When Strong Town's civil engineer Charles Marohn visited Ludington earlier this year, he made quite an impression on city leaders, and on me. Marohn has a natural awareness of what makes a city strong and what weakens them, and it often runs counter to conventional wisdom. But it often makes total sense when you consider his arguments and look at the data.
Marohn's wisdom is usually couched into easy to remember paradigms and parables, such as when he references the Holy Trinity of Decline for cities as growth projections, subsidies and debt. By way of illustration, city leaders hope new growth will provide more revenue. Their desperation—although they would rather call it “commitment”—is such that they’re prepared to subsidize that growth into existence, if need be. And when all else fails, they tell themselves they can handle a cash shortfall (which they hope is temporary, given that they’re investing in growth) by taking on debt.
The growth is a hope that often does not materialize, but the subsidy and debt are very real and often shouldered by the citizens seeing increased taxes and fees for infrastructure and services. The downtown of Ludington recently saw a couple of apartment houses for the poor and elderly be erected to the tune of $16 million, $266,000 per apartment unit, much of that investment coming through tax credits and financing gimmicks that puts federal state and local governments into the subsidy and debt business. You know by now where governments get their money from.
It's called the Haskelite Building by the old timers, others consider it Ludington's Wolverine Building, but this manufacturing relic from the 1800s has been targeted by developers to be the framework of a new apartment complex housing up to 67 units of various sizes from studio to three bedroom. It sounds very nice, it would be fantastic to rehabilitate the building for another century or more of service, but it's turned into being more costly than the two buildings downtown and the developers are wanting you to pay a much higher figure than what they agreed to this last December, and wanting to do so discretely so that you don't see the subsidization and debt. That's why they use a Brownfield Plan with Tax Increment Financing (TIF) as a mechanism, because few people will understand exactly how their money is being taken.
An amended brownfield plan came before the city council on the evening of October 12th, 2020 trying to capture (i.e. steal) your tax money at a much higher proportion than it was set to by the earlier agreement. The private developers (Third Coast Development LLC) reportedly got a couple million less than they hoped for from state subsidies, and costs reportedly increased once they learned of some additional environmental factors.
It became a bad investment for them, so they skedaddled and left their non-profit partner, Michigan Community Capital (MCC), figuring out whether it might be feasible. MCC decided they would take more money from the Ludington community and use less of their money in order to make the project break even. When a host of public money is being invested just to make a project break even with development and maintenance costs with a non-profit agency running the show, I see a red flag. I'm positive that Chuck Marohn would see that same pennant. That's why I included some of his observations in my public comment arguing against throwing more good public money after bad in this textbook case of the Holy Trinity of Decline. [When the video of the meeting becomes available it will be included.]
XLFD: When Chuck Marohn does his Strong Town presentations, one of his mainstay anecdotes involves comparing two nearby city blocks in Brainerd, one with 'old and blighted' development and the other with a Taco John's Restaurant that replaced the blighted development that was there.
Taco John's received 26 years of tax increment financing in 2007 to come into being, and Marohn systematically shows how the old and blighted block consistently and significantly outperforms the new growth and how it will likely continue to do so even after the TIF is gone in 2033. Marohn notes that even if there were no tax subsidy to the Taco John’s, the city would be collecting 79% more taxes from that old, run down, blighted block than they are collecting from the shiny new investment up the street that they worked so hard to get.
Tonight, this council is set to significantly amend a Brownfield Plan they passed just 10 months ago. Gone is Third Coast Development LLC and the promises they made to the people of Ludington. This amendment is actually calling for a lot more community sacrifice and a smaller amount of investment by Michigan Community Capital. In December 2019, the TIF Plan was set to capture $2.9 million in local taxes,
the new plan is set to capture $4.3 million, nearly a 50% increase.
Instead of a 22 year plan it becomes a 26 year plan, reminiscent of Taco John's deal. The money lost to local taxing authorities combined with the added strain on city services and infrastructure will be shouldered by the rest of the community in this gamble.
Let's couple that with MCC's investment in this project decreasing. In December, they were investing $12.2 million into this project, with the amended Brownfield Plan, which includes a $1 million donation from a local foundation, that investment goes down to $11.8 million.
We are now told that the Brownfield Plan agreed to in December where our local contributions were fair, reasonable, and accepted by MCC is insufficient now, and that the only way it can go through is with an increase of nearly 50% to our burden while their contribution decreases. The promises Third Coast Development LLC made are being overlooked now that they've ran away from the project and it seems as if MCC wants to take advantage of our community, when it has many other challenges coming at it.
Please consider sticking with the original agreement, this new agreement has Taco John's written all over it and your vote for it will only encourage them to come back later asking for even more when the State won't subsidize them to their liking [END].
Rather than acknowledge the tremendous jump in obligations of subsidy and debt the amendment brought to the city and its citizens, the council and MCC representative danced around the issues of why the citizens were supposed to pick up $1.4 million of subsidies because the State didn't give MCC as much as they wanted. This was transcribed by David Bossick of the City of Ludington Daily News (COLDNews) who artfully dodged the issue, and totally ignored my comment with my concerns in his article in the Tuesday paper, the bulk of which is reproduced below:
I think we all would love to see the Haskelite Building be rejuvenated and put to good use, but I also think we would like to see our community leaders show a little more caution in granting subsidies and going into greater debt for this now-questionable growth that has all of us shelling out 50% more for the cause. The Holy Trinity of Decline seems to have reared its ugly head in this project, and don't think for a second that they won't come back for more after seeing how easy it was this time.
On Tuesday night, the County Commissioners followed suit in passing this subsidy and debt onto their taxing authorities too. I would have spoke there on the problems their Brownfield Plan had, primarily on legal grounds, but they met out at the airport, and I went to where they said they would be in their agenda and board meeting post, which was the courthouse. But that's going to be another story.
Thanks again, X for cutting through the crap and getting to the truth.
Imo, Ludington city administration is so choking for growth so much that they'll do anything to bring more development and housing at the expense of the longtime taxpayers that they are going to tax the longtimer out of town. 56 mils now, almost three to four times as much as outlying townships. Not to mention the tripling of water and sewer costs.
Plus just another cluster development in an already too clustered city, outgrowing its area.
I think Charles Marohn would agree that organic growth is preferred over growth that sucks up taxes from all units of government just to come into existence. A handful of years ago, Mitch Bogner looked at a property on North Washington and figured out he could build four buildings on it each containing 20 units. He had to deal with environmental issues as barrels were found on the property once containing who-knows-what. He had to contend with some controversies at city planning commission and council meetings due to his lot being close to the austere 'Forest Hills' district in Ludington.
Bogner weathered these issues and how much financial help from the government did he get? Nothing. The taxes taken in by local taxing authorities for the partially developed parcel (two buildings) increased by more than tenfold the year after. That's real growth that pays for itself with interest.