Search results for 'Brownfield'

Brownfield Funding Legislation Enacted

5 Jan 2017

law

The bills passed.  At last.  As you may recall from two years ago, I served on an MDEQ-led task force to  review and improve the “patchwork quilt” of statutes and rules regarding brownfield redevelopment incentives, grants and loans.  A CSI II group (of which, in full disclosure, I chaired the Legislative Committee) met regularly in 2014.  The changes certainly would’ve been introduced earlier but the Flint Water Crisis happened and everyone’s attention was diverted. Earlier this year, a package of six bills was introduced in the Legislature; on the 15th they were passed and on  January 5, 2017, the Governor signed them.  They take effect in 90 days and are now 2016 Public Acts 471-476.

These changes streamline, simplify and speed up the process for loan, grant and TIF approvals to enable projects to get started faster than ever before while supporting a greater range of eligible activities than previously available.

The most significant changes include:

  • demolition, lead abatement, asbestos abatement dredging and excavation of uncontaminated but unusable soils may be eligible for grant and loan funding, subject to certain criteria and prerequisites (such as a threshold that at least 51% of the eligible activities are part 201 type expenses);
  • one can be technically liable under Part 201, TSCA or RCRA and still be eligible for grant, loan or TIF funding – previously, even someone who submitted a technically deficient BEA was barred from eligibility – with a renewed emphasis on remediation and redevelopment, only those who actually caused contamination are barred from eligibility, again, subject to certain criteria and prerequisites;
  • while the definition of “eligible property” was changed very little, activities eligible for funding through TIF are broadened to include such things as due care expenses, UST removals, solid waste disposal, sediment removal and disposal (where either the sediments or the upland are contaminated), plan preparation and implementation costs (subject to certain conditions and caps), including the costs to track plan compliance and a clearer set of sheeting and shoring costs;
  • overall streamlining of the application and review processes in an effort to speed up the TIF process including giving greater authority to the Michigan Strategic Fund to approve plans of up to $1 Million without waiting for a Fund Board meeting.

There was some tension between those championing redevelopment and those focusing on environmental remediation but, ultimately, the set of changes to the rules and statutes clarifying the process for obtaining loans, grants and tax increment financing for brownfield redevelopment. Not every issue was agreed upon and there was a list of so-called “parking lot issues” (either because they were discussed at length in the parking lot after the meetings or because we “parked them” there as we couldn’t reach consensus).  Hopefully some of these will be addressed in the near future but these changes should streamline, simplify and speed up the process for loan, grant and TIF approvals to enable projects to get started faster than ever, while supporting a greater range of eligible activities than previously available.  Given the Legislature’s unwillingness to approve other similar bills, this was a real accomplishment for brownfield redevelopment in the State of Michigan.

Gilbert Transformational Brownfield Legislation Stalls

12 Dec 2016

MOnroeblock9Dan Gilbert’s team drafted legislation based on the current Brownfield law.  This legislation was  moving rapidly through the Michigan Legislature until the Michigan Speaker of the House announced that the House would wait until next year to move the bills forward.  While this seems to have killed the bills for now, some are still lobbying for them to become law before 2017.

Articles had appeared in the local papers describing two proposed towers for the Monroe block of downtown Detroit (pictured), These articles include statements that the buildings won’t be built without this legislation being enacted (and presumably implemented in their favor).

The legislation is based on an existing approach – when a project increases property value, the taxes on that increased value can be captured and used to pay for  “eligible expenses.” Typically, these TIF (tax increment financing) programs put the risk of failure on the developer (where it belongs) while they increase the potential return by reimbursing the developer for expenses it would otherwise absorb.  The current brownfield law allows communities to issue bonds and pledge their full faith and credit, but in the brownfield “universe” that almost never happens.

The brownfield TIF law allows reimbursements for cleaning up contamination and taking protective measures and, in more urban communities, for costs of site preparation and infrastructure improvements.   This State, like many others, has decided that these incentives are necessary to entice developers to take desired risks. This is not a tax credit, nor, do the taxpayers of the State front any money to the developer.  If the development does not result in the increase in taxes expected, the developer loses. Without a bond, if there is no tax increment, the community/state owes the developer nothing.  Further, the community is held harmless because the predevelopment property taxes continue to go to the government as they did before project development. In short, this is a kind of “deferred gratification” for the taxing authorities as they must wait until the developer is repaid to get taxes on the increased property values (certain taxes are exempted from the TIF program and so there is some immediate benefit to the community).

So what’s the fuss about the Gilbert legislation?  These bills take the Brownfield TIF and put it on a massive dose of steroids. In addition to capturing real property taxes,  the Gilbert team proposes to capture both income taxes and sales taxes generated on a property following its redevelopment, if the project is “transformational.” This legislation vastly broadens the eligible expenses which can be reimbursed.  Instead of covering only environmental cleanups, environmental due care and communal benefits like infrastructure, the Gilbert legislation would allow a developer to be reimbursed for all of its construction costs. This is bold and would almost certainly lead to new, riskier developments. A developer could wind up with a significant competitive advantage because his costs are could be fully reimbursed. This could allow such a developer to undercut the market or amass significant profits.  The potential for market distortion appears to have been overlooked by the few commentators who have spoken on the subject.

