Brownfield Program Overview Joe Agostinelli Michigan Economic Development Corporation

1. Brownfield Program OverviewJoe AgostinelliMichigan Economic Development Corporation March 18, 2010

2. How is MEDC Involved? Administer Non-Environmental Brownfield Program Support to MEGA Board TIF and Large MBT Approvals Support to MEGA Board Chair Small and Mini MBT Approvals

3. MEGA Brownfield Guidelines Focus on our urban areas Host community is a strong supporter of the project Tax Increment Financing (TIF) will be looked to first to green the site (versus the MBT). Projects will include green and sustainable elements as part of the project.

4. MEGA Brownfield Guidelines Properties that legally qualify, but are not significantly impacted from brownfield conditions (khakifields) will not be supported with Brownfield MBT tax credits unless there is a strong economic development rationale for providing brownfield tax credits. Retail projects, unless part of a larger mixed-use redevelopment in a historically underserved market, must have a particular compelling reason for consideration of MBT tax credits. Manufacturing projects which are creating base jobs and will re-use existing, vacant, functionally obsolete and/or blighted industrial facilities will be given priority for MBT credits.

5. MEDC�s Brownfield Process

6. Brownfield Incentives MBT Credits- MBT Credits available for up to 12.5% of eligible investments (hard costs) for brownfield projects (up to 20% if UDAP) Eligible investment categories include: demolition new construction site improvements building renovation addition of personal property (machinery, equipment and fixtures)

7. Urban Development Area Project: UDAP designations include Downtowns or Traditional Commerce Centers of Qualified Local Units of Government and County Seats Increases Density Promotes Mixed-Use Development Promotes Sustainable Development Addresses Area Wide Redevelopment Addresses Underserved Markets of Commerce

8. Up to 20% tax credit for Urban Development Area Projects in 2009 and 2010 After 2010, Up to 15% tax credit for Urban Development Area Projects Urban Development Area Project:

9. Brownfield MBT Eligibility Qualified Local Governmental Units (QLGUs) are defined in PA 146 of 2000 (OPRA) Facility Functionally Obsolete Blighted Other areas in the state must qualify as a facility (small and mini MBTs available only) Specific to Large MBT credits, there are 3 special allocations for Non-QLGUs (2 have to be a facility and 1 can be either functionally obsolete OR blighted)

10. Brownfield MBT Tax Credits �Large�, �Small� and �Mini� Credits Large Credits: 20 projects with eligible investment over $10 million (credit capped at $10 million) Small Credits: projects with eligible investment between $2 & $10 million Mini Credits: projects with eligible investment $2 million and less * Small/Mini MBT Credit Allocation up to $40 million/year

11. Refundable Brownfield MBT Credit Refundable Brownfield MBT Tax Credit Credits that exceed a qualified taxpayers liability can be refunded directly to the Qualified Taxpayer at a rate equal to 85% of the amount that exceeds the liability Can be transferred to another taxpayer Can be carried forward for up to 10 years

12. Types of Projects Mixed-Use � residential, retail, office and cultural/entertainment in a single or connected structure(s) Residential � mixed income residential, adaptive re-use of existing vacant and deteriorated structures Manufacturing � existing vacant, functionally obsolete and/or blighted industrial facilities Retail � unlikely to incent retail, underserved populations in traditional downtowns

13. Tax Increment Financing (TIF) PA 381 of 1996 allows Brownfield Redevelopment Authorities (BRA) to capture state and local property taxes to pay for eligible costs related to Brownfield sites. The capture may include school taxes, both school operating and state education tax Debt mills are not allowed to be captured.

14. Tax Increment Financing (TIF) Key to TIF is the increment Increment is the driving force that makes a TIF work. If there is no increment, there is no capture. How it works Developer makes improvements to a property, which in turn raises the taxable value and increases the tax revenue collected from the property.

15. Tax Increment Financing (TIF) Increment is based on the difference between the base taxable value of the property and the increased taxable value after improvements. Base values are established when the property is placed in the Brownfield Plan and the plan is adopted by the city council. BRA can then capture the taxes associated with the increment over a period of years to repay approved eligible activities under the Brownfield Plan. When the TIF is paid off, the increased property taxes are distributed to the respective taxing jurisdictions. Therefore, the locality doesn�t lose existing tax revenue generated from the base value for that property.

16. Tax Increment Financing (TIF) Two types of TIF: MDEQ for eligible environmental activities BEAs, due care and additional response activities Administered by MDEQ and Approved in an Act 381 Work Plan MEGA for eligible non-environmental activities demolition, lead and asbestos abatement, public infrastructure improvements, site preparation, and certain assistance to land banks. Demolition and lead and asbestos abatement are available statewide. Site preparation, public infrastructure, and land bank assistance require core community status (QLGU). Administered by MEDC and Approved in an Act 381 Work Plan.

17. Tax Increment Financing (TIF) Other eligible activities: Reasonable costs of developing and preparing Brownfield Plans and Work Plans Reasonable costs of environmental insurance. TIF Project Requirements: Must occur on eligible property that is included in a locally approved Brownfield Plan and the plan must identify eligible activities. MEGA Property Qualification: QLGU: Facility, functionally obsolete (level III or IV assessor), or blighted. Non-QLGU: Facility, functionally obsolete, or blighted (demolition & lead/asbestos abatement ONLY). Is tax reverted property owned or under the control of a land bank fast track authority. Includes property adjacent and contiguous to qualifying property.

18. Tax Increment Financing (TIF) Projects seeking the use of state school tax capture must receive approval from the MEGA Board BEFORE undertaking the activities. Projects capturing local only taxes do not require approval by MEGA. Local capture may also be utilized to pay portion of the BRA administrative expenses and to fund the local site remediation revolving fund. In addition, a development or reimbursement agreement between the community and the developer must be included along with a work plan detailing the eligible activities to be completed for the project.

19. Comparative Statistics

20. Brownfield MBT Credit Updates PA 241 of 2009 Amendments: Eliminated the �Jumbo� Credit Reduced number of Large Credits from 20 projects to 19 projects in 2010 Reduced number of Large Credits from 19 projects to 17 projects for each year after 2010 Beginning January 31, 2010, the MEGA Board may approve up to two previously issued Large Credits per year if the taxpayer did not use any or a portion of the credits Extend Sunset Date from January 1, 2013 to January 1, 2014

21. QUESTIONS??Joe AgostinelliCATeam Specialist(517) 241-7643agostinellij@michigan.org www.michiganadvantage.org/CAT