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Michigan Retools its Brownfield Redevelopment Program

Client Alert

Author: Todd C. Fracassi

6/24/2011

On June 6, 2011 the U.S. Environmental Protection Agency (EPA)’s Administrator Lisa P. Jackson was in Lansing, Michigan, to announce that EPA had awarded more than $76 million in brownfield grants to help clean up, revitalize, and reuse contaminated properties in the United States. Communities in 40 states and three tribes will share the $76 million. In Michigan, seven communities will receive grants totaling $2.9 million.

The $76 million in EPA grants will contribute to the assessment and cleanup of abandoned industrial and commercial properties throughout the country. With an estimated 450,000 abandoned and contaminated waste sites in the United States, an ongoing financial commitment by the federal government and states will be imperative. Such a commitment can be difficult, however, as the economy still recovers and the tax base in some states has shrunk.

These realities have led Michigan to rethink and restructure its brownfield program. In May 2011, the Michigan legislature passed and Gov. Rick Snyder signed into law tax reform that eliminated Michigan’s brownfield tax credit. While the overall impact to Michigan’s brownfield program remains unknown, approximately $170 million in brownfield tax credits that were approved annually by the Michigan Economic Development Corporation (MEDC) will no longer be available to developers. So how does the state plan to address this gap in brownfield funding/incentives?

The State of Michigan has announced that in fiscal year 2011-2012 the MEDC will have $100 million for different financial incentives, including brownfield redevelopment sites. The incentives will be administered by the MEDC as a loan and grant program. Loans and grants will be awarded on a competitive basis, but the details about how the program will be administered are unclear and questions remain regarding many items, including eligibility, maximum loan or grant amounts, loan terms, and selection criteria.

Projects that previously would have qualified to receive brownfield tax credits will have to compete for the available brownfield financial resources, and developers will need to be creative to combine financial incentives available through state and federal government grant and loan programs, and through local redevelopment authority incentives (e.g., tax increment financing) to make many projects work. Engaging environmental consultants and legal counsel well versed in the programs and knowledgeable about available funding sources will be critical going forward.

To resolve brownfields issues, Pepper Hamilton LLP offers a unique team of lawyers who deal with matters relating to the environment, real estate, project finance, construction, government contracts, governmental relations, bankruptcy and commercial/corporate issues. Pepper’s brownfield services range from negotiating cleanup obligations and liability limitations, attending to the requirements of lending institutions and local authorities, to developing creative financing, including loans, grants, bonds, tax credits, and tax increment financing.

Todd C. Fracassi

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.