Detroit

Crony Capitalists in Detroit Are Ripping Off Taxpayers

The city's revival is mainly reviving the pocket books of connected billionaires

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The popular narrative in Motown, near where I live, has it that the city is back! In the downtown core, business is booming, streets are buzzing, eateries are opening, and apartments are renting. And all of this is credited to the hard-work and big investments of rich billionaires, particularly Quicken Loan's Dan Gilbert, who have all banded together and adopted this city to nurture it back to health.

But Adam Smith's Wealth of Nations warned, when business meet up, "even for merriment and diversion," the conversation inevitably "ends in a conspiracy against the public." And so it is in Detroit where Gilbert and his pals are turning crony capitalism into a high art. They are cramming this city, whose population is about a third of what it used to be, with one structure after another: Stadiums, high-rises, light rail. Why? Because they get taxpayers to subsidize part of their construction while they keep the entire profit from its use.

But the latest brownfield transformation scam – ooops, legislation—that Gilbert is pushing in the state would put all of these previous schemes to shame, I note in The Week. It will allow him to collect taxpayer dollars for a skyscraper he wants to build where Detroit's famous Hudson store once stood. But the way he's doing it is interesting:

Now, businesses routinely hit up taxpayers for money. They obtain subsidies, tax breaks, special tax write-offs, and low-interest loans backed by state bonds. But this legislation, which has already sailed through the state Senate and is now being considered by the state House, is particularly egregious.

The bill would allow five developers in five cities every year to not just capture part of the property taxes from the brownfield (which is a site contaminated or environmentally damaged by previous users) they are redeveloping, but also $40 million worth of income taxes for 20 years. Whose income taxes? Remarkably, as soon as work on the site begins, the developers will be able call dibs on the income taxes paid by their own construction workers. And once the project is completed, a portion of the income taxes of the residents and the sales taxes of the businesses will be handed over to these developers as well…

There is even more awfulness to this that the column spells out. But the real issue is, are such boondoggles improving the lives of average Detroiters?

Well….Go here to find out.

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  1. But the real issue is, are such boondoggles improving the lives of average Detroiters?

    No, no it’s not. To suggest that such boondoggles would be perfectly okay if they did indeed improve the lives of average Detroiters is just wrong.

    1. The people of Detroit had their voice in electing the State Senate who is approving their fleecing. Not only do I see what was sowed being reaped but I don’t know that I think the people of IL (or any other state) should do anything to ‘solve’ the ‘problem’.

      Also, it’s better than them taking *my* income taxes to pay for it.

      1. I am sure the Michigan state senators elected from residents in Detroit and that county are few compared to the rest of the state.

        Me thinks it payback from the rest of Michigan for all the years of siphoning off non-Detroit tax revenue and wasting it in Detroit.

        Payback is a biyotch!

  2. God damn, I hate to agree with this insufferable woman, but this is true. It is also true for most major cities that use public dollars to accommodate the whimsical tastes of the wealthy.

    1. A good article from Robby and another from Dalmia?! In the same day even! I had to go check to make sure the sky wasn’t falling.

  3. The elected officials put out the shingle “NOW TAKING BRIBES” and we’re supposed to pretend it’s all Dan Gilbert’s idea.

  4. Everyone in Detroit is ripping off tax payers.

    Although, how many tax payers actually live in Detroit anyway?

  5. I hate to disagree with my friend Shikha, but she’s being disingenuous when she says ‘Detroit’s’ population is 680,000. While that’s true for the actual city boundaries, the Detroit metropolitan area houses about 4 million people, and, on any given night the people in Orchestra Hall or Ford Field (housing the Detroit Symphony and the Lions respectively) are probably only 10 to 20% citizens of Detroit proper. More likely they come from Grosse Pointe, West Bloomfield and the dozen or so other political units in the tri-county area.

    Not to say that she’s wrong about the subsidies Gilbert and the late Mike Illich talked the city and the state into giving them. They are indeed crony capitalism at its worse. However, the revival of Detroit she pooh-poohs is actually happening, and Gilbert and Illich’s subsidies are only very indirectly responsible.

    I’d invite anyone on this board to come visit and I’ll show you twenty new restaurants that have opened in Detroit in the past two years that could win James Beard awards (and a couple of them have, or are runners-up). And it’s not just the downtown and mid-town corridor any more–it’s spreading to Corktown and east Jefferson and the old Livonia area are also crawling back. Websites available upon request. Here’s one non restaurant business that’s exploding, just for fun:
    Shinola

    1. For every neighborhood gentrifying two others in the city are decaying at a faster rate. That is not a revival.

      When the poverty moves to marginal suburbs, y’all can pretend the city solved its poverty problem even though the government just shoved it into other jurisdictions. Rahm Emmanuel must have his fist up you.

    2. Democrats still run Detroit, don’t they?

      Mayor Mike Duggan is a Democrat.

      Billions in bankruptcy forgiveness and now back on the same track. Everything in Detroit should have super cheap land costs for new companies to start up with that overhead expense. Companies move in because land is cheap and there are customers. The jobs start increasing.

      Instead government officials are selling income tax revenue to crony capitalists to fund big publicity buildings. Its a cesspool of corruption. The bankruptcy protection just prevented the total collapse of Detroit while allowing corrupt government officials to stay in business.

      The whole place deserves to be razed!

    3. Awesome. I mean sure, casual dining has been on the decline, but that surely won’t affect Detroit.

  6. Dalmia may have made some cogent and well-put together thoughts.

    It is a shame that she had to be the one to write the article.

  7. Does Ms. Dalmia have anything to show that a net cash flow from the restof the city’s taxpayer’s to the principals involved w this is in the offing? All I see is a net taxpayer getting a deal to get some of it back. It may be cronyism, but not an aggression vs. the city’s residents AFAICT. If the investors provide a job to someone & then get a cut of it back, who’s hurt?

  8. “Crony Capitalists in Detroit Are Ripping Off Taxpayers”

    Wow! This is some awesome, hard-nosed journalism there Captain Obvious, er I mean, Shitka. Have you learned that Trump won the election yet?

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