A guest editorial by Rapid Growth Media Publisher, Jeff Hill
Our new Governor, Rick Snyder, has said that "everything is on the table" for cuts in the upcoming budget, including cuts to the State's very successful Brownfield Redevelopment Tax Credits. But at a time when the State is trying to create jobs, be more efficient, and be more business-friendly, is doing away with these credits a smart move?
Making stuff is sometimes dirty work
I'm sure you've heard this story before: Grand Rapids has a long and rich history in manufacturing, dating back to the mid 1800's and the rise of the furniture industry in the Grand River Valley. It was even minted "Furniture Capital of America" at the turn of the 19th Century, with over 400 furniture makers lined up and down the Grand River and spilling into the surrounding countryside. At its peak, 40% of the workforce in Grand Rapids worked in furniture manufacturing. And making furniture, particularly wood furniture, was a very dirty business.
Long before we cared much about our air and water quality, we spewed tons of toxins into the air, ground and waterways. That practice continued well into the mid 1900's, and still plagues many (predominantly urban) sites not only in Grand Rapids, but all over Michigan and the United States. Cleaning up these contaminated sites is expensive, sometimes litigious, and many of the perpetrators aren't even around anymore.
That's why in the mid 1990's, the State of Michigan and many other states put into place Brownfield Redevelopment Authorities, and created a system of tax credits to help companies offset the costs of redeveloping contaminated industrial sites and old buildings. In many cases, the projects are not even feasible without Brownfield Tax Credits.
It's usually much less expensive in the short term for a company or developer to work with a Greenfield site (traditionally rural and agricultural). In Grand Rapids for instance, the cost of land in downtown has skyrocketed to $3 - $5 Million+ per acre, while land in the suburbs can be picked up for as low as $50,000 per acre. In addition, many old buildings are filled with asbestos and other hazardous materials that prohibit their use without massive and costly cleanup. The "path of least resistance" many times, at least short-term, is to build in the suburbs.
How far we've come
Grand Rapids has made huge strides in the rejuvenation of historically industrial and riverfront areas. That's what a State that has been too dependent on manufacturing for too long is supposed to do, right? According to the City of Grand Rapids, just since 1998, 79 Brownfield Plans were approved, amounting to over $1.5 Billion in investment and 7800 jobs; and not just downtown, but all over the city. They have also brought thousands of new residents to the city.
Many of these projects would not have happened without Brownfield Tax Credits, or they would have happened out in the suburbs or in another State.
Here are just a few projects that used Brownfield Tax Credits:
Women's Health Center, Midtown Village and Park Row Condominiums on Michigan Street, 38 Commerce, City Flats Hotel, American Seating Park, 920/924 Cherry Street (home of ICCF and The Green Well), The Gallery on Fulton, Hopson Flats, The Bicycle Factory, Steelcase Campus reuse on Eastern Avenue, Founders Brewing Company, 632 – 636 Wealthy Street, Mercantile Bank on Leonard Street, Union Square Condominiums, The Fitzgerald, Vern Berry Place on South Division, Goei Center on Butterworth, 201 Monroe (Reserve Wine Bar building), Flat Iron Building on Monroe Center, Harris Lofts, Division Park and Serrano Lofts on South Division, the proposed Urban Market, The JW Marriott Hotel, all of the Seward Avenue area projects on the West Side, the Michigan Hill project including the MSU – CHM Secchia Center, the Custer Office project on Grandville Avenue, Integra Printing on Oak Industrial Drive, CRC Paulstra on Fuller Aveue, Coca Cola on Butterworth and Benteler Automotive, Marie Catrib's and The Center of the Universe on LakeDrive.
Imagine going back in time to 1998 and crossing all of these projects off of Grand Rapids' future. I moved here in 1996; I'm not interested in going back to that. Now imagine all of the projects that could benefit from Brownfield Tax Credits over the next 10 – 15 years, which most likely won't happen if they're done away with. That's what we're saying to the people in Grand Rapids in 2024: No soup for you.
Not only that, but these Brownfield Tax Credits and programs have helped clean up industrial and contaminated sites all over the State, including Benton Harbor, Ludington, Jackson, Muskegon, Detroit, Lansing, Traverse City, Kalamazoo and hundreds more.
