Brownfield Redevelopment Complications Being Debated

June 5, 2002
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LANSING — A bill recently introduced in the state House attempts to once again amend the Brownfield Redevelopment Financing Act, legislation which uses school operating taxes to help pay for remediation projects done by the private sector.

The original bill, passed by the Legislature as PA 381 in 1996, was amended a year ago as part of a four-bill package that also included a brownfield Single Business Tax credit, an obsolete property rehab exemption and a bill that gave the Michigan Economic Growth Authority (MEGA) more power in high-tech matters.

MEGA then replaced the Michigan Department of Environmental Quality as the presiding judge over who gets financial assistance for a brownfield project.

Two camps of thought have risen from the amendments.

Some said last year’s changes reshaped the law into more of an economic development tool instead of the environmental clean-up remedy for blighted properties that it was intended to be.

Others argued that clean-up provisions and economic development naturally go hand-in-hand.

Some feel the new changes could make it even more difficult for smaller companies to participate in the brownfield program, and that it will put even more strain on an already-taxed state treasury. Others agree with the first point, but not the second.

The House Committee on Commerce recently began debating the amendment’s merits.

“For smaller developers and smaller municipalities that don’t have their own technical staff this will be so overwhelming, and it is so subjective that there is no certainty to it, said Kate Lynnes, project manager with Williams & Beck Inc., an engineering firm in Rockford.

"When you’re dealing with developers, they need certainty. They need to know how much they’ll get reimbursed and what their tax credit will be for their investment,”

“Basically, except for a huge thing like a new GM plant coming to Lansing, this is not a working program,” she added.

“In theory, a 50-employee machine shop could apply for credits under this and get reimbursement for eligible activities. But in reality, the process is so cumbersome and so slow and so subjective that a little guy wouldn’t know what to do with this with their limited resources.”

Rick Chapla, redevelopment specialist for The Right Place Program and a member of the city’s Brownfield Redevelopment Finance Authority (BRFA), saw the changes differently.

“At least as I understand it, and based upon some other meetings that we had last week, there is language that will be inserted into the legislation that will clean it up,” he said.

“Is the brownfield program becoming more and more of an economic development program? Well, yes, it certainly is. It’s another tool in our economic development tool bag.”

The current bill only gives MEGA three criteria to consider when it reviews a project for approval. The amendment adds 11 considerations to that list, and would allow MEGA to apply any standard to evaluate a work plan that it considered appropriate — giving the agency a broader power base.

“They (MEGA) only have three people to review this stuff, and none of them have any experience in brownfields,” said Lynnes.

But, perhaps, the biggest change the amendment offers is that it limits to 25 the number of work plans that MEGA can approve statewide each year. Lynnes said limiting the projects would likely create an application race that probably would be won by large firms with legal departments, and leave smaller developers swallowing their dust. Chapla agreed.

All is not lost for small firms, however — at least not yet. Lynnes and Chapla said it appears that lawmakers are leaning toward splitting the brownfield program to make it more accessible for smaller companies, and are considering not placing a limit on the annual number of these projects.

“Although I would like to see them change some definitions and make other provisions to make this more streamline, it looks like they are beginning to agree to create a duo program. One would be for the smaller developer with under a half-million credit,” she said.

“I think that was primarily the major concern that we expressed, that the fairness of the playing field seemed to be tilting exclusively toward big projects. No question about it. It was a provision that many had serious reservations about,” said Chapla of the 25-project limit.

“I expect the bill will reflect the changes agreed upon by representatives from DEQ, Treasury, chambers of commerce and brownfield authorities,” added Chapla, who is waiting for the final draft.

Two years ago, the Consumers Renaissance Development Corp., a nonprofit created by Consumers Energy and encouraged by two state agencies, cited Michigan as having the best brownfield redevelopment program in the nation.

“It’s become such a complicated program that people who used to benefit can’t access it anymore,” said Lynnes.

With less tax revenue projected coming to the state from a slowing economy, Lynnes also worries that an emphasis on large brownfield projects, which can earn up to a $30 million SBT credit, will strain the treasury even further. When school-operating taxes are captured by a company for a remediation plan, the state replaces those dollars that the district loses.

“The state makes the school district whole, so it basically becomes a grant from the state,” she said.

Chapla didn’t agree.

“That concern, I don’t think, is universally shared, certainly not within the development community and certainly not even with those of us involved in brownfield redevelopment activity, either,” he said.

The city created BRFA three years ago. Since then, the board has assisted developers with a handful of local remediation projects.

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