See our Best of Detroit 2020 winners.

Detroit's dealers 

Pulling back the curtain on the Detroit Economic Growth Corporation

Page 3 of 4

He adds: "This is a pretty competitive business, and people who do well in it get compensated. People that aren't at the top of their games don't get compensated as much."

A slew of metrics exist to judge a CEO's worth, Finkle says: how many jobs the individual can take credit for, if the budget grew under their watch, what the economic value of the agency's projects are worth, how many deals were closed, and more.

In the DEGC's case, it projects it "managed or assisted" in crafting in 2013 were expected to generate $1 billion in investment and generate or retain 6,000 jobs, according to the nonprofit's so-called 2013 Progress Report. That was likely boosted because of the Ilitches' proposed $450 million arena and adjacent entertainment district.

Jackson also boasted of the agency's efforts to potential donors in a 2011 letter provided to Metro Times by the Michigan Attorney General's office, writing that the DEGC that year attracted a combined investment of $82 million to the city, assisted in the creation or retention of nearly 3,500 jobs, and worked with nearly 380 companies "interested in investing in Detroit."

However, in its 2011 progress report, the agency maintains that the projects it managed or assisted in that year were "expected to lead to $645 million in public and private investment in the City of Detroit when they are completed, generating new or saving 8,000 jobs for the city."

The conflicting 2011 numbers in the letter at the AG's office, according to DEGC spokesman Bob Rossbach, are "irrelevant." It was an internal draft, he says, one that was never sent to potential donors. Asked why the letter was submitted to the AG office, Rossbach didn't respond. A voicemail and email were left with the AG's office for comment, but went unreturned at press time.

***

How to independently verify the DEGC's numbers published in their annual reports can seem like a fool's errand.

The agency says its job figures are "based on the best estimates we have from public records and representations made by businesses." The estimates stem from investment and job commitments made during the year.

"They represent commitments made in the time period, which may vary in practice from construction costs paid or people hired," the agency says. "DEGC makes a concerted effort to review the numbers available to avoid duplication in the total number, however, you will notice that in some instances a projected investment will be counted in two categories. The overlap is adjusted in the overall total."

The DEGC reported on its IRS filings that financial statements are made available to the public upon request. When Metro Times asked last month to review the statements, the DEGC's spokesperson said he was unaware of the agency's protocol to review the documents. He said to make a direct request by phone or through the DEGC website. Voicemails left at the DEGC office, as well as a message left via the contact submission on degc.org regarding the protocol, went unreturned.

Jackson, who stepped down earlier this year, announced his retirement in light of restructuring by Mayor Duggan. To some, his decision to retire was seen as an indication that Duggan might bring the DEGC under the auspices of Detroit's central government. But a spokesman for Duggan told Metro Times the mayor is fine with DEGC's role as it relates to economic development within the city.

Last month, Jackson's replacement, 36-year-old Rodrick Miller, was approved by the DEGC board as its next CEO. A recruit from New Orleans, it's unclear if Miller will earn as much as Jackson.

According to The Detroit News, Duggan said of Miller: "When I sat down with Rod, I felt like it was somebody from our administration already. He talked step by step how he engaged the city of New Orleans, drew them in every step of the way. I said this is exactly what we need at this time and this city."

Miller launched the New Orleans Business Alliance, an agency similar to the DEGC, according to Crain's Detroit Business. The organization focused on bringing national names to the city, Crain's reported, which included New Orleans' first Costco and two Wal-Marts.

Surprisingly little information exists on the public's response to Miller's big-box "achievements."

***

Back in late 2012, even after the state bill to support construction of the new Red Wings arena was introduced, media reports were scant on details, because details were scant.

Yet it's clear, from emails obtained by Metro Times, that in private, those involved in discussions — the state, the Ilitches, and Detroit's negotiator, the DEGC — understood a basic structure of the deal months before lobbying the state Legislature for support: The state would borrow money to finance construction costs of the arena, and that would be repaid by DDA-captured tax dollars and arena revenue.

