Livonia, MI, September 12, 2024 – Today, Citizens Research Council of Michigan released a new analysis of the Detroit Downtown Development Authority’s (DDA) tax capture practices. The report, titled ‘Allowing the Detroit DDA’s Captured Tax Revenues to Again Fund Government Services,’ highlights that while the DDA has significantly improved downtown Detroit as a business and tourist destination, it has failed to enhance the ability of Detroit, Wayne County, and the other taxing authorities to fund government services.

In 1975, Michigan law authorized local governments to create special authorities with the extraordinary power to “capture” property taxes levied to fund city, county, school, and other types of governments. When DDA-funded economic development projects cause the property tax bases within the specified geographic areas to appreciate, the DDAs can divert tax revenues generated from those enhanced tax bases to fund the economic development investments.

Over its 47-years history, the Detroit DDA has been instrumental in implementing numerous projects that have attracted and retained businesses in the city. The DDA’s initiatives have undeniably made a significant impact on the city’s economic landscape.  

However, the Detroit DDA (and DDAs throughout the state) does not serve its primary purpose: to enhance the tax bases of the several taxing jurisdictions that serve downtown Detroit. The state law itself is the primary culprit for this failure because it allows DDAs to amend their development plans in perpetuity to fund ever-growing economic development needs. The governments that serve Detroit properties have foregone benefit from the tax base growth for 47 years and, with some exceptions, will continue to do so for another 29 years if the debt repayment schedule remains unchanged and adhered to.

The report recommends that the DDA use the relatively large amounts of tax capture to repay its outstanding debts as soon as possible and continue the practice of using captured tax revenues only for their intended economic development purposes. It also recommends that the state DDA law be amended to end the unending tax capture and alter the governance of the DDA to better involve the city council.

Eric Lupher, President of the Citizens Research Council of Michigan, emphasized the situation’s urgency, stating, “While Detroit has made significant strides over the past decade, it still lags behind surrounding communities and other Midwest cities for business attraction. It is imperative that the city and state promptly address the existing laws to ensure they work in the best interest of Detroit, Wayne County, and Southeast Michigan.”

This paper is the second of three commissioned by the Detroit City Council. The third paper, which addresses the city’s use of tax abatements, will be released soon.

###