Public-private partnerships and development incentives spur Detroit investment

Clifford Brown always knew he wanted to be a developer. The Southeast Michigan businessman grew up in a historic mixed-income neighborhood in Toledo, Ohio filled with Victorian homes. The character of the neighborhood encouraged Brown and his friend Chris Early to think about the difference they could make by being part of the real estate world.

"The homes that people lived in reflected the lives of the people who lived in the homes. And so we wanted to figure out a way to build lives, communities, andClifford Brown of Woodborn Partners wealth in that order," he says. "We wanted to change people's lives via real estate development."

Brown eventually graduated from Ohio State University with several degrees in business administration and later went to work at Ford in various capacities for 15 years. He never lost sight of his development dreams, however, and would go on to found Woodborn Partners with Early in 2009.

Today the two men run a Detroit-based family of companies that encompasses development, investment, fundraising, and property management. Through Woodborn Partners, their development arm, they've been active in many parts of the city, working on a variety of mixed-use and residential projects.   

"We were co-developers of the Scott at Brush Park. We completed the Coe at West Village, and we're currently working on phase two of the Coe, the Pullman Parc site. We have the Brooke on Bagley, which just recently we did the groundbreaking over in Southwest Detroit. So we're staying busy."

But even though making Woodborn Partners a successful local development firm has taken a lot of hard work and careful decision-making from the two partners, the involvement of the city of Detroit has also been instrumental in its rise. That's especially true of the tax abatements the city offers, which Brown believes are essential to making development happen in the Motor City.

"Every project that we've done, the city has been a partner on the abatement side, as well as additional financing and additional funding," he says. "There's [almost] no project in the city of Detroit that really gets off the ground without incentives and additional support. It's just the economics of the way Detroit is built, where your rents are not commensurate with construction costs."
The Brooke at Bagley is a new mixed-use, mixed-income development in SW Detroit.Incentivizing development

Abatements can serve as powerful economic development tools. They're essentially tax breaks offered by governmental entities on certain kinds of real estate or business ventures to incentivize investment. 

"The ones that I would say are used most often [in Detroit] are probably the Neighborhood Enterprise Zone (NEZ) abatements, which [allow] a reduction of the millage rate for up to 15 years on residential property," says Jason Friedmann, Director of Public-Private Partnerships with the City of Detroit's Housing and Revitalization Department (HRD). 

Made possible through the State of Michigan's Neighborhood Enterprise Act, NEZ abatements are designed to encourage new construction, rehabilitation projects, or investments in existing homes located in eligible "distressed" districts.

Other common abatements used by small-to-mid-sized developers in Detroit include those connected to the Obsolete Property Rehabilitation Act (OPRA), which involve the rehabilitation of obsolete commercial property, and the Commercial Rehabilitation Act (PA210), which involve rehabbing existing commercial properties for commercial businesses or multi-family residential facilities.

According to Friedmann, there are always two steps involved in gaining access to abatements. The first involves creating a special district or finding an existing one where those incentives are allowed. The second involves getting a certificate for a specific building or development, which can be issued after what's called an underwriting review. In some instances, this is done through the City of Detroit and in others through the Detroit Economic Growth Corporation (DEGC).

"They review to make sure that project needs that type of abatement to make it profitable at a reasonable return for the developer," says Friedmann. "[There's almost] always some sort of abatement to help subsidize it, but they're doing their review to make sure that abatement is for a certain amount of time, so the developer's project is financeable but they aren't becoming rich off it." 

In the case of the Coe at West Village, a $4 million mixed-use development at the intersection of Coe Street and Van Dyke Avenue, a limited liability company A bulldozer at The Brooke on Bagley development site.established by Woodborn Partners in conjunction with Invest Detroit purchased two parcels of land in a PA210-designated district in Detroit's West Village neighborhood. An application for the 12-unit complex — which is composed of eight townhomes, four apartment units, and 1,200 square feet of retail space — was then submitted to and reviewed by the city. Then an agreement for a ten-year tax abatement worth $236,700 was drawn up and signed by the developer. Finally, after a public hearing, Detroit's city council approved the agreement and a certificate was issued for the PA210 abatement.

