26 April 2011

Supporters work to sustain best of brownfield tax credits

Expert urban developers and local officials throughout Michigan are quietly working to maintain key aspects of what they believe to be the most significant economic program for rebuilding struggling Michigan cities, a tax credit for the redevelopment of areas that at one time were home to deserted factories or old industrial complexes.

Anxiety grips developers of projects, such as Presbyterian Villages of Michigan, as they wait to see what lawmakers will do. Parties supporting the Presbyterian Villages are trying to finalize the finances needed to build the $38 million redevelopment project in a Detroit neighborhood. The Villages would provide housing, health care and other community services for the elderly.

While the project's closing date nears, Michigan's governor, Rick Snyder, has spiked concerns after proposing to omit such tax credits for brownfield redevelopment, historic renovation and other improvements.

"Everyone's kind of standing and waiting," said Brian Carnaghi, Presbyterian Villages' senior vice president of finance and business development. "This one is a little bit out of our control."

The proposed changes Snyder put forward are still being debated in the budget process. He added that businesses, whether they are in the building industry or auto transport industry, will be better off if the state takes on a 6 percent corporate income tax on corporations with shareholders rather than hosting several incentive programs that don't always yield jobs and can be quite costly.

State officials advise that current commitments to projects will be honored with credit. They plan to work with project applicants during the transition phase.

However urban development experts and supports argue that the brownfield redevelopment credit must be kept if economically challenged cities are to be revived.

"If you want to see... revitalization of some of our core urban areas, where you have existing infrastructure and old, unused buildings, you have to continue to use tools like this," said John Byl, chair of the Michigan chapter of National Brownfield Association and a Grand Rapids lawyer. "If they simply eliminated the program or minimized it so drastically . . . we would see downtown urban development come to a screeching halt."

Byl, who is currently working with the Snyder administration on creating a new brownfield program, said he's "cautiously optimistic" that the state can "continue some of the great achievements with the current program."

He said brownfield credits have been crucial to the success of several statewide projects, including the restoration of Detroit's Book-Cadillac hotel, reviving a vacant, century-old high school in Grand Rapids now the Union Square Condominiums, and redeveloping the lawn care and long abandoned complex of the Traverse City State Hospital into a residential and retail community called The Village at Grand Traverse Commons.

One concern now being addressed is how much of a budget should be allocated to such redevelopment credits. Initially, Snyder proposed a $50 million appropriation that would include Michigan Economic Growth Authority incentives, however he has noted that amount could see an increase of as much as $100 million. Some growth incentives could indirectly help companies ranging from the car shipping business to real estate agencies.

"He understands the feedback" from economic development leaders throughout the state, said Michael Finney, president and CEO of the Michigan Economic Development Corp. "It's unclear whether we'll be able to do as many projects as we did in the past, but we're willing to make some movement in the amount of money available."

One critical component, Finney claimed, is straying away from unlimited tax credits in a budget-sensitive state and setting aside certain sums of money.

"There are projects that have been incentivized as high as 80 percent," Finney said. "When it takes that level and there's very little private investment, there's something that's fundamentally wrong."

Finney added that the governor's proposed 6 percent corporate income tax could also aid many would-be Apex homes developers. If lawmakers approve replacing the Michigan Business Tax with the new tax, an estimated 95,000 businesses would not be required to file a state business tax return, even if they're constructing Raleigh homes.

"We now have a lower starting point for companies so the need to incentivize them at a really high level is reduced," Finney said.

But Detroit Economic Growth Corp.'s vice president of board administration, Art Papapanos, is worried that several projects in the city's works will not earn state approval for brownfield credits, hindering progressive efforts to redevelop Detroit, one of the state's largest and economically challenged cities.

"You cannot expect (developers) to spend money to on a what-if basis," he said. "I don't know where we'll be in line."

The Detroit project of Presbyterian Villages, which was among eight projects this month to receive approval from the Detroit Brownfield Redevelopment Authority, now waits for state economic development officials to give the green light to begin the car hauling.

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