A group of bills (SB 1061, 1062, 1063, 1064 and 1065) have passed the Michigan State Senate and will now be taken up in the Michigan House. The amendments, affectionately called “TIF on steroids” by some, would expand current tax increment finance legislation in Act 381 of 1996 (the Brownfield Redevelopment Financing Act), to include the return of certain sales and use taxes and income taxes associated with a Transformational Brownfield Plan (“TBP”) to an owner or developer. Presently, Act 381 only allows for the capture of certain ad valorem taxes and specific, redevelopment—or rehabilitation—purposed taxes. Senate Bill 1061 contains the material amendments.
To qualify for such new return, a project must be “transformational” for the jurisdiction where it is located, as evidenced by meeting certain statutory criteria:
- Approval of TBP created by a local brownfield development authority, and approved by both the local government where the project would be located and the Michigan Strategic Fund (“MSF”);
- Be a mixed use development (commercial/retail and residential);
- Result in a minimum capital investment between $25,000,000 and $500,000,000, depending on the size of the municipality; and
- Based on the extent of brownfield redevelopment, demonstrate appropriate anticipated growth in population, commercial activity and employment as a result of the TBP and project.
The MSF could approve the capture of up to $50,000,000 in new sales and use taxes and income tax “capture revenues” (as each are defined) combined each year, and up to 5 TBPs per year. A municipality could approve 1 TBP per year. There is not any cumulative limitation on any municipality with respect to the total outstanding capture potential, or the number of active plans within each municipality.
MSF would remit captured funds that have been set aside by the Treasurer in the State Brownfield Redevelopment revolving fund, and MSF would be responsible for administration of the program, TBP amendments, etc. Once approved with a development agreement in place among the parties, the use of the funds would be binding upon the State.
Income Tax Retention
Also moving to the House is legislation that would allow the MSF annually to authorize up to 15 new agreements where businesses, in exchange for creating at least 500 new jobs in the state (or 250 if they were paying 125% of the average wage in the county where they are located), would retain a portion of the state income tax withholdings for those new employees instead of remitting those tax revenues to the state.
The bills (SB 1153, SB 1154 and SB 1155) would set a limit of $250 million on the combined abatement agreements in effect at any given time.
The legislation specifically excludes casinos, professional sports stadiums and portions of commercial space devoted to retail sales, and contains other requirements for evaluation, including the maintenance of existing jobs, the creation of jobs within 5 years, third party cost/benefit analysis, the overall benefit to the State’s economy, etc.
The abatement could be as high as 100%, depending on the wages, but the MSF would be responsible for developing a sliding scale to determine the amount of any abatements.
Also important to note is the movement of Senate Bill 627, the Michigan Alternative Project Delivery Act. This is a new authorization for public-private partnership developments.
The bill would permit agreements among public (broadly defined) and private parties in support of eligible projects. A public authority would have wide authority toward this purpose, including authority to hire consultants with specialized knowledge to assist in a variety of fashions. The method of selection of these services is also very flexible.
Section 9 of SB 627 states “any lawful source of public and private funding and financing, or combination of these, may be utilized for the development of an eligible project under this act.” And such public authorities would be able to contribute their own available funds. Bonds, notes and other obligations would also be permitted as otherwise permitted by law, for the purposes of funding an eligible project.
This bill attempts to address a number of legal limitations that have applied to public bodies involved in economic development. Given its wide application, it seems to broaden the financing and other authority of certain bodies already in existence, and may be impactful with respect to projects such as, among others, the Willow Run driverless car facility being developed.