Brownfield incentives return value to blighted areas

GRAND TRAVERSE CO. – In addition to health hazards, properties designated as brownfields create economic problems. When a facility is vacated and a brownfield is the result, there is little taxable income for the city, county or state. Usually, the owners of these facilities have trouble selling their sites, as possible buyers are wary of potential liability for cleanup costs and environmental contamination. As a result, many sites end up being abandoned, decreasing the tax base of the area and becoming sources of blight in the community.

Historically, lending institutions, investors, and real estate developers were cautious when dealing with brownfield redevelopment. However, in 1989 Michigan issued an Environmental Protection Bond, which enabled the Michigan Department of Environmental Quality (MDEQ) to offer grants and loans for environmental assessments and cleanups at properties with known or suspected contamination. This funding was a means to restore or modify brownfield property to an economically efficient and environmentally friendly condition. In 1998, the “Clean Michigan Initiative” authorized a second bond issue for further funding of any qualifying brownfield projects

The state of Michigan was relatively late in passing state tax-based brownfield incentive programs. Yet, Michigan’s brownfield program is rated as one of the most successful in the United States by the Consumers Renaissance Development Corporation in a National Comparative Analysis of Brownfield Redevelopment Programs. They ranked states’ programs on liability protection, cleanup standards, financial incentives, and government support from both state and local levels.

Why remediate brownfields? Cleaning up and reinvesting in these properties increases local tax bases, facilitates job growth, utilizes existing infrastructure, curbs sprawl, and improves and protects the environment.

“The cleanup and redevelopment of brownfield sites in Michigan is essential to the continued economic success and environmental health of Michigan,” U.S. Senator Carl Levin explained. “Both cities and small towns in Michigan have brownfields, where it is too expensive for developers to build, leaving these areas in economic and environmental despair. The funds received are necessary to continue efforts for combating the plight of brownfields, ensuring a better life for all Michigan residents.”

For the most effective and efficient remediation, efforts between government and the private sector must be coordinated. The role of local government and its community is especially important, since they can often best prioritize sites most in need of rehabilitation, and encourage developers’ participation.

“I find that it is really unique that the DDA, the city and the county work so well together,” said Jean Derenzy, director of the Grand Traverse County Brownfield Redevelopment Authority, launched in 1997. “It’s a very coordinated effort; a win for everyone.”

According to Rob Bacigalupi, Deputy Director of the DDA, the county Brownfield Authority has been aggressive and efficient in getting brownfield money for projects within their jurisdiction. They’ve led the way in the state, acquiring brownfield funding either through grants, loans or Tax Increment Financing (TIF).

In fact, the Radio Centre/Larry Hardy Parking Deck, located in downtown Traverse City, is considered by the Michigan Economic Development Corporation (MEDC) to be the crown jewel brownfield project.

In total, the Grand Traverse area has received six separate MEDC incentives, bringing in $28 million to assist in brownfield projects. That does not include the $4 million awarded by the MDEQ to the county for brownfields.

Of the 14 brownfield projects in Grand Traverse County, four will generate individually from $45 to $80 million in investment value: Copper Ridge at the old County Road Commission facilities, River’s Edge and Midtown on the site of the Ironworks foundry, The Village at Building 50 on the State Hospital grounds, and the old Grand Traverse Auto on Front Street (a brownfield designation at the beginning of development).

The county designated the Copper Ridge development in Garfield Township eligible for TIF capture to pay for the remediation of the contamination from the salt brine used by the road commission, along with cherry orchard contamination. Copper Ridge is the first brownfield project in the county and one of the first in the state that has had the tax capture stopped ahead of schedule.

“The tax base was stagnant there,” Derenzy said. “The tax base for that project went up so substantially it was incredible.”

The tax base is frozen at the level before development in TIF financing, according to Grand Traverse Co. Treasurer William Rokos. The increase from the frozen base to the level after development is used for the developer’s clean up costs, until those costs are reimbursed. Then the increase goes to the taxing units.

For an environmental investigation and lead abatement at Building 50, Grand Traverse County received a $1 million MDEQ brownfield redevelopment grant in 2003. The historic building is coated with paint in which lead is found in unusually high concentrations. There are asbestos problems, as well. The county applied for an additional grant from MDEQ and another $1 million was approved last February. Building 50 is within a tax-free Renaissance Zone, not allowing capture of property taxes to repay a brownfield loan.

The Minervini Group, owner of Building 50, is preserving the entire structure. The building will contain a mix of uses, including commercial and residential and, when completed, will be a vibrant center for the community.

Another statewide-recognized project, River’s Edge was one of the first brownfield projects in the county.

“The environmental issues associated with that particular project were enormous,” Derenzy explained. “To remove all of the contamination was so cost prohibitive that even a brownfield grant wasn’t enough to help make a project.”

A $1.6 million MDEQ grant was used to start that project, and went toward the removal of four tanks and bank stabilization.

Although grants are not repaid, the city won’t see any TIF capture on the River’s Edge site until 2014.

“However,” Bacigalupi pointed out. “The increase in value of the surrounding neighbors benefits the city. Also it contributes to a healthy downtown area and has inspired other developers to build similar projects in the surrounding area.” BN