Some of the criticism at public hearings of the development has involved claims that taxpayers are being asked to “give a welfare check to a billionaire,” namely Pistons owner Tom Gores, the founder and chairman of investment firm Platinum Equity.
At the most recent public hearing last Thursday, before council’s Planning and Economic Development committee, several speakers said they support the Henry Ford Hospital expansion — but not awarding incentives for the housing the Pistons organization would develop.
“The hospital itself is not tie-barred; it’s not connected to the incentives request,” said attorney Tonya Myers Phillips of the Sugar Law Center for Economic and Social Justice. “We’re going to get a new hospital no matter what.”
In response, a health system executive appeared to suggest that the their hospital expansion plans could be scaled back if the residential projects do not happen.
The executive, Jerry Darby, vice president of development for Henry Ford Health, called the development plan a “three-legged stool.”
“Our development, if the Pistons were not to go forward, would be significantly different,” Darby said. “We’re not saying we wouldn’t do something. But in all likelihood we would not be able to do something of this scale across the street.”
Henry Ford Health currently owns all the land for the six project sites, which means they are not currently generating any property tax revenue. And the health system would continue to own all six sites once the projects are built.
However, the three sites with the planned apartment buildings would go back on the city’s tax rolls because they would no longer be used for the health system’s nonprofit mission.
City officials have emphasized that the development’s proposed tax capture would not siphon money away from Detroit schools. That is because the state’s School Aid Fund provides full funding to the Detroit Public Schools Community District, so funding would therefore not be impacted by tax abatements or captures.
Transformational Brownfield
The largest of the requested incentives is a Transformational Brownfield, which is a local- and state-level tax capture valued at $241 million for the developers over 35 years.
The value of the development’s tax abatements would be $55 million, according to a report by City Council’s legislative policy division.
A Transformation Brownfield is one of the most powerful development incentives in Michigan. It has only been approved for use four times, including last year for the $1.5 billion, 10-building District Detroit development in downtown, which has since fallen behind its original schedule and has yet to break ground.
For the Future of Health development, the five projects seeking incentives carry a price tag of $773 million, which includes the $7.3 million cost of the Pistons buying Henry Ford Health’s current corporate headquarters building — One Ford Place — for redevelopment as apartments.
The health system would continue to own the land under One Ford Place and lease it to a Pistons-related entity. A Henry Ford representative declined to disclose terms of the lease.
Those five projects, if built, are estimated to result in $85 million in net new tax revenue for the city over 35 years and $226 million in net new tax revenue for the state, according to the developers’ Transformational Brownfield application.
When counting the sixth project — the Henry Ford Hospital expansion, which isn’t seeking incentives — those figures rise to $118 million in net new tax revenues for the city and $276 million for the state, when state and local income taxes are factored in from the added payroll.
On the jobs front, the five projects seeking incentives are expected to create 2,145 construction jobs and support 735 permanent full-time jobs, with 540 of the permanent jobs being new jobs.
Reports About the Project Under Wraps, For Now
Those jobs and tax revenue figures were derived from an outside firm’s economic analysis of the Future of Health development, conducted by RCLCO Real Estate Consulting.
A representative for the developers declined a Free Press request to see the analysis report, saying it contains outdated calculations and doesn’t include things such as the recent addition to the plan of a 72-bed rehab center in the new hospital tower — the Shirley Ryan AbilityLab — that would create 162 more new jobs.
The Michigan Economic Development Corp. also declined Free Press requests to see an underwriting analysis for the development, a report that is required by law for Transformational Brownfield applicants.
An MEDC spokesman said the report cannot be shared until after the Transformational Brownfield has gained final approval from the quasi-public Michigan Strategic Fund in Lansing. The strategic fund would take up the brownfield request after Detroit City Council gives its approval.
The developers anticipate gaining that final strategic fund approval for the brownfield in April, documents show.
David Whitaker, director of City Council’s Legislative Policy Division, said information from the undisclosed analysis reports was shared with his staff and incorporated into their synopsis of the overall development for council members. The analysis documents then were returned to the developers’ fiscal agent, Plante Moran, he said.
Return on Investment
As proposed, the Future of Health development is expected to have a 4.5% return on investment for the trio of developers, according to the Legislative Policy Division review. Without the incentives, the return on investment would be a negative 6%, making the development unfeasible.
Most new Detroit developments receive some incentives or tax breaks to help close a gap between the cost of construction and attainable rents in the city.
A Community Benefits package for the Future of Health development gained preliminary approval in December in a 6-2 vote by a volunteer group of New Center-area residents, known as a Neighborhood Advisory Council.
Benefits packages are a final product of a legally mandated Community Benefits process in Detroit for large developments seeking significant public subsidies.
The monetary value of the Future of Health benefits package is a matter of controversy, with the developers saying it totals over $604 million, but critics at public meetings contending the value is far less when excluding things such as hospital charity care that Henry Ford Health would do anyway.
Key items in the package of various concessions, gifts and commitments from the Future of Health developers include:
- Accepting Section 8 housing vouchers for the 20% of the development’s apartments being set aside as “affordable.”
- Establishing a $2 million home repair fund for existing neighborhood residents.
