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Monday, 16 April 2012 14:35

Slow start for new state redevelopment program

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WEST MICHIGAN — The Michigan Economic Development Corporation is trying to dispel rumors by letting developers and community officials know money is still available for redevelopment projects.

The Community Revitalization Program (CRP), which replaces the former brownfield redevelopment and historic preservation tax credits, is a part of the Governor’s budget and tax reform overhaul. Under the new program, $100 million total was set aside for the CRP and Business Development Programs program, with at least $20 million allocated to projects that would have previously gone after brownfield and historic tax credits.

The $20 million CRP funds fall far short of the funds available to previous brownfield and historic projects. On average, the state had approved $170 million in brownfield tax credits per year from 2008 to 2010, about $85 million to $100 million of which had been claimed. The historic credits averaged $15 million per year in the same time frame.

The redevelopment credits were also separate from the state’s business development tools, including the former MEGA tax credits toward the Michigan Business Tax and other grants.

The budget appropriation for CRP is not guaranteed next year either, though there has been talk in the House of approving some funds for the program in the state’s 2013 budget.

Katharine Czarnecki, community assistance team manager at the MEDC, said projects in Detroit, East Lansing and Kalamazoo totaling $5.5 million are in the process of final approval.

“This is very much a three-way conversation with the developers, the community and the MEDC.” She said. “What we’re hoping for is that the communities can help prioritize projects for us.”

Czarnecki said there is still a lot of apprehension on the part of developers who don’t want to be guinea pigs for the program. Still, the pipeline of projects is filling daily, and several projects are on the horizon, she said.

Skeptics of the program question whether the limited amount of funds will keep pace with the number of projects done under the former tax credits. Others argue there was no need to change a successful program. Sources familiar with the subject contend that the change was a matter of fiscal responsibility and that tracking and budgeting the former credits was too difficult.

The new performance-based system provides grants and/or loans up to 25 percent of the eligible investment. Grants cap at $1 million and loans cap at $10 million, however the project total cannot exceed $10 million. One important point to note is while the grants are exempt from state taxes, federal taxes still apply. Projects are also subject to a fee of $5,000 upon completion. Brownfield tax increment financing remains unchanged and will still be used and supported by the MEDC.

Sarah Rainero, community assistance team specialist at the MEDC, said during a roundtable discussion at Grand Rapids City Hall in March that the CRP funds are only available to projects in main street communities, noting a project in Old Town in Lansing as example. Projects also must have community support, address an underserved market and create jobs. Projects for mixed-used facilities also take precedence.

“This program is meant to be gap-driven,” Rainero said. “(The MEDC) does not want to be first in, like so many (projects) have been in the past. The emphasis is on projects ready to go now.”

A project will also have to meet certain milestone agreements to keep in place any grants and loans, which would be paid upon completion.

Mike Shore, director of corporate communications for the MEDC, said the state has yet to approve a single project under the CRP program. Several are close to getting final approval, and there are 23 in the pipeline asking for a total of $33.5 million, he said. Five projects approved under the Michigan Business Development program, which draw from the same $100 million pot, total $2.4 million. And additional 45 projects are in the pipeline seeking $46.1 million, Shore said.

Given all projects in the pipeline gain approval, only $18 million in funds remain for projects this budget year.

Kara Wood, economic development director for the city of Grand Rapids, said so far the city has limited use for the program. However, the city submitted two projects already and has about 10 more for future consideration, she said.

Because funds are limited, the city is only trying to submit the most competitive projects. The two projects submitted are both mixed-used facilities downtown, Wood said.

“I think the old program was working well and driving significant development, and while I think it’s important to look at things every year or so, there was definitely a market for it,” Wood said. “Changing midstream is difficult, but from a budget standpoint, it makes sense.”

Chuck Hoyt, VP of development for Locus Development in Grand Rapids, said he appreciates that the MEDC is out trying to update those interested in the program and reassure them that there is money still available.

“We’re not really worried,” he said. “We’re confident we’ll be able to access what we need going forward.”

Considering the limited amount of money in the pot, Hoyt said he’s not really surprised that the process is getting more competitive or that developers are having to do more on the front end before going to the state for support.

“We’ll get what we can,” he said.

Jared Belka, attorney at Warner Norcross & Judd who was at the roundtable meeting, said change is always difficult.

“The biggest thing here is allocation,” he said. “It is possible that some good projects could get sidelined.”

Read 1929 times Last modified on Saturday, 11 August 2012 09:49

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