Governor's call to eliminate brownfield credits puts funds for Ann Arbor's Georgetown Mall project at risk
A conceptual drawing shows what the owner of Georgetown Mall envisions for the property on Packard Street in Ann Arbor. The developer is seeking tax breaks on the project.
From The Harbor Companies LLC
Financing an environmental cleanup and redevelopment of the polluted Georgetown Mall site in Ann Arbor is proving to be more difficult than expected for a Bloomfield Hills developer.
When Craig Schubiner appeared before the city's Brownfield Review Committee in January, he was seeking roughly $3 million in tax-increment financing over a period of seven years.
That was to help pay for items such as cleanup of contaminated soils, demolition and asbestos removal, which are eligible under the state's Brownfield Redevelopment Financing Act. Now it appears the cleanup costs could be double the original projections.
Gov. Rick Snyder then dropped a bombshell on developers like Schubiner this past month when he called for an elimination of brownfield credits in the state of Michigan.
Schubiner originally was hoping for up to $4.5 million in brownfield credits for Packard Square, a mixed-use project with 230 apartment units and 21,000 square feet of retail space along Packard Street.
Another view of the proposed concept for Packard Square.
From The Harbor Companies LLC
A brownfield property is one in which site conditions present an obstacle to redevelopment. In Michigan, that can include properties that are contaminated, blighted or functionally obsolete — and the developer of Packard Square is claiming all three conditions exist.
Schubiner appeared before the city's Brownfield Review Committee once again Monday night, joined by Anne Jamieson of AKT Peerless Environmental and Energy Services.
Jamieson said the project's chances of getting brownfield credits aren't dead, but the effort is going to be extremely difficult.
"How it's working is, as of April 1, brownfield credits are going to be put in with a pot of all the other credits available in Michigan that are proposed to be cut," she said. "Between April 1 and Oct. 1, we have an opportunity to get credits approved in the state of Michigan."
However, Jamieson said, Snyder's office is not prioritizing Ann Arbor as one of the core communities for receiving those credits.
"He's looking at more of the urban cores like Detroit, Flint and Pontiac," she said. "So we are pretty much certain this credit is in jeopardy for the project."
Jamieson did most of the talking Monday night, discussing the developer's recently submitted brownfield redevelopment plan for the Georgetown Mall site.
The plan shows nearly $5.1 million worth of costs the developer hopes to get tax-increment financing assistance on, including demolition, lead and asbestos abatement, public infrastructure improvements and other activities. The payback period for that is 12 years.
Through tax-increment financing, no existing taxes are abated. However, the incremental increases in tax revenues that result from improvements to a property are channeled back to the developer to help cover costs and incentivize the development.
The developer provided a additional estimate on Monday for even more cleanup activities that would add $2.3 million in reimbursable costs to the project and extend the payback period to 23 years. Jamieson explained the reasons for the additional costs.
"We did not factor in Ann Arbor's requirements for cleanup criteria before, and basically that doubled the plan," she said, adding it now means removing more soil and water from the site. "Our original proposal included just a dig and haul, and source area removal. We then factored in that we also need to look at Ann Arbor's requirements. And we also met with the state DEQ folks and they had additional requirements."
The developer traces the source of the site's environmental contamination to a dry-cleaning facility that once operated along the southern portion of the property. Previous investigations identified both soil and groundwater contamination, including chlorinated solvents.
Marcia Higgins, one of three Ann Arbor City Council members who comprise the city's Brownfield Review Committee, said the city prides itself on its high cleanup standards.
"When we did our brownfield plan 10 years ago, we deliberately made ours more stringent and that was to make sure that when we had an opportunity to do a cleanup that we cleaned it up to the most pristine level we can, versus paving it over," said Higgins, D-4th Ward. "So that's what we're dealing with here. The state has one level. Ann Arbor has another."
Higgins said she recognizes that it will be more costly to the developer, but that's where the city is willing to consider a longer payback period.
"And that's always to Ann Arbor's benefit because so much of our stuff runs to the river, so it helps on many different levels," she said of the standards.
Tom Crawford, the city's chief financial officer, said he's looking forward to seeing what the developer brings to the committee next month.
