News Story

Wayne County 'Jail Fail' Site Moves Closer To Subsidized Redevelopment

Experience shows projected jobs for high profile projects often fizzle

An aging criminal justice complex in Detroit informally known as the “Fail Jail” may be another step closer to being reworked, though without the Major League Soccer stadium some had hoped for.

Whether or not the site includes a stadium, the holding company for developer Dan Gilbert will likely take advantage of state and local subsidies as it redoes the site. A study commissioned to support the subsidy said the development would result in more than 30,000 construction jobs, 2,000 permanent jobs and about $2.4 billion in total construction impact.

Those projections are based on a University Michigan study done by the Center for Sport & Policy funded by Rock Ventures. In describing itself, the Center’s staff says, “We hope to change the societal perceptions that exist today in relation to sports facilities as a vehicle for growth and an opportunity to improve the fiscal footprint on the surrounding environment.”

Studies and claims that sports venues promote economic growth are typically raised when developers seek government subsidies, according to Christopher Douglas. Douglas is the chair of the economics department at the University of Michigan-Flint and a member of the Board of Scholars at the Mackinac Center for Public Policy. Douglas criticized some of the accounting being used to justify the subsidy. “I don’t agree with calling costs associated with the project ‘economic impact,’” he said. “The real question is what brings the most benefit to the county after paying the costs of the project.”

Stories in other media outlets about the land have featured artist’s drawings of a stadium, fueling speculation that an Major League Soccer expansion team might be in the works. Also, the developer includes a stadium in its latest pitch to Wayne County, which includes an economic impact report. But the soccer league is also considering other cities for expansion.

According to Rock Ventures executive Matt Cullen, the final plans for the project may end up not including a soccer stadium. The site could be solely redeveloped into a mixed-use entertainment area with office, commercial, hotel and residential space.

Cullen said that Rock Venture officials thought the timing was bad when former Wayne County Executive Robert Ficano approached them in 2013, but have since changed their minds.

“We think Detroit would be a more inviting community if the main gateway isn’t six facilities with razor wire,” Cullen said.

Ann Arbor offers an example of how big-name companies often don’t live up to their pre-development projections.

In 2001, the Michigan Economic Development Corporation awarded drug company Pfizer a tax credit of $25.8 million over 20 years and the city of Ann Arbor approved a 12-year $47.7 million tax abatement. Pfizer had projected that its expansion would create up to $47 million a year in extra taxes for the city and create nearly 1,000 jobs. Instead, six years later, the company decided to close its Ann Arbor facilities.

In 2007, Google said it was opening a site for an advertising branch of its company. The state offered Google $38.25 million in subsidies known as refundable tax credits. The company projected it would create 1,000 jobs within five years. The company won’t say how many employees it has in Ann Arbor now, only that it has 400 employees in two Michigan offices.

And state-subsidized job projections are a bust, according to a state auditor general report in 2013. That report looked at two programs that subsidize jobs in the state: the Centers of Energy Excellence and Business Plan Competitions. The audit reported that only 19 percent of the Centers of Energy Excellence projected jobs ever materialized and just 22 percent of the Business Plan Competitions job projections ever happened.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.