Michigan's state government wants to plow millions of dollars into a new infrastructure project in Flint, where residents are still suffering from a government-caused water crisis. The project? A new Hilton hotel.
The state will spend $7.9 million renovating the former Genesee Bank building on Flint's South Saginaw Street. The 11-story building has been abandoned and vandalized for years. Upon renovation, the building will host the Hilton Buckham Square Hotel, which is expected to cost an estimated $37.9 million.
In addition to those direct subsidies, the state will implement tax increment financing (TIFs), in which taxes on a property are frozen for a period of time in exchange for making certain politically favored investments. Most notably, the Hilton's tax bill will stay at $25,000 a year for the next 14 years. (After that, the annual bill will jump to $530,000.)
Imposing TIFs without simultaneous spending cuts means local residents and businesses end up paying a favored corporation's capital costs and its taxes. TIFs are especially troublesome when one remembers that the local businesses paying for these projects often compete to deliver the same service.
Michigan's state TIF bodies have a history of evading accountability and oversight, as the Michigan-based journalist Emily Lawler reported in 2014. As Lawler explains, the unelected officials have the power to re-route funds via a method that establishes "a baseline tax value for properties in a certain area," where they then "capture the revenue above and beyond that level." Though the state requires the TIF bodies to report how many taxes are withheld, only about 20 percent regularly comply. In 2014 alone, TIF bodies captured anywhere from $500 million and $1.2 billion, all in the name of economic development. From 2005 to 2014, they captured upwards of $2.9 billion.
The state also approved a $2.2 million local and school tax capture, under a similar understanding that the money will be used for development projects.
If half a million dollars in new taxes 15 years down the road doesn't sound like a good enough reason to subsidize a global corporation, the project's supporters also claim the new hotel could add an estimated 70 jobs to the local economy. They do not estimate how many jobs would be lost elsewhere in the economy as businesses are taxed to pay for the renovation. Also, they tend not to dwell on the fact that there's no guarantee the new jobs will go to local residents.