In a Nutshell
- Detroit’s economy has improved substantially since it filed for bankruptcy a decade ago, yet the city still has serious socioeconomic problems that, when combined with high property tax rates, make it hard to attract and retain businesses.
- The property tax rate is one of the handful of costs to do business that the city controls, and to reduce that cost and subsidize what may otherwise be unprofitable investments the city offers tax business attraction incentives—tax abatement and improvements funded through tax increment financing.
- After nearly 50 years of granting tax abatements and using tax increment financing to provide improvements in the downtown areas, it could be hoped that conditions in the city would have improved sufficiently so that their use would no longer be necessary.
- A cursory analysis of the cost of locating in the city and the revenues businesses can expect to yield reveals that a gap continues to exist stacking the deck against the city for business attractions. Detroit can ill afford to cease the use of tax abatements until the gap between costs developers face and return on investment is closed.
- The city has multiple reasons to end the Downtown Development Authority and resume the distribution of the collected property tax revenue to the taxing jurisdiction. All of those reasons are negated by the fact that the DDA anticipates needing more than $571 million to finance bonds pledged against tax capture. This suggests that the DDA could not cease operations until at least 2053 at the earliest.
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