected to be discussed in May.

Theo Pride of Detroit People's Platform stands inside Detroit city hall
Theo Pride, of Detroit People's Platform, standing inside Detroit City Hall. Photo: Joe Guillen/Axios

Community groups seek more neighborhood investment

Overlooking downtown from city hall's 13th floor, Theo Pride assessed the landscape of offices, corporate shops and hotels and saw prosperity missing from Detroit's neighborhoods.

  • "It's a tale of two cities," Pride, a community organizer with Detroit People's Platform, tells Axios. "It's what's going on down here, and it's the rest of Detroit."

Why it matters: Motivated by the disparity between downtown and the city's neighborhoods, Pride is part of a grassroots effort to educate the community about how the DDA works.

  • The project, in collaboration with the CivicLab, examines how tax revenues are extracted from the public in the name of development.

State of play: While activists and some residents have opposed recent tax incentive deals, City Council, church leaders and other Detroiters have supported the developments for the jobs and new housing they help create.

What they're saying: Chase Cantrell, executive director of Building Community Value, says the debate underscores the need to understand exactly how Detroit benefits from having the DDA, which is required by law to spend its property tax revenues just downtown.

  • "I don't think it's justifiable to keep (the tax revenues) downtown," Cantrell tells Axios. "The community development ecosystem thinks there's too much money going downtown — that's clear."

Between the lines: Despite the criticisms, the city's economic development strategy does include some focus on neighborhood development.

  • Since 2018, the Strategic Neighborhood Fund, which is separate from the DDA, has invested $118.5 million in 72 projects, including an affordable housing development that broke ground last week on West Vernor Highway in southwest Detroit.
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