Stop Me-Too-ing Urban Incentives

eastwood

“Downtown” Lansing Township

Statewide Initiative 3

Once upon a time, the cities were our centers of commerce and residential density. But then, helped by the interstate highway system, Michigan’s subdivision law, higher crop yields due to factory farming, the home mortgage income tax credit, fear of living with “those people” and a real estate market built not upon demand but “the deal,” people began moving to ever-expanding suburbs.

We were foolish enough to call it “growth” when, in fact, it was simply movement. And it led to a decline in population and real estate values in our cities.

Some well-meaning legislators, recognizing the importance of incentives, came up with programs designed to help encourage redevelopment in the inner cities. These generally consisted of special tax capture districts – in which the property taxes generated by improvements (there’s that negative incentive again!) could be captured and reinvested in the district, rather than paid out to the taxing entity.

One of the earliest was the downtown development Authority. It was soon joined by other programs, such as a brownfield development credit, used to mitigate costs of cleaning up former urban industrial sites.

And then a funny thing happened.

I have three children, ages 12, 10 and 7. If the 12-year-old gets a treat, the 7-year-old demands one, too: “Grace got one; I should get one, too.”

Michigan legislators haven’t shown much more maturity than my pre-teens.

“Hey, Detroit gets a DDA,” said legislators from suburban districts. “We should, too.”

So we are treated to the great irony of a law enacted to help level the playing field for aging core cities used to further tilt the field against them.

At the intersection of US-10 and Mackinaw Road in Bay County is an area that, when I attended Delta College in the 1970s, was farmland. In the 1990s, it became, in order to satisfy the requirements of the legislation, the “downtown” of Monitor Township. And a rather massive industrial park grew up around it. Most of the businesses located in that industrial park today were formerly in the core cities of Saginaw and Bay City the law was originally intended to help.

Similarly, Eastwood Towne Center stands at the intersection of US-127 and Lake Lansing Road. It, too, was built thanks to a DDA capture district that declared farmland a “downtown.”

Now, it’s a solid cornerstone of Republican dogma that an unfettered free market is the ultimate level playing field. That’s why most Michigan Republicans – and Governor Snyder’s administration – would like to do away with development incentives altogether: they believe that would level the playing field.

It would actually tilt it more.

The playing field hasn’t been level since we built I-675, I-475, I-696, I-496, I-675 and every other gash that tore neighborhoods asunder, causing urban real estate values to nosedive for blocks around them. It hasn’t been level since we started looking at “new housing starts” as an economic indicator. It hasn’t been level since the FHA and the VA worked together during the post-war boom to make low-income loans readily available for people (well, white people) to move to highly segregated, low-density suburban houses built around federally subsidized infrastructure development.

You can build a new concrete-block box and re-sell it for two to three times the margin than you can retrofit a turn-of-the-20th-century commercial building in a downtown district, and have far less time and trouble involved in assembling land for parking.

You can buy a vacant 10-year-old vacant big-box store and make it ready for retail or commercial space at about half the cost of bringing a 1920s building up to code – even with Michigan’s rehab subcode.

It’s because real estate development isn’t really concerned about financial sustainability of a project, any more than a Hollywood movie is about the quality of the story. It’s all about “the deal.” That’s why we continue to develop new suburban big boxes even though there are millions of square feet of big-box space lying vacant. In what other industry can a “producer” knowingly create a twofold surplus – and still make money on it?

Let’s come close to making the playing field somewhat level again, by making urban reinvestment incentives what they were intended to be: tools to help our urban centers rebuild.

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