HUD Archives: News Releases

HUD Announces Detroit and Flint Selected a Renewal Community Eligible for $17 Billion in Tax Incentives

DETROIT - The Department of Housing and Urban Development today announced Detroit and Flint each will be designated a "Renewal Community," eligible to share in an estimated $17 billion in tax incentives to stimulate job growth, promote economic development and create affordable housing. The 2000 Community Renewal Tax Relief Act established the Renewal Community Initiative that will encourage public-private collaboration to generate economic development in 40 distressed communities around the country.

As a result of this Renewal Community designation, Detroit and Flint will receive regulatory relief and tax breaks to help local businesses provide more jobs and promote community revitalization.

"These tax incentives will help businesses grow in some of our country's most challenging communities," said Donald Mains, Deputy Assistant Secretary for Economic Development, HUD. "By creating the incentives that will promote job growth and economic development, we are joining with the private sector to restore economic vitality and restore whole communities in the process."

Renewal Communities will use the power of public and private partnerships to build a framework of economic revitalization in areas that experience high unemployment and shortages of affordable housing.

"A job and a paycheck goes a lot further toward building strong families and communities than any handout ever will," said Congressman Mike Rogers. "Tax incentives can drive the economic renewal of communities and build a stronger future for workers through job creation and worker training. While working with the Administration in support of Michigan applications for renewal community zones, it has been apparent there is a commitment to renew our great cities by providing the economic tools to grow strong and vital. Today's announcement underscores that resolve."

An estimated $6 billion in tax incentives are exclusively available for Renewal Communities across the country. As distressed areas, Renewal Communities will also be eligible to share in an additional $11 billion in Low-Income Housing and New Market Tax Credits.

These new RCs can take advantage of wage credits, tax deductions, capital gains exclusions and bond financing to stimulate economic development and job growth. Each incentive is tailored to meet the particular needs of a business and offers a significant inducement for companies to locate and hire additional workers.

Michigan State Housing Development Authority (MSHDA) Executive Director James Logue said, "On behalf of Governor Engler, we applaud HUD's decision in designating Detroit and Flint as Renewal Communities (RC). The combination of the RC incentives and those provided through the Michigan Renaissance Zone program provide important tools in helping Mayor Kilpatrick and Mayor Stanley revitalize their cities. As the Michigan Low Income Housing Tax Credit allocation agency, MSHDA looks forward to working with both Mayors."

Forty percent of the more than 190,000 residents in the Detroit Renewal Community live in poverty and can't afford basic necessities for their families. Almost twice that are low income and twenty-five percent are unemployed. By cutting taxes, increasing local services through Neighborhood First, reducing crime and reducing government requirements, Detroit hopes to attract businesses into the 25-square mile area that will make up its Renewal Community. In addition, the Detroit Renewal Community will work with community-based organizations to reduce burdens and to improve services for its residents and businesses.

Detroit Interim Deputy Mayor Conrad Mallett said, "This Renewal Community designation will give Detroit a solid foundation from which to begin the task of neighborhood revitalization."

Almost 50 percent of the residents in the Flint Renewal Community live in poverty and 71 percent are low-income households. Twenty-eight percent are unemployed and can benefit through job and skills training, education, transportation and support services. A Renewal Community Skill Development Task Force will be established through the CoRA to respond to the specific labor needs of businesses attracted by the Renewal Community designation. In addition, Flint will reduce taxes in the Renewal Community to attract new investments for economic and tax base growth, continue community-based crime prevention, involve community partners and solicit in-kind donations to fill in the gaps in public funding programs.

"This designation is a tremendous achievement for the people of Flint," said Flint Mayor Woodrow Stanley. "The tax incentives contained in this program will benefit Flint residents for years into the future. This is a proud day for every resident of Flint."

Tax Credits

• Wage credits are especially attractive to businesses looking to grow. These businesses are able to hire and retain RC residents and apply the credits against their federal tax liability. Businesses operating in the new Renewal Community will enjoy up to a $1,500 credit for every newly hired or existing employee who lives and works in the RC.
• Work Opportunity Credits provide businesses in Renewal Communities with up to $2,400 against their Federal tax liability for each employee hired from groups with traditionally high unemployment rates or other special employment needs, including youth who live in the RC.
• Welfare to Work Credits offer businesses a credit of up to $3,500 (in the first year of employment) and $5,000 (in the second year) for each newly hired long-term welfare recipient.

Tax Deductions

• Commercial Revitalization Deductions permit a State with one or more RCs to deduct $12 million per RC per year, up to $10 million per project for commercial or industrial buildings developed in the RCs. A business can deduct up to $5 million in the year the building is placed in service or deduct the full amount of eligible expenditures pro rata over 10 years.
• Section 179 Deductions under the tax code allow a qualified Renewal Community business to expense up to $35,000 of additional qualified property such as equipment and machinery acquired each year during the period of the RC designation, 2002 through 2009.
• Environmental Cleanup Cost Deductions allow businesses to deduct qualified cleanup costs in Brownfields.

Capital Gains Exclusions

Zero Percent Capital Gains Rate applies to an interest in, or property of, certain businesses operating in a Renewal Community, if the asset is acquired during the period of the RC designation and held for at least 5 years.

Bond Financing

Qualified Zone Academy Bonds allow state and local governments to match no-interest loans with private funding sources to finance public school renovations and programs.

In addition to the incentives described above, HUD will provide technical assistance to these communities to help make businesses fully aware of the many opportunities available to them. To make certain the Renewal Communities are successful in the initial stages of their designations, HUD will host an Implementation Conference in the spring of 2002 where the newly designated RCs will meet to hear from experts in the fields of business, taxes and economic development.

Other Incentives

Like all distressed communities, Renewal Communities will also be able to take advantage of the New Markets Tax Credits that provide investors with a credit against their federal taxes of 5 to 6 percent of the amount invested in a distressed area. Also available to Renewal Communities is the Low-Income Housing Tax Credit providing credit against Federal taxes for owners of newly constructed or renovated rental housing.

The 2000 Community Renewal Tax Relief Act authorized HUD to designate 40 Renewal Communities and seven new urban Empowerment Zones. HUD received more than 100 Renewal Community applications from communities around the country. Urban RC applicants were ranked according to their 1990 Census rates of poverty, unemployment and low-income households. Rural RC applicants were exempt from the household income factor. Bonus points were given for having low crime and having been identified by GAO as an extremely distressed area. In other words, the most economically distressed communities were awarded designation. Existing EZ/ECs also received a preference in rating and ranking.

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Content Archived: April 9, 2010