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A Better Partnership


Dec 2012
December 28, 2012

Brownfield TIF Process Streamlined

Amendments to Act 381, Michigan’s brownfield  tax increment financing (TIF) statute, were signed into law by Governor Snyder on Dec. 27, 2012. The amendments, contained in Senate Bill 1210, reduce regulatory requirements, streamline the approval process and facilitate urban development throughout the state.

The legislation, which is now Public Act 502 of 2012, was the result of recommendations from a group of 10 municipal, state and business leaders experienced in brownfield redevelopment issues, including Warner Norcross & Judd’s John Byl, who is chair of the Michigan Chapter of the National Brownfield Association. The group was convened by the Michigan Department of Environmental Quality (MDEQ).

Act 381 and other TIF programs are designed to capture increased tax revenue from a project for a period of time and use that revenue to cover expenses related to the project. The increased tax revenue often makes the project financially viable, and there are no out of pocket costs for municipalities.

The amendments will:

Eliminate the sunset provision. The Act previously expired at the end of 2012.

Expand the definition of infrastructure to include public or privately owned or operated multi-level and underground parking structures and urban stormwater management systems. This will be particularly helpful to large urban projects.

Streamline the process at the state and local levels to:
  • Eliminate the requirement for two public notices in a newspaper.
  • Allow approval of both local and state TIF by Local Unit of Government (LUG) for expenses incurred prior to the approval of the brownfield plan for preliminary assessment activities (Phase I, BEA, Phase II investigation for BEA and to evaluate due care obligations and Due Care Plan). Previously, only local TIF could be approved retroactively for this purpose. This will help deal with the timing of environmental due diligence for these transactions.
  • Allow the MDEQ to retroactively approve state TIF for costs associated with unanticipated response activities, provided that the developer consults with the MDEQ prior to incurrence of the expenses. This would apply to items such as tank removal and associated expenses upon discovery during excavation.
  • Allow LUGs to approve local TIF for reimbursement of any eligible costs incurred prior to approval of a Brownfield Plan, whether environmental or non environmental expenses.
  • Allow the Michigan Economic Growth Authority (MEGA) to approve state TIF for reimbursement of any MEGA (non-environmental) costs occurred prior to Brownfield Plan approval.
  • Allow the chair of MEGA to approve the state’s share of MEGA eligible activities up to $500,000. This eliminates the requirement to get approval from the MEGA board.
  • Allow for the option to submit a combined brownfield plan/work plan rather than requiring separate documents.
Define/clarify roles and responsibilities by requiring developers to provide a report to the LUG every year that the project receives TIF reimbursement. The local Brownfield Redevelopment Authority (BRA) has discretion to terminate this requirement earlier. This new requirement applies to all active projects, even those approved before enactment of this legislation. Required data will include the amount of actual capital investment, number of residential units constructed or rehabilitated, amount of square footage constructed or rehabilitated by category (residential, retail, commercial or industrial) and number of new jobs created.

Capture funds for redevelopment programs. When a state TIF is approved for any new brownfield project, three mills of the state education tax will be captured to fund brownfield projects. This will continue for the duration of state TIF capture, up to 25 years. The new fund will:
  • Provide funds for grants and loans for TIF eligible activities for projects. This will provide a terrific financing tool to help fund TIF eligible activities up front.
  • Allow for the use of up to 15% for MEDC and MDEQ administrative expenses to administer the programs. The balance will be used by MEDC and MDEQ for eligible activities.
  • Allow funds to be transferred to the MDEQ grant and loan programs under Part 196.
Clarify when the 30-year tax capture period begins and specifies that LUG can terminate a plan if no activity has taken place and can restart a 30-year clock if no reimbursement has occurred, provided that the 30-year clock can start no later than 5 years after the date the property was added to a Brownfield Plan.

Add historic resources as eligible property for Brownfield TIF. Previously, only contaminated, functionally obsolete and blighted properties were eligible.

Clarify ad valorem property tax inclusion, regardless of when created. Some questions were raised previously regarding new millages that take effect after the date of a Brownfield Plan. The amendments make it clear that all ad valorem property taxes that are levied are included in the TIF revenues, regardless of when those taxes were levied.

The changes should significantly aid urban revitalization throughout Michigan, particularly in urban centers.

If you have questions about this brownfield legislation or other economic incentives, please contact John Byl, Jared Belka or any other member of the Economic Incentives Practice Group at Warner Norcross & Judd.

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