DEBUNKING THE DEtroit economic growth corporation
A look at a few of the misleading claims that the DEGC makes during their "educational" series.
On October 2nd, 2024, Councilwoman Santiago-Romero hosted a virtual "information session" by the Detroit Economic Growth Corporation (DEGC), and Councilman Benson hosted the same presentation again at Farwell Rec Center on October 16th. Both were very similar to the presentation DEGC gave back in March at the Butzel Rec Center for Councilwoman Sheffield. Detroiters For Tax Justice had nine of our own members present at the Farwell event, and there were about the same number of regular people from the community—hardly a crowd. One block club was represented with three members.
In the past, the DEGC's sessions restricted questions or comments from the public. Now questions are allowed, but only at the end of the presentation, and it was soon clear that the DEGC's presenters were talking for longer than they needed to, stalling in order to wind down the clock for public comment—probably because they saw us in the audience. The time slot for the meeting room was only reserved for 90 minutes, so after talking for 75 minutes, they hurried to rush everyone out because the rec center would be closing soon...a convenient way to avoid hard questions from the public.
myth #1: "Detroit has the highest taxes in the region
In the past at these sessions, the DEGC have repeated the falsehood that "Detroit has the highest taxes in the region." And then they show the slide that Mayor Duggan is holding in the photo, using red and blue shading to indicate which cities have higher or lower mills than Detroit.
We have rebutted that claim several times now by noting that just because Detroit has a higher number of mills than most suburban communities does not equate to higher taxes, because our property values are on average much lower than in any affluent city like Grosse Pointe, or even Livonia. Despite this they still continue to say that Detroit has the highest taxes. Granted, in proportion to the income level of most Detroiters, yes, our taxes are way too high, but that's not the same thing.
The reason the DEGC keeps perpetuating this misconception is to justify their central claim that they must continue giving out tax incentives to prospective developers "in order to make up for our high taxes," or those developers will skip over Detroit to build in another city. Mayor Duggan also tied this myth into his misleading narrative about why he said we needed his proposed Land Value Tax.
So basically, unless the DEGC can keep lying about the myth of "high" Detroit taxes, they have little basis to continue giving out these huge tax incentives—or in fact, to even go on existing.
myth #2: "We do not take directly from tax money
The DEGC also loves to state in these presentations that they "do not take directly from tax money to give away as 'payments' to developers," insisting that this is "misinformation." Of course there are no direct "payments," but we have never alleged that either; this is just a way for them to omit the fact that they reroute tax money away from our voter-approved millages. Whether it's direct or indirect, the fact is they're still taking it, but they want to play with semantics.
That's what tax captures and abatements are—a de-facto form of stealing taxpayer money from taxpayer-funded institutions. Here's another way of looking at it: they are essentially arguing that if they take your paycheck before it you can cash it, then it's not stealing, it's rerouting.
Lately they have been using a new one. In order to be able to keep saying that the DEGC "does not tax capture the City's or schools' debt millages," they have begun instead saying that they don't capture it for brownfield projects. Since the average person doesn't know the details of the various DEGC authorities or what tax captures are, they can gloss over the fact that the DDA (and thus the DEGC) does in fact capture money from our school and city debt millages...a lot of it.
Here is a chart showing the various authorities within the DEGC, in case you are the average person and aren't familiar with it.
myth #3: "DEGC focuses on small businesses"
In order to polish their tarnished image in the face of scathing criticisms, the DEGC's presentation heavily emphasized the work that they do for small black-owned businesses, and they claim that that's where the bulk of their tax incentives go. And by the *number* of individual incentives issued, that may be true. By *dollar value* however, the vast majority of the public money that DEGC handles is funneled downtown.
And even more important is to remember that all of the money DEGC handles is money that was supposed to go to school, library, and other public services funding.
Here's the thing—if DEGC only helped small neighborhood developers, we wouldn't really have much to criticize them about, but from September to October of 2024 alone there have been THREE news articles that were very critical of the DEGC's massive downtown tax incentives and the harm they do to our public schools, libraries, and other public services, as well as the long-term bond debt they rack up. So you don't just have to take our word for it. By the way, DEGC refused press requests for comment on all of those articles.
