By Shea Howell
May 2, 2017
Big developers across Michigan are celebrating. The State legislature is on a fast track to approve tax incentives to provide a collective $1 billion windfall to folks like Dan Gilbert and shift the cost of future private developments onto citizens. The plan would let developers withhold tax money from new revenue raised by projects on “blighted or long vacant land.” Governor Snyder is sure to sign the final version of the plan.
This is an astonishing abuse of legislative power. Even some Republicans have found this set of bills disturbing. Rep. Martin Howrylak of Troy, said this is “nothing more than a transfer of wealth” from the working class to “selected special interests” and is an example of “crony capitalism.
Michigan has not seen such a blatant abuse of legislative authority in support of private gain since the Quick Take law enacted to allow General Motors to flatten Poletown for a Cadillac plant. In 1981 the Michigan Supreme Court approved the power of the State to seize private property for a “public purpose.” They justified the forced relocation of 3,500 people and the destruction of 1500 homes, 144 businesses, 16 churches, a school and hospital. In 2004 that same Court decided they had made a mistake and overturned their earlier decision.
In the case of Poletown, there was at least a robust public debate over the appropriate role of government in fostering economic development. The current plan is supported as little more than a moneymaking scheme for big developers. Detroit News columnist Daniel Howes asked simply, “Why not?”
Howes spends most of his column accurately outlining that most people object to this scheme because it is all about using public money to support private wealth. He then says there is nothing wrong with that. “Rich developers whose overriding purpose is to generate meaningful returns on their investment” cannot ignore what he calls “market realities created by a half-century of urban decline.”
Howes exclaims, “I got news for the skeptics: You can’t build your way out of 50 years of urban disinvestment on the cheap.” This declaration is apparently supposed to make “skeptics” and “recriminators” back off.
However, the same people and thinking that brought us the last 50 years of disinvestment are the ones backing this new scheme.
Every credible academic and economic study of the last 50 years demonstrates the failure of this kind of thinking. The Upjohn Institute senior economist Timothy Bartik said, “Incentives do not have a large correlation with a state’s current or past unemployment or income levels, or with future economic growth.”
Currently Michigan’s array of tax breaks and business incentives are well above average in the country. In a recent article offering a different view of development by the Brookings Institution, scholars argue for “holistic approaches to revitalizing legacy cities.” They argue for “policies to increase human capital throughout the city, including improving public education and expanding employment and entrepreneur training.”
“The most important short-term strategy,” they say, “ is increasing employment levels among Detroit neighborhood residents.”
If we develop a “ healthy, sustainable local economy” they explain, “ increasing the number of jobs by 100,000, we would add more than $2 billion annually to the local economy, even if those jobs paid $10 an hour.”
Just, sustainable development is possible. It requires the will to make it a reality and the willingness to refuse to fall for the schemes by those who claim a concern for the public interest while lining their own pockets.