When the Brownfield Redevelopment Financing Act, 1996 PA 381, as amended (Act 381) was passed in September of 1996 it was creative; it was a financing statute with economic and environmental benefit. It allowed municipalities to establish a brownfield redevelopment authority (BRA), adopt brownfield redevelopment financing plans, and capture incremental local and school property taxes from redeveloped contaminated properties to pay for the environmental costs associated with those properties. In essence, it established a way for property improvements associated with cleanup and redevelopment to pay for environmental activities necessary for safe redevelopment. It was novel, the only one of its kind in the country. The law went unchanged until it was improved in 2000.

The June 2000 amendments were major and again, innovative. They provided municipalities with additional tools to encourage brownfield redevelopment by introducing the "qualified local governmental units" concept. This allowed tax increment financing to pay for a wider variety activities on more types of properties. Brownfields now included blighted or functionally obsolete properties which became eligible properties in qualified local governmental units. Eligible activities were expanded to include infrastructure improvements, demolition, lead and asbestos abatement, and site preparation in those communities.  And the other incentive of equal importance was the eligibility to apply for the Single Business Tax Credit (now the Michigan Business Tax) for eligible property included in an approved brownfield plan. 

Act 381 was amended again in December of 2002. The main provision was extension of the sunset through December 2007 for approval of work plans to capture school taxes to conduct eligible activities under a brownfield plan.

The amendment to Act 381 in December 2007 extended the sunset through December 2012; however, numerous other changes were made. The amendments included new eligible activities, changes to the public notification and hearing process, clarification of several provisions, changes to the work plan approval process to increase local authority and streamline the process, and increases in the annual cap for a BRA's annual administrative and operating expenses, to name a few. This document summarizes the amendments; however, a more in-depth look can be found in the presentation and handout from the February 2008 Brownfield Redevelopment Workshops which are at www.michigan.gov/deqbrownfields and then select Brownfield Grants and Loans. 
Act 381, as amended, can be found at: www.legislature.mi.gov.

*This document does not discuss the eligibility of land bank fast track authorities or other property-specific exceptions where tax capture and use is limited to local taxes only.

GENERAL PROVISIONS 

• A municipality may establish one or more BRAs to implement brownfield plans.
• A county may operate a BRA on behalf of a municipality located within the county only if the municipality concurs with the provisions of the brownfield plan for the eligible property located within the municipality.
• A municipality must hold a public hearing before approval of a brownfield plan.
• A BRA may develop a brownfield plan that identifies which properties the BRA will conduct eligible activities on and from which it will capture taxes.

TAX CAPTURE PROVISIONS

• All incremental property taxes that come from the increased value of an eligible property, including taxes levied for school operating purposes, can be captured. Capture must start within 5 years of the base year, which is the year the property was added to the brownfield plan, and cannot exceed 30 years. Taxes already captured as part of an existing tax increment financing plan (under other state laws) and taxes levied to pay off specific obligations are exempt.
• For the purposes of Act 381, school taxes are the local school operating tax and the state education tax.
• Approval of a work plan by the Department of Environmental Quality (DEQ) is necessary if school taxes will be used to conduct certain eligible environmental response activities.
• Approval of a work plan by the Michigan Economic Growth Authority (MEGA) is necessary if school taxes will be used to conduct all eligible non-environmental activities.
• The percentage of local taxes captured must be equal to or greater than the percentage of school taxes captured - considering all tax capture plans in place under Act 381 or other state laws.
• A BRA may issue revenue and tax increment financing bonds and notes to finance the eligible activities and use tax increment revenues to pay off the obligations.
• Interest costs associated with financing of the eligible activities can be reimbursed with captured taxes.
• A BRA may establish a local site remediation revolving fund and place excess captured taxes from properties at which eligible activities are conducted into the fund. The BRA can use the fund to conduct eligible activities at other eligible properties.
• Depending on the number of active projects, a BRA may capture up to $300,000 per year in local taxes for reasonable and actual administrative and operating expenses of the BRA.
• School taxes may not be used for response activities that benefit a party who is liable under Section 20126 of Part 201 , Environmental Remediation, of the Natural Resources and Environmental Protection Act, 1994 PA 451, as amended (NREPA).
• The state or BRA may take appropriate legal action to recover the costs of eligible activities funded through tax capture from person(s) who are liable for the contamination.

HOW CAPTURED TAXES CAN BE USED
Captured taxes can be used pay for the costs of eligible activities that are conducted on eligible property.

Eligible Property and Eligible Activities
To begin, eligible property is property that was used or is currently used for commercial, industrial, public, or residential purposes, including personal property. Then, location further defines property and activity eligibility, as follows:

Statewide: is a facility as defined in Part 201 of the NREPA, functionally obsolete or blighted.

Eligible Activities

• Response activities to complete a Baseline Environmental Assessment (BEA)
• Response activities needed for an owner or operator to comply with the due care requirements of Part 201 of the NREPA
• Additional response activities that go beyond BEA or due care activities for a facility
• Demolition that is not a response activity
• Lead or asbestos abatement
• Reasonable costs of developing/preparing brownfield plans and work plans
• Reasonable costs of environmental insurance

Qualified Local Governmental Unit: is a facility as defined in Part 201of the NREPA, functionally obsolete or blighted. Eligible Activities - in addition to the statewide activities above, the following additional activities are eligible.