In approving the abatement, city officials considered that the Coe at West Village would create 73 temporary construction jobs and four permanent retail jobs. They also noted that the project supported an area targeted for multi-family housing, was part of the city's Strategic Neighborhood Fund Initiative, and wouldn't have been viable for the developer without the incentive. 

In addition to these factors, Brown feels it's worth noting that, unlike grants or loans, abatements are simply offsetting taxes on revenue that wouldn't exist if the projects they were connected to didn't exist.

"What people really don't get is that those incentives are not taking from other parties, those incentives are recognizing the value that was created," he says. "If not for the project, the value wouldn't be created and the incentives wouldn't float." 

Grants and support

In addition to abatements, the City of Detroit offers a variety of other economic tools and resources to support development. 

For those interested in engaging in environmental remediation, Brownfield Redevelopment Tax Increment Financing (TIF), is a subsidy connected to new construction or rehab work taking place in environmentally distressed or blighted areas. Established under Michigan Brownfield Redevelopment Financing Act, it enables the city to reimburse developers for eligible costs as incremental property taxes are generated. These TIFs and other Brownfield-related incentives and loans are handled through an entity known as the City of Detroit Brownfield Redevelopment Authority (DBRA).

There are also numerous grants that the city provides or helps facilitate to encourage development efforts. Perhaps the most well-known of these are federal Community Development Block Grants (CDBG), which HRD awards directly to the public through a Request for Proposals (RFP) process through which various proposals are evaluated and approved. Developed by the U.S. Department of Housing and Urban Development, CDBG grants are meant to support community development activities, including housing rehab and economic development projects, that help build stronger and more resilient communities.

There's also a newer program called the Neighborhood Beautification Program that provides small grants between $500 and $1,500 to block clubs, nonprofits, and small businesses to support goals like blight removal, recreational opportunities, home repairs for seniors and the disabled, and the financing of affordable housing. It's funded by the city Neighborhood Improvement Fund and the federal American Rescue Plan Act. Grant applications for the program are currently closed, but will open up again next spring. 

Friedmann, who works with HRD, says his department focuses on mixed-use and multi-family projects, particularly those related to affordable housing.

"We're the ones who are releasing RFPs [for those projects] and then managing the process, everything from initial concepts to financing to permitting to getting those projects up and running," says Friedmann. 

HRD also assists developers in these areas navigate city processes, and through its division of public-private partnerships works to connect them with public financing tools, entitlement approvals, and publicly-owned properties.

Friedmann encourages newer developers to start small and build up, and often directs them to programs offered by organizations like  Building Community Value and Capital Impact Partners to gain more insight into the industry. He also recommends aspiring developers and contractors attend the city's annual Detroit Construction Conference, which takes place in January. 

"It's a resource fair for folks to learn about all the programs that are available for smaller contractors and developers and learn about the RFPs that we put out," he says.
Neighborhood Homebase is a community center and the headquarters of the Live6 Aliiance.Strategic alliances

The city is also engaged in a variety of collaborations with the private sector, philanthropic entities, and nonprofit partners to encourage development. One of the most ambitious of these public-private efforts is the Strategic Neighborhood Fund (SNF) initiative.

Launched in 2016, it's a partnership between the City of Detroit, Invest Detroit, local nonprofits, and corporate donors. The SNF initiative is aimed at revitalizing neighborhoods along ten commercial corridors through a combination of investment that includes streetscapes, park improvements, commercial development, and housing stabilization efforts.

One of the earliest communities involved with that initiative is Live6, an area of Northwest Detroit located around the intersection of Livernois Avenue and West McNichols Road (also known as 6 Mile Road). The city's work there has a valuable nonprofit partner in the form of the Live6 Alliance, an economic development organization launched by University of Detroit Mercy President Dr. Antoine M. Garibaldi and The Kresge Foundation in August 2015. A partnership of local organizations, community members, charitable institutions, and other area stakeholders, it's dedicated to the revitalization of four local neighborhoods: Bagley, Fitzgerald, University District, and Martin Park.

According to Garibaldi, the city of Detroit has been a big help, especially as the work the Live6 Alliance has been doing with the input and participation of local residents has picked up steam.

"The city is very much of a partner," he says. "We've used individuals in the planning dept to work along with us as we've redeveloped. And the city really took the initiative to work on the Fitzgerald revitalization project."

