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Brownfield Program’s Big Pay-Off

Record confirms brownfield development generates jobs, economic vitality better than most

January 14, 2006 | By Keith Schneider
and Mac McClelland
Great Lakes Bulletin News Service

Mac McClelland

In northern Michigan only a few communities, like Traverse City, have been savvy or prepared enough to tap state funds for redevelopment.

Part Five in a Series

Michigan’s brownfield redevelopment program has proven to be immensely cost-effective, well managed, and productive economic development program, particularly for Traverse City and a select group of other northern coastal communities.

Along with $4 billion in private investments on once idle, contaminated land the program has yielded 14,000 jobs, 1,500 new housing units, and great promise for downtowns across northern Michigan.

This payoff was built on the following taxpayer-supported investments:

  • Michigan’s Brownfield Redevelopment Grant and Loan Program awarded $122.9 million in loans to 300 completed projects.
  • The state DEQ approved over $65 million for brownfield redevelopment tax increment financing from 1996 through 2004.
  • The Michigan Economic Growth Authority approved over $77 million in economic development expenses from 2000 to 2003.
  • The Department of Treasury approved $122 million in Single Business Tax Credits for brownfield redevelopment projects since 1996.
  • The U.S. Environmental Protection Agency pumped $28 million in grants and loans into Michigan since 2000.

The state’s total investment, $386.9 million, produced jobs that cost an average of $27,000 each, a bargain when compared to other economic development programs.

Up North Towns Need to Capitalize on Brownfields
But the benefits of Michigan’s brownfield redevelopment strategy are spread unevenly around the state. In northern Michigan only a few communities have been savvy or prepared enough to tap state funds for redevelopment. For the region to thrive, more towns must seize this opportunity.

An increase in the number of Up North towns applying for brownfield grants and tax incentives would also lend some political clout to the region’s state legislators who are pushing to expand the state’s successful brownfield reinvestment program.

Already, the program’s hefty return on investment, and ten-year track record of generating jobs and business investment makes it a prime candidate for expanded state and federal investment. As one of the most cost-effective economic development strategies in recent history, brownfield redevelopment deserves the attention of Michigan’s leaders.

In an era of persistent budget deficits, Michigan’s leaders must carefully evaluate the cost effectiveness of state economic development strategies, concentrating resources on strategies that yield big results at modest cost. Certainly, redeveloping brownfields as new businesses, homes, and parks, is a more effective strategy than funneling billions of dollars into expanding highways that damage the view and harm quality of life and provide very few jobs relative to the billions of dollars the state spends each year.

If highways, cars, and sprawl were the key ingredients to a successful state economy, then Michigan’s current development strategy should have long ago transformed this state into an economic Eden. On the contrary, the state is gradually sliding to the bottom of the heap nationally as high unemployment, sinking housing prices, a nation-leading brain drain of young workers, an aging and slow-growing population, and a lack of urgency and leadership combine to set Michigan on a path to a reputation as an economic backwater.

Five Recommendations
That is why the Institute prepared a guide to help northern Michigan communities better understand the brownfield redevelopment program: It’s time to invest in communities, capitalize on our brownfields, and unleash northern Michigan’s entrepreneurial spirit. We urge northern Michigan’s lawmakers, other state representatives and senators, and Governor Jennifer M. Granholm to make the following recommendations a reality:

  • Legislate consistent and objective criteria for deciding which brownfield projects should be approved and funded first. Different divisions of state government approve brownfield grants, tax increment financing, and single business tax requests according to different criteria. While these programs work well together, a common set of criteria for funding priorities would provide consistency, more certainty for developers, less subjective discretion, and direct funding to the most significant projects. The criteria set forth by the Michigan Economic Development Corporation for the Single Business Tax Credit provide a good model: MEDC requires that the local government contribute to the redevelopment project, and gives preference to projects that support downtown redevelopment, environmental improvement, manufacturing, and that demonstrate a genuine need for incentives. Other criteria could include encouraging mixed-use and mixed-income projects and access to transportation. In fact, such criteria could apply across the myriad of state economic development incentives.|

  • Fund the Brownfield Grant and Loan Program. There is approximately $20.4 million left in the Brownfield Grant program, which is expected to last two more years.

  • Revise legislation to provide grants for preparing a property for sale and redevelopment. Assessing the environmental condition of a site, clarifying who owns an abandoned piece of property, and lining up grants and loans to redevelop a brownfield helps attract developers because it gives them a clear idea of what will be required to redevelop the property. In the past, many properties were successfully redeveloped thanks to the now-defunct Site Assessment Fund, which assessed the environmental conditions of a site, removing many unknowns for developers, and lowering their risks. Now, brownfield legislation only allows communities to receive loans, not grants, to position property for redevelopment. A developer must be in place in order for the community to receive a grant to prepare the property for sale and redevelopment. But if a developer has committed to investing in property, a grant is not needed because a loan would be paid off by tax increment financing. What is really needed are grants that can help communities attract developers by positioning property for sale and redevelopment.

  • Provide seed money for communities seeking brownfield technical assistance. One of the main barriers for smaller northern Michigan communities — and small communities throughout the state — seeking brownfield incentives is the lack of funding, expertise, and capacity to establish and operate brownfield authorities or seek outside state and federal grants to support brownfield and economic development. Small grants to provide the expertise and technical assistance communities need will set the stage for private investment.

  • Expand brownfield incentives to more communities. Adding eligible activities for brownfield tax capture, including lead and asbestos abatement, demolition, site preparation, and infrastructure have been a huge bonus for communities that are designated as either qualified local units of government or core communities. But only five coastal communities and five inland communities in northern Lower Michigan qualify. That leaves out towns like Rogers City, Grayling, and Gaylord, which are struggling to maintain and improve their downtowns. One option would be to extend this successful approach to all incorporated cities in Michigan that are not, under current rules, qualified local governments.

Keith Schneider is the Michigan Land Use Institute’s deputy director. Reach him at keith@mlui.org. Mac McClelland is the manager of brownfield redevelopment at Otwell Mawby, P.C., in Traverse City. Reach him at mac@otwellmawby.com. To read or download New Plans for Barren Lands in its entirety, click here.

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