- Donating $500,000 for rental assistance.
- 50 free tuition MSU scholarships for seniors at nearby University Preparatory Academy and Northwestern High School.
Henry Ford Hospital Expansion
The $2.2 billion Henry Ford Hospital expansion project would encompass 1.1 million square feet and feature the new 21-story hospital tower as well as new operating rooms and an emergency room.
The expansion and tower would go across from the existing hospital along West Grand Boulevard, on land currently occupied by parking lots and a Henry Ford-owned office building that will be torn down.
The project also would convert all patient rooms to private rooms, while keeping the hospital’s total bed count at 877. The existing hospital would remain standing and be used for outpatient services and patient rooms.
Three floors in the new tower would house the new 72-bed Shirley Ryan AbilityLab rehab center for conditions such as strokes. The AbilityLab’s 162 new jobs would raise the total number of net new jobs for the entire development to 702.
Funding for the $179 million construction cost for the AbilityLab space would primarily come from the Gilbert Family Foundation ($119 million), with $60 million from Henry Ford Health.
A ground-breaking for the expansion is expected this year.
Henry Ford + MSU Medical Research Center
This $393 million, eight-story research center, to be built at 6175 Third St., would be a joint project between Henry Ford and MSU. It would contain just over 325,000 square feet. An entire floor would be occupied by the Nick Gilbert Neurofibromatosis Research Institute, where medical research would happen on neurofibromatosis, a genetic condition that led to Gilbert’s death last year at age 26.
The research center is projected to have 558 permanent full-time jobs, paying an average wage of about $137,800 a year. Just under 200 of those jobs would be existing jobs that relocate from a research center inside Henry Ford’s One Ford Place building at 6005 Second Ave.
The project could break ground as soon as this spring and be done in the second quarter of 2027, according to project documents.
One Ford Place Redevelopment
A Pistons-related entity is to develop three apartment buildings with a total 662 apartments.
The first project, costing $190 million, would redevelop Henry Ford’s One Ford Place headquarters into 403 mixed-income apartments. There would be 181 studio units averaging 565 square feet, 168 one-bedroom units (averaging 718 square feet) and 43 two-bedroom units.
One Ford Place, at nearly 627,000 square feet, dates to 1918 and was designed as a factory for the Burroughs Corp. by architect Albert Kahn. It underwent a 1968-1970 Brutalist-style renovation and was acquired by Henry Ford Health in 1992.
The redevelopment also calls for over 17,000 square feet of new commercial space in the building, with an estimated 98 new permanent jobs created in those spaces.
The project could get underway in April 2027 and finish in the second quarter of 2029, according to project documents.
725 Amsterdam
A new six-story, $79 million apartment building with 154 mixed-income units is planned for 725 Amsterdam St. on what is now a surface parking lot. There would be 75 studio apartments (averaging 514 square feet), 69 one-bedrooms and 10 two-bedrooms. There also would be retail space.
Construction would start in the second quarter 2025 and take two years to finish.
675 Amsterdam
This six-story, $54 million apartment building would be built at 675 Amsterdam and have 105 mixed-income units. There would be 55 studio units (averaging 493 square feet), 40 one-bedrooms and 10 two-bedrooms, plus retail space. Construction would begin in the second quarter of 2027 and finish two years later.
Parking Deck
Henry Ford plans to build a six-story, $58 million parking deck at 6205 Third Ave. to be used by residents of the three housing developments and workers at the research center. Initially, about 10% of the 804 parking spots would be hooked up for EV charging stations.
Construction could begin in the fourth quarter of 2025 and finish in the second quarter of 2027.
Affordable Housing
The developers have committed to setting aside 20% of the 662 apartments in the development as “affordable” and with significantly reduced rents.
That means 13 units for those making no more than 30% of area median income (AMI) or $19,890 a year for a single person; 107 units at 50% area median income or $33,150 a year; 13 units at 70% area median income or $46,410.
Actual rents for the 50% AMI units would be about $828 per month in current dollars for a studio unit, $888 per month for a one-bedroom and $1,066 per month for a two-bedroom, according to the developers. Section 8 vouchers would be accepted in these “affordable” units.
By comparison, the developers anticipate market-rate rents for one-bedroom units at just under $2,000 per month, project documents show.
To help support the deep level of affordability, the developers hope to utilize several incentives beyond the local tax breaks and Transformational Brownfield:
- Low Income Housing Tax Credits
- Federal historic tax credits for conversion of One Ford Place
- A 35- to 40-year Payment In-Lieu-of-Taxes, or PILOT, incentive. The developers would seek approval of the PILOT from city council in 2025, which would result in about $6 million less in net taxes paid by the Pistons-entity to local and state jurisdictions over 35 years, according to the developers’ calculations.
What Taxes Captured in a Transformational Brownfield
- Incremental local property taxes at a project site — 30 years.
- Construction materials for the buildings — 100% sales tax exemption.
- Construction labor at the site — 100% state income tax capture.
- Permanent employees in the new buildings — 50% capture of those employees’ paid state income taxes for 20 years.
- Residents in the new apartments — 100% capture of those residents’ paid state income taxes for 20 years.
