By on September 11, 2018

Image: Ford/YouTube

For Ford, returning to the city of Detroit means first checking off a long list of tax abatements — breaks it says it needs in order to pull off its planned Corktown campus. That would mean $103 million in lost future tax revenue for the city itself, though total incentive package Ford wants amounts to $238.6 million.

Depending on which direction you’re coming from, it’s either agregious or just the cost of doing business.

The automaker hopes to turn the now-purchased Michigan Central Station and a slew or surrounding buildings and properties into a high-tech hub. From this campus, in which Ford says will invest $740 million, up to 5,000 workers, half of them Ford employees, will develop the next generation of vehicle-related tech, as well as vehicles themselves — just not of the internal combustion, pickup variety. Renovating the long-abandoned train station and transforming it into a public/corporate nerve center stands to eat up a large slice of the cash.

Monday night, the automaker laid out its wish list to the Detroit Economic Growth Corp. According to the Detroit Free Press, Ford hopes to gain $103,591,804 in tax incentives from the city, with the remaining abatements bringing the total to $238,559,497.

The largest abatement on the list concerns just over $208 million in deferred property taxes, city corporate income tax, and utility users tax over the period of 30 years, of which the city’s on the hook for over $90 million. Nearly $29 million in incentives would come from commercial and rehabilitated sites having their property taxes frozen for a period of 12 to 15 years, while a smaller sum concerns residential development in the campus. Those breaks would save future residents money, not Ford.

Each campus property lies in a Renaissance Zone — places where residents and businesses are eligible for combined tax breaks from the city, Wayne County, and the State of Michigan. The three entities formed the zones to attract residents and employment in the hopes of stabilizing economically depressed areas of Detroit. Economic opportunity, neighborhood improvement, and a boosted local economy serving those extra paychecks is the goal of the program.

The Free Press heard an earfull against the abatements, though the city and state were apparently willing to hand over $4 billion in tax breaks if Amazon decided to locate its second headquarters in the Motor City. Ford is hardly the only company to arrive in Detroit and ask for incentives it’s eligible for. It’s just the most recent. Could it go without? Sure —the extra tax it would have to pay over the coming few decades would be the equivalent of one or two big product recalls, and there’s been no shortage of those recently. But neither is it being forced to come to Corktown.

The city votes on the tax package on October 16th.

[Image: Ford/YouTube]

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31 Comments on “Ford Seeking $238 Million Tax Break for Big Move...”


  • avatar
    NoID

    If I understand correctly, companies receiving these breaks in the City of Detroit are on the hook for a “return on investment” / “community investment” case in exchange for receiving them.

    • 0 avatar
      forward_look

      Stay until the agreement expires, move to a new city, rinse, repeat. Everybody does it, cities never learn. Politicians get re-elected, everybody’s happy but the taxpayers holding the bag.

      • 0 avatar
        bd2

        Pretty much true.

        Even worse when it comes to new stadiums/arenas/ballparks for professional sports teams (aside from a few places like California) and their billionaire owners.

    • 0 avatar
      twotone

      Same thing here in Denver when courting Amazon, Google, etc. My feeling is if a city is giving a company tax breaks, then 75% of the hires must have lived in the city at least two years prior. Also, wages must be at least 10% above local industry averages. Probably not going to happen, however.

      • 0 avatar
        MBella

        I love how everyone is always against these kind of tax breaks. “You’re caving to big companies, etc…” The nice thing is when they don’t get the tax breaks you get no taxes anyway, because they go where they can get them. Look at how well it worked when the genius Jennifer Granholm refused to play ball with the movie industry. Yeah, the state sure dodged a bullet with all those jobs now in Georgia.

  • avatar
    IBx1

    Hey guys we bought this decrepit building so now you can’t tax us

  • avatar
    tallguy130

    Sad truth is either Detroit gives them that deal or ten other cities will line up to offer the same.

    I would also make the case that most of those buildings are currently paying zero in taxes anyway. So even the downstream revenue from supporting businesses and (maybe) attracting residents is better then what they have now.

    • 0 avatar
      NoID

      Do 10 other historical hubs of automotive activity have decrepit, abandoned, historic buildings suitable for Ford’s use? This is a PR grab for Ford as much as a business move. They want to be seen investing in Detroit / America.

      I guess they could roll into Flint and step on GM’s toes.

      • 0 avatar
        tallguy130

        Nothing saying it has to be a “historical hub of auto production” for a city to make the same offer. I’m sure Cleveland, or Baltimore, or Newark, or wherever would be all for it in a plot of land that is already doing nothing.

        I’m not even saying it’s right but we have a system where cities complete for development and it’s absolutely a race to the bottom. Detroit can lament that fact or they can make their pitch and get what they can. What would you do as mayor?

