Whitmer OK extends development tax incentives for 5 years

Lansing – Michigan developers with “transformational” plans to redevelop brownfields may continue to seek tax incentives after Gov. Gretchen Whitmer and the legislature extended the program for another five years.

The state’s economic development board can approve new projects until 2027, instead of 2022, under a bill signed last week. The law, which was enacted in 2017, allows developers to retain income taxes and withholding taxes from people who live and work on sites as well as sales taxes associated with construction.

Brownfields are contaminated, dilapidated, functionally obsolete, or historic properties.

In 2018, the state granted Bedrock, a commercial real estate company owned by Dan Gilbert, $ 386 million in tax relief for a multibillion-dollar development project in Detroit that includes a 58-story building on the site. of the former JL Hudson department store. . The state authorized $ 30 million in incentives in 2019 to redevelop a long-closed stationery in Vicksburg.

An overall cap of $ 1 billion on incentives remains intact. But lawmakers changed the law to allow the Michigan Strategic Fund to approve a brownfield transformation plan that captures up to 100% income taxes instead of 50%, if there is a written, binding agreement. on affordable housing with the municipality.

Other changes waive requirements that a project be for mixed-use development only, that officials determine that the plan will have an overall positive tax impact for the state, and that there be an underwriting analysis by one-third if a project captures more than $ 10 million in income taxes and withholding taxes in any year.

According to the non-partisan House Fiscal Agency, these and other changes are likely to make the plans easier to approve and increase in size, making it more likely that the $ 1 billion cap will be reached than under the old law. The legislation was approved on 28-7 and 78-26 in the Senate and the House.

The incentive program “was very acceptable, very transparent but practically unusable,” the sponsor of the bill, Republican Senator Ken Horn of Frankenmuth, told a House committee this month. Potential projects in Lansing, Detroit, Grand Rapids and Petoskey were ineligible, he said, and the coronavirus pandemic disrupted the need for new offices.

“The purpose of this rewrite is to make sure it is usable statewide for smaller projects in all of our districts,” Horn said.

Critics who voted against the bill said the program should not be extended.

“For me, I always felt like I was creating a small fiefdom in a certain way where the tribute, instead of being collected by the state, was collected by the owner. This system has always made me scratch my head, ”said Representative Yousef Rabhi, a Democrat from Ann Arbor who questioned the impact on state revenues.

Supporters said the schools aid fund was healthy and countered that without the incentives it would be too expensive to redevelop abandoned properties.

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