Brownfield progams work – who doesn’t get this?

9 May 2011

Last week’s Freep had a piece supporting the brownfield tax credit and historic tax credit programs.   Unfortunately it was only in the online version and I wonder how few people saw it.

It was written by the City of Adrian DDA director and economic development coordinator, a U-M public policy professor and the CEO and executive director of the Michigan Municipal League. 

They “get” that these programs work by facilitating investment.  “And they are smart investments because private dollars come first, jobs come first, rehabilitation or renovation comes first, increased tax base comes first, and then, and only then, does the state provide a short-term reduction on taxes that were already increased as a result of the project completion.”  

The argument that there’s no data about the economic ripple effects of  these programs (i.e., the “do they pay for themselves” question) isn’t an argument against the programs – it’s an argument for better data gathering.  I believe that once data is gathered, it will show developers are using these incentives to break down barriers to market entry which include business risks and reluctance by traditional lenders to lend in urban areas.  These developers are in it to create jobs because that makes money, but no one has ever measured these benefits before.  However,  no developer is saying “I want to spend years of my life rehabbing a building or site because I will recoup 15% of my investment at the end of this process.”  They expect to make money – and that means jobs.  

The Governor seems to be getting his way with the Legislature – revised tax legislation doing away with these credits is moving swiftly toward his desk.   However, the Governor has reportedly said that he wants to do something to replace these programs – funding them at lower levels, via a Legislative appropriation or some other mechanism.

That approach is less than optimal because it would be subject to political whims and likely would be inconsistent – a serious disincentive.  Stability and predictability are key to the success of these programs.  A lower level of funding is problematic because it limits the number of projects that can be funded.  Whether and how those programs will be funded remains to be seen.  One thing is clear – unless the Governor and Legislature replace these incentives in a way that encourages urban redevelopment, there will be far fewer brownfield and urban redevelopments – just as the City of Detroit seemed to be reaching a positive tipping point.

Leave a Comment to “Brownfield progams work – who doesn’t get this?”

  1. Josh 01. Jun, 2011 at 5:02 pm #

    Especially in Michigan! After visiting Detroit with a brownfield tax attorney we saw almost too much potential development. Seems like a silly time to be losing them.

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