Economic Development, Government, and Real Estate

Grand Rapids and developers watch clock running out on Brownfield re-development funding

December 11, 2012
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An important state law that has been largely responsible for the redevelopment of urban areas in Michigan, including Grand Rapids, will go away if state lawmakers don’t act before the end of the year.

Time is running out on the Brownfield Redevelopment Financing Act of 1996, as it is set to sunset on Jan. 1.

If that happens, the losers will be downtown property owners and developers who won’t receive a valuable incentive for turning contaminated and vacant properties into useful ones that go on the tax rolls when their redevelopment projects are completed.

Other losers will be the city of Grand Rapids, the Grand Rapids Brownfield Redevelopment Authority, the Michigan Economic Development Corp. and the Michigan Department of Environmental Quality, as all will lose revenue from rehabilitation projects. In addition, the city would lose jobs that are created from the rehab projects.

Extending the legislation is especially vital for Grand Rapids, because the city is second statewide in the total number of approved brownfield projects over the past 16 years, meaning the act has proved its worth with local developers. Only Detroit has awarded more brownfields.

So far just one bill, SB 1210, has been introduced this year that would amend and extend the act. It was introduced in July and was voted out of the Senate’s Economic Development Committee in August. But neither the full Senate nor the House has taken any action on it as the sunset deadline approaches.

“I don’t know what the likelihood of it passing is, but we are still hopeful,” said City Economic Development Director Kara Wood, who also is executive director of the brownfield authority.

The new bill may not be as good as the original, which offered tax credits until the Michigan Business Tax was eliminated and a tax capture for remediation work. But the new bill is likely better than no bill.

The Senate offering would create the State Brownfield Redevelopment Fund, which would finance a grant and loan program that would cover the eligible costs a developer includes in a project that gains a brownfield designation. The money for the fund would come from the tax revenue a brownfield authority captures.

The tax capture would be 3 mills and would come from the State Education Tax, which would deliver an estimated $1.5 million to $4 million annually. A downside to the plan is local brownfield authorities currently capture those dollars but would have to send the funds to the state Treasury.

“Local brownfield redevelopment authorities would have less revenue under the bill due to this shift of a portion of the captured school operating taxes to the proposed State Brownfield Redevelopment Fund, potentially delaying repayments to developers or other eligible local projects,” said Elizabeth Pratt, a Senate fiscal analyst.

The state Senate has six tentative sessions left in its legislative year, while the state House has 10. But three of the 10 are listed as being tentative. Dec. 20 is the last potential day for both chambers.

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