Dan Gilbert committed $500M to Detroit neighborhoods. Here's the immediate impact

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Mar. 26—DETROIT — As billionaire Dan Gilbert pumped billions into downtown buildings and helped spur a revival in one of America's poorest major cities, Detroiters kept asking: "What about the neighborhoods?"

The mortgage mogul, coping with the after-effects of a stroke, and his wife, Jennifer, delivered a $500 million answer Thursday. Help is on the way, first with a $15 million fund to help pay overdue property taxes.

"I'd like to see the people of Detroit benefit," Gilbert said during a news conference at Quicken Loans parent Rocket Companies Inc.'s headquarters at One Campus Martius after announcing the commitment during an interview on CBS. "You look at every level in downtown right now, and we have to carry that through to the neighborhoods and have the whole city have that energy."

Experts hailed the 10-year commitment by the Gilbert Family and Rocket Community foundations as an "unprecedented" corporate pledge to the neighborhoods. But questions remain about how the vast majority of dollars would be deployed, where the capital would be spent and how it would improve conditions in the city's neighborhoods — for now.

The Gilberts' generosity, remarkable in a town that's seen its share of big-move philanthropy, is offset by enduring skepticism in some quarters of Gilbert's amassing downtown real estate and his company's role in Detroit's home mortgage meltdown that was exacerbated by the Great Recession.

"We don't have all the answers today," Laura Grannemann, vice president of strategic investment for the Rocket Community Fund, told The Detroit News when asked how the remaining $485 million would be disbursed. The organizations, however, will engage with residents who reach out for help with delinquent property taxes to determine next steps.

"Property tax foreclosure and prevention and support is not enough to take someone from experiencing economic instability to the dream of economic mobility," Grannemann said. "We will engage with these residents, and we will kind of put together a series of changes around future investments and see what community partners are excited about coming alongside with us."

Based on the community fund's previous work keeping renters and homeowners in their homes, persistent needs include rehab and repairs, digital literacy, access to technology and employment opportunities. Initial efforts are expected to pay off about 20,000 low-income residents' unpaid property taxes this year — a starting point to stabilize neighborhoods on the way to revitalization.

Joshua Akers, an associate professor of geography and urban and regional studies for the University of Michigan, has spent a decade examining the contributing factors and impacts of foreclosures in Detroit. He said the announcement from the Gilberts is unexpected and has the chance to be beneficial for Detroit neighborhoods, but property tax itself isn't the root of the problem. There are larger economic challenges associated with opportunities, jobs and education, Akers said.

"If the goal as stated is to help to begin to build generational wealth, stopping foreclosure in the immediate term is helpful," he said. "But there are much greater challenges to bringing change to these neighborhoods and to the people who live there."

The initial donation would create the Detroit Tax Relief Fund. Administered by the Wayne Metro Community Action Agency, it is designed to pay off existing property tax debt for low-income residents. The agency also runs Wayne County's property tax foreclosure relief program.

"We are going to help so many people," said Jackie Grant, president of the Morningside Community Association on Detroit's east side. She has aided Rocket on housing stability efforts and for years has helped neighbors avoid foreclosures. "In any way that I can, I've been helping. Not all of us have $15 million to throw into the pot. It's good for the city. It's going to stabilize neighborhoods."

Wayne County Executive Warren Evans said the county also would contribute $5 million in foreclosure prevention funds: "Is it a total solution to the foreclosure problem? Absolutely not. Is it a step in the right direction? It is. It leads us down the path."

Gilbert said Thursday that the more he and his team studied Detroit's issues, they came to believe property tax foreclosures were at the root of them, creating "mass cycles of blight."

His wife, Jennifer, stood slightly behind Gilbert, with her right hand on his right shoulder, during both of their remarks. "Detroiters need greater access to economic opportunity," she said. Property tax debts are "the root of the problem."

How effective Gilbert's plan could be will be determined by many uncertain details, said Peter Hammer, a law professor and director of the Damon J. Keith Center for Civil Rights at Wayne State University.

"It's good that people are generous, but what is the business plan for these funds?" he said. "Who are the primary beneficiaries? How is it going to impact long-term historic residents? Whether or not this produces lasting benefits is yet to be determined. It really depends on how he plans on spending his money."

Previous efforts by the Rocket Community Fund have been fruitful, said Mayor Mike Duggan, helping to decrease foreclosures by 95%: "We have very few foreclosures now. The stress is that you have people with bills from four, five, six years ago hanging over their heads, making them insecure in their life, every day. And what the Gilberts have done today is give them a road to financial security."

Other companies and philanthropies have pledged millions of dollars to support efforts in the city's neighborhoods but not to this extent. The Kresge Foundation annually invests $40 million into community development, housing, the arts and more.

"The residents of Detroit are going to face in the coming years utility bills, deferred medical bills, businesses that close down," Kresge CEO Rip Rapson said. "You make the first move to stabilize the welfare of Detroit families, and then you can figure out what else is needed, whether that's access to health care, early maternal care, childhood services, open space, small business loans, transit. All those other things will fall in place over time."

'Game changer'

To benefit from the funds, homeowners must enroll in Detroit's Homeowners Property Tax Assistance Program, which lowers the current year's property taxes. Those who are granted that relief and also owe money qualify for the Pay As You Stay program under the Wayne County Treasurer's Office. PAYS eliminates a portion of that debt. The Detroit Tax Relief Fund then will clear homeowners of back taxes.