  • avatar
    SCE to AUX

    If this story was about TSLA, it would be a ‘government handout’. In the case of Ford, it’s a ‘community investment’.

    They all do it, and no politician can say no to the promise of jobs.

    • 0 avatar
      civicjohn

      @SCE, let’s not forget that your friends at Tesla haven’t met their hiring #s at GF2 in New York, so now Panasonic is selling solar panels to anyone who will buy them, while Solar City is stumbling badly and Tesla may not hit the job numbers promised.

      I think most people recognize a handout when they see one, not blurring any lines. In my neck of the woods, we got a Nissan plant, a Saturn plant (now GM), and the Nissan headquarters to boot. The Nissan HQ had the least “money on the hood” because many of the employees were shocked at the cost of living in TN vs. CA.

      Side note – today I was behind a car transporter loaded up with Model 3s, and when the driver should have took a right-hand turn, he went left. So I followed him into a shopping mall, and there was 1 dude on his phone, and there was 80-100 cars there. Pick your model, S, X, or 3, they were loaded up. Maybe all of them were sold, but why multiple S and X cars? It will be interesting to see how the mix and quantity change throughout the last month of Q3.

      Did the math work on all of these deals? I would say the jury is still out, but 2 of my close neighbors transplanted to Nashville from Detroit and that’s why we have a hockey team (a lot of previous Red Wings fans are now Predators fans).

      • 0 avatar
        SCE to AUX

        I don’t defend any corporate welfare; I’m merely looking for some commenting equity on the subject.

        I’m guessing that truck filled with Teslas was simply lost. As for the sales mix, the plan has always been to survive on the Model 3, whose volume already dwarfs the S and X. I hope you’re not suggesting TSLA is dumping cars, because that would be much more expensive than simply not building them. However, it is becoming apparent that they have a distribution challenge.

        • 0 avatar
          civicjohn

          @SCE, no, you guessed wrong, he wasn’t lost. You either make a right turn to the dealership (that has some empty space), or you go down one light further, hang a couple of lefts, and you’re in a huge mall with plenty of space. He knew exactly where he was going. The dude that was on the phone was giving hand gestures to the transport driver to get him to park at the right spot to unload.

          There was another spot about 1/4 mile away that was stacked and jacked with Hyundai (is that plural?) cars, to keep my reporting as honest as possible. There used to be an Infiniti dealer there, and they also used to pack that lot with cars.

          I am not suggesting that Tesla is dumping cars, but shipped cars do appear on different parts of the balance sheet as they are considered “in transit”, so maybe all of them are pre-sold, but there were a number of Model 3s on the dealer’s lot as well. Elon said on the Q1 2018 sales call that they only expected to ship 100k of S/X, because they used the older battery cells and they were not going to make the changeover in 2018, and those estimates have been pretty reliable. Tesla is facing increased headwinds in Norway, China, and other countries where they could always move some S/X iron. That’s why I found it puzzling that there were at least 30 S/X models in the parking lot.

          IMO, based on the stash I saw there, they aren’t having a distribution challenge, hell, hire a couple of valet drivers, and move 2 every 30 minutes or so and get those suckers delivered. It’s that easy based on the proximity of the dealership. There was only 3 on the truck that had the aero wheels, the rest appeared to have the 19″ rims (Performance/ Dual Motor?). Now that I’ve found it, I may drive by occasionally and see what’s going on. I will freely admit that I’ve owned Tesla stock – never shorted a position, but bought on a dip and sold on a rise. No borrowing of shares, it was my money, and the stock is incredibly volatile, so I don’t recommend that to anyone, but I made some good coin. I’m on the sidelines now and don’t plan on purchasing any shares until Q3 numbers are put on the table.

  • avatar
    thegamper

    I agree that if Detroit, Wayne County and State of Michigan were willing to Fork out way more to attract Amazon, this makes total sense. Ford is not a Detroit tax payer presently, it is new business in a blighted area. I suspect the tax breaks will come with all sorts of conditions about hiring Detroit residents, working with contractors located in Detroit, etc. It will still be boon long term and no doubt create growth and tax revenue in the surrounding neighborhoods.

    I don’t think you pass this up if you are Detroit. Not to mention restoration of such a large, beautiful, historical landmark that has been abandoned for decades.

  • avatar
    Omnifan

    So much for the 2008 brag that Ford didn’t take a government buyout.

  • avatar
    Gardiner Westbound

    $238,000,000/5,000=$47,600 per job, a bargain by contemporary corporate welfare standards. The jobs may not all materialize or be short term if and when heavily mortgaged Ford jumps the shark. As always, profits are privatized and losses are socialized.