The legislation includes a cap on the number of such transformational projects per year and per community and with a maximum of $50 Million in the first year’s capture for new projects. It is tiered so what is transformational (based on a dollar amount) varies based on the size of the community. This was a sop to smaller communities to get their support for this legislation as was a provision putting funds into the State’s Brownfield revolving fund. There are also some exemptions from the spending requirements including one that seems directed right at Flint.

“Transformational” can mean many different things  but the legislation’s focus is whether a project will transform local economic development, community revitalization, growth in population, commercial activity and employment.

The legislation received little notice until recently. Interestingly, it has been criticized by those on the left and on the right. A Free Press column calling this legalized “serfdom” for employees seems over-the-top. Yes, taxes will be collected and ultimately reimbursed to the developer.  I don’t see that equaling employee slavery. The Mackinac Center piece is a bit closer to the mark. They complain of “crony capitalism.”  The fact that only a few developers can get these projects approved per year and one per community per year does seem like the sort of favoritism inherent in crony capitalism. Further, the fact that the projects are limited to extremely expensive ones (on a range between $15 Million and $500 Million depending on county population), again, seems to mean that only the elite get benefits that are not available to the ordinary developer. In that regard, as the Mackinac Center points out, this is no different than any TIF financing model (and there are many of them in use throughout Michigan and the US).  This is the world we live in as evidenced by President-Elect Trump’s efforts to keep a Carrier plant in Indiana.

The capture of sales and income taxes would be new to Michigan and would put Michigan in the minority of states that allow such capture.

What has not been commented on is the need for a mechanism to ensure that the taxpayers of the State of Michigan are held harmless – so that the income and sales taxes to be captured are truly new to the State and not the result of a business moving its operations from one place to another.  This mechanism (and others needed) are to be developed later.  This is a practical consideration with large implications.  The State’s review of this legislation thus far includes an admission that the Legislature has no idea how much this might actually cost the State in revenue if it passes as is.

Will this package of bills pass?  I expect it will.  If not this month, then early next year.  If the Legislature doesn’t address some of the concerns expressed above, we may find ourselves with some major projects and some unintended consequences not too far down the road.

CSI Part II – MDEQ rolls out brownfield tax increment financing proposal – five major changes you should know about

11 Nov 2014

moneyAs you may recall from this spring, I was asked to serve on MDEQ’s initiative to  review and improve the “patchwork quilt” of statutes and rules regarding brownfield redevelopment incentives, grants and loans.  A CSI II group (of which, in full disclosure, I chaired the Legislative Committee) met regularly over the Spring and Summer and MDEQ has announced two meetings (see the attached flyer) to roll out the proposed changes. These changes have not yet been introduced in the Legislature and thus, are currently only an MDEQ internal recommendation. The hope is that these changes will be introduced shortly.

if passed, these proposed changes should streamline, simplify and speed up the process for loan, grant and TIF approvals to enable projects to get started faster than ever before while supporting a greater range of eligible activities than previously available.

There was some tension between those championing redevelopment and those focusing on environmental remediation but ultimately, there was agreement on a set of changes and clarification of the rules and statutes to clarify the process for obtaining loans, grants and tax increment financing for brownfield redevelopment.  The five most significant changes include: (more…)

CSI Part II – this time, it’s brownfields

14 Mar 2014

z39237120As regular readers of this blog know, initially, I was not a huge fan of MDEQ’s 2012 CSI (Collaborative Stakeholder Initiative) process aimed at refining MDEQ’s Part 201 language and rules to enable more sites to achieve closure and get out of “contamination limbo.”  Well, the process did lead to some specific recommendations and some concrete legislative changes and it appears that closures are slowly being approved more quickly and easily.
Well, not one to rest on her laurels, Anne Couture at the MDEQ decided to try and revisit the process in 2014, this time focusing on making the “patchwork quilt” of statutes and rules regarding brownfield redevelopment, incentives, grants and loans more straightforward.  A CSI II group (of which, in full disclosure, I am a part) has had its first meeting and will be working throughout the Spring and Summer. The group has been charged with focusing on the following six specific areas:

1. Legislative;
2. Core Communities;
3. Site Reclamation Rules;
4. Demolition, Lead, Asbestos, and Dredging;
5. Liability; and
6. Program Implementation.

If you have specific concerns regarding these issues or ideas on ways to improve or streamline the brownfield process or incentives, feel free to let the MDEQ know or send me an email at asiegal@jaffelaw.com and I will be sure to pass your comments on.

Will 2014 be the year that Michigan Brownfields take off?

