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Published in Economic Development

Bipartisan bills seek pilot program, tax incentive for community developments

BY Thursday, September 03, 2020 01:08pm

LANSING — A bipartisan bill package in the state Legislature would create a pilot program and new tax incentive to promote affordable housing, business development and blight elimination projects in economically distressed areas of Michigan.

Under House Bills 5820 and 5821, qualifying 501(c)(3) nonprofits would submit “community investment plans” to the Michigan Strategic Fund, while investors supporting a project could claim a tax credit equal to 50 percent of the investment, capped at $25 million.

Left: Rep. Aaron Miller, right: Rep. Ronnie Peterson COURTESY PHOTOS

“This is a motivational tax credit to motivate giving on a community level toward something like housing,” state Rep. Aaron Miller, R-Sturgis, testified during a House Commerce and Tourism Committee Wednesday. 

Miller is sponsoring H.B. 5820 to create the pilot program, while H.B. 5821 outlining the tax credit is sponsored by state Rep. Ronnie Peterson, D-Ypsilanti. 

A legislative analysis of the bills describes community investment plans as “strategies to encourage small business development, provide affordable housing, promote financial empowerment, create and retain jobs, and any other strategies proposed by a qualified organization to assist a distressed area in a neighborhood, community, or commercial corridor or the low-income residents of a neighborhood or community through qualified investments.”

Qualified organizations are 501(c)(3) nonprofits focused on specific “economically disadvantaged” neighborhoods or communities, and do not include financial institutions.

If supporting a project, investors would need certification from the Michigan Strategic Fund at least 30 days prior to issuing funding for a project.

The bills are modeled after similar programs in 14 other states, supporters said.

Miller discussed housing shortages in his hometown of Sturgis, while Peterson said community investment plans could help eliminate blight and bring productive properties on the tax rolls.

The legislation has support from the Grand Rapids Area Chamber of Commerce, the city of Grand Rapids and New Development Corp., which rehabs blighted homes and properties for affordable housing buyers on Grand Rapids’ north side. Backers from southeast and northern Michigan also testified Wednesday in support of the bills.

New Development Corp. Executive Director Helen Lehman said most federal funding for these types of projects is earmarked for rentals, while nonprofits typically don’t have funding support from private investors to accomplish all of their goals.

“Right now, we have three vacant lots that could be utilized for affordable housing if the money was available. It simply is not,” Lehman said. “We could use this to bring new private dollars into our community.”

Jonathan Klooster, Grand Rapids’ acting assistant economic development director, said the legislation aligns with a key priority to increase the city’s housing stock. He cited a recent housing needs assessment showing the city needs more than 9,000 new housing units of all types to meet demand.

“These bills would provide a new tool to be leveraged by qualifying organizations,” Klooster said.

Miller said the bills were broadly written and could be amended during the committee process after some Republicans expressed hesitation to a new tax incentive and supported the “free market” to find solutions.

“The free market is where you go … but I appreciate the effort to correct the situation,” said state Rep. John Reilly, R-Oakland Township.

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