Counseling through Wayne Metro also is available to help prevent the issue from becoming a longtime problem.

"We are ready to go today on the launch," Wayne Metro CEO Louis Piszker told The News. "It's a game changer for the monthly budget and not having to choose between your medications and food and gas in the car. It's extremely impactful knowing the roof over your head is secure."

There are 11,000 residents currently in the tax assistance program, according to the city. It estimates up to 20,000 might have some delinquency but haven't yet applied for the program.

High tax rates contribute to foreclosures in the city, said John Mogk, a Wayne State University law professor focused on urban issues. In 2019, the average residential property tax millage rate for Michigan was 42 mills. Detroit's residential property tax rate for 2019 was 67.6 mills.

"The value of property is relatively low when compared to other cities," Mogk said. "In order to raise sufficient support for municipal services, the tax rate has to be set reasonably high."

But residential property taxes account for a smaller percentage of the city's revenue when compared with income, casino wager and utility taxes and assessment fees. Of the $116.6 million in property taxes generated for the Detroit's municipal operations in the 2020 fiscal year, $37.3 million was received from properties that were homeowner occupied, according to City Council's Legislative Policy Division.

"The best way to eliminate tax foreclosure on homeowners is to eliminate the property tax," Mogk said. "The rest of it is a bunch of Band-Aid solutions."

'Gas on a fire'

Gilbert formerly chaired a blight task force convened by the Obama administration to help Detroit develop a strategy to tear down houses and salvage its neighborhoods.

But his company, Quicken Loans, had the fifth-highest number of mortgages that ended in foreclosure in the city between 2005 and 2015 — and half of those properties were left blighted, a Detroit News project examining the impact of foreclosure on the city found.

Firms with more failed loans in the city were sister companies Argent Mortgage Co. and Ameriquest Mortgage Co.; Washington Mutual; New Century Mortgage Corp., and Countrywide Financial Corp., according to an analysis by The News.

All except Quicken collapsed during the mortgage meltdown. The company went public in August, as Rocket Companies made $9.4 billion in profit last year. Gilbert's wealth, roughly $47 billion, makes him the 25th richest person on the planet, according to Forbes.

Gilbert at the time said the number of foreclosures on the company's loans reflected the large volume of investments Quicken made in the city. It had little role, he said, in the eventual conditions of homes in a city otherwise decimated by the economic meltdown, abandonment and high taxes.

"It's very hard to make any causation between these loans and the fact that (homeowners) walked away or could not afford the payments and some eventually became blighted," Gilbert told The News in 2015.

"I'm sure some lenders contributed to part of it. But No. 1, I'd have to say, is property taxes. ... That was like throwing gas on a fire."

Mortgage foreclosures happen when someone can't pay back the money they borrowed to buy the home. Tax foreclosures happen when someone can't pay the government the taxes owed on his or her home.

In 2010, the mortgage mogul and real estate developer moved Quicken Loans' headquarters from Livonia to downtown Detroit. His Bedrock company owns more than 100 downtown properties. It and its affiliates are Detroit's largest employer, with more than 17,000 workers. Gilbert's companies have invested and committed more than $5.6 billion in efforts to help revitalize Detroit.

City hall has a property tax issue of its own. The News reported in 2020 that Detroit overcharged homeowners $600 million on their property taxes by failing to accurately bring down property values in the years following the Great Recession.

"This win didn't come out of the sky," said Bernadette Atuahene, law professor and member of the Coalition for Property Tax Justice, who celebrated the Gilberts' pledge. "It's due to all the various grassroots organizations in Detroit who have been speaking up and demanding justice for overtaxed Detroiters."

And it has "zero political motivation whatsoever," Gilbert said Thursday with respect to the aid coming during a Detroit mayoral election year. "It wouldn't matter who was in there. Well, it always matters who the mayor is, but it wouldn't matter from our standpoint. We would be doing this."

Gilbert also disputed the "moral hazard" that people who are able to pay their property taxes might get the impression they don't need to pay them.

"You still want to pay your property taxes if you can afford to," he said. "There's probably more pride in doing that, and it allows the funds to go to those who really do need it."

Detroiters who want to learn more on how to get property tax assistance can visit waynemetro.org/propertytax. Residents who want to find out if they're eligible can call 313-244-0274. Eligible incomes range from $17,000 for a family of one to $49,000, for a family of eight, with a partial exemption.

The city accepts an unemployment letter as proof of income. And this year, participants don't need their documents notarized. Both changes owe to COVID-19, according to the city's website.

Stroke recovery

The commitment comes after Gilbert had a stroke on May 26, 2019, and spent months in rehabilitation.

"You start to appreciate everybody and everything more than you did," he said. "When you have a stroke, it's like the whole family had a stroke."

The CBS reporter who interviewed Gilbert, Dana Jacobson, said that as of the interview a couple of weeks ago, Gilbert said he was going into the office about two days a week and uses a wheelchair to help his mobility. Additionally, he has hours of physical therapy almost every day.

bnoble@detroitnews.com

jdickson@detroitnews.com

cferretti@detroitnews.com

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