Two Years in the Making, PA 471 will Facilitate More Brownfield Redevelopment in Michigan.
On January 4th of 2017, Governor Snyder signed into law Public Act 471 of 2016, the first major amendment in four years to Michigan’s Brownfield Statute (Act 381 of 1996). The amendment serves to streamline and expand the reach of the Statute and is the result of over two years of collaborative work between the Michigan Department of Environmental Quality (MDEQ), Michigan Economic Development Corporation (MEDC), and a committee of brownfield experts from State agencies, local governments, industrial trade groups, and private consultants.
Below, I summarize the main changes, and the rationale for those changes.
Environmental Activities: Clarification and Expansion
Environmental eligible activities – which the previous version of the law distinguished as baseline environmental activities, due care activities, and additional response activities – now all fall under the umbrella of “Department Specific Activities”. The use of a single term will make brownfield plans easier to approve and implement. In addition, the amendment identifies specific new environmental activities that fall within the definition.
Removal and closure of underground storage tanks (USTs). Removal had been considered a non-environmental demolition activity to be approved by MEDC rather than MDEQ, while closure activities had been approved by MDEQ. Now, UST removal and remediation activities all fall under MDEQ’s purview.
Disposal of solid waste under Part 115, if a liable party isn’t benefiting. This provision expands the reach of the brownfield law to remediation of landfills not covered by Part 201.
Dust control related to construction activities where contamination is present. This had been covered in the past, but is now formally acknowledged as a reimbursable activity that helps prevent the spread of contamination.
Dredging and disposal of contaminated lake and river sediments associated with an economic development project. With all the port rehabilitation and dredging planned for Michigan, it was recognized that these activities should be included in Brownfield TIF. The eligible activity includes initial cleanup in cases where contamination in a waterbody has been a barrier to channel improvement, but not channel maintenance. Prior to the amendment, contaminated sediments that are the product of dredging have not been the regulatory responsibility of the MDEQ, but with the amendment, the disposal of sediments can now be covered as an eligible activity as long as it can be demonstrated that they contain contaminants exceeding MDEQ criteria.
Sheeting and shoring where necessary due to removal of contaminated sediments. This cost has been covered as a non-environmental activity in core communities, but is now recognized as a direct cost associated with contamination removal, available statewide.
Industrial cleaning had been approved in certain circumstances as an additional response activity in the past, but is now formally identified as an eligible cost to prepare existing facilities for safe reuse.
Lead, mold, and asbestos abatement when they pose an imminent threat to human health. Like UST removal, these activities had been considered a non-environmental for approval by MEDC, but now are considered environmental costs when conditions warrant. Mold is now included in the abatement suite, when it had not been previously.
Leaking Underground Storage Tanks as defined in Part 213, now qualify property as brownfield eligible.
A couple of additional amendments are noteworthy:
Resetting taxable value. The amendment allows lowering a brownfield property’s initial taxable value (base value) once during the life of the brownfield plan if, due to a decline in assessed values, the property is unable to generate tax increment revenue (TIR) after construction. Such declines were a big problem after the economic crash of 2008-09 where TIR plunged, and bond and TIR-backed loan payments were threatened (or failed).
Brownfield plan abolition. A plan may be abolished after two years after approval under certain circumstances. Another brownfield plan may then be established for the property for a new project.
Increasing Michigan Strategic Fund’s (MSF) threshold for administrative approval of 381 Work Plans. The last major change in terms of MSF funding of non-environmental activities allows the MSF Chairperson (typically the head of MEDC) to administratively approve up to $1,000,000 in eligible activity costs (up from $500,000).
A few other minor changes include:
- Renaming the “Local Site Remediation Revolving Fund” to “Local Brownfield Revolving Fund”.
- Setting the amount to be reimbursed for the costs of the brownfield plan and 381 work plan preparation to $30,000.
- Setting the amount to be reimbursed for the costs of the brownfield plan, work plan and tracking, recording and compliance costs up to $30,000.
- Both MDEQ and MSF have 60 days to review a complete work plan. Prior to this, MSF had 65 days and MDEQ had 60 days.
- The requirement to describe the cost gap between a brownfield and a greenfield site in an Act 381 work plan has been removed. This is due to the much more rigorous cost vetting that occurs when projects are being considered for support by the agencies, making this unnecessary.
While the changes to the Brownfield Redevelopment Act effectively make the law easier to read by rearranging some sections and adding clarifying language, it is the expansion of eligible activities that will facilitate the further successful redevelopment of more brownfield sites throughout the State of Michigan. As such, the MDEQ should be commended for assembling and leading an experienced and diverse stakeholder group toward achieving these improvements.
It should also be noted that this Amendment did not include the other notable brownfield TIF bills from 2016: The proposed “Transformational Brownfield Site” bills – seeking to add new construction as an eligible activity, as well as enabled capture of income and sales taxes – failed to secure passage in the State Legislature, though it is likely that some form of this bill package will be introduced in this new legislative session.
AKT Peerless has significant knowledge and experience with brownfield redevelopments and the financial mechanisms that often make projects viable and sustainable – in fact, we have successfully delivered our clients over $500 million in brownfield resources in Michigan alone. And you can count on us as we continue to be engaged in legislative improvements in this arena and to serve as a critical resource for our clients and prospective clients on brownfields.
To see how these improvements can be leveraged for your project, or if you should have any questions about Public Act 471 or about brownfields in general, please contact me directly at 616-608-0229 or at firstname.lastname@example.org or contact AKT Peerless at 800-985-7633 or at email@example.com.