Brownfield and Land Bank Development Tools Training What are Brownfields? Dickinson Area Economic Development Alliance March 10, 2020
Acronym Trivia • EGLE = • MEDC = • MSF = • LUG = • TIF/TIR = • BRA = • UST = • LUST = • ESA = • BEA = • DDA =
Acronym Trivia • EGLE = Environment, Great Lakes and Energy • MEDC = Michigan Economic Development Corporation • MSF = Michigan Strategic Fund • LUG = Local Unit of Government • TIF = Tax Increment Financing/Tax Increment Revenue • BRA = Brownfield Redevelopment Authority • UST = Underground Storage Tank • LUST = Leaking Underground Storage Tank • ESA = Environmental Site Assessment • BEA = Baseline Environmental Assessment • DDA = Downtown Development Authority
What are Brownfields? State of Michigan Definition Blighted: Public nuisance, dangerous, eyesore, Facility: or property owned or under control of a Land Bank Contaminated Functionally Obsolete: Historical Resource: Can’t be used for its original purpose Historic building or structure Other potential eligible properties: ▪ Adjacent and Contiguous ▪ Tax Reverted Property ▪ Targeted Redevelopment Area ▪ Transit-Oriented Property or Development
Examples of Brownfields ▪ Landfills and dump sites ▪ Mine-scarred lands ▪ Industrial sites ▪ Commercial facilities ▪ Publicly owned/government buildings and land ▪ Vacant schools ▪ Former health care facilities ▪ Abandoned and vacant buildings ▪ Dry-cleaning facilities ▪ Gas stations ▪ Railroad yard ▪ Vacant land ▪ Distressed housing ▪ “Main Street” buildings
What is Brownfield Redevelopment? Brownfield Redevelopment is the process of cleaning up and reinvesting in brownfield properties which protects the environment, protects health, reduces blight, and takes development pressures off greenspaces and agricultural land. ▪ According to the U.S. Government Accounting Office, there are an estimated 425,000 brownfields throughout the U.S. ▪ The State of Michigan has approximately 42,912 “brownfield sites.” ▪ Dickinson County has approximately 146 known sites of environmental contamination according to EGLE’s Inventory of Facilities Database (Includes Part 201/Part 213 and BEA sites).
Site Redevelopment Challenges ▪ Apparent/obvious disinvestment ▪ Known or perceived environmental contamination – soil, groundwater, unknown ▪ Lead and asbestos concerns ▪ Underground storage tanks ▪ Need for total or partial demolition ▪ Lack of infrastructure ▪ Corporate “moth - balled” sites ▪ Junk/debris
Benefits of Brownfield Redevelopment ▪ Increase investment, jobs, and revenue ▪ Opportunity for focused redevelopment, e.g., workforce housing, greenspace ▪ Reuse existing infrastructure ▪ Encourage redevelopment ▪ Recovery of tax base ▪ Improve value of surrounding property After ▪ Preserve historic and cultural community icons ▪ Conduct environmental cleanup ▪ Reduce sprawl Before
Michigan Act 381 of 1996, as amended (Brownfield Redevelopment Financing Act) ▪ Primary law that allows the creation of Brownfield Redevelopment Authorities and dictates the makeup and powers of an Authority (BRA) ▪ Defines: • Eligible properties • Eligible activities • Rules related to tax increment capture through a Brownfield Plan • How to interact with the regulatory agencies (i.e., EGLE, MEDC, Department of Treasury) • Relationships with Local Units of Government • How to interact with the Local Units of Government and the general public • Local Brownfield Revolving Fund (LBRF)
Brownfield Redevelopment Authorities ▪ Broad range of capabilities ▪ Primary use: • Provide funding/financing of brownfield eligible activities that may create a project financing gap o Brownfield Plans – Tax increment financing o Secure and implement grants/loans – EPA, EGLE LOCAL BRAs: • Dickinson County* • Iron Mountain • Kingsford * Cannot act independently from the local units of government
Brownfield Redevelopment Authorities ▪ Local municipality and/or county-wide Core Communities: • Iron Mountain ▪ Brownfield “Redevelopment” Plans • Kingsford • Norway • Tax increment financing o Reimburses eligible brownfield costs & activities − Due Diligence/Due Care − Site cleanup − Demolition/lead/asbestos abatement − Site preparation (Core Communities, Land Banks) − Public infrastructure (Core Communities, Land Banks) o Funds future projects through local revolving fund • Can be layered with other incentives
