DEVELOPMENT INCENTIVES IN MICHIGAN

If you lived in Michigan last Spring, or closely followed the new administration, you know that one of Governor Snyder’s first acts was to eliminate the dreaded Michigan Business Tax (MBT) and to replace it with a 6% corporate income tax on “C” corporations. Designed to improve business attraction and expansion, it also resulted in the elimination of all MBT Credits utilized as development incentives (Brownfield, State Historic and MEGA Jobs Credits.) As of December 31, 2011, the Governor insisted that Lansing should not be in the business of picking winners and losers by awarding tax credits, that each project should stand on its own merit, and that the state should be assisting only when there is a real need for incentives.
Governor Snyder signed a five bill package into law creating new economic development and
community revitalization programs that empower the Michigan Strategic Fund (MSF) to provide $100 million in incentives for highly competitive projects. This is an annual appropriations-based allocation and continued funding is not guaranteed.

Background
The Brownfield and Historic Tax Credit programs in Michigan were among the best in the country.

In recent years the amount approved for Brownfield, Historic and MEGA credits totaled about $500 million per year. These credits were essential in attracting redevelopment to struggling downtowns and brownfields. Although the new MSF is designed to similarly assist redevelopment efforts, the $100 million represents 20% of the credits provided annually under the previous program, and only a third of the funds that some predict are needed to assist with redevelopment.

What Happened to Brownfield and Historic Tax Credits?
The Community Revitalization Program (CRP) replaces the Brownfield and Historic Tax Credit programs. The CRP will provide grants, loans and other assistance to
help close financing gaps on eligible projects. To be eligible, a project must be a facility (contaminated above residential criteria), a historic resource, blighted, functionally obsolete, or adjacent and contiguous to any of these types of properties.

Once eligible, the types of investments that can be covered (eligible investments) include demolition,

construction, rehabilitation, site improvements, machinery and equipment, environmental and professional services, and fees. When reviewing applications, the MEDC will consider whether the project provides revitalization of a regional urban area, is located in a downtown or traditional commercial center, is important to the community and has the community’s support
(both conceptually and financially). Additional considerations include, but are not limited to, development density, job creation, reuse of vacant or historic buildings, and the financial need.

The incentives can be no more than 25% of the eligible investments. The incentives can be a combination of a grant and loan, but there is a maximum grant amount of $1,000,000 per project and a total limit of $10,000,000 per project. Allocation and repayment of the incentive
is performance based, with grant repayment required under some circumstances.

What About the MEGA Job Credits?
The other MSF program is the Business Development Program (BDP). There are some similarities to the CRP, but the BDP provides grants, loans and economic assistance to qualified businesses making qualified investments or creating qualified new jobs. A qualified business is one that physically is, or will be, located or operated in Michigan, and is financially viable. Preference is given to businesses that need additional assistance for deal-closing or second stage gap financing. The qualified investment must be made in Michigan, and the qualified jobs must be new positions (retainage and transfers within Michigan are not considered).

The project must create a minimum of 25 jobs in a rural county or for a high technology activity project, or 50 jobs elsewhere. Factors influencing these awards include out-of-state competition, private investment in the project, business diversification opportunities, near-term job creation, wage and benefit levels of the new

jobs and net-positive return to the state.

What Other Incentive Are Available?
Even with the changes to the tax credits, there are still other valuable redevelopment tools available in Michigan (contact us for more information).
These include, but are not limited to:

Tax Increment Financing
DEQ grants and loans for remediation
EPA assessment and cleanup grants
Local and EPA Revolving Loan Funds
Neighborhood Enterprise Zones (NEZ)
New Market Tax Credits
Federal historic tax credits
USDA Rural Development Grants
Renaissance Zones
21st Century Jobs Fund
Private Activity Bond Program

Next Step?
The details for implementation of the CRP and BDP have been released by the MEDC, and market realities will undoubtedly help shape the program. The MEDC has engaged Austin-based Angelou Economics to conduct an economic impact study to determine whether our business incentives are still competitive with other states. However, don’t wait for the comparative study to explore these incentives. Contact our staff to review options and stay tuned as this story unfolds.

For more information about redevelopment
incentives contact Tom Wackerman at
810.599.5463 or twacker@asti-env.com.

Tech-Bits is intended to provide information concerning current environmental issues, and is not intended to provide technical or legal advice regarding any particular situation. Specific questions should be addressed to your environmental professional. ©2014 by ASTI