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LANSING, MI — Michigan has expanded a lucrative development financing program by authorizing another $1.6 billion in future state tax capture for developers, clearing a major financing obstacle for the proposed Renaissance Center overhaul in Detroit.
On Wednesday, July 22, Gov. Gretchen Whitmer signed bipartisan legislation raising the Transformational Brownfield Program cap to $3.2 billion. The powerful incentive is used to finance skyscrapers, stadiums, housing towers and other massive developments.
The nine-year-old program’s capacity was nearly exhausted after the state approved billions for projects concentrated largely in Detroit and Grand Rapids. Only about $30 million remained last year after accounting for approved projects and those invited to apply.
“Together, we’re making communities across Michigan even better places to live, work, and invest,” Whitmer said in a statement. “I’m proud to sign these bipartisan bills that will expand our ability to transform abandoned or blighted sites into affordable homes and thriving commercial spaces.”
Senate Bill 723, sponsored by Sen. Sarah Anthony, D-Lansing, doubles the amount of post-construction state tax revenue available, from $1.6 billion to $3.2 billion. Combined with a separate $200 million allowance for construction-related tax incentives, the change raises the program’s overall state capacity from $1.8 billion to $3.4 billion.
The program does not give developers an upfront check. Instead, it reimburses approved costs with a portion of the new taxes generated by construction and the completed development. Those can include income taxes paid by construction workers, taxes withheld from employees, sales and use taxes and increased property taxes.
State taxes can be captured for up to 20 years. Property tax captures can continue longer under some plans.
If a project is not built or fails to generate the projected activity, there is less tax revenue available for the developer to collect. Developers can nevertheless use projected future reimbursements to secure financing before construction.
The expansion clears the most significant financial hurdle facing General Motors and real estate developer Bedrock LLC’s proposed redevelopment of the RenCen, which had been stalled for more than a year while lawmakers debated the program’s future.
The RenCen plan calls for demolishing two of the five original towers and the concrete podium connecting them, converting office space into apartments and creating a large public park and entertainment district along the Detroit River.
Bedrock, which is owned by billionaire Dan Gilbert, would contribute about $1 billion and GM another $250 million. The remainder would come from public financing and incentives, according to developers. Detroit’s Downtown Development Authority has committed up to $75 million.
A potential Transformational Brownfield award has not been determined, although the new law caps any newly approved project at $300 million in combined state tax captures and exemptions.
The project must still undergo local review, Detroit’s community benefits process and approval by the Michigan Strategic Fund.
Developers hope to begin demolishing two towers by next summer.
The $1.6 billion RenCen project is “arguably the most complex adaptive reuse project in the country,” Bedrock CEO Jared Fleisher told the Detroit Free Press this month.
The legislation could also support other major projects that could not fit under the former ceiling.
In Muskegon, Parkland Properties is planning a roughly $220 million redevelopment of the contaminated former Sappi paper mill along Muskegon Lake. The proposed Windward Pointe project would convert the 123-acre industrial property into a waterfront neighborhood with housing and commercial space.
Overcoming the expense to redevelop the Sappi site “would not be financially possible without assistance from the State of Michigan,” said Muskegon Mayor Kenneth Johnson.
In Kent County, a proposed $450 million John Ball Zoo aquarium was positioned to seek transformational brownfield assistance once a site was selected. However, zoo officials abandoned a contaminated former landfill in Walker this spring. They continue evaluating other locations, including potential sites in downtown Grand Rapids. It’s uncertain whether the project could qualify for the program at another location.
Created in 2017, the Transformational Brownfield Program has grown rapidly as developers contend with high construction costs, interest rates and the expense of demolishing or rehabilitating obsolete buildings.
Michigan initially limited the program to $800 million in post-construction state tax captures and $40 million annually. Lawmakers doubled those limits in 2023 and have now doubled them again.
The state has awarded about $3.34 billion in total incentive packages. The 14 development plans that have received Transformational Brownfield approval are:
- Bedrock downtown Detroit developments, including Hudson’s Detroit, Book Tower, One Campus Martius and the Development at Cadillac Square: $618 million
- Henry Ford Health and Michigan State University development in Detroit’s New Center neighborhood: $231.8 million
- New Vision Lansing developments, including Tower on the Grand, Capitol Tower and the Washington Square redevelopment: $202.2 million
- The former Shaw-Walker furniture factory redevelopment in Muskegon: $159.6 million
- Middlepointe mixed use development in Southfield: $131.8 million
- Factory Yards mixed use redevelopment in Grand Rapids: $103 million
- The Exchange mixed use development in Pontiac, including Exchange Flats and redevelopment of the former Oakland Press and Federal Department Store buildings: $79.2 million
- PlazaCorp hotel and housing redevelopments in downtown Kalamazoo: $54.6 million
- The Mill at Vicksburg redevelopment of the former Lee Paper Mill: $30.1 million
- Affordable-housing tower at 350 S. Fifth Ave. in downtown Ann Arbor: $30 million
Roughly two-thirds of the program’s approved value is now tied to five projects backed by some of Michigan’s wealthiest families and investors, including Dan Gilbert, the Ilitch family, Stephen Ross and the DeVos and Van Andel families.
Supporters say those developers are among the few investors capable of financing projects large enough to qualify and that the developments would not proceed without assistance.
Related: Billionaires tap major tax incentive to reshape Michigan cities
Critics question whether projects would truly be abandoned without subsidies and whether resulting jobs and investment justify diverting taxes that otherwise could support schools, roads and public services.
The program’s performance has been difficult to independently audit.
The Detroit Free Press sued the Michigan Department of Treasury last year after the agency refused to release reports showing payments and performance associated with Bedrock’s One Campus Martius expansion in Detroit. Treasury argued the records were protected by taxpayer-confidentiality laws.
The new legislation addresses some of those concerns by requiring the Michigan Strategic Fund to publish underwriting analyses, fiscal impact studies, audits, projected payments and actual tax captures on a website.
New development agreements must establish annual milestones for construction, investment or housing completion. The state must publish whether each milestone was met, missed or adjusted.
Projects containing housing must include an affordable-housing component, although the law leaves its size and terms to the state and local government. Developments that reserve at least 20 percent of housing for income-qualified households can qualify to capture a larger share of state income taxes.
The law also limits developers’ ability to generate subsidies by moving existing Michigan workers into a newly developed building. New projects generally cannot capture state income taxes from workers whose jobs are not newly created or who work for an existing employer with more than 50 employees. Retail and hospitality jobs are exempt.
That provision may reduce the value of a Renaissance Center incentive because one tower is expected to remain office space.
Whitmer also signed Senate Bills 721 and 722, which extend two older local commercial-property tax abatement programs through 2035. Those programs allow municipalities to reduce taxes on qualifying commercial rehabilitation and redevelopment projects.
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