Redevelopment Using Brownfield Plans and TIF
September 30, 2022
Michigan’s brownfield toolbox is a powerful resource that economic developers and communities throughout Michigan have come to rely on. Brownfield tax increment financing (TIF), being one of the most used tools, continues to help close financial gaps on redevelopment projects. Brownfield sites — which can be contaminated, blighted, functionally obsolete, or a historic resource — typically need the added financial support to offset brownfield conditions. These conditions include but are not limited to, site contamination, lead and asbestos abatement, demolition, due care obligations, site preparation, and infrastructure improvements. Without these reimbursements, many brownfield redevelopment projects might not move forward.
Tax increment financing through a Brownfield Plan is unique in that it relies solely on the investment and performance of the individual project. Unlike other “TIF Districts,” it doesn’t pull tax revenues from other properties within the district, which may be sorely needed by the community. If the project fails to perform (i.e., the project is delayed or there is limited investment with no improved taxable value), or taxes are not paid, the community/Brownfield Plan has no obligation to reimburse the developer for their eligible brownfield costs.
The fortunate thing about Public Act 381, the Brownfield Redevelopment Financing Act, which authorizes the ability to adopt Brownfield Plans, is that the terms and conditions of the plans can be adjusted in several ways. For instance, a redevelopment project included in a new Brownfield Plan can delay tax capture for up to five years. This would allow for a project to be phased in, providing more time for a developer to complete the development, which would allow for a greater increase in capturable tax revenue at the time capture begins. Additionally, if assessed values decline for three consecutive years and an existing Brownfield Plan fails to generate tax increment due to economic conditions, then through an amendment to the plan the initial taxable value can be lowered once during the term of the plan.
The Brownfield Redevelopment Financing Act has been modified over the years to allow for greater flexibility and applicability, which has allowed greater opportunity to take on those brownfield projects that may otherwise not be considered by developers. Tax increment financing through a Brownfield Plan can also be layered with many other incentives or authorities including tax abatements, OPRAs, Commercial Rehabilitation and/or Redevelopment Districts, DDAs, etc. Although over 200 communities state-wide have created Brownfield Redevelopment Authorities, many have become inactive either due to the lack of incoming projects or failure to educate the developer world of this economic development tool. If your community does not have the resources to either create or maintain a Brownfield Redevelopment Authority, you should check to see if you have a county-wide Brownfield Redevelopment Authority that can provide you with the same brownfield tools. Having this tool in-place and ready, whether locally or through your county, can be a great resource when trying to attract redevelopment opportunities within your community.
To learn more about using Brownfield Plans or TIF for your specific redevelopment project, please contact Jeff Hawkins, CEO, at (269) 342-1100 or via email.