Michigan's brownfield redevelopment tax credits are history, but new incentive pool created
MACKINAC ISLAND — The reconfiguration of Michigan’s brownfield redevelopment efforts was necessary due to the state’s financial challenges and the dysfunctional way tax credits were being distributed under the old system, Gov. Rick Snyder said today.
Under the tax reform law approved by the Michigan Legislature and signed by Snyder last month, brownfield tax credits — distributed to offset the cost of redeveloping distressed properties with environmental issues — were wiped out.
But in the 2011-12 fiscal year, which starts Oct. 1, the Michigan Economic Development Corp. will have a general pool of $100 million for a variety of different incentives, including brownfield redevelopment sites.
A conceptual drawing shows what the owner of Georgetown Mall envisions for the property on Packard Street in Ann Arbor. But the project may not be doable without brownfield redevelopment incentives.
From The Harbor Companies LLC
Snyder said today at the Detroit Regional Chamber's annual Mackinac Policy Conference that brownfield redevelopment is important. But he said the tax credits were being handed out frivolously.
“It got to the point where you could qualify if you had a house in the suburbs and in the winter your lawn was brown,” Snyder said. “That’s not brownfield development.”
In recent years, Ann Arbor area developers have secured brownfield redevelopment tax credits and historic preservation tax credits for several different projects. Those include the Zingerman’s expansion in Ann Arbor and the Mellencamp building and West Michigan Lofts project in Ypsilanti. All projects that have already received tax credits will keep them.
But developers say that other brownfield projects, including Ann Arbor’s polluted former Georgetown Mall site, may not be redeveloped without tax incentives.
Under the new system, developers seeking to revitalize brownfield sites will have to convince the MEDC that their projects are worthwhile.
“We could do a loan, we could do a grant, we could do a direct investment, we could do a hybrid of those,” MEDC CEO Michael Finney told AnnArbor.com. “We have incredible flexibility to make investments work and because of that (it will be) less costly than tax credits.”
George Heartwell, mayor of the city of Grand Rapids, said brownfield redevelopment is “the linchpin of our economic development strategy,” but he suggested that he still supports the governor’s changes.
“The fact that the appropriation is larger than anticipated is welcomed,” he said. “ I think the approach is a good approach and I look forward to seeing that pool built over the years.”
Dave Bing, mayor of the city of Detroit, which has a number of projects that have previously qualified for brownfield tax credits, said the tax reform will lead to changes.
“Down the road, we’ll have to rethink some of the redevelopment opportunities that are there,” he said.
Snyder, repeating a sentiment he’s regularly expressed since the early days of his gubernatorial campaign, said a “great urban environment” is important for attracting young talent.
“Many of them are looking for that urban environment,” he said. “The comeback of Detroit is critical to the future of Michigan.”
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
SonnyDog09
Sun, Jun 5, 2011 : 12:52 p.m.
"How about some examples of abuses that Snyder claims occurred under the previous program?" I'll bite. The article mentions that the Zingerman's expansion qualified for "brownfield tax credits." How exactly is that neighborhood a "brown field?" It hardly looks like a former industrial property that needs to be cleaned up before redevelopment.
John Q
Sat, Jun 4, 2011 : 2:56 a.m.
Snyder's poor attempt at humor only displays his lack of knowledge about brownfields efforts around the state. How about some examples of abuses that Snyder claims occurred under the previous program?
Jeff Irwin
Fri, Jun 3, 2011 : 4:02 p.m.
The elimination of the brownfield credits was a very unfortunate development for Michigan. Brownfield incentives were working and I hope that Gov. Snyder and Micheal Finney find a way to put the pieces back together. Sadly, this announcement doesn't seem to do it. Our brownfield redevelopment programs were a national leader; and, although not perfect, those programs brought in some big investments and cleared up some troubled sites. Once again, the structure of the old rules meant that investment came in from the outside, all of the costs were paid by developers and the developers were only repaid based on actual expenses when future tax revenues were realized. Because of all of these barriers, many projects were approved for credits but never used them (Lower Town comes to mind). This system could have definitely been improved - such as by requiring stricter cleanup standards or by requiring performance indicators within a specified period of time in order to keep the credits. However, the general direction of the brownfield statutes was good. Now, the Governor has proposed and Finney has said, "We could do a loan, we could do a grant, we could do a direct investment, we could do a hybrid of those." So, now Michigan is going to spend $100M to pick winners and directly invest in private projects. This plan introduces additional opportunities for abuse and political patronage. This plan spends precious state dollars on private investment and places the state in the role of development speculator. Why would we spend tax dollars on certain private projects when we had a working system that was attracting investment from the outside? This is a step backward and I'll be trying to encourage my Republican colleagues to support the more market-based strategies that John Engler created a decade ago.