Coleman Young
History
In the 1980s, the federal government began taking action to clean up contaminated sites. Unlike some previous legislation, federal brownfield programs emphasized state cooperation, voluntary agreements, and incentivizing funding, rather than punitive measures.[v] Notably, contaminated site cleanup was initially motivated by environmental concerns. Over time, the policy focus has shifted to contaminated site clean up as a developmental tool, superseding environmental concerns in importance.[vi]
Michigan has been particularly active in implementing and encouraging brownfield sites as development tools.[vii] This focus- returning brownfield sites to productive use- began with the Engler administration in the late 1990s and early 2000s.[viii] Michigan’s brownfield programming has several unique features. First, new owners are only liable for contamination measured over the initial baseline assessment.[ix] Second, sites are held to different clean up standards based on zoning (i.e., residential, commercial, industrial), with overall risk standards being reduced. Third, there is a wide variety of funding incentives available for local organizations to tap into. Finally, in 2000 the definition of a brownfield site was expanded to include obsolete property.[x] This obviously greatly increased the number of properties that could benefit from brownfield incentives and fits into the larger narrative of an economic development focus rather than an environmental one.
The result of this historical arc is that remediating brownfield sites is now a largely economic activity rather than an environmental one (see endnote on staff qualifications).[xi] This fits into a nationwide pattern. While not specific to Detroit or Michigan, a 2008 survey by Devashree Saha and Robert Paterson found that, even though many cities proclaim a focus on sustainable growth, few have a robust plan for maintaining that focus.[xii] Furthermore, those cities often failed to fit equitable goals into that sustainable focus. According to Saha and Paterson, cities that did have a sustainability framework were better able to incorporate economic, environmental, and equity goals into policy.[xiii]
How it works
What is a Brownfield Site?
According to the US Environmental Protection Agency (EPA), a brownfield site is a property that has been contaminated or blighted in some way by a previous use. Therefore, the redevelopment and reuse of the site is more costly and task-intensive.[xiv] There are federal and state agencies dedicated to encouraging brownfield redevelopment.[xv] The US EPA oversees a Brownfields & Land Revitalization Program. The Department of Environment, Great Lakes, and Energy (EGLE) oversees brownfield redevelopment in Michigan. Under Michigan law, blighted properties have a wide definition.[xvi] Eligible properties, defined by statute, can include former industrial, commercial, or residential properties (excluding agricultural properties) with certain characteristics as enumerated in MCLA 125.2652(p). The Michigan Economic Development Corporation (MEDC) site contains several resources for prospective developers, including an Act 381 Work Plan Instruction guide, dated from November 2019.[xvii]
Local municipalities are empowered to transfer private property, taken under condemnation procedures, to the local authority for use in a brownfield redevelopment plan.[xviii] This is considered a taking, used for public purposes. MCLA 125.2660 states: “A municipality may transfer private property under the uniform condemnation procedures act, Act No. 87 of the Public Acts of 1980 … to the authority for use as authorized in the brownfield plan, on terms and conditions it considers appropriate…”
DBRA and the City of Detroit
The DBRA is authorized to provide financial incentives on behalf of the City of Detroit. It’s run by a Board of Directors and the Detroit Economic Growth Corporation (DEGC) provides “staff assistance” for redevelopment plan implementation.[xix] Brownfield redevelopment and related issues are handled by the Environmental Affairs division of the Buildings, Safety, Engineering, and Environmental Department (BSEED).[xx] The city website doesn’t contain any information regarding the Brownfield Redevelopment process or working with the DBRA, despite including information on other “collaboration, partnerships, compliance assistance…” For information on brownfield sites and spending in the City of Detroit, see Appendix B.
