Michigan Enacts New Legislation for "Brownfield" Redevelopment

June 01, 1996-

The Michigan Legislature recently enacted new initiatives to encourage the redevelopment of abandoned, environmentally contaminated "brownfields" property.

The centerpiece of the legislative package is the Brownfield Redevelopment Financing Act (Public Act 381), which authorizes municipalities to establish Brownfield Redevelopment Authorities to foster the cleanup and reuse of brownfield properties. These authorities may pay or reimburse public or private parties for certain site assessment or cleanup costs at contaminated property located within the municipality's brownfield redevelopment zone. Eligible costs generally must be incurred consistent with a work plan approved by the Michigan Department of Environmental Quality ("MDEQ"). The authorities also may lease, mortgage or transfer property; borrow money and issue notes; and establish local site remediation revolving funds to finance eligible redevelopment activities. The authority can capture property tax increments paid by the user of redeveloped contaminated property located anywhere in the brownfield redevelopment zone. The zone may be as broad as the entire municipality and the property reuse may be commercial or residential, as well as industrial. A Brownfield Redevelopment Authority may be used in conjunction with a Downtown Development Authority, Local Development Financing Authority or Tax Increment Financing Authority.

Public Act 382 amends the Single Business Tax Act to provide a credit of 10% (up to $1 million total per taxpayer) of both the real and personal property investment by an owner or tenant of contaminated property being cleaned up under a brownfield plan. The credit is not available to owners or tenants who are liable for the contamination under the state Superfund law (Part 201 of the Natural Resources and Environmental Protection Act). Thus, not only may the developer of contaminated property be reimbursed by the Brownfield Redevelopment Authority for its cleanup costs, but the user of the redeveloped property can qualify for a 10% single business tax credit on its investment.

In addition, Public Act 380 establishes a Brownfield Redevelopment Board within MDEQ and Public Act 383 creates a Revitalizing Revolving Loan Program within MDEQ to loan funds to local governments for evaluation and demolition activities to facilitate redevelopment.

This initiative comes on the heels of sweeping amendments to Part 201 enacted in 1995 to reduce the scope of liability for environmental contamination and make cleanup standards more reasonable. A recent MDEQ report concludes that the Part 201 amendments already have resulted in $221 million in private brownfield redevelopment. The 1996 legislation should further accelerate redevelopment efforts.

For additional information, please call Peter Holmes, head of Clark Hill PLC's environmental practice, at (313) 965-8230 or email pholmes@clarkhill.com.