    • 0 avatar
      thegamper

      The thing about that calculation is that almost none, or very few, of those 5000 jobs will go to Detroit residents. I am guessing that more than 80% of that professional workforce will live outside of Detroit’s boundaries. Still, Detroit has income tax on non-residents.

    • 0 avatar
      forward_look

      Hey, Mario Cuomo pays out ten times that for jobs that leave in two years.

  • avatar
    Jerome10

    Detroit (and other cities, states etc) would be best served if they minimized the cost of doing business and living there for everybody. The system of picking who gets big breaks while everyone else pays for it is complete trash.

    There has to be a reason so many companies and people are moving to States with no income or sales taxes etc. Sure you have pay somehow, but I can about guarantee you Detroit and Michigan are not among the low-cost, low-hoops-to-jump-through cities and states.

    Often cracks me up how capitalism creates these great (or once great) cities, and then eventually the costs and hoops end up putting them in a stranglehold.

  • avatar
    EBFlex

    Nobody forced Ford to buy that train wreck. They bought it, they can pay.

    The only thing that should be done is it should be leveled.

  • avatar
    Sub-600

    NYS is good for this type of nonsense. They’ll give a company $2.3 billion in tax breaks to open a 15 person call center or something. Then there’ll be a campaign ad reading “Andrew Cuomo: Bringing Business Back to NY!”. Meanwhile North Carolina has hijacked half the population of Upstate NY over the past 20 years just by being business friendly. Ford should take every nickel that those dolts offer them.

    • 0 avatar
      Jerome10

      Ha yeah I was thinking that every time I’d see those ads about NYS open for business.

      Meanwhile 3 million companies and 200 million people have moved to Texas, Nevada, North Carolina, Georgia, Florida, South Dakota, Wyoming, or Idaho, where they ACTUALLY are open for business.

      Michigan and Detroit should follow their lead.

  • avatar
    Verbal

    I can’t wait to see the exciting autonomous mobility solutions that will come out of Corktown.

  • avatar
    carguy

    I have never understood how it can be legal for the government to create sweetheart tax deals with individual companies. This clearly puts their competition and any new upstart at a disadvantage. It also shift that tax burden on other tax payers and is prone to corruption.

    If you’re going to give a tax break – give it to everyone or don’t bother.

  • avatar
    Garrett

    This sort of stuff doesn’t bother me nearly as much as public financing for sports venues.

    • 0 avatar
      SCE to AUX

      Amen to that.

      Here in the Pittsburgh area, we’ve been blessed/shafted with *3* taxpayer-funded sports venues in the last 20 years, despite the votes against them by the electorate.

      1. You don’t say no to the Steelers – period. Heinz Field is used now by the Steelers and Pitt Panthers for a combined 13 regular-season games a year.

      2. If you knock down Three Rivers Stadium, then the Pirates have nowhere to play, so then they need a new ball park *next door* to Heinz Field. At least they play 81 games a year there.

      3. The Penguins are a winning team, so we needed a new arena to replace the one built in 1960. At least the Pens play 41 games a year there.

      And the Allegheny County sales tax was raised by 1 percentage point to help pay for it all. This is in a city with a 50% population loss since the 1970s.

    • 0 avatar
      civicjohn

      @Garrett, I completely agree, yet I’ve been a Titans ticket holder since day 1 (I had to wear a hard hat to pick out my seats), but 20 years later I still cringe at the thought of how much money the city spent to get the stadium built, and they only give the city a few days per year to use it (CMA Week, concerts every night, etc.).

      They pitched it as some kind of revenue generator for tourists, but if locals own all of the tickets, I don’t get it and still don’t. Now the city is trying to get a soccer stadium built – $250 million of bonds, I look at that deal and I cringe again. Thank goodness that I don’t live in that county, it really doesn’t make sense from a fiscal standpoint when Davidson County (Nashville) is having to cut the public schools budget and they have a bunch of condos and apartments in the downtown area that unfortunately remind me of Miami (South Beach) 18-20 years ago when A1A was loaded with high-rise condos and it took a heck of a long time for the city to absorb the buildings. Nashville simply doesn’t have the infrastructure downtown (groceries, etc.) to support a mass influx.

  • avatar
    Tele Vision

    e·gre·gious.

  • avatar
    vehic1

    Sub-600: Yes, NC is a very progressive Southern state; that’s why it’s growing so much more in population than Alabama, Mississippi, etc. – people want to live there. Cities like Charlotte, Raleigh, Durham, Asheville attract outsiders; they aren’t just the same old sleepy towns anymore.

  • avatar
    Superdessucke

    Early warm up tosses, for when they come to the nation as a whole asking for their bailout after the next economic downturn in 3-4 years.

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