Detroit City Council OKs $60 million tax break for Hudson's site project

Detroit — The Detroit City Council approved $60 million in property tax breaks Tuesday for the Hudson's site redevelopment in light of Bedrock agreeing to amend its community benefits package.

Council acted in its last session before recessing until Sept. 5 after the developer said it will make seven amendments to enhance its commitment to Detroit-based small businesses and community-based projects. 

The City Council approved the 10-year tax abatement 5-4 with members Angela Whitfield-Calloway, Latisha Johnson, Pro Tem James Tate and Gabriela Santiago-Romero voting no.

Tate said he voted against the effort because "it was not noticed for the public that this was going to be a vote today."

Whitfield-Calloway said she opposed it because it was a "disservice to our taxpayers and it's not transparent" as she was not aware of the community benefits amendments before Tuesday.

Bedrock representatives told the council Tuesday the company is dedicating at least 20% of rentable square footage within the street-level retail of the Hudson's site project to local small businesses and will provide $1 million in small business development support over the 10 years of the agreement to those businesses that are, or were operating within the dedicated space of the project. 

It will also provide $5 million in community-based projects to meet the Neighborhood Improvement Fund eligibility requirements. They include removing blight, providing recreational opportunities, offering home repairs for seniors and disabled, offering educational apprenticeship opportunities and financing affordable housing developments. 

"Developer further agrees to work collaboratively with the Detroit City Council in identifying projects for funding under this section," the resolution states.

The resolution is the latest development in the council's deliberations on the 10-year abatement, which included delaying a vote for three straight weeks in June. There has been pushback from residents who said that Bedrock owner Dan Gilbert, a billionaire, doesn't need a tax break. 

The matter will now move on to the State Tax Commission, which must give final approval for the tax break to proceed. 

Last month, Detroit officials said they weren't worried about the 60-day time limit specified in state law to approve or reject Bedrock's request, saying  the statute is a benefit for the developer, instead of a deadline for the city. Bedrock submitted its initial application on June 7, 2018, just shy of six months after its ceremonial groundbreaking, but no further action was taken. The firm submitted an amended application dated March 11. A spokeswoman for the Michigan Department of Treasury said the state does not have oversight of the certificate process at the local level. 

The agreement follows calls from council members, including City Council President Mary Sheffield, for improvements to Bedrock's community benefits offerings. Sheffield last month outlined five commitments she was seeking from Bedrock, including an increase in affordable housing across the firm's development portfolio.

Also in the resolution, the developer stated it will spend $1 million to establish a central technology hub, bringing together its 22 neighborhood hubs. It will expand its support for youth by partnering with the Detroit Public Schools Community District to provide technology skills training and internship opportunities. It would also support digital equity initiatives by partnering with the city's Department of Information Technology on strategies to leverage technology hubs for digital literacy and programing. 

The initial agreement said that 20% of its portfolio should be for affordable housing at 80% the area median income, which is being expanded to 30% of affordable housing at 60% the area median income.

Ahead of the vote, Sheffield said her requests for tangible community benefits were met and she relied on the fiscal analysis from the city's law department, which determined the project will result in a net benefit to the city in excess of $71 million. 

"In a perfect world, we would not need to offer tax abatements to developers to attract projects to the city of Detroit," Sheffield said. "Unfortunately, Detroit has one of the highest tax rates in the nation amongst other major cities ... putting us at a competitive disadvantage."

She said 56% of residents in District 5, which she represents, approved of the project in a poll her office conducted. 

"Given Bedrock's and Gilbert Foundation's recent philanthropic commitment to the city of Detroit, I believe that they are committed to be true partners in the city's revitalization and sustainability of Detroit," Sheffield said. "I will be ensuring that the Hudson's project complies with the affordability agreements and all commitments made at this table and ensure that Detroiters truly benefit from any project that take place here."

More than a dozen in-person commenters, including construction workers of the site, union leaders and real estate developers spoke Tuesday in support of Gilbert and the Hudson's site project, saying it will feed local business.

"It means a lot to me and hundreds of others working over there because we're able to raise our family up. I've been through an apprenticeship program and we are trying to be more than just Detroiters," said Dorian Kemp, a worker at the Hudson's site who spoke to the council on behalf of the Michigan Regional Council of Carpenters.

Other public commenters argued that Gilbert wouldn't leave the project and that council should vote no.

The Hudson’s site project in downtown Detroit received public assistance before it broke ground, qualifying for $618 million in transformational brownfield tax credits for that site, Monroe, Book Tower and One Campus Martius expansion, over 30 years. 

The prior city council believed the incentive would help build Detroit’s first new skyscraper in nearly 25 years, attracting businesses and tourists while creating jobs. Now, the developers have argued the $60 million in property tax breaks is necessary to continue construction work on the way-behind-schedule project.

New at-large councilwoman Mary Waters wrote in an op-ed earlier this month that permanent jobs expected from the Hudson's site are heavily concentrated in technology that many Detroiters lack the skilled or specialized training to qualified for and "it is up to us on council to see that this is addressed."

Rocket's Steve Ogden, president of government relations, and Jared Fleisher, vice president of government relations, said incorporating council members' initiatives was essential.

"We came back and recognized that there needed to be even more finer point to the pencil," Ogden said.

Waters said she was thrilled that a central hotline will be established to help service Detroiters' technology needs.

"They did a thorough job explaining this digital effort," Waters said. "I appreciate the comments from our community and sometimes we don't always agree ..."

"The Downtown Development Authority was started years ago by the late-Mayor Coleman Young, and I want people to understand that the developers in the downtown area are who is (limited) to this money. These particular captures cannot go into the neighborhoods," Waters said.

The estimated cost to complete the project has risen from $909 million when Bedrock broke ground on the Woodward site in 2017 to $1.4 billion.

Plans for the under-construction development include a hotel, retail, office space, event spaces, rooftop amenities and a public plaza. The tower portion of the development will be 685 feet high, making it the second-tallest building in Detroit and Michigan when the project is complete in 2024.

In 2017, the city council approved a PA 210 district for the project, known as a Commercial Rehabilitation District, the first of a two-step process that allows a developer to request a property tax abatement. 

Mayor Mike Duggan told The Detroit News in a statement following the vote Tuesday, "City Council members have done a great job to make sure the Hudson's project includes the kind of community benefits that are important to all Detroiters, especially the affordable housing. I appreciate their hard work on this and am in full support of the agreement they have reached with the developer."

srahal@detroitnews.com

Twitter: @SarahRahal_

Staff writer Candice Williams contributed.