Brownfields are often old industrial sites. They can be polluted with heavy metals or chemicals. That pollution can make these sites much more expensive to build on – because you have to clean up the pollution first.
Right now, developers can get as much as a 20% tax credit from the state of Michigan when they build on a brownfield site. That means they can apply that credit to the taxes they owe the state.
John Byl chairs the Michigan chapter of the National Brownfield Association. He’s standing on the roof of a building in Grand Rapids called The Gallery. It’s the new home of the Urban Institute for Contemporary Arts.
“The site we’re on right now was a contaminated site here in downtown Grand Rapids. So for example, this project received a 20% credit so if the construction was $30 million dollars it received $6 million credit.”
John Byl says the tax credits are popular. And he says without them… a lot of contaminated sites around the state might not be cleaned up.
“It costs more to build in tight spaces, it costs more to deal with contamination, it costs more to renovate existing buildings. If you don’t have that tool, projects like that won’t happen or they’ll be built somewhere out in the green field space.”
So it’s cheaper and easier for a developer to build out in the country.
Governor Rick Snyder wants to get rid of the brownfield tax credit. Last week, the state House approved a bill that eliminates the credit. The Senate is voting on that bill this week.
Rick Pluta is the State Capitol Bureau Chief for the Michigan Public Radio Network. He’s been following the state Legislature’s decisions on the brownfield tax credit and he joins me now to talk about this.
So, what kinds of arguments are you hearing from lawmakers for eliminating the brownfield tax credit?
RP: Well, I would start with the Governor’s argument and he says simply that they are unsustainable, that they cost the state too much:
(clip from Governor Snyder):
“If you have states continuing to do the incentive model and playing that game, at some point people should be asking the question, are they going to have to change their tax system, raise their tax rates, to pay for these things? And if you’re a business in that state, that could come out of your hide later.”
RP: The Governor says as a matter of fact that the state over the next couple of years is already obligated to forgo two billion dollars in revenue because of these credits.
RW: Okay, so the Governor is saying that we just can’t afford the brownfield tax credit anymore?
RP: That these are unsustainable. Now, he’s not saying the incentive will go away entirely. He wants the Legislature to create a fund, to appropriate money. It’ll be controlled by the Michigan Economic Development Corporation, and it will give, basically, cash up front. Grants to developers that promise to redevelop old factories and historic buildings and such. But it’s got to be done up front and if you want to do more of it, then you’ve got to find somewhere in the budget to pay for it.
RW: Okay, so there are some concerns about that kind of model, that it could get muddied by politics.
RP: You know, the advocates for these credits say, well, now it’s going to be a system of ‘who do you know?’ Who do you know at the Michigan Economic Development Corporation in order to become first in line to get the limited amount of funding available for this, and maybe, who do you know in the legislature who can apply some political pressure to the MEDC to get you what you want.”
RW: Well, Rick, thank you so much!
RP: My pleasure, Rebecca.
Rick Pluta is the State Capitol Bureau Chief for the Michigan Public Radio Network. The Senate will be deciding the fate of the brownfield tax credit this week.
That’s the Environment Report. I’m Rebecca Williams.
Special thanks to Michigan Radio’s Lindsey Smith for her help with this story.