"Given the challenges at the state level with incentives being backed off a bit, they need to revisit their financing plan," he said. "They've got a very interesting project that has a lot of potential, but the financing plan is going to have to be revised for the latest information."
If the brownfield tax credits go away, or the rules around them change, it will make projects like Packard Square more challenging financially, Crawford said.
"So it's something developers are really going to have to sharpen their pencils on and try to figure a way around," he said.
Jamieson said the game plan is to try to narrow down the costs before coming back to the city. She said the developer also will be meeting with the state Department of Environmental Quality to secure additional funding. Schubiner said he's eyeing financing from the U.S. Department of Housing and Urban Development, but he declined to elaborate on details.
Schubiner asked Monday night if there were a way the city could expedite approval of the project. City officials said mid-April is likely the earliest it could go before the City Council.
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529.
Comments
Stan Hyne
Fri, Mar 4, 2011 : 4:17 p.m.
We don't need a brownfield tax credit. Just have the city put in an underground parking lot.
Smalltownbanker
Fri, Mar 4, 2011 : 2:54 a.m.
This has nothing to do with environmental issues...we had too many broke developers trying to make millions with our (taxpayers) dollars. Look at lower town, Georgetown, washtenaw. developers paid way too much for r/e thinking they'd make moneybwith tax credits. If property is contaminated, it is worthless, let's bill the owner to clean up. Look across the state at all the failed projects resulting from broke developers tying up properties they could' develop without taxpayer support. In the new world, cash is king, let the developer buy the property, develop it, lease it up, give them a tax break during this process, then let' s get our fair share once it's built and leased out.
treetowncartel
Wed, Mar 2, 2011 : 8 p.m.
We lost money for the bridges and now this? Wait, you have to have something in your possession before it is can be lost.
EyeHeartA2
Wed, Mar 2, 2011 : 7:20 p.m.
Root cause why this won't get done: "We did not factor in Ann Arbor's requirements for cleanup criteria before, and basically that doubled the plan,"" and "When we did our brownfield plan 10 years ago, we deliberately made ours more stringent and that was to make sure that when we had an opportunity to do a cleanup that we cleaned it up to the most pristine level we can, versus paving it over," said Higgins, D-4th Ward. "So that's what we're dealing with here. The state has one level. Ann Arbor has another." The state has one level. Ann Arbor has another." The state has one level. Ann Arbor has another."
E. Manuel Goldstein
Wed, Mar 2, 2011 : 7:10 p.m.
So, eliminating Brownfields credits creates how many jobs?
whatsupwithMI
Wed, Mar 2, 2011 : 5:43 p.m.
Fortunately with the shiny, new, flat business tax the mega-developers and corporations are going to be swimming in extra profits- taxes are down from what, 25% to 6.5%?. They can now finally afford all these expensive, job-producing projects that they currently aren't able to properly resource. There's won't _be_ a need for the tax credit as a result. We *know* they will reinvest those record earnings in projects like this. Ring the church bells! Anyway, that tax credit is just socialism and should be removed as it promotes pasty, weak corporations. @IntheHall, I agree- I don't like this new math either. I much preferred W Bush's means of making a budget- simply fail to include 10's of billions of expenses that would make the bottom line look bad. There's a war on, you know, and that doesn't count on a budget. Since I started doing such for my household budget- things are going swimmingly.
dotdash
Wed, Mar 2, 2011 : 3:05 p.m.
My questions are 1) is this just an easy way for the developer to shift costs to the taxpayer and 2) even if that is the case, is it a good thing because otherwise no one would redevelop the site?
bugjuice
Wed, Mar 2, 2011 : 2:59 p.m.
Brownfield cleanup does not appear anywhere in the Constitution. Any effort to create a nanny state cleanup law is unconstitutional We must resist all job killing rules that mandate businesses to clean up their messes no matter the health costs to our citizens.
John B.
Wed, Mar 2, 2011 : 7:11 p.m.
Well-said! Let all the citizens die of cancer, etc.! Let 'em go back to Kenya with Obama if they don't like it! I wonder how many that are voting for your comment are actually taking it seriously, though....
clownfish
Wed, Mar 2, 2011 : 2:53 p.m.