Brownfield Plans ▪ Method to finance eligible activities by capturing local and potentially state tax increment • Plan term – maximum 35 years • Tax Increment Revenue (TIF) capture – maximum 30 years • Transformational Brownfield Plan o Allows 20-year capture of: − Construction period income tax − Construction period sales tax exemption − Construction period use tax exemptions − Income tax capture − Withholding tax capture • Act 381 Work Plans required for school tax capture on certain eligible activities – approvals by EGLE and/or MSF • TIR can be used to repay EPA/EGLE/LBRF Loans
Tax Increment Financing The New (Incremental) Taxes are used to Reimburse the Party that Financed (Developer and/or Authority) the Eligible Activities Described in the Brownfield Plan. ▪ Tax increment = new taxable value – initial taxable value (based on new investment) ▪ Plans limit amount of Eligible Activities to be reimbursed and the amount of time for reimbursement ▪ Once the Plan reaches one of these limits, it is ended and all future tax increment accrues to the individual taxing jurisdictions
Brownfield Plans and Tax Increment Financing
What are “Eligible Activities”? (Redevelopment Expenses) ▪ EGLE (Environmental): • Phase I and II ESAs, BEAs, Due Care activities, response activities, removal and closure of USTs, disposal of solid waste, dust control, removal and disposal of lake or river sediments, industrial cleaning, certain sheeting or shoring, lead, mold, or asbestos abatement. • Demolition that is a response activity ▪ Preparation of Brownfield Plans and Work Plans ▪ Brownfield Plan and Work Plan implementation
What are “Eligible Activities?” Non-Environmental (Michigan Strategic Fund – MSF): ▪ Demolition that is not a response activity (MSF) Core Communities: ▪ Asbestos/lead abatement (MSF) • Iron Mountain • Kingsford ▪ Site preparation that is not a response activity • Norway (MSF – Core Community or Land Bank) ▪ Infrastructure improvements (MSF – Core Community or Land Bank) ▪ Relocation of public buildings or operations (MSF – Core Community or Land Bank) ▪ Develop/prepare Brownfield Plans and Act 381 Work Plans ▪ Administrative and eligible activities of BRA ($100,000+ annually, depending on number of projects)
Brownfield Plans ▪ Per pupil school funding is not affected when school tax millages are captured in a Brownfield Plan ▪ Interaction with other LUG, County, Library taxes, and other debt/millages ▪ Reimburses eligible brownfield costs only if project creates tax increment from new investment and the taxes are paid ▪ Reimburses Authority expenses and funds LBRF for future projects
Brownfield Plans and Potentially Exempted Millages ▪ School taxes State Education Tax (6 mil) and Operating Tax (18 mils) • Unless Act 381 Work Plan has been approved (EGLE and/or MSF) ▪ Special assessments ▪ Debt millages ▪ Abatements/Exemptions (198, 328) ▪ Other TIFA Districts • DDA, LDFA, OPRA, etc.
Brownfield Plan Approval Process ▪ Developer (Authority) prepares brownfield plan according to Act 381: ▪ https://www.miplace.org/programs/brownfield-tax-increment-financing/ ▪ BRA approves plan and recommends adoption subject to: ▪ If local BRA: ▪ Notification to taxing jurisdictions ▪ Noticed public hearing held by governing council ▪ Adoption by resolution by governing council ▪ If County BRA: ▪ Notification to taxing jurisdictions ▪ Resolution, by LUG in which project is occurring, concurring with the terms of the plan ▪ Noticed public hearing help by County Board of Commissioners ▪ Adoption by resolution by Board of Commissioners ▪ Timing – plan for 60-90 days
Post Brownfield Plan Approval ▪ Brownfield Plan should have a Reimbursement Schedule ▪ Development and Reimbursement Agreement • “Rules of Engagement” • Who gets what when • Tax appeals • Default • Reimbursement procedures
Brownfield Plan Implementation ▪ Brownfield Plans are dynamic and can change over time – Plan assumptions/estimates become reality and reality may not fit with the assumptions ▪ Issues that may affect the Plan include: • Changes in TV, e.g., FTV is less than ITV • Tax appeals • Tax abatements/exemptions • Property splits or combinations • New or changed tax millages • Delinquent taxes – Delinquent Tax Revolving Fund • Changes in PRE vs Non-PRE • Developer default • Plan amendments
Brownfield Plans and Land Banks ▪ Used to reimburse eligible environmental and non-environmental activities • Property owned or under the control of a Land Bank expands eligible non-environmental activities normally only allowed in a Core Community ▪ Land Banks allowed to use TIR for eligible activities on any eligible properties owned or under control of Land Bank (multi-site BF Plan) • Leverage higher value properties to conduct activities on lower value properties
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