Legislation proposed in the Michigan Senate could go a long way toward getting large-scale development projects over the finish line. While it’s interested in using the program to help future projects, 616 Lofts doesn’t see the incentives playing a role in the $140 million mixed-use movie theater development it’s a part of in Grand Rapids. Legislation proposed in the Michigan Senate could go a long way toward getting large-scale development projects over the finish line. While it’s interested in using the program to help future projects, 616 Lofts doesn’t see the incentives playing a role in the $140 million mixed-use movie theater development it’s a part of in Grand Rapids. Courtesy Rendering

Major developments could get funding boost under proposed incentives

BY Sunday, October 02, 2016 01:21pm

To help make Michigan more attractive for large-scale real estate developments, lawmakers want to give developers new options to help fund their projects.

Michigan Senate Bill 1061 and a handful of companion bills would allow for the capture of sales and use taxes — as opposed to just property taxes — in the development of “transformational” mixed-use real estate projects. 

It seems commercial real estate interests and economic developers, after years of calling for additional state development incentives, might realize their goal of having more “tools in the toolbox.”

But while developers in West Michigan say they welcome the funding mechanism for future ventures, they contend their existing projects — including ones that could potentially qualify for added tax capture under the proposed legislation — remain viable without added incentives.

“Based on the current state of the bill, it’s not something we can depend on for our Arena South project,” said Jeff Olsen, director of development at 616 Lofts LLC, a Grand Rapids development and property management firm.

616 Lofts is one of the partners — along with J.D. Loeks of movie theater chain Celebration! Cinema — involved in a proposed $140 million mixed-use project that would transform two parking lots south of Van Andel Arena in Grand Rapids into a multi-phase development with a movie theater, parking, commercial space and hundreds of housing units.

The firm continues to work on project designs and expects to finalize its incentive package, which includes brownfield funds and Community Revitalization Program (CRP) grants, according to Olsen. 616 Lofts hopes to break ground on the project in the third quarter of 2017, he said. 

Based on the thresholds written into the legislation, only the 616 Lofts/Celebration Cinema project and a couple of other current proposals in West Michigan would qualify for the added tax capture. For a city the size of Grand Rapids at around 200,000 people, an investor would have to commit at least $100 million in private capital to qualify. For Muskegon, with a population of 37,000 people, the investment would have to be just $25 million. For projects in Detroit, only private investment of $500 million or more would qualify. 

To Rick Chapla, vice president of strategic initiatives at The Right Place Inc., those thresholds seem reasonable, given the kinds of projects that have already taken place to revitalize a city like Grand Rapids. 

“The easier projects that have helped to transform downtown Grand Rapids are largely over,” he said. “The projects going forward are likely to be bigger in scale and more expensive, but potentially (bringing) new tax base and job creation.” 


Until being contacted for this report, Olsen said 616 Lofts was unaware of the talks to expand brownfield tax capture. Nonetheless, the executive says the firm would be interested in pursuing the incentive in the future. 

“If this bill comes about, it could create opportunities to get projects off the ground,” he said. 

Like Olsen, other West Michigan developers say they also were unaware of the current discussion over development incentives. 

“We didn’t even know the legislation was being introduced,” said Wes Eklund, one of the principals at Pure Muskegon LLC, an investor group that announced plans in August to redevelop the former Sappi Paper site, a polluted 120-acre plot of land on the shores of Muskegon Lake. “If it includes the capability of getting (additional) funding, it would give us some options.” 

The Pure Muskegon group previously secured a $1 million Brownfield Grant from the Michigan Department of Environmental Quality (MEDQ) to help with site remediation as part of its deal to acquire the property, as MiBiz reported at the time. 

Eklund, who also serves as CEO of Fleet Engineers Inc., said the group is still about a year away from having formal plans to redevelop the site, which it has dubbed Windward Pointe. He declined to discuss specifics of what kind of gap financing the partners could use for the project, which they said previously could reach a cost of more than $200 million.