Brownfield Approval Process
To begin work on a brownfield site and receive public financing for the work, the developer/builder must submit either a brownfield plan (defined under MCLA 125.2663) or a transformational brownfield plan (MCLA 125.2663c; 125.2664a). A brownfield site plan must include: a description of what will be paid for with tax revenues, summary of eligible activities, estimate of the captured taxable value, how the plan will be financed, the beginning date and duration of the project, legal description of all property to which the plan apples, estimates of the number of people living on the property (and a plan for relocating them), and compliance steps.[xxi] Tax revenues can only be used for eligible activities. Tax capture must end in the year in which it reaches the total amount of reimbursement for which the property is eligible or 30 years after tax capture begins, whichever comes first.[xxii]
A transformational brownfield plan is a brownfield plan that “will have a transformational impact on local economic development and community revitalization based on the extent of brownfield redevelopment and growth in population, commercial activity, and employment that will result from the plan...”[xxiii] To receive state-level funding, a transformational brownfield plan must have an “overall positive fiscal impact” on the state and will only be considered for funding if no other funding from the Michigan Strategic Fund is available.[xxiv] This decision is contingent on potential tax displacement from other areas of the state and the effects of the plan on the surrounding area.[xxv] The plan is also tied to increasing local population, commerce, and employment.[xxvi] Designation is also dependent on the capital investment per capita. For example, in a municipality that has a population of at least 600,000 (i.e. Detroit), the plan must call for $500,000,000 investment. A maximum five transformational brownfield plans may be approved in a calendar year.[xxvii] These are required to be distributed equitably by geography.[xxviii]
DBRA applications are submitted to the agency to begin the review process. Plans go through several rounds of organizational review and public comment opportunities. The steps are below:[xxix]
Financing/Incentives
The DBRA can get funding in a variety of ways. The authority is allowed to accept money and donations from private sources.[xxxi] It can invest the money at its own discretion.[xxxii] MCLA 125.2661 authorizes financing from: contributions, contracts, or appropriations; revenues from a building controlled by the authority; tax revenues; tax bonds; the revolving brownfield fund; revenue captured under a transformational brownfield plan; other sources approved by the local municipal authority.
The authority is not allowed to use tax revenues in the following ways: to pay for activities conducted before plan approval; for administrative purposes other than to operate the authority, work conducted on prospective eligible properties, and reasonable costs of plan preparation; and the reasonable costs of preparing a brownfield plan.[xxxiii]
The state also funds brownfield redevelopment through a Corporate Income Tax (CIT) and TIF programming. For the fiscal year 10/1/18-9/30/19, the state committed $326,755,698 to brownfield redevelopment TIF projects.[xxxiv]
Tax Increment Financing (TIF)
As Laura Bassett explained in a 2009 article, TIFs can be understood as a financing method that encompasses different authorities, such as the DBRA or Downtown Development Authority (DDA).[xxxv] Bassett explains: “a TIF plan allows a local unit of government to freeze the amount of assessed property values in an underdeveloped or distressed area that is retained by that local unit, and apply increases in property tax revenues due to increases in value to finance improvement projects in that area.”[xxxvi] TIFs rely on existing property values, rather than generating a new pool of money, as if from a new levy. TIF plans are created by the authorities, a public hearing is held, and the governing municipality decides whether or not to approve the plan.[xxxvii]
TIFs are used by the DBRA to reimburse developers for certain activities on eligible properties and form the basis for most DBRA public financing.[xxxviii] The DBRA determines the captured taxable value of each eligible property.[xxxix] There are many ways for properties to be eligible: contaminated per the Natural Resources & Environmental Protection Act, a historic resource, functionally obsolete, blighted, transit-oriented, or a parcel directly adjacent to an eligible property.[xl] Funded activities can be both environmental (Environmental Testing and Reporting, preparation of a Brownfield Plan and Act 381 Work Plan, Environmental Insurance, and removal and remediation of contamination) and non-environmental (demolition; lead, asbestos, and mold abatement; historic building survey, evaluation and nomination work; publicly owned infrastructure improvements in public right of way; site preparation; privately-owned vertical parking structures, integrated parking, and underground parking; privately-owned urban storm water management systems).[xli]
