These States are Leaning into the Brownfield Boom with New Funding and Policy Initiatives
Michigan boosts brownfields with a 5-bill package and a billion dollars, Florida doubles its voluntary cleanup tax credit and adds new site assessment tool, and Illinois carves out brownfields for solar.
This year has started out with a bang for the brownfield universe. Brownfields everywhere are finding demand from new end uses. Billion dollar industrial mega-projects are back in a big way. Brownfielders are busier than ever, even at the policy level. Lawmakers on Capitol Hill are now considering five separate brownfield bills that have been introduced into this congressional session. Many of these bills are bipartisan and the committee hearings discussing brownfields this year have stood out as rare love fests of constructive agreement.
Conditions are ripe for brownfields to be booming. Redevelopment is at the front of mind for more than the everyday brownfield heroes working on the built-environment day in and day out. Now states are leaning in to tap the momentum and seize the moment.
Florida doubles its voluntary cleanup tax credit on the 20th anniversary of its brownfield program.
The legislature in Florida have advanced a number of bills built to facilitate brownfield redevelopment. Florida Governor Rick Scott has signed bills doubling the state’s brownfield cleanup and redevelopment tax credits, adding flexibility and speed to petroleum and drycleaner cleanup programs and continuing the state’s brownfield job incentive.
The Voluntary Cleanup Tax Credit (VCTC) was signed by Governor Scott in May and permanently doubled funding the program from $5 million to $10 million per year. The VCTC is a heavily used program developers use to get started and take on the cleanup and redevelopment of contaminated sites, such as gas stations and dry cleaners. Eligible VCTC sites can receive a 50% state tax credit applied to state corporate income tax for environmental cleanup costs incurred and paid in the calendar year.
These VCTC tax credits are transferable to third parties, which you can list on the Online Incentives Exchange.
Florida also codified new elements to the Florida Department of Environmental Protection’s (FDEP) petroleum cleanup program in SB 1018, which will provide an additional $5 million per year for FDEP's new petroleum redevelopment initiative. Sites are eligible for up to $1 million in a given fiscal year. Applications are awarded on a first-come, first served basis and may be granted outside of the FDEP petroleum site ranking order.
The same law gives FDEP a new advanced site assessment tool for sites in Florida's drycleaner cleanup program. Property owners will be able to apply for a state-funded site assessment to be performed in advance of FDEP drycleaner site ranking order. This new program will grant up to a maximum of $70,000 per site and allows for the selection of sites if site cleanup is expected to provide cost savings to FDEP, assessment is expected to offer better evaluation of contamination risk, and the property owner agrees to implement a remedy using approved controls. This will give the FDEP a much great latitude to fast-track the front end due diligence for sites with high redevelopment potential, which is something every market in Florida could use to in this strong market.
Florida also opted to continue funding for Florida's Brownfield Redevelopment Job Bonus incentive. This $2,500 incentive accrues per new job created on redeveloped brownfield sites or adjacent sites and adds extra bonuses for employers.
Michigan's $1 billion and 5-bill package for big developments on contaminated brownfield sites
Stepping back into the revitalization swing, Michigan has also started 2017 with a package of five bills aimed at restarting its redevelopment. This is a reversal for Governor Rick Snyder, who signed off on big cuts he made to Michigan’s very successful brownfield program in 2011.
The newly passed Brownfield Redevelopment Financing Act (SB 111, amending the original act) contains the bulk of working elements in the brownfield stimulus bundle, including a “Transformational Brownfield Plan” (TBP). A TBP 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." A TBP requires a significant equity contribution from the developer. Projects must also be mixed-use development to qualify, which is given as "a real estate project with planned integration of some combination of retail, office, residential, or hotel uses." Projects could be single developments on qualify properties or a series of developments on eligible properties in a "related program of investment" that redevelops multiple properties in the same plan even if they are not necessarily adjacent or contiguous.
Projects must also surpass a minimum capital investment threshold, which is $500 million in a city with a population over 600,000 and $15 million in a community under 25,000. There are also four other levels of investment keyed to the specific population of the municipality. A TBP must ensure a significant equity contribution from the developer. There are caps on the amount of tax revenue captured and limits to the number of projects that can be approved in any one year (five projects per year).
Michigan’s new TBP’s also allows for the capture of three kinds of income tax revenues related to the project and property tax increments for use in financing "any demolition, construction, restoration, alteration, renovation, or improvement of buildings or site improvements on eligible property, including infrastructure improvements that directly benefit eligible property." These three (1) capture the amount of income tax levied and imposed in a calendar year on wages paid to individuals physically present and working on an eligible activity within a TBP, (2) the amount for each tax year by which the aggregate income tax from individuals domiciled within the eligible property subject to a TBP exceeds the initial income tax value, (3) the amount for each calendar year by which the income tax withheld from individuals employed within the eligible property subject to a TBP exceeds the initial withholding tax value.
