VICKSBURG — A proposed large-scale redevelopment in Southwest Michigan is angling to be the second project in the state to use a new funding tool.
Paper City Development LLC is hopeful its proposal will meet the Michigan Strategic Fund’s criteria to use the state’s transformational brownfield program, an incentive first enacted in 2017.
The developers are preparing to submit a 190-page transformational brownfield plan detailing an ambitious $80 million undertaking to rehabilitate the former Lee Paper Mill site, which has sat dormant for about two decades in Vicksburg, a village of 3,400 people that’s located about 15 miles south of Kalamazoo.
The mixed-use project would transform the mill, which is listed on the National Register of Historic Places, to include a brewery, distillery, beer garden, restaurants, various commercial and residential spaces, boutique hotel, and a museum dedicated to the American brewing industry. As well, the developer’s plans call for multiple event spaces and an outdoor courtyard for music and other events that can fit up to 10,000 people.
“We’re planning on having multi-day music festivals on the compound and we’re planning on having up to 40,000 people visiting two weekends a year,” said Jackie Koney, director of Vicksburg operations for Paper City Development.
Executives at the company, founded by Vicksburg native Chris Moore, who lives in Seattle and owns software firm Concord Technologies, have spent about four years coming up with what they believe is a sustainable plan for Paper City, Koney said. They now are working through the application process for the state’s transformational brownfield program, which they say is necessary for the project to move forward.
Developers hope to convince the MSF board with a plan that estimates the project will create 1,852 jobs over the first five years of operation and lead to $214 million in new wages, $399 million in new value and $60 million in new state and local taxes.
Koney said the project would not only benefit Vicksburg, but also Kalamazoo County as a whole. Paper City Development hopes to complete the project by 2024.
“Given how new the program is, we have had to rely heavily on the expertise of MEDC staff, all of whom have been extremely responsive to questions and requests for feedback,” Koney said.
The state has used the transformational brownfield program for just one other project: Bedrock Management Services LLC’s $2.1 billion development of four sites spanning six acres in downtown Detroit.
Quicken Loans founder Dan Gilbert, also the founder of Bedrock Management, helped push the legislation that created the transformational brownfield program, which allows for the capture of additional taxes to fill funding gaps that would prevent a development from moving forward.
Approval of the plan in Vicksburg would bring in $23.9 million in state taxes to reimburse cleanup activities for a period of 30 years. Paper City Development would provide about $56 million in private investment.
Offsetting the gap
Since the MSF board approved the transformational brownfield program for Gilbert’s Detroit project, communities and developers from other areas have been in talks with the state, but so far none of them have applied to use the funding tool, said Lori Mullins, director of community development incentives for the Michigan Economic Development Corp.
The state created the program to allow large projects to capture additional revenues so they can be financially feasible, specifically to overcome challenges at difficult-to-redevelop sites, she said.
“In a lot of development cases, the proposed project won’t create the revenue from operations and cash flow that’s necessary to pay the debt service that would be required to make the project happen,” Mullins said. “The transformational brownfield plan allows for the capture of certain revenues that are created from the project — that would otherwise go to the state and other taxing jurisdictions — to help offset that gap.”
The transformational brownfield program allows for the capture of five new sources of tax revenue associated with a project, in addition to incremental revenue from property taxes. The additional tax revenue includes various income, sales, use and withholding tax captures, which are limited to up to 20 years.
The project must prove it will have a transformational effect on local economic development and community revitalization, based on the extent of brownfield redevelopment and growth in population, commercial activity and employment that will result from the plan. It also must be a mixed-use project and meet minimum thresholds of capital investment that vary depending on the population size of the municipality where it’s proposed.
Since Vicksburg’s population falls in the category of less than 25,000, Paper City Development would need to have a capital investment of at least $15 million. On the other end of the spectrum, communities with at least 600,000 residents require a $500 million investment to qualify for the program.
So far, Paper City Development’s transformational brownfield application has garnered resolutions of support from the village of Vicksburg, Schoolcraft Township and most recently Kalamazoo County. The development must complete the MEDC’s review process, including an analysis by the state treasurer. The developers need to show there is a net benefit to the state with agreement from the treasurer. If it meets the criteria, the Paper City plans would then go before the Michigan Strategic Fund board for consideration.
Paper City executives describe the project as a labor of love for Moore, who for a time worked at the mill, following in the footsteps of his father and grandfather. Moore also plans to connect the project to his Seattle-based company, Old Stove Brewing Co., by opening a satellite brewery and taproom at the mill, which he purchased in 2014 from the Kalamazoo County Land Bank.
Village Manager Jim Mallery believes the redevelopment of the mill would have an impact measured in the “tens of millions” of dollars for Vicksburg. The village council voted in October to create a zoning classification to accommodate the proposed redevelopment.
The village and the developers also are considering other effects on the community, like increased traffic and noise. Developers will submit plans to the village on how to mitigate these challenges, and have retained firms to study the project’s effects on the environment, sound and the residential market.
“We’ve had a lot of those discussions and we understand there will be an impact,” Mallery said. “Hopefully there’s pretty significant traffic coordination plans being put together, and event plans, so it can have the least negative impact possible.”