• Infrastructure improvements that directly benefit the property
• Site preparation that is not a response activity

**See the definition eligible property in Act 381 to determine the eligibility of contiguous and adjacent parcels.
At a BRA's discretion, property taxes from an eligible property in excess of the amount needed to pay for the eligible activities can be captured and deposited into a local site remediation revolving fund. This excess capture can continue for up to five years after the aforementioned costs are reimbursed. The revolving fund can be used only for eligible activities on other eligible properties within the municipality. Excess school tax capture is limited to the amount of school taxes captured/used to reimburse the actual cost of the environmental response activities or up to five years, whichever comes first. Excess school taxes cannot be captured on activities approved by the MEGA; however, the revolving fund may be used to fund MEGA-eligible activities on eligible properties. 

SCHOOL TAXES & WORK PLANS 
A BRA cannot use school taxes to reimburse the cost of certain eligible activities unless the activities are consistent with a work plan approved by the DEQ or MEGA prior to the work being conducted. Currently, work plans for use of school taxes must be approved by the end of December 2012.

Eligible activities requiring DEQ approval:

• Implementation of response activities to comply with due care requirements of Part 201 (does not include due care evaluation and due care plan)
• Implementation of additional response activities
• Reasonable costs of environmental insurance

Eligible activities requiring MEGA approval:

• Infrastructure improvements that directly benefit the property
• Demolition that is not a response activity
• Lead or asbestos abatement
• Site preparation that is not a response activity.

As indicated previously, financing costs are an eligible expense. MEGA approval of interest costs is required for all activities approved in a work plan by the MEGA. DEQ approval of interest costs is not required for activities approved in a work plan by the DEQ.
Sufficient time must be allowed for work plan review and must be taken into consideration during the planning phase of the project. The statute requires that a written response be provided regarding work plan acceptability. Review periods are dependent upon the type of eligible activities to be conducted and which agency is completing the reviews and are statutorily mandated as follows:

• DEQ BEA and due care activities: 60 days
• MEGA non-environmental activities: 65 days
• DEQ additional response activities: The statute does not specify a review period; however, work plans must be reviewed within six (6) months under Part 201 of the NREPA. Under most circumstances you can expect a response much quicker than this.
• DEQ review of requested additional information: 45 days

For a combined DEQ/MEGA work plan, you will receive separate written responses from each agency regarding their review and determination.

Detailed instructions for preparing and submitting a work plan under Act 381 can be found by linking to the Act 381 Work Plan Instructions at www.michigan.gov/brownfieldauthority . It is strongly recommended that the appropriate agency representative be contacted to discuss the project prior to submission of an Act 381 work plan (see agency contacts below). This will help save time on preparation of the work plan, prevent inclusion of ineligible activities that would not be approved, and reduce agency review time and cost.

WORK PLANS
The authority determines which of the eligible activities will be conducted at an eligible property. An authority cannot capture school taxes to conduct the eligible activities unless the activities are consistent with a work plan approved by the DEQ or MEGA prior to the work being conducted. Work plans for school tax capture must be approved by the end of December 2007. For adjacent or contiguous properties, see reference in Tax Capture Provisions above regarding additional circumstances under which MEGA approval is required.

The work plan must be submitted to the DEQ and/or MEDC by the authority, not by the property owner, developer, consultant, etc. The work plan must include a copy of the brownfield plan as approved, by resolution, by the governing body of the municipality. For eligible properties that have both DEQ and MEGA activities, one work plan should be prepared for submission to both agencies. Detailed instructions for preparing and submitting a work plan under Act 381 can be found by linking to Act 381 Work Plan Instructions (Microsoft Word format). It is strongly recommended that the appropriate agency representative be contacted to discuss the project prior to submission of an Act 381 work plan (see agency contacts below). This will help save time on preparation of the work plan, prevent inclusion of ineligible activities that would not be approved, and reduce agency review time and cost.

Sufficient time must be allowed for work plan review and must be taken into consideration during the planning phase of the project. The statute allows different review times depending on the type of eligible activities to be conducted and which agency is completing the review. 

• DEQ BEA and due care activities: 60 days.
• MEGA eligible activities: 65 days.
• DEQ additional response activities: The statute does not specify a review period; however, work plans must be reviewed within six (6) months under Part 201 of the NREPA. You can expect a response from DEQ within this timeframe.
• The statute requires a written response regarding work plan acceptability. For a combined DEQ/MEGA work plan, you will receive separate written responses from each agency regarding their review and determination.

QUESTIONS?
For answers to questions frequently asked of the DEQ regarding Act 381, please link to the Frequently Asked Questions document in Microsoft Word format.

Questions regarding preparation and submission of an Act 381 work plan should be directed to the agency responsible for review of the eligible activity.

DEQ-Remediation and Redevelopment Division
Darlene Van Dale, 989-705-3453, vandaled@michigan.gov or
Ron Smedley, 517-373-4805, smedleyr@michigan.gov

Michigan Economic Development Corporation
Peter Anastor, anastorp1@michigan.org or Joseph Martin, martinj11@michigan.org