That fact was not confirmed until mid-2013, nearly a year after Morante sent the email to Jackson and Holdwick requesting confirmation on his $2 million order.

In part, it appears the arena deal was mostly negotiated in Lansing with state lawmakers and officials; state school taxes are supporting the majority of the public costs tied to the project. But when the time came to present Detroit City Council with the components needed for city approval to keep the project rolling on schedule, criticism was levied against the DEGC by some who said too much was given by the city to the Ilitches for little in return.

The DEGC's Holdwick, who has denied Metro Times requests for comment in the past, told the Detroit Free Press earlier this year, "We obviously wanted more ... Given the amount of money that the city's put into this — which is zero — it's a great deal for the city and its residents."

But that point has also been argued by critics of the way the Detroit DDA finances its operations, and some projects: with a dense financing tool called tax-increment financing, or TIF. Examples of TIF projects downtown include the M-1 Rail streetcar along Woodward, Quicken Loans headquarters, housing developments, and more.

TIF provides a sort of subsidy for businesses attracted to the DDA's district. It allows the DDA to create an area in which it captures the increased property taxes generated as a result of new development. That money can be spent on a multitude of projects. However, it's money that would otherwise flow to, among other entities, Detroit and its general fund, which finances the city's police and fire services. The city captures the taxes generated in the district and then is legally required to transfer the funds to the DDA, which also levies a tax on all property owners within its district.

According to David Bieri, associate professor of urban planning at the University of Michigan-Ann Arbor, that creates a continuing problem, because "not a single real estate deal that has taken place in [downtown] Detroit has come without the form of a subsidy."

That was a point echoed recently by John Gallagher, of the Detroit Free Press, who wrote that incentives and subsidies "are so built into Detroit's development culture that they're not going away anytime soon." But, he wrote, they should: "Incentives and subsidies take tax dollars away from other projects and services that need them. ... Meanwhile, getting rid of incentives and subsidies ought to quiet the perennial rancor over what deserves priority — downtown or the neighborhoods."

The DEGC countered, saying Detroit exists in a competitive environment where it has to match other cities and states with their business acumen to generate interest from developers.

"As long as other places are willing to offer businesses financial incentives as trade-offs for investments and the creation of jobs, Detroit has to have access to similar tools in order to compete," the DEGC says. "Detroit has tremendous advantageous [assets] to offer, including ... transportation infrastructure, a skilled workforce, a concentration of research activities ... and access to globally recognized centers for healthcare and medical research.

"Even with those assets, however, it must have additional tools to ensure it can compete for new businesses or expansions of existing companies."

But, says Bieri, in the case of development agencies, that sort of incentive culture is fueled by a structure that provides little accountability.

With TIF districts, he says, it's "potentially problematic because the district earmarks funds out of the general fund ... for special purposes, for special development, but they're not subject to the same accountability mechanisms as the general fund is."

To facilitate the new Red Wings arena, the DDA's TIF district was expanded and extended for an additional 30 years. Detroit City Council would have to sign off on the TIF expansion, but by the time it came up for consideration in late 2013, its approval was almost a technicality: Detroit Emergency Manager Kevyn Orr, a supporter of the project, under state statute could've unilaterally approved the needed resolutions. By the time it expires in 2045, it will have existed for nearly seven decades. Studies and experts have said a productive use of the tool would be to keep a TIF district limited in scope.

Bieri says "the only logical conclusion" he can find why DDAs and other separate authorities exist and can continue using TIF "is that it's in some people's interest in how much money [they collect.]"

He adds, "Nobody's asking what could we be using that money for if it got fed back into the general fund."

Breaking down how much the DDA captures requires a review of numerous budgets and records kept with the city and state. The $11 million captured by the DDA last year included $8.55 million in property taxes paid by downtown property owners that otherwise would've flown to the city. About $6 million of the city's cut came from its general fund, the remainder from the Detroit Public Library.

