Kathleen Gray

Detroit Free Press Lansing Bureau

LANSING -- Transformational brownfield projects would get tax incentives under a bill that passed the House of Representatives on Thursday with bipartisan support.

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The package of bills is intended to help redevelop blighted sites that have long sat vacant because of the cost of dealing with demolition and environmental problems, like the Summit Place Mall in Waterford, the Silverdome in Pontiac and the Hudson’s property in downtown Detroit. Businessman Dan Gilbert has proposed to turn the Hudson's block into the highest skyscraper in the city filled with retail, office and residential space.

“Before 2011, we had these brownfield tax credits, and we were doing $450 to $500 million in investments. When that was eliminated, we unilaterally disarmed. Economic development folks lost an important tool,” said state Rep. Andy Schor, D-Lansing. “We gave up on revitalizing our communities, but these bills are going to allow us to reinvest in our hometowns.”

But 19 Republicans and three Democrats voted against the bill with some of them calling the tax breaks corporate welfare or crony capitalism.

“These are nothing more than bailouts of uneconomic projects,” said Rep. Martin Howrylak, R-Troy. “We should stand up and say we don’t support crony capitalism.”

SB 111-115 would:

Allow for the capture of 50% of the income taxes of workers at the development site and the exemption from sales and use taxes for transformational brownfield projects that have a capital investment by a developer in six population categories ranging from at least $500 million in cities with a population of more than 600,000 to $15 million in a community with a population of 25,000 or less.

The project must be a mixed-used development combining residential, retail, office and/or hotel uses and at least 35% of the projects would be earmarked for cities, villages or townships with populations of under 100,000.

Developers could not be reimbursed until the investment was actually certified. The tax credit would have to be approved by the local community, the Michigan Strategic Fund, an independent third party that analyzes the project and the Michigan treasurer.

Each city is limited to not more than five transformational plans over the life of the bill.

The bills had widespread support from business groups and communities hoping to clean up blighted properties in their towns.

“This legislation offers a way to revitalize the toughest brownfield properties left in our communities. It will make it possible to transform these empty sites into exciting, vibrant destinations that create jobs and opportunity for our communities,” said Kent Wood, director of government relations for the Northern Michigan Chamber Alliance in a statement released after the vote. “It truly can be a game-changer.”

During testimony on the bills last month, Paula Holtz, economic development director for Tecumseh, described a former industrial site that had employed 4,000 people, but had been left vacant, blighted and contaminated when Tecumseh Products closed. It left a 55-acre hole in the heart of the city. Now a city resident has purchased the property and has proposed redeveloping the property, but needs the help to clean up the problems at the site.

“This is instrumental to our health and well-being,” she said. “It’s an opportunity unlike anything we would get in the future," Holtz said.

And Jared Fleisher, vice president for government affairs for Quicken Loans, told lawmakers during a Tax Policy Committee hearing last month that Gilbert’s plans for the Hudson’s property redevelopment would be greatly scaled back without the incentives.

“What this comes down to, it’s a choice for the state of Michigan. These are sites that have been in this type of condition for years, decades,” he said. “We have a choice we can leave these sites as they are or we can turn them into thriving areas.”

But some lawmakers said they were adamantly opposed to giving tax breaks to the wealthiest instead of ordinary taxpayers.

“This is corporate welfare. It is helping a small group of very wealthy developers to get wealthier,” said Rep. Yousef Rabhi, D-Ann Arbor. “We’re losing tax dollars that we could have invested in our schools, roads, universities … At the end of the day, there are a few people who get rich off these and the rest of us are left holding the bag.”

The House had been wary of taking up the tax break for businesses, especially after they came up three votes short in February to cut the income tax on all Michigan workers from 4.25% to 3.9%.

State Rep. Steven Johnson, R-Wayland Township, added, "This is a handout to 25 wealthy developers. Do you stand for wealthy developers or hardworking taxpayers?"

After passing on votes of 85-22 or 83-24, the bills will have to go back to the Senate for concurrence in the changes made in the House, but they are expected to be quickly approved next week.

Gov. Rick Snyder has been an opponent of targeted tax breaks, but has said that he generally supports the concepts of these transformational brownfield tax breaks.

Contact Kathleen Gray: 313-223-4430 or kgray99@freepress.com