Corporate welfare took $1 billion from Detroit’s schools, city services over past decade

More than $1 billion intended for Detroit’s schools, libraries, and city services has been diverted to pay for real estate projects that benefit wealthy investors over the past decade, according to public records.

The whopping amount of corporate welfare comes at a time when the city and schools are struggling to pay for basic services. Meanwhile, the investments in areas like downtown and Midtown are driving up the costs of living and displacing long-time residents .

The figures were compiled by Detroiters for Tax Justice , an activist group that obtained the data through Freedom of Information Act requests.

Since 2014, when the city was in the thick of municipal bankruptcy, Detroit has captured $516.8 million in taxes for groups that use the money to drum up economic growth. Those groups include the Detroit Brownfield Development Authority, the Local Development Finance Authority, and the Downtown Development Authority (DDA).

The DDA notoriously spent hundreds of millions of dollars on developments for the billionaire Ilitch family to build Little Caesars Arena and surrounding neighborhoods that never came to fruition. The DDA will be paying off that money in bonds over at least 2048.

Between 2017 and 2023, the city lost out on more than $500 million in tax abatements that are intended to attract new businesses, encourage expansion of existing businesses, and create jobs. Wealthy developers like Dan Gilbert benefit from those abatements.

Together, the tax captures and abatements cost more than $1 billion.

Russ Bellant, co-organizer for Detroiters for Tax Justice, argues that abatements and tax captures favor wealthy developers at the expense of regular taxpayers.

“The thievery is just incredible,” Bellant tells Metro Times . “When you start undercutting the funding of city, library, and school services, you are bleeding the neighborhood services, and you’re creating conditions that are less and less for people.”

Over the past decade, more than $347 million that was intended to fund Detroit’s public schools was diverted to development projects or wiped out by tax abatements. The city’s general fund, which pays for services like buses, police protection, affordable housing, parks, and social and senior services, lost out on $237.1 million. Also impacted by the tax handouts were the state education fund ($82.9 million), Detroit’s libraries ($53.9 million), Wayne County Community College District ($39.1 million), Wayne County government ($6.8 million), the underfunded Wayne County jail ($13.3 million), Huron-Clinton MetroParks ($2.5 million), and the Detroit Institute of Arts ($6.9 million).

The Detroit Economic Growth Corporation (DEGC), which handles the tax incentives, defended the use of the money, saying it generated growth and new taxes.

“It’s important to note that many of these tax dollars are earmarked specifically for economic development,” a DEGC spokesperson says in a statement. “Without the DDA, a significant portion of these funds would revert to the State, possibly to be deployed outside of Detroit, rather than being reinvested in our city. It’s crucial to understand that these taxes would have never accrued to their current levels without the DDA’s strategic investments and development initiatives.”

Despite the purported benefits, many Detroiters have opposed using tax dollars to benefit development. A survey in May 2013 found that an overwhelming majority of Detroiters are opposed to tax handouts for wealthy developers and believe incentives should instead benefit neighborhood services, affordable housing, libraries, and recreation centers. The survey of 430 Detroit voters, conducted by the independent pollster American Pulse Research & Polling, found that only 6.1% support prioritizing tax incentives for retail, dining, and entertainment districts. An additional 8.1% of voters support incentives for projects in Midtown and downtown.

Despite the opposition, the Detroit City Council approved more than $615 million in tax breaks in May 2023 for two billionaire developers — the Ilitch family and Stephen Ross — to develop more of District Detroit, the same entertainment district that previously received roughly $400 million a decade ago to build Little Caesars Arena and surrounding neighborhoods.

In its statement, the DEGC notes that Coleman Young, the city’s first Black mayor, created the DDA to capture taxes about 50 years ago.

Young “understood the power of its ability to reinvest in the DDA footprint and attract major development and large-scale employers,” the DEGC said. “Mayor Young’s vision is what has given us tools we have used over decades to bring thousands of jobs into the city and generate income tax revenue that far exceeds — in amount and duration — the more limited property tax revenue realized as a result of the DDA capture.”

But Bellant says the city is in much better shape than it was a half century ago.

“Even if you thought giving money to investors was valid to do 20, 30, or 40 years ago when the city was more abandoned, that time is over,” Bellant says. “It just needs to be stopped.”

Studies have shown that Detroit’s economic development disproportionately favors white, suburban residents and drives up the costs for long-time residents.

Detroit Future City, a think tank that develops strategies for a more equitable city, found that metro Detroit’s fastest-growing, well-paying jobs are disproportionately going to white workers. About 16% of Black workers in the region are in so-called growth occupations, compared to 26% of white workers.

Opponents of tax handouts say the incentives aren’t stopping because no one is held accountable.

“There is not a system of accountability so that the record of the votes is conveyed to the citizens,” Bellant says.

And tracking the amount of money spent on developments is very difficult. Bellant took more than a year to obtain and compile all of the tax data he received in public records requests. He says the lack of accessibility is unconstitutional.

“The city should have this information on their websites,” Bellant argues. “The only place you can get all of this in one place is in our reports.”

Detroiters for Tax Justice is holding meetings, called teach-ins, in neighborhoods to educate residents on how their tax dollars are spent on developments.

“Citizens have come to our previous teach-ins, and they have been very affected by it,” Bellant says. “They realize it’s important stuff.”

The system, he says, is inherently unfair.

“Wealthy investors are not paying for the cost of city services that they get,” Bellant says. “They aren’t paying into the libraries and schools, but they are benefiting from them.”