30 Dec 2013

brownfieldFor the last 20 years, we have seen the innovative and aggressive Michigan brownfield liability and redevelopment laws move redevelopments forward.   While some of these projects have been big, all of them have been what I like to characterize as “low hanging fruit.”   This makes sense because, for all the incentives available, at the end of the day, if you rehab a building that no one wants to occupy, the incentives available won’t make the difference.  While not easy to redevelop, these sites have been redeveloped while other major environmental sites (either very large, very contaminated or in less desireable locations) continued to lay fallow.

So, it is logical that downtown Detroit and areas of Ann Arbor and Grand Rapids and Lansing have seen major brownfield redevelopment pushes and that smaller projects in outer ring suburbs with sound economies have also benefited from the State’s brownfield programs.

But now, we have some major projects that are not “low hanging fruit.”  The Packard Plant is paid for and soon will be owned by a Brazilian developer with big plans. He calls it the “best opportunity in the world” and he sounds serious.  Work on the long-stalled Uniroyal site is reportedly moving forward.  DTE recently sold its Marysville Michigan Plant to a St. Louis developer with experience in Brownfields.  There has been talk for years about Detroit looking at Turin Italy as a model for post-industrial redevelopment and the TV show, Morning Joe recently came to Detroit to tout its urban revival.  I saw this article about the creative redevelopment of a Spanish cement plant, and now I wonder whether we will see this sort of investment and creativity in Detroit and southeast Michigan brownfields which are not the easiest of sites to redevelop.  If so, it will be a very exciting time in Michigan.  Michigan clearly has the supply; now it is time to see if there is sufficient demand.

Bill Could Make Brownfield Redevelopment Easier

30 Nov 2012

Michigan Senate Bill 1210, which would amend the state’s Brownfield Redevelopment Financing Act, was recently passed by the Senate and is now on its way to the House.  If enacted, the Bill could further promote urban development throughout the state.  Some of the Bill’s highlights include:

  • creating a “State Brownfield Redevelopment Fund” which would, among other things, support a grant and loan program to fund the costs of eligible activities on eligible property,
  • expanding the definition of “infrastructure improvements” to specifically include underground parking, multilevel parking structures, and urban storm water management systems – allowing, for the first time, TIF funding of these often-critical components to a development,
  • adding historic resources to the Act’s definition of “eligible property” and “eligible activities,”  which will assist in Michigan’s redevelopment program taking a more wholistic approach,
  • eliminating the requirement for municipalities to pay the Michigan Strategic Fund or the Department of Environmental  Quality to review work plans,
  • removing the requirement that a plan be approved before January 1, 2013, thereby allowing the program to continue to support new developments,
  • allowing for approval of either a work plan or a combined brownfield plan, which will reduce the amount of work developers must do, and
  • providing mechanisms to respond to the failure of a project to occur.

Michigan’s brownfield redevelopment law helps to preserve undeveloped property for agriculture, wilderness and recreational use, and also benefits urban centers by returning contaminated, blighted, or obsolete property to productive use and providing for the generation of tax revenue.  We believe that Senate Bill 1210 will improve the law, remove barriers and streamline brownfield redevelopment.

So, what is replacing the brownfield and historic credit programs?

25 Aug 2011

The Michigan Economic Development Corporation (MEDC) announced yesterday that effective October 1, 2011, it has taken the old MEGA, Brownfield and Historic tax credit programs and has recast them as the: (1) Michigan Business Development Program and (2) the Michigan Community Revitalization Program.  This was done ostensibly due to the elimination of the MBT on which those credit programs depended.  However, more likely, this was the Governor’s attempt to put his preferred focus on “business gardening” into action. 

Beginning Oct. 1, the new programs will provide $100 million in incentives for competitive projects in the State which can be in the form of grants, loans, or other economic assistance of up to $10 million each.

According to the MEDC:

  • The Michigan Business Development Program will support businesses that create qualified new jobs and make new investments in Michigan.
  • The Michigan Community Revitalization Program will support projects to revitalize regional urban areas, act as a catalyst for additional investment in a community, reuse vacant or historic buildings, and promote mixed use and sustainable development. 

It is nice that the MEDC is creating two new incentive program and it’s good that the MEDC is focusing on job creation, community redevelopment, benchmarks, flexibility and  transparency.  The problems here are that these programs are smaller than the current $175 Million program the Governor put into place for this year and far smaller than the programs that these programs replace. 

Even more problematic is the fact that roughly eight months after the Governor pulled the plug on the MEGA, brownfield and historic credit programs, is the fact that the MEDC still seems to be “creating” these programs with only a month to go before they launch – there appear to be no publicly available criteria, scoring mechanisms, goals or targets – while it is clearly a big and important job, how can the business community plan to seek these incentives when they don’t know what’s being incentivized or how the two programs will interact?   

This issue is too important to the business community and the future of the State for 8 months to pass and the MEDC still not to have much concrete to show.