A $50 million annual cap is being added to legislation slated to be taken up next week in the Senate that would allow “transformational projects” to capture the state sales and income taxes collected from their creation.  The Sen. Ken HORN (R-Frankenmuth) package, described at one point as being Tax Increment Financing (TIF) on “steroids,” would still allow the Michigan Strategic Fund (MSF) to approve as many as five projects a year.
But to scale back concerns the bills could be a state budget buster, the growing alliance of supporters agreed to a benefit cap as well as a mandatory third-party fiscal analysis on any project brought before the MSF.

Unless this analysis shows the completed project will net more money to the state in tax dollars it wouldn’t have otherwise created than it will lose through the tax capture, the project cannot go through.

Another noteworthy change in the bills’ third substitute is a provision that makes it clear that the developers, not the state, will be on the hook for the state’s administrative costs.

The changes to  SB 1061,  SB 1062,  SB 1063 and  SB 1064 comes after a Senate Fiscal Agency (SFA) analysis that concluded the package would reduce General Fund revenue by an “unknown, but likely significant amount.” It also said it would raise administrative costs for the Department of Treasury and the MSF.

Making various assumptions, the SFA ballparked the state’s General Fund loss through the income tax at between $15 million and $45 million. The sales tax portion was guesstimated at $9 million.

The push for the legislation comes from Quicken Loans CEO Dan GILBERT‘s quest to build a mixed-use project on the old J.L. Hudson department store property in downtown Detroit and a new soccer stadium. He would also like to do something with the site of the Wayne County jail. (See “‘TIF On Steroids’ Bills Move To Senate Floor,” 9/20/16).

The bills are tentatively slated to be taken up by the full Senate on Tuesday, with the hope they will get to the Governor’s desk by the end of lame duck.

Gilbert, Phil HAGERMAN of Flint’s SkyPoint Ventures, Birgit KLOHS of The Right Place in Grand Rapids and Sam CUMMINGS of CWD Real Estates joined several other economic development partners in appealing to lawmakers in a Friday letter to move the bills.

Gov. Rick SNYDER eliminated nearly all state tools that could be used to spur economic development in local communities as part of the creation of the Corporate Income Tax (CIT) in 2011. The argument is that some “transformational” projects in the state’s urban core need a push only something like this proposal can create.

“Given the gap between construction and rehabilitation costs and market rents, particularly in our urban cores, many projects are simply not viable without assistance to close this gap,” reads the letter.

While much of the focus on the package has been on Gilbert’s interests in Detroit, Shannon MORGAN of Home Renewal Systems, a real estate developer that specializes in house projects in small urban settings, heralded the possibilities this bill could mean for various areas in the state.

A potential mixed use development overlooking the Sault Ste. Marie locks. Lofts with a Lake Michigan view in Escanaba. A 150-unit renovation project at the site of downtown Jackson’s Hayes Hotel: three possibilities that could transform the downtowns of these small cities that need the type of push that this legislation could bring, Morgan said.

They see these “transformational projects” as the first domino to fall in what will become additional investment around these areas.

“These types of projects will not pencil out without these types of incentives,” Morgan said.

The Governor’s Office has been reserved in their potential support of the bills, not being generally supportive of picking “winners and losers” in development projects. However, supporters hope the latest changes will help sway minds in both chambers.