While developers across the state remain interested in the bill, the proposal to add additional tax capture for large redevelopment projects has been greeted with mixed reactions in Lansing. 

As written, the bill “would reduce the State General Fund by an unknown, but likely significant amount,” according to an analysis from the nonpartisan Senate Fiscal Agency. 

Proponents, however, say there’s a number of stopgap measures written into the legislation, including capping the total amount of capture and limiting the board of the Michigan Strategic Fund (MSF), the state body that would have to approve all projects, to no more than five projects annually. 

No municipality could approve more than one project in a year.  

“If done properly and consistent with the legislative intent, that test means the impact to the state budget can be only positive,” Dan Austin, a spokesperson for MI Thrive, the coalition pushing the legislation, said in an email to MiBiz.  

The 20-member MI Thrive group counts among its ranks organizations like The Right Place Inc., Southwest Michigan First, and Grand Rapids Area Chamber of Commerce, as well as individuals including CWD Real Estate Investment Inc. Managing Partner Sam Cummings.

“I have been a supporter of the concept of this effort but have not been involved in the details beyond that ‘conceptual support,’” Cummings wrote in an email to MiBiz.

It seems most of the push behind the legislation, and the discussion of the bills, is taking place in the Detroit market, where Crain’s Detroit Business first reported on the effort in mid September. 

The reason: Billionaire Dan Gilbert, the chairman and founder of Quicken Loans Inc. and backer of several major real estate ventures, has been out front lobbying for the legislation. 

Gilbert reportedly aims to deploy around $2 billion in added real estate projects — including a proposed Major League Soccer stadium at the site of a stalled jail being built north of downtown Detroit. He has said that the expansion of brownfield tax capture will be vital to getting more large-scale projects over the finish line. 


The legislation, which was introduced by state Sen. Ken Horn, R-Frankenmuth, and that unanimously cleared a committee vote in late September, includes bipartisan sponsors in the state Senate.
Austin said he’s hopeful the matter could come to a full vote in the Senate when the governing body reconvenes in the third week of October. 

Brownfield experts note that Horn’s proposal would bring about some significant changes to how the state gets involved in redevelopment deals. 

Under the existing law, only local jurisdictions are subject to reimbursing developers for their projects. If the new legislation were to take effect, the board of the MSF would become a signatory to the transformational deals.

“There’s a shift there in the sense the board is now tying the MSF to the reimbursement of the state tax, which is different,” said Dan Wells, a senior project manager in the Grand Rapids office of AKT Peerless Environmental Services LLC, a private sector brownfield consulting firm. “I’m not saying it’s better or worse that way, but it is a shift.”

Prior to his role at AKT Peerless, Wells spent five years working in the brownfield department of the Michigan Economic Development Corp. (MEDC).

Additionally, Wells expressed concern that the makeup of the MSF’s board — including executives from the commercial development and finance sectors — could pose conflicts of interest. 

For its part, the MEDC says it is not yet in a position to discuss the proposed legislation. 

“This is a legislative proposal that is being brought forward, and we are still evaluating and analyzing the proposal,” Jeremy Hendges, deputy director of legislative affairs for the MEDC, said in a prepared statement. “At this time, we are not able to provide an accurate assessment to the questions that were posed, as we are still evaluating the proposal and the potential impact.”

Ari Adler, director of communications for Gov. Rick Snyder, said the governor would wait until any final legislation hits his desk before making a formal statement on the proposal. 

“The governor is always open to new ideas and welcomes the discussion on tax reform,” Adler wrote in an email to MiBiz.

That policymakers are taking time and reviewing the legislation before jumping to support it comes across as good news to Mark Nettleton, an attorney practicing in public finance and municipal law with Grand Rapids-based Mika Meyers PLC.

“It’s essentially a gamble,” he said. “Will these developments be generating enough revenue, enough foot traffic, enough jobs to (lift) all boats? The devil is in the details.” 

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