Detroit adds background checks for tax breaks
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Landy Land's Walker, Pingree and Pierce buildings at 3135-3161 Woodward Ave., targeted for a tax abatement. Photo: Annalise Frank/Axios
Detroit is taking a closer look at who's behind development projects before approving tax breaks, Axios has learned.
- Council member Angela Whitfield Calloway plans to introduce a resolution Tuesday or next week.
Why it matters: Tax breaks mean cities collect less money to encourage development, so it's crucial how they decide who gets them.
Driving the news: City law and economic development officials drafted the new screening process over the past month, according to a confidential Sept. 9 memo provided to Axios.
- The new policy went into effect Sept. 14.
- In applying for tax breaks through the Detroit Economic Growth Corp., the applicants, key owners and personnel will be subject to criminal and civil background checks covering the previous five years concerning business integrity, per the memo from corporation counsel Conrad Mallett Jr.
State of play: Calloway urged Detroit to create a screening process for companies seeking city incentives.
- At a July council meeting, she questioned a proposed tax break for developer Landy Land LLC after learning of Landy Land's registered agent, Adam Kessler, facing an unrelated civil fraud judgment — which he's appealing.
- Calloway also pointed to a separate issue — the city's demolition-dirt controversy — as another example of needing more due diligence, after contaminated fill was used.
What they're saying: Detroit needs to do better due diligence "to protect the taxpayers' dollars," Calloway tells Axios. "How many times have we missed something similar?"
The other side: Kessler said in a statement to Axios that the concerns misunderstand his role in Landy Land, the entity that bought late developer Joel Landy's portfolio of around 55 Detroit properties in 2023. It's seeking a property tax exemption for three two-story buildings along Woodward Avenue.
- Kessler said in the statement that he hasn't had an active role with Landy Land in more than a year, wasn't involved in or aware of the tax abatement application and holds an indirect 10.5% interest. He adds that serving as a registered agent was an administrative role, not a sign of leadership.
- The litigation was related to a COVID-19 testing business venture, per court records.
What's next: It's yet to be seen how the new policy could change the tax abatement landscape.