MICHIGAN — Proposed changes to the state’s lauded brownfield redevelopment act have proponents of the program hopeful that Michigan could see even more development activity.
Michigan’s brownfield program, which helped transform many urban areas in West Michigan, is set to sunset at the end of the year, but the Legislature is considering a bill that not only extends the popular program, but also makes some tweaks to make it easier to use for developers.
That’s the word from John Byl, partner with Warner Norcross and Judd LLP and chair of the Michigan Chapter of the National Brownfield Association. Byl and a handful of other business and local government leaders have been helping legislators identify ways to improve the program.
“What we’re doing is trying to remove all the typical issues that create barriers to revitalization,” Byl said. “We’re making it easier for people to make the right decisions.”
Broadening the ability to capture additional tax revenue could make even more projects viable, Byl said.
At its heart, the brownfield Tax Increment Financing (TIF) program helps defray the cost of cleaning up blighted and contaminated projects by capturing increased property taxes that would have been paid because of the rehabilitation project and passing those funds on to the developer. This up-front help is important, many in the industry say, because brownfields have high initial costs for clean up and remediation before a project can get off the ground. If communities want to redevelop challenged properties, then they need to help developers get over this initial cost barrier.
The proposed changes, if approved, would ratchet up the capabilities for TIF, Byl said.
The goals for Senate Bill 1210 are to reduce regulatory requirements, streamline the approval process and facilitate more urban development throughout the state.
Senate Bill 1210 expands the definition of infrastructure eligible for TIF. Under the proposed changes, urban storm water management systems and multi-level or underground parking structures could qualify for the program. That could be good news for the city of Grand Rapids, which is currently reviewing a user fee or use tax to pay for improvements to its aging stormwater system.
The bill could also encourage more businesses to install green infrastructure — including rain gardens, porous pavement and green roofs, which typically pose higher initial cost — in new or reuse developments. This fits with the growing emphasis to install appropriate urban management systems, Byl said.
The proposed changes would also spread the TIF program to historic resources, including buildings and infrastructure. Currently, only contaminated, functionally obsolete and blighted properties are eligible.
The bill’s advocates are also pushing for a quicker and more responsive approval process at the state and local levels.
“We’ve leveraged millions of dollars of investment with (brownfield TIF). It’s definitely a program benefitting the community,” said Kara Wood, economic development director for the city of Grand Rapids. “We also know it has the ability to do better with some tweaks.”
Wood said the TIF process is lengthy and can take up to three months for projects to get through public hearings and approvals. The changes could see projects turn around in 30 days to 60 days, instead of 90, she said.
Offering the TIF program costs Grand Rapids around $400,000 annually to operate in terms of staff time and related expenses. More projects mean more staff time and administrative costs, so for Wood and other city officials, streamlining the process could provide some relief.
The Michigan Municipal League also supports the proposed changes and was part of the stakeholder workgroup convened to guide the legislative process.
Most of the issues with the existing program stemmed from the lengthy approval process through both the Michigan Economic Development Corp. and the Michigan Department of Environmental Quality, said Nikki Brown, capital office coordinator for the MML.
“As it is right now, you have to submit a work plan and a brownfield plan,” she said. “Part of this legislation simplifies that to a combined plan. One of the biggest changes is that (the new bill) eliminates the approval time period for a work plan in order to capture state tax dollars.”
The bill update also seeks to further define roles and responsibilities by requiring developers to provide a report to the local unit of government every year that the project receives TIF reimbursement. Developers would have to report the amount of capital investment; number of residential units constructed or rehabbed; square footage constructed or rehabbed in retail, residential, commercial or industrial projects; and new jobs created.
The legislation would also set up a State Brownfield Redevelopment Fund that would provide grants and loans to help fund upfront costs of state approved brownfield projects.
Annual revenue for the fund is estimated at $1.5 million to $4 million per year. However, a bill analysis by the State Fiscal Agency points out initial revenue would be lower, but increase over time.
The amount of revenue would depend on local authority activity, the pace of development and the amount of captured taxable value. Local brownfield redevelopment authorities would have less revenue under the bill due to the shift of a portion of the current tax revenue to the new state fund.
The grant and loan program at the state level would be a big help in getting community projects off the ground, Brown said. Access to upfront capital can pose a big hurdle to developments, she said, adding that changes to the process would broaden the function of the program and allow greater access for funds to offset those initial costs.
Brown said the MML and the legislation’s other supporters hope to see the bill pass the House during the upcoming lame duck session. If the bill isn’t passed by the end of this year, supporters would have to reintroduce the bill again next year.
Byl of Warner Norcross said the bill builds on the changes to the state’s business incentive programs in Gov. Snyder’s Community Revitalization Program (CRP).
“Michigan has already taken the initiative with the CRP,” Byl said. “The focus is more on urban core development and revitalization. The CRP program along with these (TIF) modifications are steps in the right direction.”