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A Better Partnership


Aug 2007
August 01, 2007

Despite Budget Woes, Michigan's BF Programs Still a Model for Other States

Michigan has long had one of the nation's best programs for redeveloping brownfield sites. Over the last few months, however, numerous articles have warned that the current budget crisis may jeopardize some of the state's brownfield initiatives. Yet, despite these warnings, several key financial incentives remain available, and new opportunities have become available that will keep Michigan a leader in brownfield redevelopment.

Tax increment financing (TIF), for instance, allows a municipality to share the increased tax revenue resulting from a redevelopment project with the developer as a way of offsetting the costs of eligible environmental activities such as assessment, due care and cleanup activities. Also, in a municipality identified as a "qualified local governmental unit," TIF can be used for many non-environmental activities such as demolition, infrastructure improvements, site preparation, and lead and asbestos abatement.

In general, any property with contamination that exceeds the most stringent residential cleanup criteria under Michigan law qualifies for TIF. Also, in qualified local governmental units, parcels that are functionally obsolete or blighted are also eligible for TIF reimbursement, even if the properties are not contaminated.

As a result of recommendations made by a statewide brownfield work group, legislation has been prepared in both the House and Senate—with enactment expected this fall—that will extend the sunset of the TIF program, enhance the TIF incentive and streamline the approval process.

Tax credits may also be available to persons who acquire and develop an eligible brownfield property. On July 12, 2007, the new Michigan Business Tax (MBT) was signed into law to replace the Single Business Tax (SBT). The MBT continues the brownfield tax credit that currently exists under the SBT. There are four categories of credits ranging from $200,000 or less for smaller projects to credits up to $30 million for large projects. An MBT credit generally equals 10 percent of eligible investment expenses incurred at the eligible property, which include demolition; construction; restoration; renovation; site improvements; and the addition of machinery, equipment, and fixtures to the eligible property. A person who does not have enough MBT liability to use a credit may assign the credit to a third party with the state's approval.

Up to $1 million in brownfield redevelopment grants and $1 million in brownfield revitalization loans also are available to municipalities annually to assist with redeveloping contaminated property. Municipalities, in turn, typically agree to reimburse a developer using the grant and loan funds for eligible environmental expenses. Currently, the grant funds are somewhat limited, but there still are loan funds available for appropriate projects.

There are significant financial incentives to developers in Michigan who acquire and redevelop contaminated and blighted property. Developers should consider these incentives and plan carefully to maximize the value of the financial incentives.

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