Flint Residents Could Be Forced to Foot the Bill for a New Hilton

Just what they need right now!

Ken Wolter/Dreamstime.com

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.

Comments

[Rockabilly]

Sounds like white privilege !!!

#ResistTheWhitePrivilegeOfParisHilton!!!

[Fist of Etiquette]

TIFs are especially troublesome when one remembers that the local businesses paying for these projects often compete to deliver the same service.

So all of the sudden we don't like thumbs on scales.

[Hugh Akston]

Once again Raisin comes out against lower taxes. What else do you expect from a magazine where the staff cast over a million votes for Hillary!

[Hamster of Doom]

The staffers died and no one told us!

[Kivlor]

Or they are opposed to granting special exemptions from taxes? This is actually a good argument, and one of the stable, positive things about Reason. They regularly oppose TIFs and other special tax abatements for large corporations. They rightly view this as government paying for corporate activities.

As a RE Developer, I've been involved in several TIFs. They are never a good deal, and never have I seen a company actually request one because without it they wouldn't build the store. They are going to build anyway, and are just asking for special treatment because they know as a large company they have the clout to push it.

Even if the company was serious that this is the make or break point, it is really quite evil to tax your citizens for building a company, and then offering tax relief to other companies to build in your town.

[grips]

"where residents are still suffering from a government-caused water crisis"

Sigh.

[Hamster of Doom]

>>>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.)

Or it might drop to $0 after they leave town. It's a zany, unpredictable world!

[DiegoF]

If Flint really wanted to be progressive they could simply impose a fat tax on junk food. Then they could fund this and the rest of their expenses from Michael Moore alone.

[Hamster of Doom]

>>the project's supporters also claim the new hotel could add an estimated 70 jobs to the local economy.

Yeah, guys. 70 new hotel jobs, why aren't we more excited? Think of the long-term value.

I'm sorry, I can't even parody this. We've gone beyond parody. This is it. What we've all been dreading, and knew in our hearts was coming.

Peak parody.

Run.

[Agammamon]

And even Reason's laaaaarge number of assistant editors seem to never have understood that jobs are a cost, not a benefit, and they consistently fail to hammer that home whenever a politician touts 'job creation' as a 'benefit' of stealing other people's money.

[Kivlor]

This is just retarded. From a municipal--or even state / nation-state--POV they are indeed a benefit. You know this. When faced with the option of a population of unemployed people, or an employed one, which is better for the individuals, the community, and the government? The answer is always the employed population.

[Agammamon]

1. Jobs are a resource input - labor - like any other input. The more you have, the more the final product costs.

2. Do you think its all or nothing? That if government doesn't provide these jobs that these people simply will sit on their arses all day? Taking money from Peter to give Paul a job because otherwise Paul won't look for work on his own means you just wasted that money.

[Juice]

Cuz you know, you need a shitload of nice hotel rooms to house all the tourists and businessmen constantly traveling to Flint, MI.

[Kivlor]

Well, you may need a bunch of nice hotel rooms for all of the outside contractors, consultants and government overseers that will be coming to help fix the water problem.

[BYODB]

Upon renovation, the building will host the Hilton Buckham Square Hotel, which is expected to cost an estimated $37.9 million.

When did it become so expensive to renovate buildings no one wants for purposes that no one needs?

[MatthewSlyfield]

ERROR: CATASTROPHIC SYSTEM FAILURE.

ERROR CODE: 1D-10-T

[loveconstitution1789]

Will Paris Hilton drink the water and semen at the same time?

[Agammamon]

$25,000 a year for the next 14 years. (After that, the annual bill will jump to $530,000.)

So, they're renovating a shitty, vandalized building that, in a decade will be ready to be torn down - but somehow the city thinks it will still be standing on the 15th year so they can get that sweet, sweet, property tax bump?

[buybuydandavis]

"which is expected to cost an estimated $37.9 million."

That's the government estimate. Any grown up should expect the final bill to be twice that, at a minimum.

[Kivlor]

This is most likely Hilton's estimate. It may be low still, because IME renovations of old multi-story buildings tend to run over budget. I've seen a lot of small to medium sized companies go bankrupt doing it. That said, we should expect Hilton to have an understanding of what it takes to do it.

[Kivlor]

Realistically, you'll have to completely gut everything, down to the exterior walls. You'll have to run all new electric wires throughout the whole thing. Most likely the plumbing will all have to be replaced--especially due to lead-pipe issues. The bill gets expensive fast. Telephone and ethernet lines too.

[Kivlor]

Also, large companies tend to have a lot of waste in their projects, much like governments, so we can expect this to cost a lot more than it would a local investor / investment group. There's a high likelihood that they will be getting billed for work that doesn't need to be done, or isn't done. With that in mind, if you wanted to calculate an estimate, I'd bump whatever final number you get by ~20%.