ESCANABA — A planned hotel project for the former site of the Delta County Jail moved forward Thursday after two separate Escanaba boards approved documents related to the project and its funding.

Bringing the three-phase project — which includes a $13 million hotel, a $5 million mixed-use retail and residential building, and the creation of a $5 million townhouse development — to fruition has required the cooperation of a number of governmental entities, including both the city of Escanaba and the county itself. However, Thursday’s activities revolved around the Escanaba Brownfield Redevelopment Authority and the city’s Downtown Development Authority.

The Illinois-based Proxima Management Group is seeking approval for more than $7.9 million worth of brownfield-eligible activities on the multi-parcel development area through a brownfield redevelopment plan, also known as a “381 plan” after the public act establishing the rules for brownfield developments in Michigan. If approved by the brownfield authority and the city council, the taxes that normally would be collected on the property as its value increases would be captured and reimbursed to pay for the actual expenses of items included in the plan, for a period not to exceed 30 years, through a process called tax incremental financing (TIF).

“Obviously taking out the jail is a big deal. It is a big ticket item. Some of the contamination on the site also requires some special consideration, so the idea here is to provide a financial incentive to help equalize those those pieces by getting reimbursement from the increased taxes generated by the project,” said Mac McClelland, manager of brownfield redevelopment for Otwell Mawby, P.C., who is representing Proxima for the project.

TIF collection on a brownfield site only affects the difference in the amount of taxable value resulting from the development. The taxes paid on a property prior to its designation as a brownfield site is still distributed to all of the taxing entities that property owners would normally pay for the duration of the plan. At the end of the plan, the taxing bodies would begin collecting the entirety of the taxes on the property, which is typically a significant increase over whatever the value of the property was before the development occurred. In this particular project, the jail and other government-owned parcels that were not being taxed would be added to the tax rolls, further increasing the tax revenue collected.

“Obviously, the site doesn’t have any taxable value now. Once it’s sold and once it’s developed, that taxable value will increase dramatically,” said McClelland.

However, that money won’t go to the city if the 381 plan is approved. Instead, that money will go directly to the DDA, which is funded by collecting the entirety of taxes collected on properties within its boundaries, with the exception of the taxes assessed on non-homestead properties that are allocated to fund public schools.

While under city oversight, DDAs function semiautonomously, and the city itself does not have the authority to strip the DDA of funding by approving a 381 plan. For the plan to move forward, the brownfield authority, the DDA and the city must all enter into an “interlocal agreement” for the DDA to waive its right to those taxes. The DDA approved the agreement in a meeting held immediately before the brownfield authority met Thursday, and the authority approved the agreement themselves during their own meeting.

After some discussion of the process Proxima intended to follow to develop the properties, the brownfield authority took another step towards bringing the project to fruition by setting a meeting to hold a public hearing on the 381 plan itself and its contents. That meeting will take place Thursday, Sept. 10 at 9 a.m. at the Escanaba Marketplace.