The Fitzgerald Revitalization Project is a plan to revitalize a quarter-square-mile Detroit Pizza Bararea of the Fitzgerald neighborhood that was previously covered with hundreds of publicly owned vacant lots and empty buildings. It's being spearheaded by the city of Detroit with support from the Kresge Foundation, the Fitz Forward development team, and is funded in part by a Reimagining the Civic Commons grant. While the effort has so far fallen short on its goal of rehabbing 100 homes in the area, the city has created a new 2.5-acre park there as well as a greenway linking the University of Detroit and the former campus of Marygrove College.

This work in Fitzgerald in turn is part of a larger Livernois/McNichols Corridor Plan being carried out in coordination with the SNF initiative.

The city has also implemented extensive streetscaping projects along sections of Livernois Avenue and West McNichols Road. Funded by a $125 million road bond, the recently completed streetscapes feature elements like new sidewalks, lighting, landscaping, bike lanes, street resurfacing, and signage.

The city of Detroit and the Live6 Alliance are taking a cooperative, coordinated approach to the revitalization of the area. For its part, the nonprofit has been helping raise awareness of the municipal revitalization efforts in a way that complements the city's engagement efforts. On the other side, the city has helped the Live6 Alliance with planning and applying for federal and state grants, and helped to attract new investment to the area. The nonprofit also enjoys a close relationship with Kim Tandy, District 2's manager with the city's Department of Neighborhoods. 

There's been overlap between the Live6 Alliance and the city's SNF partners too. Neighborhood HomeBase, a local community space and the Live6 Alliance's headquarters, was designed and built with $2.8 million in funding from the Kresge Foundation, which is also a major contributor to the SNF initiative. What's more, the Live6 Alliance and Invest Detroit are currently collaborating on the SNF-funded renovation of a building at 7434 McNichols Avenue, which they plan to turn into an incubator for local businesses.

Beyond those projects, these collaborations have opened up a wealth of new revitalization opportunities for the Live6 Alliance. 

"The Strategic Neighborhood Fund and all of the different myriad of corporate and philanthropic funders that are at the table are opening up our ability to reach out to those funders that we don't yet have relationships with to pitch the next phase of work," says Caitlin Murphy, the Live6 Alliances' Director of Strategic Partnerships and Special Programs. 

Garibaldi says business has picked up in the Live6 area in the last few years. "That certainly has been very obvious," he says. "If you ask anyone in those businesses, not only on McNichols but also along Livernois, they will say that in a heartbeat."

The area has recently seen several new businesses sprout up, including a new pizzeria called the Detroit Pizza Bar. Other developments like The Sawyer Art Apartments, a three-story apartment complex being built by Roderick Hardamon and George R. N'Namdi are also on the way.

Garibaldi attributes successes like these to years of collaboration between his organization, local residents, and other partners. And he feels the city, by creating the new streetscapes and offering other support, has played a vital role in the revitalization of the two corridors. 

"The city's been certainly involved and working very closely with us to do the things that we aimed to do that otherwise would not have been possible."

New development along McNichols. Reflecting on his development, Brown is confident that his projects have also resulted in benefits for local residents. In addition to creating jobs, he believes developments like the Coe at West Village can serve an important role in driving additional investment and revitalizing neighborhoods.

"You have a corner that was largely vacant, that was blighted. Now you're going to have a beautiful building with neighborhood retail. It allows us to bring additional light, additional density." 

In doing this type of work, Brown feels the city of Detroit can play a valuable role, assisting developers with technical support and offering incentives that can make otherwise unfeasible projects become a reality. Although he recognizes some developers may harbor skepticism towards the city, he encourages them to reach out and see what kinds of assistance it can offer them.

"The people in the city are not your enemies, they're partners in this," he says. "They want to see you be successful. And so it's just a function of just everybody working together."

All photos by Steve Koss.

This is part of the Block by Block series, supported by FHLBank Indianapolis, that follows minority-driven development in Detroit.
Enjoy this story? Sign up for free solutions-based reporting in your inbox each week.

Read more articles by David Sands.

David Sands is a Detroit-based freelance writer. He's covered the news for Huffington Post Detroit as an assistant editor and worked as a staff writer for the transportation news site Mode Shift. Follow him on Twitter @dsandsdetroit.