On Thursday, March 8th, CORENET hosted a professional panel at the Fort Shelby Hotel to discuss changes in the way Michigan supports new development under Governor Snyder’s recently enacted programs.
After networking and lunch, the panel took the audience of real estate professionals through the prior state history of tax incentives for developments under the Granholm administration. Many in the audience recall there were no caps or ceilings on how much the state would spend for development projects that qualified under one of many available programs. My how times have changed!
One of Governor Snyder’s first acts upon entering office was to eliminate the unpopular Michigan Business Tax (MBT) and replace it with a 6% corporate income tax on “C” corporations. As part of this restructuring, all MBT Credits utilized as development incentives (Brownfield, State Historic and MEGA Jobs Credits) were also eliminated. Governor Snyder’s main point in such restructuring included the premise that each project should stand on its’ own merit and that Lansing ought not be in the business of picking winners and losers in private business decisions by awarding tax credits.
In mid-December, Governor Snyder authorized a five-bill package, effectively creating a new economic development structure in Michigan along with community revitalization programs that empowers the Michigan Strategic Fund (MSF) to provide $100 million annually in incentives for highly competitive, qualified projects. This annual appropriations-based allocation is to be reviewed and apparently adjusted each year.
It’s certainly not a stretch to suggest the Michigan development community is nervous because that $100 million represents only 20% of the credits previously approved by the state each year and only a fraction of the necessary annual funds. Two case studies discussed proved the point that neither one would have had sufficient funding under the Community Revitalization Program since eligible investments and loans are capped at $10 Million per project. Both The Broderick Tower and The Fort Shelby Hotel projects had multiple layered financing, several concurrent tax incentive financing tools and extremely complicated organizational models, all of which were necessary to make such projects “redevelopment ready”. Again, neither one of the above-named projects would have been built under the present tax incentive restructuring and current financing programs.
While it is commonly understood at this time that Governor Snyder is adamant about changing how the State of Michigan does business through its assistance with the private real estate development sector, it is very uncertain whether the present tax incentive program is robust enough to provide the necessary momentum to help create more Michigan jobs and to return a better quality of life back to urban centers. Perhaps there is recognition of this uncertainty in Lansing at this time since the panel commented on the fact the MEDC has hired Austin, Texas-based Angelou Economics to conduct an economic impact study to determine whether our business tax incentives are still competitive with other states. It will be interesting to see how this tension between the private development industry and the state government gets resolved. Stay tuned!
ROBERT E. MATTLER, Associate Broker, Attorney and LEED AP BD+C, is Director of Green Brokerage at Armada Real Estate Services in West Bloomfield, Michigan. He speaks and writes about emerging green real estate issues in Michigan and elsewhere. For more information, contact Bob at Armada Real Estate (248) 855-1221; or by e-mail: firstname.lastname@example.org
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Author: Robert E. Mattler, Green Agent Man, representing GreeningDetroit.com