Here is the problem I have with this situation: The former owner allowed this property to fall into disrepair. The City attempted on multiple occasions to get the owner to bring the property into good condition but he took his rents and ignored the state of the buildings. Now the owner or new owner wants The City to step up and help him because the property is in disrepair? Sounds like corporate welfare to me.
Tom Whitaker
Wed, Mar 2, 2011 : 2:30 p.m.
Speaking of contamination, I see that Village Green has filed for an amendment to the City Apartments PUD, claiming there is a "toxic plume" in the groundwater below the site. They want to raise the building height in order to pull the foundations up and out of this plume. I wonder if they already have Brownfield credits, too? Oh, and staff also has put them down for a two-year extension of their site plan approval which does not expire until December 2011. We've been hearing this project is ready to break ground any day now, and pay the City $3 million for the air rights, but that doesn't appear to be the case. <a href="http://etrakit.a2gov.org/etrakit2/View_Attachment.aspx?grp=project&key=MG1%3a1103010349278810" rel='nofollow'>http://etrakit.a2gov.org/etrakit2/View_Attachment.aspx?grp=project&key=MG1%3a1103010349278810</a>
Tom Whitaker
Wed, Mar 2, 2011 : 4:06 p.m.
It works intermittently thanks to that multi-million dollar eTrakit software the City invested in. Try going to the City website. On the home page, go to the eTrakit link in the middle of the olive green area on the right. Click on it to go to the eTrakit home page. In the middle of the page, click on projects. Then, search by address using "221 w washington" . You must enter it exactly like that (no period after the "w" and no spelling out the word west, or you will get no results). Double-click on SP11-008 at the bottom of the list. This should get you to a page where the application for an amendment at the bottom under "attachments." Good luck.
MjC
Wed, Mar 2, 2011 : 3:33 p.m.
Tom - the link didn't work; is there an easy way to google the info? I'd like to know more about the Village Green project. Thanks!
Tom Whitaker
Wed, Mar 2, 2011 : 2:29 p.m.
I've never been in favor of using Brownfield credits for "blighted buildings." If a developer sees potential for making a profit on a site, then clearing that site ought to be a cost borne by the developer. In my education and experience, the term "blight" is highly subjective and has been misused by governmental authorities for decades to justify "urban renewal" projects that take private property by eminent domain. Well-kept houses, historical buildings, and cultural artifacts are often lost in the frenzy due to their unfortunate location within a neglected area. Many old buildings can be salvaged whole, or in part, which is a far more sustainable and environmentally-friendly practice than simply carting entire blocks to the landfill and bringing in all new materials. Brownfield credits should be reserved for contaminated sites, and only after substantial effort to find the original polluters and make them pay. Instead of funding costly clean-ups after the fact, I'd like to see industries with a history of leaving behind contamination for society to clean up, be required to buy contamination insurance. This program could be funded in part by tax credits if need be.
Thaddeus
Wed, Mar 2, 2011 : 2:24 p.m.
This is quite sad and unfortunate. Without incentives to reuse and build on brownfield sites, developers will continue to instead mostly build on safe, lower taxed, township farmland. As Mr. Caldwell here commented, there may be improved clean-up methods in years to come. But the longer many of these brownfields sit unused without any clean-up attempts, the more the contamination can spread and the longer they remain eyesores, as well as tax and safety liabilities. So the sooner these properties can be cleaned-up to the best of abilities now and reused the better. I do not see how eliminating tax credits for brownfield clean-ups and reuses are pro-business, pro-environment, or pro-people....
glimmertwin
Wed, Mar 2, 2011 : 2:10 p.m.
What I find interesting is that no matter which way government goes on any issue, it upsets people. Many people want government "to get out of the way". But what is really hard to grasp is that when government does this, it often removes some benefit or program that it hat no business being involved with in the first place. In these circumstances, people see it as "taking away" something. Take the film credits for example. I'm afraid we are in for a lot of pain before this mess is worked out.
Ed Kimball
Wed, Mar 2, 2011 : 1:42 p.m.
@InsideTheHall: Thanks to Obama?? I think you'd better go back and check your history. The financial collapse occurred during the administration of G. W. Bush. While the economy, and especially jobs, are nowhere near where we'd like them to be, they have been improving since President Obama took office.
murph
Wed, Mar 2, 2011 : 1:41 p.m.