TIF funding was challenged in In re Request for Advisory Opinion on Constitutionality of 1986 PA 281 (note: this case is exclusive to Local Development Finance Authorities (LDFA)).[xlii] In that case, the court upheld the TIF plan, noting that the excess tax capture would not have existed absent the TIF plan.[xliii] The court also ruled that TIF bonds were credit lending, subject to Article IX, Section 18 limitations.[xliv]
Michigan Strategic Fund
The Michigan Strategic Fund was created in 2012 after then-Governor Snyder abolished the MEGA Board and transferred the responsibilities to the new fund.[xlv] MCLA 125.2002 notes the purpose for which the fund was created. This includes, among other things: diversify Michigan’s economy, assist businesses in accessing alternative funding, alleviate and prevent unemployment, and develop agricultural and industrial activities. The act is set up so that it can be interpreted to apply to a wide variety of activities. For example, MCLA 125.2004(b) notes: “’Economic development project’ means an endeavor related to industrial, commercial, or agricultural enterprise.” The fund is able to solicit and collect money from a variety of public and private sources, and to make grants, loans, and investments.[xlvi]
The fund is an independent entity within the treasury department of the State of Michigan.[xlvii] The fund is governed by a board of directors, the members of which are detailed in MCLA 125.2005(3). The fund is required to submit an annual report to the legislature and governor detailing each program operated by the fund.[xlviii] Board meetings occur once a month and are open to the public for comments.
Other Funding Sources
Brownfield plans may also be funded through the local brownfield revolving fund (LBRF).[xlix] The LBRF can be used on eligible properties and for eligible activities, including using funds to secure loans or financing.[l] The LBRF is made up of public and private sources and excess tax capture per certain caveats (see statute).[li] Public funds are TIF capture from eligible properties. Borrowers in Detroit are required to take at least $50,000. The Detroit LBRF makes both grants and loans. Contributions from the LBRF are capped at no more than 50% of the final DBRA TIF commitment or $1 million, whichever is less.[lii] LBRF’s are subject to additional restrictions: only one can be given per project and TIF capture from the Brownfield project is used to repay the LBRF loan.[liii] Loan terms are decided on a case-by-case basis.[liv]
There is also a state-level revolving brownfield redevelopment fund. The program is housed under EGLE.[lv] While the fund is administered by EGLE, the state treasurer is authorized by MCLA 125.2658a to direct investment and credit the fund. Individuals and municipal bodies can apply for funding from the state revolving fund.[lvi] Money from the revolving fund can be used by the Michigan strategic fund for brownfield redevelopment programs.[lvii]Individuals are able to apply directly to the fund.[lviii]
DBRA is authorized to issue bonds to pay for eligible plans only with agreement from the state, the developer, and DBRA, according to DBRA literature.[lix] MCLA 125.2657(m) empowers the authority to issue bonds and notes in anticipation of future tax revenue.[lx] These are exempt from taxation, as is the interest on them.[lxi] The DBRA is required to submit an annual report to the Michigan strategic fund, the City of Detroit, and the department of environmental quality.[lxii] This report largely focuses on the authority’s financial activities.
Footnotes
[i] The authority was authorized by Public Act 381 of 1996. Detroit Economic Growth Corporation, Detroit Brownfield Redevelopment Authority, 2020 https://www.degc.org/DBRA/ [hereafter: DBRA].
[ii] Id.
[iii] Notice that the exact language concerning this number is “approved” plans and contains little else to qualify the success of the authority. Id.
[iv] M.C.L.A. § 125.2653(3)-(4) (2017): “…The authority shall possess all the powers necessary to carry out the purposes of its incorporation. The enumeration of a power in this act is not a limitation upon the general powers of the authority….”; M.C.L.A. § 125.2654(5) (2017): “The exercise by an authority of the powers conferred by this act shall be considered to be an essential governmental function and benefit to, and a legitimate public purpose of, the state, the authority, and the municipality or units.”
[v] Richard Hula, Rebecca Bromely-Trujillo, & Roger Hamlin, Bending Priorities: A Study in Policy Framing. State of Michigan’s Brownfield Initiative, 27E Transylvanian Review of Administrative Sciences, 105, 108-109 (2009).
[vi] Id. at 108.