The articles cropped up in the wake of the release of not only our own Billion Dollar Report, but also a major report on tax incentives conducted for City Council by the Citizens' Research Council, which offered a mostly damning analysis of the DEGC and its methods.
Doesn't it seem odd that the DEGC would spend an entire 90-minute public presentation without ever once mentioning any of the negative criticisms currently being leveled at them in the media? They are a private corporation, yet they handle public money...and there are unaddressed potential legal issues around that, but the DEGC should not be able to avoid answering questions about their conduct with such impunity.
DEGC have also started bragging that some of these incentivized projects like the Fisher Body 21 Lofts are evidence that they are "moving beyond downtown," and into "the neighborhoods." But even if these projects are "moving beyond downtown," and even if a few Black developers benefit, DEGC's programming is not rooted in racial equity if it moves into the neighborhoods while exacerbating the same disparities because it's still working off the same blueprint as before.
In fact there is already a word for that: GENTRIFICATION.
By the same token, there is no racial equity if those incentivized black neighborhood developers are operating just like their white downtown counterparts...gentrification is gentrification.
Here are some slides from the DEGC's presentation
Let's address these "misconceptions" one by one.
1. "My property taxes will go up"
Okay, no argument here; tax incentives definitely do not make your taxes go up, but they do cause tax-funded services to decline in quality, because less of our millage money intended for them is reaching its destination. Essentially tax incentives defund our schools and other public institutions, which means we pay for it in degraded outcomes.
2. "Abatements take money from the City that would otherwise be spent on services, and gives it to rich developers"
Actually that's exactly what happens—a tax abatement means that a developer (almost always a rich guy) doesn't have to pay taxes for a set amount of time. And the effect of a person with a large, valuable property not paying taxes negatively affects the public good by creating a hole where his fair civic contribution to society would have been. The DEGC would argue that this loss of property tax is offset by a supposed increase in income tax due to "job creation," but this is a flimsy rationale at best, especially since income tax does not go to fund schools, libraries, etc., it goes into the City's General Fund.
3. "Companies get a tax abatement without demonstrating a need or benefit to the city"
In order to get a tax abatement a developer does have to go through a process, but the bar for "demonstrating a need" is pretty low, considering we are talking about developers who are almost always billionaires, and in the case of Chris Ilitch's "District Detroit" project the reason for the incentive was that the banks wouldn't finance their ridiculously flawed concept of building massive amounts of new office space in a downtown already flooded with unused offices, during the work-from-home era. So they wanted the taxpayer to finance what the banks thought was a bad risk! As far as demonstrating a benefit, once again they are depending on the dubious claim of generating income tax revenue to offset the loss in property tax revenue, via "creating jobs" (that mostly go to suburbanites).
4. "Companies receive abatements with no accountability or oversight"
Can anyone name a single time that a tax incentive in Detroit was revoked, by either the DEGC or City Council? The reality is that once it is out of DEGC's hands, and once City Council passes it, there is virtually no chance that any of that money will be clawed back if the promises that were made to secure it go unfulfilled. You may have heard of the fine that applies if a developer's requirement for including more than 50% of Detroit-resident construction workers is not met, but it is only a few thousand dollars, and you can rest assured that cost is already rolled into their calculations. For these billionaires, it is easier to just pay the fine. Then there is the fact that DEGC is a private corporation that handles vast amounts of public money. Their boards of directors are handpicked by the mayor, and they come exclusively from the business elites of the region—a very self-dealing model. To our knowledge there has never been any kind of audit of the DEGC, and there is no mechanism for holding them directly accountable to the public, nor is there any public accounting of their use of public money available, as required by the Michigan Constitution Article IX, Sec. 23.
how to play Three-card monte...
This slide claims to show the benefits of DEGC tax incentives to city revenue...
However it does not distinguish between income taxes and property taxes; the problem is that their tax captures and abatements take away from property taxes, while supposedly increasing revenue via income tax (by "creating jobs"). Generating more income taxes will not fill the deficits in our property tax millage funded school and library budgets created by tax captures & abatements!
Okay let's tackle this slide too...
1. "Less revenue for the city from neighborhood development"
First of all, the bulk of what DEGC spends our money on is NOT in the neighborhoods, and when it is, it is usually for projects that gentrify. Second, if we are talking about less revenue being generated, we want to see a hard statistical analysis that shows how DEGC's incentives offset their significant cost to property tax funded institutions (as well as the effects of long term bond debt) by the supposed generation of increased income taxes. Because right now the word around City Hall is that the math ain't mathing.