Brownfield Tax Credits for Dummies
Here's a simple explanation of how Brownfield Tax Credits work: I own a company that's looking to expand or want to develop a project. I basically have several choices A) build on a Greenfield site, which is generally much cheaper per acre than an urban site, and probably won't need to be cleaned up B) build on a Brownfield site or reuse an old dilapidated building C) not do anything, keep my money for other investments, State gets nothing.
Brownfield Tax credits help make up the difference between building on the Greenfield site and the Brownfield site, and reimburse the company part of their tax liability to help offset the costs of cleaning up the contamination. In other words, you build this project and you'll owe less in taxes to the State than you normally would on the project (or you can sell the tax credits at a discount to other parties to help finance the project) and do the cleanup. If you don't build the project, the State never gets any money, and no economic stimulus occurs. No people are hired, no new residents move into the city, no new tax base is added to the municipality, no contaminated site is cleaned up; you get the picture. Receiving a percentage of something is usually better than 100% of nothing.
Why urban sites matter
Trends show that people are moving to large urban areas, en masse, all over the country. According to several reports out recently, there has been a massive shift of construction from suburban and exurban areas to urban areas, where construction in urban areas has nearly doubled in comparison to suburban areas in many regions.
In 1950, only 30% of the world's population lived in urban areas. By 2050, it's estimated that 70% of the world's population will be part of massive urban networks. Where are these people going to live, if many urban sites are contaminated and economically infeasible to redevelop? And will people make urban areas in Michigan their home?
From an efficiency standpoint, it only makes sense. Why encourage growth in undeveloped Greenfield areas where there is very little infrastructure, when there are scores of previously used parcels already served by water, electricity, sanitary and storm sewer, streets, cable, fiber optics, transit, trash collection, healthcare, school buses, sidewalks, parks and a whole lot more. Even many Kent County Commissioners (acknowledged by the Grand Rapids Press) have come to that same conclusion in the last couple of years with increased support of Purchase of Development Rights in rural areas, to help limit suburban sprawl and refocus development efforts toward existing developed areas.
It's less expensive to the population as a whole to have job density located in the center of the metro area. It makes for shorter commutes for most (which means fewer highways and bridges to build and maintain), allows for increased density that can be served by transit and other infrastructure, and can create the energy that comes from having your workforce concentrated with other similar workers.
And young people are continually being drawn to urban areas that have dense, vibrant urban centers with plenty of housing options, amenities, entertainment, access to transit, and walkable residential areas. In fact, some studies predict the next big housing boom will be precisely in these urban neighborhoods, with millennials looking to snatch up affordable properties in these areas. Will we be ready for them, or will they find better opportunities elsewhere because cleanup costs are too great?
The bottom line
If the secret to economic success was to encourage development far out into rural agricultural areas, than Michigan should be one of the most successful economies in the country. At a time when the State should be looking to save money both short- and long-term, and when the population is not growing, investing in and reusing what we already have seems to make a lot more sense than to subsidize growth in new areas. In addition, it seems like incentives that provide a triple whammy: create jobs, bring in new city residents, and clean up the mess left by generations before us, would appeal to both sides of the aisle.
Jeff Hill is the Publisher of Rapid Growth Media, and holds a degree in Communications and Economics from Western Michigan University.Photos by Brian Kelly, Jeff Hill and Joe Force
In order
Furniture factories on the West bank of the Grand River around 1911
The Grand Rapids riverfront around 1915
Looking West down the Belknap Lookout Hill, pre Bridgewater, River House, Icon on Bond and Union Square redevelopment
Looking East up I-196 and Michigan Street around 1991, pre Medical Mile
Van Andel Arena site work
44 Grandville (Bistro Bella Vita building) pre redevelopment
101 South Division pre redevelopment
A building on South Division set to become affordable apartments, using Brownfield and Historic Preservation Tax Credits
Cranes work on Icon on Bond condominiums and Medical Mile developments in 2007
Excavation work in 2005 at the site of the JW Marriott Hotel
Excavation work in 2005 at the site of Lemmon Holton Cancer Center
Grand Rapids 2011 aerials