[vii] Id. at 109.
[viii] Id.
[ix] New owners of brownfield sites are only liable for contamination over a baseline assessment. This assessment must be filed with EGLE within 45 days of “purchase, occupancy, or foreclosure.” R. Hula & P. Davis, Mihcigan Brownfield Redevelopment Efforts, Brownfield Sites II 243 (2004). This is statutorily defined in M.C.L.A. § 324.20101(f): “’Baseline environmental assesment’ means a written document that describes the results of an all appropriate inquiry and the sampling and analysis that confirm that the property is or contains a facility. For purposes of a baseline environmental assessment, the all appropriate inquiry may be conducted or updated prior to or within 45 days after the earlier of the date of purchase, occupancy, or foreclosure.” (2018).
[x] Hula, supra note 5, at 110-111.
[xi] “Recent (fall 2007), in-depth interviews conducted by this paper’s authors of 10 of the most active local brownfield redevelopment authorities (BRAs) revealed that 1) in every case the BRA was staffed by the staff of an economic development office, 2) all but one top staff person had economic development expertise, not environmental (the one exception was an environmental engineer), 3) substantial overlap in the membership of the politically appointed BRA governing board was evident, 4) when asked specifically whether they view the program as principally an economic development program or an environmental program, all indicated “economic development.” Id. at 113.
[xii] Devashree Saha & Robert G. Paterson, Local Government Efforts to Promote the “Three Es” of Sustainable Development; Survey in Medium to Large Cities in the United States, 28 Journal of Planning Education and Research 21, 35 (2008).
[xiii] Id.
[xiv] Overview of EPA’s Brownfields Program, United State Environmental Protection Agency (Oct. 29, 2020) https://www.epa.gov/brownfields/overview-epas-brownfields-program.
[xv] Id.; Brownfield Redevelopment Program, Michigan Department of Environment, Great Lakes, and Energy (2020) https://www.michigan.gov/egle/0,9429,7-135-3311_29262---,00.html.
[xvi] M.C.L.A. § 125.2652(c) (2018): “(i) has been declared a public nuisance…; (ii) is an attractive nuisance to children…; (iii) is a fire hazard or is otherwise dangerous to the safety of persons or property; (iv) has had the utilities, plumbing, heating , or sewerage permanently disconnected…; (v) is tax reverted property owned by a qualified local governmental unit…; (vi) is property owned by or under the control of a land bank fast track authority…; (vii) has substantial buried subsurface demolition debris present…”
[xvii] Brownfield Tax Increment Financing (TIF), Michigan Economic Development Corporation https://www.miplace.org/programs/brownfield-tax-increment-financing/; Act 381 Work Plan Instructions, November 2019, https://www.miplace.org/4ac433/globalassets/documents/tif/act-381-work-plan-instructions.pdf.
[xviii] M.C.L.A. § 125.2660 (1996).
[xix] The Detroit Brownfield Redevelopment Authority, Detroit Economic Growth Corporation, https://detroitmi.gov/sites/detroitmi.localhost/files/2018-06/Sugar%20Hill%20Brownfield%20Presentation.pdf.
[xx] Brownfields, City of Detroit, https://detroitmi.gov/departments/buildings-safety-engineering-and-environmental-department/bseed-divisions/environmental-affairs/brownfields.
[xxi] M.C.L.A. § 125.2663(2) (2017).
[xxii] M.C.L.A. § 125.2663(5).
[xxiii] M.C.L.A. § 125.2652(vv).
[xxiv] Transformational Brownfield Plans (TBP), Michigan Economic Development Corporation, https://www.miplace.org/programs/transformational-brownfield-plans/.
[xxv] M.C.L.A. § 125.2664a(6) (2017).
[xxvi] M.C.L.A. § 125.2664a
[xxvii] M.C.L.A. § 125.2664a(12).
[xxviii] The authority “shall achieve a balance between the needs of municipalities of differing sizes and differing geographic areas of the state.” M.C.L.A. § 125.2664a(23)(c).
[xxix] DBRA, supra note 1.
