Companies interested in redeveloping an urban site in the state of Michigan can benefit from several public finance, tax incentive, and incentive programs designed to address the unique challenges presented by underutilized sites. Below is a brief Michigan urban redevelopment program listing and discussion with a particular interest in Detroit.
Residential Property Tax Abatement/Neighborhood Enterprise Zone Program. Provides an exemption for the development and rehabilitation of residential housing located within eligible distressed communities. New facilities are taxed at ½ non-Principal Resident Exemption state average tax rate. Rehab properties are taxed at full rate that is frozen at tax year prior to certificate approval until the final three years. Tax rate is adjusted final three years for up 17-year term.
Commercial/Mixed Used Property Tax Abatement. Tax exemption for commercial property rehabilitation for the primary purpose and use of a commercial business or a multi-family residential facility with 5 or more units. The value of improvements must be at least 10% of the true cash value of the property at the start of the rehabilitation. Provides an exemption on the value of the improvements. Excludes school millages for up to 10-year term.
Obsolete Property Tax Abatement. Obsolete Property Rehabilitation Exemption Provides tax incentives for the rehabilitation of commercial and commercial housing properties that will be rehabilitated to an economically efficient condition. The city assessor must deem that the property is obsolete, which includes contaminated, blighted or functionally obsolete property. Provides an exemption on the value of the improvements but excludes school millages for up to 12-year term.
Capital Access New Market Tax Credits. If your location decision is in an eligible community, your company will be eligible to utilize the federally funded New Markets Tax Credit program that is managed by the Michigan Magnet Fund (MMF). The MMF received a $60 million qualified equity investment allocation of New Markets Tax Credits from the U.S. Department of Treasury. This is a 39% tax credit over a seven- year period for investments in job-generating businesses and projects in low income census tracts. The net present value of the tax credit is estimated to be approximately 22%-24% of the total net debt required. The MMF has indicated that it is willing to offer New Markets Tax Credits to your lenders if they place their investment in the MMF as part of the financing of your project. The MMF will then, in turn and simultaneously, invest the combined debt and tax credit equity in your company. Approximately 22%-24% of the total qualified investment will be in the form of debt at zero interest that is putted to you for $1,000 at the end of a seven-year holding period. The Company may need to make a payment to MMF’s Revolving Loan Fund from zero percent to six percent of the qualified investment depending on the increase in the project’s value during that period. The MMF will coordinate the process to raise the NMTC allocation and equity from several CDEs and obtain the best prices for the tax credit. MMF is prepared to meet with you to discuss the details and eligibility requirements at your earliest convenience.
Land Assembly. This program, administered by the MEDC, provides financial assistance in the form of loans to eligible municipalities for the acquisition of certain real property for economic development purposes, including industrial and commercial projects. The program is directed toward revitalizing the economic base of cities experiencing economic distress and decline.
Tax Increment Financing. Michigan permits municipalities to capture future property tax through municipal governments for use in public infrastructure. A municipality is given the authority both to create a TIF authority and designate the district where the TIF plan will be applied. The district does not necessarily have a limit regarding its size, so districts range from relatively small to rather large. The assessed valuation of the property in the TIF district that is determined when a TIF plan is being implemented is called the “base value”. The base value is used to measure increases in property taxable value over time. The taxable value of property can increase due to such events as a sale or transfer of ownership, major renovations or changes to the property itself, or inflation. Michigan TIFs can be used for: Central business district improvement, economic growth and increase in property values in a municipality, job creation & unemployment reduction, redevelopment of unused buildings or blighted areas, redevelopment of commercial corridors, water resource improvement, promotion & financing of operations in a transit operations finance zone for a street railway system, economic development & public infrastructure improvement, historic preservation of residential property values in a historic district, and promotion of residential growth in a residential neighborhood.
MDEQ Brownfield Grant and Loan Program. The Michigan Department of Environmental Quality (DEQ) Brownfield Redevelopment Program provides grant and loan funding to local units of government to address the environmental issues that hinder the redevelopment of a site. Generally, projects may be awarded up to $1 million in grants or $1 million in loans. The funding can be used for activities such as environmental assessment, clean-up, and actions necessary to reduce the risk of exposure for the intended reuse of the Brownfield property. Projects eligible to receive grant funds must: 1) have a committed developer; 2) be able to document the anticipated private investment; 3) create new jobs in the community; and 4) result in an increase in tax revenue. For projects that may not have a committed developer but have economic development potential, or in situations where there is a viable responsible party who is not participating in the remediation of the site, loan funds may be used. Loans are currently offered at a low 1.5 percent interest rate, with no payments or interest being due for the first five years, and they must be repaid within 15 years.
Community Development Block Grant: – Machinery and Equipment. The MSF administers the Michigan Community Development Block Grant (CDBG) program, a federal program that provides funds to eligible counties, cities, villages, and townships for economic and community development activities. Qualifying economic development projects are those directly related to a for-profit business location or expansion involving eligible activities that will result in the creation of jobs, with at least 51% of those jobs held by low- and moderate-income workers. This grant will cover the cost of machinery and other equipment required at the company’s facility, not to exceed 40% of the total cost of machinery and equipment. Upon approval of the community’s CDBG application, the funds will be available for 24 months, during which time the program will reimburse the company for machinery and equipment costs as new employees are hired. The maximum grant and reimbursement schedule will be negotiated based on the number and types of jobs being created, as well as the hourly wage rates of those jobs.
Transportation Alternative Program. TAP is a competitive grant program that funds projects such as bike paths, streetscapes, and historic preservation of transportation facilities that enhance Michigan’s inter-modal transportation system, promote walk-ability, and improve quality of life for Michigan citizens.