Gilbert seeks another $60M tax break for Hudson's site in Detroit
Dan Gilbert's real estate firm is seeking an additional $60 million tax break for its Hudson's site project in downtown Detroit.
The requested 10-year local tax break would come in addition to a slew of previously approved state and local subsidies and development incentives for the landmark development — including a "transformational brownfield" tax capture estimated to total $192.8 million for the developer through year 2052.
The Gilbert organization's head lobbyist, Jared Fleisher, on Thursday told members of Detroit City Council's Planning and Economic Development committee that the requested tax break, known as a Commercial Rehabilitation Act, PA 210 abatement, is new, yet not entirely new.
Gilbert's Bedrock firm did not request the abatement back in 2017, the year the project broke ground, because the organization had yet to finalize details for what would be in the development, according to Fleisher.
Today, construction of the Hudson's site project is well underway and expected to finish sometime in 2024, according to Bedrock's most recently announced timeline.
The project at 1208 Woodward has two chief components: a 12-story midrise building with more than 500,000 square feet of office and events space, and a 49-story hotel and upscale residential tower.
The tower, at about 685 feet, would be the second tallest building in Detroit after the Renaissance Center and contain about 100 luxury condos or apartments and a 225-room luxury hotel.
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City Council documents show how "hard costs" for the Hudson's site project are currently estimated to total $991 million, up from an earlier $909 million figure from several years ago.
During their plea Thursday for the additional abatement, Gilbert representatives placed emphasis on the project's growing "soft costs," which include such things as design and architecture expenses.
When including those soft costs, the project's total price tag grows to $1.4 billion, Fleisher said.
City officials at the meeting did not dispute the soft costs figure.
The requested abatement would freeze various local taxes at the Hudson's site at their current levels for 10 years. The site currently generates just over $620,000 a year in taxes that go to the City of Detroit, Detroit schools, Detroit libraries, the Detroit Institute of Arts and various Wayne County educational entities.
Once the project is done and open and the proposed tax abatement kicks in, the site will generate $2.6 million a year in those specific taxes.
A decade later, once the tax freeze goes away, those taxes will rise to about $10 million a year, according to city council documents.
Counting all of the various local and state tax abatements and incentives, including a previously approved NEZ tax benefit for the tower's residences, the project is still projected to have a positive $71.6 million tax benefit for the city over its first 10 years.
That estimate, however, is based on the completed buildings creating or supporting the equivalent of 1,948 new, full-time jobs in the city.
A representative from the Detroit Economic Growth Corp. told the council committee that they support Bedrock's latest tax abatement request.
"The project has thin operating margins, where this development would only be possible with the help of this tax abatement," Nevan Shokar, an associate director with the DEGC, said. "Large-scale developments such as this don’t make financial sense in the near term — you have to look at the project holistically and with a long-term viewpoint."
While Bedrock is based in downtown Detroit, the company's representatives attended the planning meeting virtually so were not available afterward to take questions.
Bedrock did not respond to a Free Press inquiry on the necessity of the new abatement or the current timeline for the project's completion.
Information on the total value of all public subsidies and incentives for the Hudson's site was not available Thursday.
Council members James Tate and Latisha Johnson voted to forward the abatement request to the full Detroit City Council with a recommendation for approval.
Gilbert, founder of Detroit-based Rocket Mortgage and one of the wealthiest men in Michigan, last year sold $500 million of his and his wife's stock in their mortgage company's corporate parent to fund philanthropic initiatives, including taxes and rental assistance for low-income residents of Detroit's neighborhoods.
Contact JC Reindl at 313-378-5460 or email@example.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.
This article originally appeared on Detroit Free Press: Gilbert seeks another $60M tax break for Hudson's site in Detroit