- Transformational brownfield support approved for Bedrock development in Detroit
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LANSING, Mich. – With recent approval of support for new construction on Detroit’s historic downtown Hudson’ site and renovations of the city’s treasured icons, the Michigan Strategic Fund board has authorized vital funds for Bedrock Management Services’ long-anticipated transformation of some of the highest-profile brownfield properties in the state.
“The Transformational Brownfield Plan continues the momentum of Michigan’s reinvention by expanding opportunities to create modern and vibrant communities throughout the state,” said Gov. Rick Snyder. “As the first transformational brownfield project, Bedrock’s visionary development in Detroit will serve as a model for how private and public entities can work together to transform brownfield sites into drivers of economic revival and growth.”
Last July, Gov. Rick Snyder signed into a law an economic-development package known as the Transformational Brownfield Plan (TBP). The development blueprint is a strategic effort designed to attract businesses and developers to invest in large, catalytic projects – and continue to attract residents to Michigan.
"The Michigan Strategic Fund's approval of the MIThrive financing represents a major step forward for Detroit and other Michigan cities that are rebuilding," said Mayor Mike Duggan. "Thanks to this new tool, we will be able to make sure these projects realize their full potential to create thousands of new jobs in our cities."
MIThrive is a coalition of Michigan economic development organizations, cities and chambers that supported the transformational brownfield legislation.
Sites considered under the package are high-profile, high-traffic areas that define a locale’s identity and economic prospects. The TBP provides a key approach in closing the financing gap for private investors while generating a positive return for both the developer and the state from long-term tax revenue.
Support for Bedrock’s package of developments in downtown Detroit is the first Transformational Brownfield project approved by the Michigan Strategic Fund under the legislation.
Located in one of the highest-profile and historic business districts in the state, the Bedrock project includes $2.15-billion capital private investment in four distinct development sites covering six acres.
The construction sites include:
- Hudson’s Block – Located on former Hudson’s department store on Woodward Avenue. Currently a vacant ground-level site above underground garage. Construction plans include building tallest tower in city, retail, conference, office and 330 residential units.
- Monroe Block – Site is currently vacant. Construction to create retail office and 482 residential units.
- One Campus Martius expansion – Adding 11 stories to rear of building.
- 13-story Book Building and 38-story Book Tower – Among city’s treasured historic sites. Will add retail, conference center, hotel space and 95 residential units.
In total, about 3.1 million square feet of new office, retail, residential and hotel space will be developed. When completed in 2022, the project is expected to create 7,738 jobs, paying on-average $34 per hour.
In addition, the average annual construction jobs created as part of the TBP is 2,764 during the building and renovation process at the four development sites. Approximately $3 billion in total economic output is projected during the five-year construction period.
“These landmark developments are a milestone representing Detroit’s credible new era of hope, optimism and growth,” said Dan Gilbert, Bedrock Founder and Chairman. "This process has been an outstanding example of collaboration between multiple levels of government and private industry that will unleash billions of dollars of investment, resulting in transformational impact to Detroit, the region, and the entire state of Michigan.”
Incentives for Bedrock’s development projects are based on an independent, third-party analysis conducted by SB Friedman Development Advisors, University of Michigan Research Seminar in Quantitative Economics, and W.E. Upjohn Institute for Employment Research.
Based on consultants’ findings, the MSF board approved the $618-million, multi-layered incentive package that includes:
- $60.6 million construction sales/use tax exemption;
- $229.6 million property tax (traditional TIF) capture revenue;
- $18.1 construction period tax-capture revenue;
- $256.2 million withholding tax capture revenue;
- $51.6 state income tax capture revenue;
- $1.6 million city income tax capture revenue.
The economic and fiscal impact assessment of the project determined that over the course of the reimbursement period, the TBP is projected to produce $2.5 billion in new state tax revenue, which has a net present value of $861 million. The net present value of the $618 million TBP incentive is $265 million. The report concludes that the net benefit to the state will be $596 million or $3.2 of new tax revenue to the state for each dollar of revenue foregone through the incentive.
“The Transformational Brownfield Program has the potential to become a best practice for how public-private partnerships enable developers to make transformative community investments,” said Jennifer Kanalos, director of board administration for Detroit Economic Growth Corporation (DEGC), which has facilitated tax abatements, sale of property, and local brownfield approvals to expedite the approval of the project.
DEGC has worked with MEDC to interpret statute and execute local approval processes, which serve as the precedent for future brownfield transformational plan requests across the state.
“The work of the DEGC and public authorities, including the Downtown Development Authority and the Brownfield Redevelopment Authority, ensured the project received the financial incentives needed to make it viable and take the first TBP project though the local process to approval.”
###The Talent and Economic Development Department of Michigan allows the state to leverage its ability to build talent with in-demand skills while helping state businesses grow and thrive. Joining job creation and economic development efforts under one umbrella, TED consists of the Michigan Economic Development Corporation, the Michigan State Housing Development Authority, the Michigan Strategic Fund, the Talent Investment Agency (TIA) and the Michigan Land Bank Fast Track Authority. Learn more about TED by visiting our website. For more information,visit https://www.michigan.gov/ted