On June 21, the Detroit City Council postponed its scheduled vote on billionaire investor Dan Gilbert’s real estate company Bedrock’s application for an additional $60 million tax break for its downtown Detroit Hudson project. The city council was forced to postpone the vote a week to June 28 amid widespread community opposition to the measure.
Community members are mobilizing to attend the hearing to stop this latest giveaway to the wealthy. They are outraged by this public money gift to Gilbert, Detroit’s main gentrifier and one of the richest men in the world with a net worth of $16.7 billion.
This tax break is intended to help fund Gilbert’s construction of new buildings in downtown Detroit, which consist of a 12-story mid-rise building with more than 500,000 square feet of office and event space and a 49-story high-rise building with a 225-room hotel and approximately 100 luxury condominiums or top floor apartments.
Gilbert tax subsidies deprive schools and parks of funding
This new tax break application comes in addition to more than $600 million in tax subsidies Gilbert has already received for his luxury project. These tax breaks were primarily provided through tax accrual financing, in which Gilbert and Bedrock, with funds channeled through the Detroit Downtown Development Authority, collect the property taxes resulting from the property appreciation resulting from the development.
This property tax collection will enable Bedrock to secure approximately $250 million in funding for its project by collecting an average of $18.56 million annually in newly generated property taxes at sites over the next few years Approved for 30 years.
Gilbert will also receive approximately $330 million in income tax revenue paid by construction workers at the site, as well as income tax payments over the next 40 years from all workers employed there. It also collects about $60 million more in sales and use taxes that would otherwise be paid to the government.
These figures are all from the City of Detroit’s Brownfield Redevelopment Plan for the development of the Hudson’s Block, prepared by Bedrock’s Jared Fleisher on October 12, 2017. Fleisher’s recent lies to the City Council that schools and other city services are unaffected by these tax breaks are corrected by the document he authored, which finds a $230 million direct reduction in local revenue, including $145 million in revenue from school operations, a $31 million reduction in state education tax revenue and a $37 million reduction primarily to the regional school services agency for bus transportation, and a $15 million reduction in revenue for parks and prison maintenance from Wayne County.
Gilbert benefited from subprime, predator Lending that led to massive foreclosures
Gilbert made his living from his mortgage lenders, Quicken Loans and Rocket Mortgage. It benefited greatly from the subprime mortgage crisis of 2005-2015, when tens of millions of African Americans and Latinos were tricked by banks and financial institutions into taking out fraudulent, non-repayable mortgage loans.
Detroit, formerly the city with the highest rate of black homeownership in the United States, has been hit particularly hard by this criminal system, with 65,000 families evicted from their homes as a result of foreclosures linked to these robbery loans. Many Detroit neighborhoods were destroyed, and the city lost a quarter of its population from 2005 to 2015.
Gilbert’s Quicken Loans has directly foreclosed on 1,084 Detroit homes, 52% of which are now forfeited or abandoned. But its larger role in the crisis was to create fraudulent subprime loans, which it then sold to Countrywide, Indy Mac and the other banks, and later to Fannie Mae and Freddie Mac.
Mortgage Fraud Investigators (MFI) Miami researched properties listed in the Wayne County Register of Deeds and examined original Detroit mortgage applications that listed Quicken Loans or Rock Financial as the original mortgagee from 2003 to 2007. They sampled 75 homes with Quicken or Rock Financial as the original mortgage lender. Of the samples, approximately 71% of the properties were foreclosed on in the second home market within the first 24 to 36 months of being sold. Quicken sold these properties to Fannie Mae, Freddie Mac, and private Wall Street mortgage-backed securities trusts.
Quicken Loans was also found guilty of fraudulently and artificially inflating loans. In 2016, a federal judge awarded Quicken $11 million for these overestimates in a West Virginia case. The Michigan Constitution provides that no property should be valued at more than 50% of the market rate. Between 2009 and 2015, approximately 55% to 85% of Detroit real estate properties violated state laws by inflating their valuations. This left Detroit homeowners exposed to inflated property tax bills and led to massive property tax foreclosures and home losses. Unfortunately, Michigan and Detroit officials have never pursued actions like the West Virginia case.
Gilbert and the banks owe Detroit reparations
In the last Detroit election, Detroiters voted to create a reparations task force, in part to right the wrongs Detroiters have suffered over housing. Rather than enact more tax breaks for Gilbert to fund developments for the wealthy, the city should require that Gilbert and all of the banks and mortgage companies that caused the destruction of Detroit’s neighborhoods pay reparations to the community to rebuild Detroit to its core once upon a time for black home ownership.
These reparations must be managed by the community, not the mayor and other politicians who are at the disposal of the banks, Gilbert and other developers. Schools need to be repaired and rebuilt with potable water and classrooms that are safe, comfortable and suitable for learning. Residents must have affordable housing and city services for which they have paid exorbitantly over the years. These funds must be used to provide Detroit residents with transportation, health clinics, community centers, and sports facilities.