The Truth About Abatements

When I look out my office window and see the letters EDS on the side of Tower 500 of the Renaissance Center it’s not just a logo for a company, it’s a sign that our economic development tools are working. I see the same signs when I drive by the American Axle & Manufacturing global headquarters and Caraco’s expansion of its generic drug manufacturing facility. They are all in Detroit because we’ve had a selection of tax incentives that level the cost imbalances between brownfield and greenfield developments.

These tax tools are crucial for communities such as Detroit to remedy tax rate inequities caused by the large amount of vacant structures, long abandoned for greenfield developments. Without key incentives such as Manufacturing and Industrial Tax Abatements, Neighborhood Enterprise Zones (NEZ), Renaissance Zones and others, Detroit simply would not be experiencing the growth it is seeing now. Make no mistake, the broad use of NEZs is the key factor that brought Detroit to number one in new housing starts in Michigan. As recently as 10 years ago, Detroit would issue less than 100 new housing permits a year. By aggressively using the NEZ program, we have pushed that number above 3,000 units per year. That’s real investment, real residents, real consumers and a real tax base. Put simply, without tax abatements, Detroit would have slipped into complete chaos and bankruptcy long ago.

Let me be clear, we don’t recommend tax abatements unless there will be real benefit to both the City and the business receiving the break. But I have no doubt that without tax incentives, American Axle and Manufacturing would not have been able to refurbish the old Chevrolet Axle Forge #5 plant and thousands of skilled, good paying jobs would have been lost to the City. Caraco certainly would not have been able to locate its expanded drug production facility here in Detroit, bringing more diverse jobs and broadening the economic base of the region.

Determining what to approve and what to deny can be difficult for economic developers, but we know the competitive landscape well, and we know how eager our community is to embrace new investment, so Detroit will continue to use every single tool available to close the deal. In other words, the sign outside our door says, “Welcome.”