Column: How do Brownfields contribute locally?
ESCANABA — In urban planning, Brownfield is a term describing previously developed property which is no longer in use. In the early 90s the EPA referred to Brownfields as properties which the expansion, redevelopment or reuse may be complicated by the presence or potential presence of contaminants on the site. In 2002, President George W. Bush signed the Small Business Liability Relief and Brownfields Revitalization Act which provided grants and tools to local governments for the assessment, cleanup and revitalization of brownfields. In certain communities, such as Escanaba, Brownfields can include property deemed functionally obsolete or blighted, rather than contaminated.
It’s estimated that there are more than 450,000 brownfields in the USA. Results from Brownfield projects from around the country show that reinvesting in these properties increases local tax bases, facilitates job growth, utilized existing infrastructure, takes development pressure off undeveloped/open land and both improves and protects the surrounding natural environment.
Brownfield redevelopment is not a tax abatement, exemption or loan. After a property is legally designated as a Brownfield, the developer must submit an “Act 381” plan and approval by the city. The plan includes site identification, redevelopment activities to be taken, cost, pre-improvement taxable value, and the specific activities for which the developer will be reimbursed by the city’s brownfield authority (i.e. Demolition, clean-up, etc.). Once that plan is approved the developer can then be reimbursed for those certain, very specific eligible expenses. But where does that reimbursement money come from?
Rather than using revenue from the local tax base, the source of money that pays the reimbursement actually comes from the property developers themselves. An important understanding to have when designating a brownfield property is what the increase in taxable value of the property will be after improvements have been made. This will certainly be much higher than the pre-Improvement taxable value on the blighted or contaminated property. With this consideration, one tool with Brownfield redevelopment is TIF (Tax Increment Financing). This enables reimbursement funds to come from the difference between the pre-Improvement taxable value and post-Improvement taxable value (newly created tax revenue).
To explain this simply, consider that you are a developer looking at a blighted property with a taxable value that amounts to $1,000/year in property tax. You would like to develop the property which would increase the taxable value amounting to $3,000/year in property tax effectively creating $2,000 in new tax revenue. In order to make this project a reality, you have to demolish an existing, blighted structure. Demolition will cost you $10,000 and you don’t have the means to cover that cost. Rather than considering moving the project to an empty lot in another community, you could submit the property as a Brownfield. Potentially then, the city could award you that $2,000 in newly created tax revenue for five years in order to reimburse you for the demolition cost. Once fully reimbursed the new tax revenue is then fully captured by the local community and used wherever its leadership decides.
Brownfield is an extraordinarily helpful tool in the revitalization of our community. In an increasingly competitive environment it’s important for us to do everything we can to promote the growth of our existing businesses and the attraction of new investment to Delta County.
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TJ Thomas is executive director of the Economic Development Alliance