To put that into context, over the course of the next 10 years, the DDA will capture anywhere from $60 million to $70 million of money that otherwise would've flown into the city's general fund. By comparison, in Orr's proposal to reinvest in Detroit's public services, the emergency manager seeks to spend $75.2 million to hire 250 additional civilian personnel for the Detroit Police Department, "which will allow the City to redeploy uniformed personnel to more appropriate functions," according to bankruptcy court documents.

Orr can't use any of that $60 million to $70 million the DDA captured.

Additionally, according to state records, the DDA's capture included $1.75 million that would've gone to Wayne County, $610,000 that would've gone to Wayne County Community College, and about $1 million that would've gone to the Wayne County Regional Educational Service Agency.

One of the reasons that's a problem, Bieri says, is a TIF district essentially allows an authority like a DDA to "circumnavigate the ballot box without making up for the accountability." Another issue, he says, is that the state treasury, which is supposed to collect data on how much TIF money is captured by authorities, doesn't have a clue how much has really been diverted by these districts statewide.

Moreover, it's unclear how many jobs the incentive has created, as that's a number typically not reported by authorities to the state, as well. In the Detroit DDA's most recent annual report filed with the state, the line for number of jobs created is left blank.

There's also a concern about providing equitable services between the DDA and other parts of the city. Think of the days in downtown Detroit when there's a baseball game, a Lions game at Ford Field, a show at the Fox Theatre or the Fillmore. Or when the annual Fourth of July fireworks take place. Tens, if not hundreds, of thousands of people flock downtown for an event that requires a serious police presence. (And, in the process, wears down our "tremendous" transportation infrastructure to the point billions of dollars are needed to repair it.)

According to the Detroit Police Department's public information office, the number of local law enforcement officials patrolling the downtown area on the night of festivities "varies from six officers all the way to approximately 1,000 officers, depending on the type of event and the amount of people expected." But, the PIO added, "We also work with outside agencies that bring officers in, so that can vary greatly."

That's a thousand officers paid by the city patrolling an area whose property taxes generally flow back into the DDA, not to the City of Detroit.

In June, during the recent fireworks festivities, while local, state, and federal law enforcement officials were overseeing festivities near Detroit's riverfront, DPD witnessed a number of emergency calls that "rolled in at a pace much faster than officers could respond," according to a report by Detroit-based Motor City Muckraker.

"Between 8 p.m. and midnight, when a bulk of police resources were downtown, officers were called to at least three shootings, seven home invasions, three armed robberies, four arsons, a rape, and numerous domestic assaults," Muckraker reported.

Detroit, by recent accounts, employs roughly 2,300 officers, down about 30 percent since 2000.

As Bieri puts it, with this kind of arrangement, the downtown authority's city services — police, fire, EMT — have been outsourced "to the rest of the community."

Louis Schimmel, the former emergency manager of Pontiac, says the bureaucracy of Detroit's development agencies, and similar ones across the state, "have their own agenda, which very often could be very different from that of the mayor and the council.

We welcome readers to submit letters regarding articles and content in Detroit Metro Times. Letters should be a minimum of 150 words, refer to content that has appeared on Detroit Metro Times, and must include the writer's full name, address, and phone number for verification purposes. No attachments will be considered. Writers of letters selected for publication will be notified via email. Letters may be edited and shortened for space.

Email us at letters@metrotimes.com.

Detroit Metro Times works for you, and your support is essential.

Our small but mighty local team works tirelessly to bring you high-quality, uncensored news and cultural coverage of Detroit and beyond.

Unlike many newspapers, ours is free – and we'd like to keep it that way, because we believe, now more than ever, everyone deserves access to accurate, independent coverage of their community.

Whether it's a one-time acknowledgement of this article or an ongoing pledge, your support helps keep Detroit's true free press free.

Read the Digital Print Issue

December 2, 2020

View more issues

Newsletters

Never miss a beat

Sign Up Now

Subscribe now to get the latest news delivered right to your inbox.

Best Things to Do In Detroit

© 2020 Detroit Metro Times - Contact Us

Website powered by Foundation