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A Better Partnership


Sep 2012
September 25, 2012

Legislation Streamlines Brownfield TIF Process

Act 381, Michigan’s brownfield  tax increment financing (TIF) statute, is likely to see significant changes yet this year. Senate Bill 1210 will amend the Act to reduce regulatory requirements, streamline the approval process and facilitate urban development throughout the state.

The bill, which was introduced in July, is expected to be approved by the House and Senate yet this year. It’s the result of  recommendations from a group of 10 municipal, state and business leaders experienced in brownfield redevelopment issues, including Warner’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) and the bill was drafted by Warner attorney Troy Cumings.

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 proposed changes will:

Eliminate the sunset provision.  The current law expires at the end of this year.

Expand the definition of infrastructure to include 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

  • Eliminate the requirement for 2 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 should help deal with the timing of environmental due diligence for these transactions.
  • Allow 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 like 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 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.

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, 3 mills of the state education tax will be captured to fund brownfield projects. This would continue for the duration of state TIF capture, up to 25 years. The new fund would:
  • Provide grants and loans for TIF eligible activities for projects.  This will provide a terrific financing tool to help fund TIF eligible activities up front.
  • Use up to 15% for MEDC and MDEQ administrative expenses. The balance will be used by MEDC and MDEQ for eligible activities.
  • Use funds that go to MDEQ in the grant and loan programs under Part 196.

Clarify when the 30-year tax capture period begins and specify 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.  Currently, only contaminated, functionally obsolete and blighted properties are eligible.

Clarify ad valorem property tax inclusion, regardless of when created. Some questions have been raised 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.

There is broad support for the amendments in both the legislature and administration. The changes should result in increased urban revitalization throughout Michigan, particularly in large, urban centers.

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