2. "Fewer renovations of blighted or vacant structures"
We're pretty sure that people knew how to renovate vacant buildings before tax incentives existed, it just takes the ability (and the bravery) for our leaders to think outside of the "trickle-down economics" box to incentivize it.
3. "Fewer jobs created, fewer employment opportunities for Detroiters"
Again, we're already looking at a scenario where the employment opportunities are bypassing native Detroiters, because there is no real effort at prioritizing the education of Detroiters. Therefore the jobs mainly go to those who already have those skills: suburban whites. Look at any construction site downtown and you'll find a sea of bearded white boys from Milford or Chesterfield, and maybe one or two token brothers...and they're usually doing the grunt work, not the skilled work. This same dynamic applies to all jobs outside of the actual construction as well; it's obvious that the good jobs still go to whites and the menial, lower wage jobs go to black & brown Detroiters, so I'm not sure who the DEGC is trying to fool with this one. Meanwhile, their tax incentives are looting the public schools and libraries that would help Detroiters access the education that they would need to ever elevate themselves to the same skill level as their white counterparts.
4. "Less affordable rental housing / homeownership"
Show me one place where there is actual affordable housing being built in Detroit right now. The current federal AMI level being used to determine "affordability" for the Detroit market is averaged for the entire metro region, meaning that the "affordable housing" they are building right now is not affordable to actual Detroiters.
5. "Fewer new retail spaces created in neighborhoods"
Once again, we're pretty sure that people knew how to do this before tax incentives existed, it just takes the ability (and the bravery) to think outside of the "trickle-down economics" box. The DEGC is just trying to justify their own existence by convincing us they are indispensable. Yes, there is a definite need for financial assistance to support the creation and sustenance of small businesses, especially legacy black businesses, but by volume this is not what the DEGC actually does.
The constitutional requirement for transparency
We have also engaged Mayor Duggan directly at some of his charter-mandated community meetings. Our organizer Russ Bellant has repeatedly called out Duggan's and the DEGC's failure to post the data on where the tax capture funds went (ie, who specifically got what), or to even commit to do so. It is outlined in the Michigan Constitution Article IX, Sec. 23 that all use of public funds must be publicly reported; we should not have to file FOIA requests to get it.
During one such meeting Duggan finally responded to this request, and turned to a DEGC representative to ask whether their meeting minutes have those details. The rep confirmed that they do. The Mayor then told him to email all of those minutes to Russ, who then retorted that the point of the request was not to satisfy Russ Bellant's personal curiosity, but to make it publicly accessible, as the Constitution requires. In any case we now have a massive pile of the DEGC's meeting minutes which our research committee is combing through.
Time to inject some historical context...
Even back in the early days when the fledgling DEGC and DDA were first formed, there were questions openly being asked about whether it was even legal for them to exist, or to do the things they were tasked to do with public tax dollars. This front page story in the February 7, 1978 Free Press admits it point-blank with the words, "LEGAL BATTLE IS CERTAIN"
Later, on Page 9A the article explains the controversial, "yet-to-be-used" plan in question: Tax Increment Financing. The DDA was looking to finance three new projects with TIF, which would become Trolley Plaza, Millender Center, and the "Cadillac Center" shopping mall project that never came to fruition. As you can see, the DDA boundaries back then were much more limited.
THAT PART, right there. These "big questions" in 1978 have still not been resolved today, almost 50yrs later! There are still grave doubts as to whether it is legal for a private corporation (DEGC, DDA, etc) to divert public voter-approved millage money into private projects. The fact is that it has never really been challenged in court.
Now this one is juicy...here we have the DDA's own lawyer basically admitting that they knew the whole idea of TIF and tax capture was a legally iffy idea, and that basically anyone with a pulse "would have a case." It almost sounds like he's trying to drop a hint...
This subsequent Free Press article is from July 14, 1978, page 8A. It discusses the origin of what we now call the "Headlee Amendment," and how it might legally hamper the DDA's ability to operate.
All it takes is some disgruntled taxpayer...
Some nervous DDA lawyer