As any neighbor of Georgetown Mall can tell you, the site has public costs as long as it sits empty, even before factoring in the contamination. Brownfields are a classic case of "market failure", in which past users have been able to dump these costs on the present. Michigan's brownfield program has been looked to as a model by experts around the country, and is still recognized as one of the best programs for addressing these historic liabilities. The brownfield tax credits are intended to address the public costs of a site, or secure the public benefits of its cleanup and reuse--eliminating public health and safety risks, whether they take the form of asbestos, trichloroethylene, or simply abandoned and blighted buildings. By offering the tax credits (and TIF financing), we leverage private developers to do this work for us as part of a building project, capturing the innovation and motivation of the developer to figure out the best method of eliminating the public costs. As a result, we not only fix the problems, but wind up with a property that pays property taxes and brings new residents & businesses to the area. The alternative would be the Superfund approach, where the contaminated sites sit vacant until the public sector directly hires contractors to go in and tear down buildings and scoop out soil, and we end with...a site that's still vacant.
bugjuice
Wed, Mar 2, 2011 : 3:02 p.m.
Your explanation makes too much sense. Therefore it will be argued as stupid and liberal and government intervention that creates a nanny state.
dotdash
Wed, Mar 2, 2011 : 2:58 p.m.
Thanks for this explanation.
Wolf's Bane
Wed, Mar 2, 2011 : 1:14 p.m.
As a resident I have real mixed feelings about the elimination of brownfield credits. This development is perhaps the only scheduled development in A2 that should be built and could potentially impact the neighborhoods in a real positive manner, unlike Ashley Terrace! Perhaps, the city could give this developer other incentives to continue with the project; tax breaks, discounted building permits or something similar?
DDOT1962
Wed, Mar 2, 2011 : 1:04 p.m.
Ryan, what exactly is "tax-increment financing"? A definition would be helpful in understanding what this developer is asking for.
Craig Lounsbury
Wed, Mar 2, 2011 : 1:14 p.m.
I was wondering the same thing
Ryan J. Stanton
Wed, Mar 2, 2011 : 1:13 p.m.
It's a form of a tax break essentially. Through tax-increment financing, no existing tax revenues are abated. However, the incremental increases in tax revenues that result from improvements to a property are channeled back to the developer to help cover costs and incentivize the development. So, the developer pays the cleanup costs upfront, but then has a forgiveness of the increases on his taxes for a period of years (up to 23 in this case) as reimbursement.
Basic Bob
Wed, Mar 2, 2011 : 12:13 p.m.
This state is getting full of abandoned buildings that can't be redeveloped because of past environmental abuses. There has to be a way to get rid of all the old gas stations, dry cleaners, steel mills, machine shops, and prisons. Right now they just sit and decay because of the contaminated soil underneath, but the soil is not miraculously cleaning itself. It is still there with an ugly and unusable building on top of it. IMO, demolition, construction, and environmental cleanup would be good skills for prison inmates to learn. Team them up with skilled workers, like an apprenticeship.
Soothslayer
Wed, Mar 2, 2011 : 1:04 p.m.
So if the property is contaminated or abused why shouldn't the sale price of the parcel be discounted then to encourange the sale & reuse of the property? Then if it can be proven that that discount incentive still isnt enough to make full remedy the city or state could be petitioned to make up the difference with fixed funding pools available for such projects. It would seem to be a city/county benefit moreover than a state one to encourage these developments.
InsideTheHall
Wed, Mar 2, 2011 : 11:55 a.m.
This is excellent that Snyder is eliminating a program that only helps developers at the expense of taxpayers. If the land is that valuable the buying interest will take on the costs OR the seller will. Thanks to Obama we are no longer an affluent nation and Republicans in state capitals across the country are left to do the heavy lifting of restoring fiscal sanity.
clownfish
Wed, Mar 2, 2011 : 2:48 p.m.