Michigan’s four other related bills include:
- The Income Tax Act (SB 112) amendment provides that an amount from the total income tax revenue collected, an amount equal to the construction period tax capture revenues, withholding tax capture revenues, and income tax capture revenues due to be transmitted under every TBP shall be deposited each fiscal year into the State Brownfield Redevelopment Fund.
- The General Sales Tax Act (SB 113) amendment exempts sales taxes on the sale of tangible personal property for use in eligible brownfield redevelopment activities on eligible property included in a TBP, to the extent that the tangible personal property will be affixed and made a structural part of the real property or infrastructure improvements included within the TBP.
- The Complementary Use Tax Act (SB 114) amendment exempts use taxes on tangible personal property acquired by a person engaged in the business of altering, repairing, or improving real estate for others, or to the manufacture of a specific product if the property or product is to be affixed or made a structural part of improvements to real property included within a TBP, to the extent that those improvements are eligible activities on eligible property within a TBP.
- The Michigan Renaissance Zone Act (SB 115) amendment provides that where a Renaissance Zone overlaps with a TBP, the property owner and local government unit may request that exemptions from the Income Tax Act and City Income Tax Act not apply within the overlap.
The Rust Belt’s brownfielding billionaire
Quicken Loans founder and major Detroit developer Dan Gilbert, who was a vocal advocate of the legislation, praised the new laws in a statement to Crain’s Detroit. "This new law positions Michigan to keep our best and brightest at home and attract top talent from across the country to the Great Lakes State," Gilbert said. "The development community is getting ready to put our shovels in the dirt, and cranes in the sky as we launch construction projects in our cities with the scale and scope not seen in generations."
Gilbert’s large proposed redevelopment of the former Hudson's site in Detroit is likely to be first in line to benefit from the new laws. The brownfielding billionaire supported a previous brownfield bill that died in Michigan’s lame duck session last year.
Gilbert testified last year in support of that effort, arguing incentives are a needed economic development tool that would help Michigan cities compete with other cities who do have incentives and have been more successful attracting college graduates and the sought after and in demand creative class. "We're here at an inflection point in Detroit," Gilbert testified, "to continue our progress, we have to take it to the next level, because we're out of space, really, downtown and we're out of residential capacity downtown.” He added that the new brownfield incentives would unlock $2.5-$3 billion worth of projects in Detroit alone.
The team leading the revitalization of Detroit with Gilbert are hoping the strong market conditions continue. “It’s still fragile,” said Matt Cullen, principal of Rock Ventures and Dan Gilbert’s point man for development. “We’d like to get another five years under our belts to be comfortable that this is sustainable through an economic downturn or other disruption.”
Gilbert’s team predicted the brownfield tax credits would propel downtown into a new phase of growth led by new construction rather than merely the renovation of existing buildings. This would include Gilbert’s Hudson’s Department Store site redevelopment, which would include the tallest building in Detroit if completed.
So far, the redevelopment activity in Detroit has been focused on the downtown core--where the strongest demand is manifest. After 7 steady years of upward movement during the recovery, echos of complaints in Detroit’s downtown are starting to sound like those in other hot urban markets where land availability is limited and building inventory is thin. “We are running out of buildings to rehab (downtown),” reported Cullen. “We need more buildings, and this legislation could make them happen.”
Bonus Coverage: Manufacturing is coming back to America
While signing the five-bill brownfield package, Gov. Rick Snyder also confirmed a reported trip he recently took to Asia to seek to lure Foxconn Technology Group to build a $4.2 billion plant that could employ 5,000 workers in Michigan. When asked by a reporter whether his trip was a success, the governor responded, "Yes. How much success? I'll have to wait and see" if the company chooses the state reported Crain’s Detroit.
Louisiana is already landing billion dollar build outs by foreign companies investing in the U.S. China's Wanhua Chemical recently announced it will build $1.12 billion plant in Louisiana. Meanwhile, China’s Yuhuang Chemical is already developing a $1.85 billion methanol complex in St. James Parish, Louisiana.
These three project evidence the strong macro trends pulling investment to the U.S. again, and breaking Foreign Direct Investment (FDI) records. The U.S. looks set to top A.T. Kearney’s FDI global confidence index once again next year (after taking the top spot as the #1 preferred destination in the world for the 5th consecutive year in 2017).
Of course, U.S. companies are building out large scale industrial projects too--including a variety of massive LNG-export terminals. Only four months after it began operations, the recently completed $1.3 billion Big River Steel plant near Osceola is already Entergy Arkansas' largest user of electricity.
Double Bonus: Even Illinois Manages to Give Brownfields a Boost
The State of Illinois may be entering a new phase of its financial crisis, but it did manage to sneak through a substantial solar law, which is triggering a rush of capital, equipment and solar experts to the Land of Lincoln. Carve-outs in Illinois’ Renewable Portfolio Standard (RPS) mandate that more than half the new solar development must come from distributed installations (e.g. rooftop), community solar and solar farms built on brownfields. As a result, solar developers are flocking to Illinois and sizing up potential sites. In most cases, Illinois is largely undiscovered territory solar developers are evaluating for the first time.