Construction, Real Estate, and Sustainability

Brownfield has been backbone of urban development

Federal Building renovation just one example of its success.

December 22, 2012
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Brownfield has been backbone of urban development
The former Federal Building, shown here cloaked in scaffolding, is just one example of brownfield incentives that have helped transform buildings throughout downtown Grand Rapids.
The toolbox of state incentives for urban redevelopment doesn’t quite look like Mother Hubbard’s bare cupboard, but it almost did.

Gone is the Renaissance Zone, as are the tax credits for historic preservation and brownfields. The Ren Zone expired a year ago, and the credits vanished this year when Gov. Rick Snyder replaced the Michigan Business Tax with a new corporate tax that doesn’t offer credits for redevelopment.

It could be worse, though. At least the Brownfield Redevelopment Financing Act of 1996, which was teetering on extinction, was rescued on the last legislative day of a lame-duck session. The law was set to sunset at year’s end, but lawmakers extended it. The Senate passed an extension bill in November, and the House followed suit Dec. 13.

The state statute has served as the foundation bill for cities like Grand Rapids to assist developers with the renovation of countless downtown structures. Just a few were the Peck Drug Store building, the structures in the aggressive Cherry Street Landing project, and the revitalization of the vacant Federal Building that Ferris State University and Kendall College of Art & Design now call home.

To show how powerful the tax credits were, just from 2008 through 2010, the state approved $510 million in brownfield credits and $45 million in historic preservation credits. Over those three years, the awards averaged $185 million each year. Those incentives were replaced with grants and loans reportedly worth about $100 million in 2011.

Once the credits were gone, the brownfield payout for developers became reimbursements from tax-increment financing. City Economic Development Director Kara Wood, also the executive director of the city’s Brownfield Redevelopment Authority, was relieved when she learned the statute will stay on the books. If it had expired, Wood said she would have tried to get it reintroduced in the next session.

Grand Rapids was second statewide in the number of approved brownfields, trailing only Detroit. At its November meeting, the brownfield board approved tax-increment reimbursements to 17 developers worth nearly $1.8 million. The reimbursements, which ranged from $3,986 to $576,844, were for July 1 through Oct. 31.

Miller Products building brownfield
The Miller Products building is another project that benefited from the presence of brownfield incentives.

At the same meeting, Joe Hooker told the board how vital the brownfield incentive and the cooperation the project received from the city, county and state were in getting the Federal Building renovated. Hooker is the development service manager with Christman Capital Development Co., part of The Christman Co.

Christman managed the project and assumed the debt, while Tower Pinkster designed the work.

When the federal government left the block-long building sandwiched between Division and Ionia avenues NW, it turned the structure over to the city. The Grand Rapids Art Museum set up shop there in 1981 and stayed for about 25 years until it moved to its new building on Monroe Center.

The building then was without a tenant, and the city was spending more than $100,000 annually to maintain it.

“The city of Grand Rapids wanted to find a use for the building, rather than carry the cost,” said Hooker.

Hooker said Christman knew that FSU wanted to expand its presence in the city and Kendall needed more space to match its growth. Hooker felt the 91,000 square feet the building offered would fill both school’s needs.

“In 2009, we approached the university as a developer, and that almost worked,” he said.

A year later, though, FSU signed on to the plan offered by Christman and Tower Pinkster.

The financing included a brownfield designation, $22 million in American Recovery and Reinvestment Act bonds that the city and county allotted to the renovation, state historic tax credits, and about $3.5 million that Christman directly invested in the project. Christman then leased the building from the city and sub-leased the space to the schools.

The parties involved in the project were the city, the county, the brownfield authority, the historic preservation board, the Michigan Economic Development Corp. and the state Treasury.

“It was a good project, but it couldn’t have been done without the ‘team.’ So thank you for your support,” Hooker said to the brownfield board.

The 1909 structure, which once was the city’s post office, was recently awarded Gold LEED certification.

As for the new statute, it eliminated the sunset on the tax-increment financing portion of the original program and created the Brownfield Redevelopment Fund. It will be a grant-and-loan program that will fund the eligible activities and eligible properties. Wood said there will be $50 million in grants available and $25 million in loans.

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