Also, we have to keep in mind that the 2001-2003 recession was "Clinton's recession" , GWB was not to blame as he inherited the bad economy from a democrat. However, Obama is completely to blame for the recession of 2007-2010 because.....? .... August 2002: "When I took office, our economy was beginning a recession," Bush said in a speech at a Mississippi high school. "Then our economy was hit by terrorists. Then our economy was hit by corporate scandals. " "Rebate checks, a rate reduction on tax day and a stimulus package helped turn three quarters of decline into two quarters of growth," Cheney said in a speech to the Commonwealth Club of California. Deja Vu all over again!
clownfish
Wed, Mar 2, 2011 : 2:16 p.m.
oooh, censored! Cool "Heavy lifting", republican style: <a href="http://tinyurl.com/yht5p2t" rel='nofollow'>http://tinyurl.com/yht5p2t</a>
clownfish
Wed, Mar 2, 2011 : 2:14 p.m.
An exerpt from the articel to entice you all... "The national debt belongs to both parties. But at least the Democrats don't go on Fox News day after day proclaiming how fiscally conservative they are, and organize tea parties to rant about deficits, without ever putting forward any plan for reducing them. Nor do they pretend that they have no responsibility whatsoever for projected deficits, at least half of which can be traced directly to Republican policies, according to Office of Management and Budget Director Peter Orszag."
johnnya2
Wed, Mar 2, 2011 : 2:13 p.m.
What a stupid statement. One, ask the people who LIVE there what they would rather have. The developer wants to rid the community of an eyesore. If the state will not do that, then it will remain EXACTLY what it is. If you want Detroit, Flint and Saginaw in Ann Arbor with abandoned centers, that is what the right wing nut jobs will get everywhere. Two, I know facts are a tough thing for the right to handle, but here they are from that "liberal rag" the Wall Street Journal o the last republican in charge regarding job creation: <a href="http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/" rel='nofollow'>http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/</a> More proof that tax cuts DONT WORK <a href="http://news.yahoo.com/s/ap/us_economy" rel='nofollow'>http://news.yahoo.com/s/ap/us_economy</a> Proof that the economy has improved and hit its low point as Obama toook office and has been going forward ever since: <a href="http://www.tradingeconomics.com/economics/gdp-growth.aspx?Symbol=USD" rel='nofollow'>http://www.tradingeconomics.com/economics/gdp-growth.aspx?Symbol=USD</a> These FACTS are indisputable. You can twist them anyway you want, but the growth of GDP is higher than it was in fall of 2007 and is currently about the same as winter 2007/2008. Thanks for playing. Your failed strategies do not work, never have, and never will.
Soothslayer
Wed, Mar 2, 2011 : 12:59 p.m.
>"Thanks to Obama" Really? Saying "Thanks to Aliens" would have made more sense. You're insinuating that this Obama "mastermind", in his 2 years of office apparently by use of a time machine, is single handedly be responsible for the past 30 years of inferior product manufacturing and illconceived economic policies that encouraged amassing debt, reduction in regulations, increasing foreign trade deficit & foreign oil dependence causing a "trickle up" economy which obliterated the middle class creating a "working poor". Reality shouldn't be shunned, it should be embraced. It's the first step toward healing and making progress.
Craig Lounsbury
Wed, Mar 2, 2011 : 12:12 p.m.
Thanks to Obama we are no longer an affluent nation you say? So we were an "affluent" nation when George Bush left office but now we aren't? What statistics are you basing this on?
Alan Caldwell
Wed, Mar 2, 2011 : 11:40 a.m.
This is unfortunate. This development seems so right -- the neighboring community wants and needs this, it provides much needed construction jobs and on-going local employment, and removes a major Ann Arbor eyesore. We all keep hearing about our pro-business Governor. This action clearly hurts business in Ann Arbor. And the higher clean-up standards, that I guess us liberal Ann Arborites are supposed to be proud of, may themselves be a major reason the project stalls or is cancelled. I would much rather see a pretty good clean-up right now, than a 'pristine' clean-up 10-15 years down the road.
bugjuice
Wed, Mar 2, 2011 : 2:54 p.m.
Doing a job once and doing it right always costs less than doing it again and again after finding out that you didn't do it right the first time.
Soothslayer
Wed, Mar 2, 2011 : 1:15 p.m.
The sellers should discount the sale price of the property to reflect the state it is in. Why should this be a state handout? Perhaps a county/city one if they have the budget for it since they will directly benefit from the increased property taxes.