MSHDA’s Partnership with Detroit & the Brownfield Redevelopment Financing Act

Michigan State Housing Development Authority Established in 1966, The Michigan State Housing Development Authority (MSHDA) provides financial and technical assistance through public and private partnerships to: create and preserve safe and decent affordable housing engage in community economic development activities develop vibrant cities, towns, and villages address homeless issues

In 2006, two new divisions were formed at MSHDA: Southeast Michigan Development Division (SMDD) Jacquelyn Williams-Armstrong/ Director Community Assistance Team (CAT) /Joe Borgstrom/Director (division transferred from MEDC) These two divisions work together with our local partners in the Detroit metro region to provide technical assistance for Brownfield tax credit applications for commercial, residential and mixed-use projects.

MSHDA Brownfield Tax Credit Staff for Southeast Michigan Jim Paquet, CAT team Pauline Millichamp, SMDD/CAT team Van Adams, SMDD/CAT team

Southeast Michigan Development Division (SMDD)/MSHDA Covers the counties of Macomb, Monroe, Oakland, and Wayne Program Consultants for: Brownfield Redevelopment HOME Program Low-Income Housing Tax Credit Taxable Lending Programs Tax Exempt Bond Financing (including Preservation Loans) Cities of Promise: Detroit, Hamtramck, Highland Park, and Pontiac Home Ownership Program Cool Cities Community Development Community Assistance Team (CAT) Programs (including Brownfield Redevelopment)

The MSHDA Team for SE MI works closely with the Detroit Economic Growth Corporation (DEGC) and the Detroit Brownfield Redevelopment Authority (DBRA) on all commercial, residential and mixed use Brownfield projects.

Brownfield Application Process 1. Intake of initial contact from consultant/developer either through MSHDA team or DEGC team. 2. Referral to DEGC for Brownfield plan/ Work plan and presentation of project application to the Detroit Brownfield Redevelopment Authority (DBRA), Detroit City Council. 3. Joint meeting with DBRA and MSHDA staff to review projects 4. MSHDA staff/DBRA staff issues Part I MBT application to client.

5. MSHDA staff reviews Part I and draft Brownfield Plan/Work plan and presents to weekly MSHDA CAT team meeting for review and recommendation to proceed with application process. 6. MSHDA staff presents project to joint MSHDA and MEDC (Michigan Economic Development Corporation) Brownfield committee weekly meeting for review, comments and decision by joint committee to invite the project for Part II application. 7. When the Part II application is complete, it will be presented to either the Michigan Economic Growth Authority (MEGA) board or MEGA board chairman for final review and decision to grant credits.

8. MEDC administers the grant documentation once the credits have been approved. Projects typically have 5 years to complete construction. Michigan Business Tax Credits are received in the tax year in which the Certificate of Completion is issued. For MEGA issued credits of over $10 million, the credits must be claimed at the rate of 10% per year for 10 years, beginning with the first year specified by MEGA on the Certificate of Completion.

Brownfield Tax Credits: An Evolving Program in Michigan Interest expense: Brownfield TIF changes (ACT 381) New Michigan Business Tax Credit Law Changes (PA 89 of 2008)

Brownfield Interest Expense Change of the TIF Expanded definition of “eligible activities” and “blighted”: Eligible activities of demolition and lead or asbestos abatement were opened up for TIF reimbursement state wide. Reimbursement for the following eligible activities was also extended: developing and preparing Brownfield work plans, obtaining environmental insurance, and acquisition of property by the land bank fast track authority for economic development purposes.

The definition of “blighted was expanded to include property that has substantial subsurface demolition debris buried on site so that it is unfit for its intended use. The bill clarifies that the Authority may capture taxes levied for school operating purposes and for payment of that interest, provided that MEGA grants an approval.

Key Changes in Michigan Business Tax Credit Law (PA 89 of 2008) Credit percentages increased to 12.5% from 10% of project hard costs Urban Development Area Projects (UDAP) allows credit percentages up to 20% from 10% (until Dec , then 15% credit going forward) of project hard costs.

Urban Development Area Projects are projects with the following characteristics: a. Multi-story projects which increase density b. Mixed-use development and walk-able communities c. Sustainable and green redevelopment d. Addresses area wide redevelopment with multiple parcel redevelopment e. Project addresses underserved markets of commerce.

Eligible Property Definitions Eligible property definitions in the Michigan Business Tax (MBT) is more limited than in Act 381(TIF). Eligible property in the MBT includes: a. Property in a Qualified Local Unit of Government (QLUG) which is a facility, blighted or functionally obsolete, including adjacent or contiguous parcels b. Property not in a QLUG, which is a facility, including adjacent or contiguous parcels. c. Tax reverted property owned or under the control of a land bank fast track authority.