[xxx] Note that the Community Advisory Committee, meant to represent the public in the DBRA’s processes, is only active in the very first part of the plan approval process. Id.
[xxxi] M.C.L.A. § 125.2657(g) (2017).
[xxxii] M.C.L.A. § 125.2657(k).
[xxxiii] M.C.L.A. § 125.2663b(6)-(7).
[xxxiv] FY 2019 MSF-MEDC Annual Report, Michigan Strategic Fund (Mar. 16, 2020) https://www.michiganbusiness.org/4a092d/globalassets/documents/reports/legislative-reports/fy-2019-msf-medc-annual-legislative-report.pdf , 124-125 [hereafter: MSF Report].
[xxxv] Laura Bassett, Tax Increment Financing as a Tool for Redevelopment: Attracting Private Investment to Serve a Public Purpose- The Example of Michigan, 41 Urb. Law. 755, 758 (2009).
[xxxvi] Id.
[xxxvii] Id.
[xxxviii] Detroit Economic Growth Corporation, Detroit Brownfield Redevelopment Authority: Brownfield Tax Increment Financing (TIF), https://www.degc.org/wp-content/uploads/2020/07/DBRA-TIF-Information-Sheet.pdf [hereafter: TIF].
[xxxix] M.C.L.A. § 125.2657(n)(2).
[xl] TIF, supra note 38.
[xli] Id.
[xlii] In re Request for Advisory Opinion on Constitutionality of 1986 PA 281, 430 Mich. 93, (1988).
[xliii] Bassett, supra note 35 at 759.
[xliv] Id.
[xlv] Michigan Strategic Fund, Michigan Economic Development Corporation, https://www.michiganbusiness.org/about-medc/michigan-strategic-fund/.
[xlvi] M.C.L.A. § 125.2007(a)-(f) (2015).
[xlvii] M.C.L.A. § 125.2005(1) (2015).
[xlviii] M.C.L.A. § 125.2009 (2017).
[xlix] M.C.L.A. § 125.2658 (2017).
[l] LBRF is intended to be a pool of funds that developers borrow from and then repay, allowing future developers to take advantage of the funds. Detroit Economic Growth Corporation, City of Detroit Brownfield Redevelopment Authority Local Brownfield Revolving Fund Guidelines (May 9, 2018) https://www.degc.org/wp-content/uploads/2020/07/LBRF-Guidelines-Amendments-050918-FINAL-1-2.pdf [hereafter: LBRF Guidelines].
[li] M.C.L.A. § 125.2658.
[lii] Detroit Brownfield Redevelopment Authority: Local Brownfield Revolving Fund, Detroit Economic Growth Corporation, https://www.degc.org/wp-content/uploads/2020/07/DBRA-LBRF-Information-Sheet.pdf.
[liii] LBRF Guidelines, supra note 50, at 2-3.
[liv] Id. at 5.
[lv] Brownfield Redevelopment Loans, Michigan Department of Environment, Great Lakes, and Energy https://www.michigan.gov/egle/0,9429,7-135-3311_29262-151086--,00.html.
[lvi] Id.; M.C.L.A. § 125.2658a(3)(c)(ii).
[lvii] M.C.L.A. § 125.2658a(3)(c).
[lviii] M.C.L.A. § 125.2658a(3)(c)(ii): “A person may apply to the Michigan strategic fund for the costs of eligible activities…”
[lix] Detroit Economic Growth Corporation, City of Detroit Brownfield Redevelopment Authority (May 9, 2018) https://www.degc.org/wp-content/uploads/2020/07/May-9-2018-Amended-DBRA-Guidelines-FINAL-WITH-ATTACHMENTS-1.pdf at 4.
[lx] M.C.L.A. § 125.2661(c)(ii) also provides authority to issue bonds. M.C.L.A. § 125.2662 provides guidance on the mechanics of issuing bonds, from what those funds can be used to the tax-exempt status of said funds.
[lxi] M.C.L.A. § 125.2662(3) (2002).
[lxii] M.C.L.A. § 125.2666(3) (2017).
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