Brownfield tax credits can help revive cities

Now that lawmakers have taken a major step to aid Michigan’s economic revitalization, it should complete the job by passing a companion bill that will help the state better compete for jobs. Many previously developed sites that were robust when built, such as the Pontiac Silverdome or Hudson’s downtown, are now vacant or decaying. They need reinvestment, but developers often don’t want to take on the mammoth costs to clear them of environmental hazards and other decades-old problems.

The legislation will help incentivize developers to invest in dilapidated buildings and areas that might otherwise remain vacant forever, such as the Pontiac Silverdome and the Hudson’s department store site in downtown Detroit. Gov. Rick Snyder is expected to sign it into law.

Opponents had fought passage, saying it will cost cities revenue and enrich wealthy developers. But what sits on these properties right now is nothing. Capturing new revenue is better than the zilch these properties are currently generating.

The bills will allow developers at various sites to capture 50 percent of the income taxes of workers who will be employed at the projects, as well as an exemption from sales and use taxes in developments of at least $500 million in cities with more than 600,000 people, down to $15 million in communities with 25,000 people or fewer.

The tax breaks will also go only to mixed-use developments. That means they must include residential, retail, office and/or hotel.

These kinds of revitalized areas are critical to cities throughout Michigan that have experienced disinvestment for decades.

While Detroit in particular has become increasingly attractive to developers, the market will still not support rents high enough to cover the cost of building projects on sites that require considerable clean-up.

But it’s hardly a Detroit bill. A third of these tax breaks will be earmarked for cities, villages or townships with 100,000 residents or fewer. That means significant investments will be made in smaller Michigan communities — many of which are struggling just as much as the urban centers.

The competition for these incentives is part of the legislation’s appeal. Only a limited number of projects will be approved, prompting developers to get creative in putting together developments.

Only one large city will qualify for the program each year.

Offering these incentives to investors and developers will give Michigan an edge over other states in attracting new growth. They will give developers a chance to transform eyesores — often hazardous as they are — into centers with the potential to thrive.

A second key incentive bill is being pushed by Business Leaders for Michigan. It would restore the states’ ability to offer tax credits to projects that create 250 or 500 new jobs and pay wages that meet or exceed the regional average.

Other states have these incentives in place, and Michigan is losing jobs to them. Lawmakers should pass this legislation next.

With Michigan’s population stable, but not exploding, Michigan has to make big plays to complete its recovery. These bills will help.