Courtesy of MIRS News Service
Michigan would take up arms again in the economic development game under a pair of packages passed Monday by the Senate. The first package would adopt the so-called “TIF on Steroids” bill, which would allow the state to forgo up to $50 million in sales and income tax revenue to bring up to five major “transformational” projects a year to life.
“The transformational brownfield redevelopment bills are primarily designed to redevelop communities,” explained Sen. Ken HORN (R-Frankenmuth) who shepherded the bills through the Senate. “I think, personally, this is going to be the biggest urban redevelopment bill we’ve dealt with in the last few decades.”
SB 1061, SB 1062, SB 1063 and SB 1064 passed on 29-8. SB 1062 earned 30 yes votes with opposition coming from conservative Republicans.
Specifically, the bills would modify the existing brownfield Tax Increment Financing (TIF) to allow developers to pursue “transformational,” large-scale urban projects to capture sales tax revenue generated on site and 25 percent (and in some cases, 50 percent) of State income tax generated by residents living in the development.
Part of the push behind the Horn package of bills is coming from Detroit developer Dan GILBERT‘s Rock Ventures company that is advocating development on the site of the failed Wayne County jail project.
Horn said there remains a lot of work to do on the package as it moves to the House.
“We still have a lot of work to do to satisfy the members of the House and ultimately satisfy the Governor,” he told reporters.
The bills were referred to Rep. Lee Chatfield’s (R-Levering) House Local Government Committee, which, at first blush, isn’t the most favorable committee where the package could have landed.
The second set of bills passing the Senate Monday – SB 1153, SB 1154 and SB 1155 — are backed by Ann Arbor SPARK, BLM and other economic development organizations as a means of “leveling the playing field” and passed by similar margins today.
The bills use the Personal Income Tax (PIT) generated from new job creation as an incentive. However, rather than providing qualifying companies a refundable tax credit, the bills would provide a tax abatement.
The bills would require the Michigan Strategic Fund beginning June 1 of next year to create a new program using a “detailed application, approval and compliance process” that must be available on the fund’s website.
It states the Fund can enter into an agreement with a company if all of the following criteria are met:
– The business creates and maintains a minimum of 500 certified new jobs in the state.
– If the wages paid by a project are at least 125 percent of the local average wage, only 250 jobs are required.
– The business agrees to maintain a number of full-time jobs equal to or greater than the number of full-time jobs it maintained in the state prior to the expansion.
– The wages of the jobs created (for all projects) must be at least equal to or greater than the average wage of the local area.
– The plans of the qualifying facility are “economically sound.”
– The project will benefit the people of the state by increasing opportunities and/or strengthening the state’s economy.
– The withholding abatement offered under this program is an incentive that addresses “competitive disadvantages” with out-of-state sites.
– A third-party cost-benefit analysis states that the project will result in an overall positive fiscal impact to the state.
– The business creates the promised jobs within five years of entering agreement and retains the jobs throughout the life of the agreement if it exceeds five years.
The package caps at 15 the number of new agreements the Michigan Strategic Fund can agree to every year. The MSF is also limited to never having more than $250 million in combined outstanding withholding abatements. Horn described the changes as a means to make sure the state doesn’t “paint itself into a credit” which has happened in the past with Michigan Business Tax credits.
According to Senate Majority Leader Arlan MEEKHOF, the package of bills is an acknowledgement that the state can’t simply lay down its economic development tools without recognition that other states are continuing to use them.
“These [projects] are things that are not everyday projects,” Meekhof told reporters. “These are big things that can be transformational in the communities.”