Tax credits boost reuse of brownfields

By ARJUN KASHYAP
Capital News Service
Friday, March 5, 2004

LANSING -- Tax credits will encourage private investments to revitalize brownfield sites across the state and help generate and retain jobs, according to the Michigan Economic Development Corp.

Since January, MEDC has approved nine new sites for redevelopment with $48 million in private money pouring into the economy and creating and retaining 145 jobs.

Ludington city manager John Shay, said that since Ludington is already developed, most new economic growth would come from redeveloping contaminated and obsolete sites.

A brownfield site is a land or building that is unused or only partly used and is considered derelict or contaminated.

About $3.7 million in single business tax credits went to companies that are investing in sectors ranging from housing, commercial space, banking and other sectors of the economy.

One beneficiary is Custer Office Environments of Grand Rapids that will use a $250,000 credit to convert an abandoned building into a consolidated headquarters, office building and showroom facility near downtown Grand Rapids. The company plans to invest more than $2 million in the project.

The tax credits made the facility an equally attractive proposition as moving into a cheaper suburban location, said Greg Wolf, Custer’s vice president of finance.

A downtown site will benefit the company’s customer base and employees, Wolf said.

Shay said that MEDC authorized the city to reimburse businesses for improvements like demolition, reconstruction and environmental cleanup of the brownfield sites.

Shay gave examples of a condominium project in Ludington that has been reimbursed $325,000 and a downtown professional office building both of which have used “functionally obsolete” sites.

Meanwhile, the city of Monroe will see the Fifth Third Bank open a new branch on what was once contaminated property. The bank plans to invest more than $1.5 million in setting up the branch and will create six jobs while keeping nine existing ones.

These and seven other projects are the first to be approved since the administrative process for awarding credits for smaller projects was transferred from the Department of Treasury to MEDC in January.

The brownfield tax credits have been “extremely effective” in the Grand Rapids area according to Birgit Klohs, president of the Right Place Inc., a regional economic development agency.

Earlier, the MEDC could authorize credits only for brownfield projects that involved more than $10 million in private investment while the treasury had to approve the rest.

MEDC can award tax credits worth $30 million every year. According to Susan McCormick of the MEDC, there are many more projects in the pipeline that would benefit from the credits.

Klohs said, a manufacturer that employed around 380 people in the Grand Rapids area has also bought an old site and is in talks with MEDC for tax credits.

A greater demand for credits than supply led MEDC to devise new criteria to determine eligibility for smaller projects.

One criterion is that the local community must contribute to a project through local funding. Another states that the project should support redevelopment in the communities and downtowns.

It also attempts to tackle international competition by requiring manufacturing projects to use existing facilities and to help create and retain jobs.

According to Wolf, Custer will use an abandoned downtown property and bring six jobs into the city and retain 58 more. It will also contribute to the city’s tax base.

The other approved projects are two in Lansing and one each in Jackson, Pinconning Township, Saginaw, Plymouth and Farmington.