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Investors engaged in brownfield redevelopment projects in Michigan could share in $1 billion in sales and income tax rebates over 20 years under a package of real estate development bills that passed the Senate Feb. 22.
A bipartisan group of senators approved bills comprising the proposed Transformational Brownfield Development Plan. The five bills— S.B. 111, S.B. 112, S.B. 113, S.B. 114 and S.B. 115—amend the Michigan Brownfield Redevelopment Financing Act to offer a range of tax incentives designed to jumpstart the remediation and redevelopment of contaminated properties. The lead measure, S.B. 111, was supported by a vote of 27-6.
A spokesman for the Michigan Thrive Initiative (MIthrive), a coalition of municipal organizations, commercial groups, building associations and unions, said the legislation could unlock up to $5 billion in brownfield redevelopment dollars and transform dozens of abandoned industrial sites across the state. MIthrive applauded the Senate’s bipartisan support and expressed hope for similar treatment in the House.
“We look forward to demonstrating to the House how the Michigan Thrive Initiative will turn eyesores into thriving developments and build the vibrant communities that are essential for Michigan to grow and prosper,” MIthrive spokesman Dan Austin told Bloomberg BNA in an e-mail.
The legislation creates a menu of development incentives of up to $1 billion for approved transformational brownfield plans (TBP). The bills create a structure by which developers could capture a portion of new income and general sales and use taxes their projects would generate to help cover some of the significant costs associated with brownfield projects.
An analysis by the Senate Fiscal Agency noted the incentives under S.B. 111 would be divided into two parts. The program would allow the capture of up to $800 million in income tax revenue across all TBPs, based on withholdings from employees working on the project and tax paid by residents of the project.
“The tax capture from employees and residents would be limited to 50 percent of the increased eligible income tax revenue under a TBP,” the analysis stated.
In addition, up to $200 million would be available to developers for the combined value of captured income tax revenue from the construction period—essentially the increase in income tax paid to construction workers.
MIthrive portrayed the approach as a risk-free win for taxpayers. The various measures contain no upfront tax expenditures by the state, only a reduction of future potential tax revenue from unproductive and polluted properties.
“The redevelopment of large, challenging brownfield sites is very costly and these projects often have financial gaps that make it impossible to move forward,” MIthrive said in a statement. “The legislation solves the problem by allowing a project to keep a portion of the new tax revenue it generates in order to close that gap—with the rest going to the local government and the state. Because these sites were not producing any revenue to begin with, everyone benefits.”
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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