Competition will be fierce for new brownfield historic incentives
Later this month, the Michigan legislature is expected to vote on new legislation designed to promote brownfield and historic redevelopment projects — and it’s time to get up to speed because the competition could be significant.
The package of bills — SB 566, 567 and 568 — is designed to replace the longstanding brownfield and historic tax credit programs that were eliminated by Gov. Snyder and the legislature earlier this year. In their efforts to balance our state’s struggling budget, they repealed the Michigan Business Tax and eliminated virtually all business tax credits.
The administration and legislature then appropriated $100 million to replace three key tax credits: brownfield, historic and MEGA job credits. Even if most of the appropriation is slated for the new community revitalization program, it will fall far short of the $185 million that has been approved annually in recent years on the highly successful brownfield and historic redevelopment programs.
Recognizing the need for a replacement program, Lt. Gov. Calley appointed a work group of business leaders and citizens to establish a replacement program that didn’t rely on tax credits. The group’s work culminated in legislation that was introduced in the Senate July 13 and could be signed into law as soon as late September or October.
The new program has a number of key components, some of which differ substantially from the brownfield and historic development programs of the past. These include:
- The Michigan Strategic Fund Board can award grants of up to $1 million to community revitalization projects. The grant may not exceed 25 percent of the “eligible investment” in construction, renovation, equipment and related costs.
- The MSF board can also approve loans of up to $10 million for community revitalization projects. The loans are expected to be flexible, subordinate or nonrecourse, and forgivable under criteria currently being developed by a stakeholder work group chaired by the MEDC.
Projects can receive both grants and loans, although the combined amount cannot exceed 25 percent of the eligible investment.
The MSF board has established general criteria for approving grants and loans that will consider the extent of urban revitalization achieved by the project, the importance of the project to the community, the applicant’s financial need, reuse of an historic structure, sustainability, job creation and other factors.
Additional implementation guidelines will be developed by the MSF board and the Michigan Economic Development Corp. Those guidelines will be rolling out over the coming months. Applications under the new program, termed a “community revitalization” program, will be accepted starting in October.
While some details are still up in the air, one thing is certain: Given the reduced amount of incentives available, competition for those dollars will be fiercer than ever.
John V. Byl is a partner at the law firm of Warner Norcross & Judd LLP. He chairs the Michigan Chapter of the National Brownfield Association and is vice chair of the National Board of the National Brownfield Association. He participated in the Lieutenant Governor’s work group and the implementation work group chaired by the MEDC. He can be reached at email@example.com