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A new ordinance that is before the Detroit City Council could have a significant impact on incentives given by the city for development going forward.

The ordinance would require that those developers seeking $300,000 or more in subsidy would be required to enter into a CBA. This CBA, or Community Benefits Agreement, could outline things like a requirement for number of residents hired, local businesses used, and other modifications as the ordinance before council sees fit. Major developments in Detroit’s past often have had set-asides for various groups, such as resident employment, minority businesses, and other restrictions.

Incentives are a touchy subject in Detroit. Although there have been a lot of blockbuster projects lately, almost all of them have required significant tax incentives (even when they’re targeted for the better off at rates of $2/square foot for residential, more than double the Metro Detroit average). Others have written that it’s going to be very hard to wean developers off of incentives, as it’s become part of the culture of doing business in Detroit.

skyline-detroit-from-miliken

The reality is that incentives are part of almost every project with significant size. There are a multitude of business reasons to take them. To possible investors you are leaving money on the table but you’re putting yourself at a competitive disadvantage if you don’t participate as again, almost everybody utilizes them.

In a letter to Detroit City Council opposing the move, the new head of the Detroit Economic Growth Corporation Rodrick Miller said that:

“We are, in effect, paying businesses to jump over the barriers they face: high taxes, questionable services, low adult literacy, blighted surroundings and negative perceptions. If we raise the height of the barriers with CBAs we will simply have to pay more in public incentives to get businesses to jump over them. We can’t afford that. Isn’t it more cost effective to lower those barriers?”

The DEGC has a summary of the kinds of incentives, abatements and other programs they help with on their site. They include Renaissance Zones, Brownfield Redevelopment, Property Tax Abatements, Workforce Development, Obsolete Property Rehabilitation, New Personal Property Tax Abatement, Commercial Rehabilitation Exemption, Loan Assistance, and a variety of other programs like a Creative Corridor Investment Fund as well as a Green Grocer program to help improve access to fresh food.

Groups like CDAD (Community Development Advocates of Detroit) have been long supporters of CBA’s. Their argument from a blog post earlier this year by LaToya Morgan is:

“Community Benefits Agreements are a necessary tool to facilitate thriving communities as Detroit goes through a revitalizing and rebuilding era.  CDAD supports the creation of CBA’s throughout the city where large scale change is occurring that will impact resident quality of life, and when public tax dollars are being used in new developments.  These agreements are an opportunity to change the development paradigm in the city of Detroit that creates mutually beneficial change.”

So what are your thoughts? Should incentives be required to have a CBA or Community Benefits Agreement?