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State considers changes to brownfield laws
Michigan’s brownfield laws are undergoing an overhaul that should reduce regulatory requirements, streamline the approval process and facilitate urban redevelopment throughout the state.
As chair of the Michigan Chapter of the National Brownfield Association, I was invited last fall to serve on a 10-member Collaborative Stakeholders Initiative group focused on brownfield redevelopment. Our group, which was one of seven convened by the Michigan Department of Environmental Quality, included community, state, environmental and business leaders experienced with brownfield redevelopment issues.
MDEQ had tasked six of these groups to evaluate certain cleanup issues under Michigan’s remediation statute, known as Part 201 of the Natural Resources and Environmental Protection Act. Our group, though, was a bit of an outlier since the brownfield program has long been viewed as effective and well run. We developed a series of recommendations to improve Act 381, the brownfield tax increment financing statute.
We focused on expanding the list of eligible activities, simplifying the approval process and giving greater flexibility to the local units of government that approve tax increment financing, or TIF, for redevelopment projects.
TIF programs capture increased tax revenue from a project for a period of time and use that increased revenue to reimburse certain expenses to build the project. This reimbursement makes the project financially viable, and there are no out-of-pocket costs for municipalities, since increased taxes from the project are used to pay for the incentives. Without the project, there is no increase in the taxes.
Key changes to Act 381
The proposed legislative changes, which are being drafted, could be enacted by June. They include:
- Eliminating the sunset provision of Act 381, which was scheduled to expire at the close of 2012. In exchange for this, developers have agreed to provide annual reports and greater accountability on projects for which they receive funds.
- Expanding the definition of “eligible activities.” For example, one of the recommendations expands the definition of infrastructure to include multi-level and underground parking structures, even if privately owned and operated. These structures are critical to the success of urban redevelopment projects, yet can cost 10 times more to build than traditional surface lots. We have also proposed the addition of urban storm-water management systems and geothermal systems as TIF-eligible activities.
- Streamlining the approval process at the local and state levels. The committee recommended several changes to make the TIF program work more smoothly, such as eliminating some timing requirements and bypassing full state board approval if the project falls below a certain threshold.
- Funding redevelopment programs at the state level. Finally, the recommendations propose establishing a statewide fund that could be used for brownfield projects. Three mills from brownfield TIF projects (typically just over 5 percent of the TIF revenue stream) would be captured for the fund. The new fund would be drawn from the millage capture associated with TIF projects, ensuring that no current recipients would “lose” monies due. Instead, the reimbursement period would be pushed out slightly. The funds raised could be significant in helping Michigan redevelop its urban core — and that’s good news for all of us.
John Byl is a partner at law firm 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