Brownfield Dollars

July 16, 2015

Projects Could Face New Scrutiny

There’s never been a time when so many large-scale developments were proposed, or in progress, in Traverse City. The incredible number of projects that could develop in the next year – and the requests for Brownfield funding expected to accompany them – means development and public incentives are slated to be a hot topic.

"We have to become choosy; we have to make selections," Traverse City Mayor Michael Estes said. "What is the better project? What serves the public good to the greatest degree?"

"AN ENIGMA TO ME"

Just as proposals are piling up, the Brownfield approval process appears to have been complicated by a new slate of Grand Traverse County commissioners who took office this year.

For a Brownfield project to be approved in Traverse City, it must first be vetted and approved by the Brownfield Redevelopment Authority (BRA). Then, city commissioners must approve it and, finally, the county board must sign off.

That last step was never considered an obstacle, but in February, the county voted 4-3 to reject Brownfield funding for a mixeduse development on Randolph Street after it had won unanimous approval from the BRA and the city. Some believe this signals new uncertainty.

Dan Lathrop, one of the four commissioners who voted no on the Randolph Street project, said the rejection does not necessarily indicate Brownfield proposals are going to face different standards going forward, but they are going to face a lot of scrutiny.

"I just voted my conscience on that one issue; I don’t know if that means there’s a change," Lathrop said. "I felt that that site wasn’t really blighted that much.

When you look at the clean up, some of that money would have gone for tearing the buildings down and moving the lumber."

Lathrop said he thinks some Brownfield projects make sense when they address severe environmental degradation. He cited Hotel Indigo and River’s Edge/Midtown. He expects the county board will be wary of Brownfield proposals that do not clean up serious environmental messes.

"Now they’re changing Brownfield, and I don’t know if I like it or not, just to make business deals work," he said. "What it ends up being is kind of a grant to developers to develop these beautiful condos, and I don’t mind that if it’s really rescuing blighted land."

He added, "I admit, right now, Brownfield is an enigma to me."

SPIRALING ECONOMIC RESULTS

Some believe Brownfield critics take too narrow a view of the projects. Brownfield funds can be used to influence development so that it conforms to a city’s master plan and revitalizes urban areas, said Jean Derenzy, deputy director of Grand Traverse County Planning and Development, which oversees the BRA.

"It’s really for private developers to look at your downtowns and build on the infrastructure that we have," Derenzy said.

Non-environmental Brownfield money can be used in urban cores for underground parking, demolition, infrastructure, and asbestos abatement. State law sets out how Brownfield funding can be used.

Jerry Snowden, developer of the Brownfield project Radio Centre, among others, said the incentives cause an economic chain reaction.

"The community gets a cleaned up site and then a building gets built, which puts a whole bunch of people to work, then businesses move in, which creates demand for other businesses and services and, when there’s more businesses and services, that creates greater demand for housing," he said.

He believes this leads to higher home values and more home construction.

"From all of that, there’s more taxes that are collected by the city, and then the city has more money to spend for infrastructure and public parks," he said.

The BRA is responsible for lots of development that wouldn’t have otherwise happened, he said.

"Environmental contamination is an obstacle to development and there’s a cost to remove it and a liability associated with owning it," Snowden said. "The program eliminates liability and reduces risk."

The fact that the Brownfield program spurs economic prosperity was evident after the economic downturn of 2008, when construction continued around Traverse City as the majority of Michigan’s economy stalled.

"We were very fortunate," Derenzy said.

"Ben Bifoss was the manager at the time and he said, "˜It’s amazing we have cranes in the air.’ I remember him saying that, and he was right. We had activity at these sites."

"MAYBE A MAJOR SHIFT"

County Commissioner Alisa Kroupa was one of the three county commissioners who voted in favor of the Randolph Street project, but she did so with reservations. She said she only voted for it because the project began under a previous county board.

"I truly did not support the Randolph Street project, but I tried to make it clear I did not think it was fair to punish a developer for following the criteria that had been laid out by the county," she said. "I didn’t think it was appropriate to punish people who had come in prior to this discussion starting."

She believes the Brownfield law has expanded too much over the years and more emphasis should be put on development in townships and villages.

A tenet of Brownfield is that funding should go to projects that wouldn’t happen without it. There are now indications that Randolph Street may go ahead even though Brownfield funding was lost.

"I’m very curious to see how that’s going to change the perception of people on Brownfield projects," Kroupa said. "I think we’re on the crux of maybe a major shift."

Estes said if the Randolph Street development occurs despite lack of Brownfield funding, that doesn’t mean it would have happened anyway. The Randolph project developer, Socks Construction, got informal go-ahead from the Brownfield Authority, purchased the property and paid for an environmental assessment, Estes said. After the rejection, Socks perhaps has little choice but to go ahead. The results of the assessment caused the property to be condemned.

"He makes that request after paying for that assessment and, in this case, he really had to move those people out of those structures. He had to evict them," Estes said.

John Socks did not return a message seeking comment.

When it was proposed, the BRA estimated the Randolph project would increase the taxable value of the property from $207,184 to $1,019,338 and create 24 new jobs. The development plan called for "green infrastructure building techniques," including a green roof and the removal of environmental contamination at the site. Brownfield cleanup costs were estimated at $654,153 and Socks was to be reimbursed those costs over a 15-year period through tax capture. If the development moves forward now, the green infrastructure and environmental clean-up conditions would no longer apply.

RANDOLPH DEBATE ON THE BRA

Before the county vote, the BRA board seriously debated the Randolph Street issue.

"I had questions about it at the start," said Ross Richardson, a city commissioner and BRA board member.

He questioned the extent of the environmental degradation, but was finally satisfied that the project met the standards. The project also offered the city an opportunity to steward a development that looked right for that neighborhood.

"That was another big part of why I supported the project," Richardson said. "It was the right scale for the neighborhood and it added some retail businesses to an area that already had some retail business."

Brownfield supporters believe the program offers tools to shape the future of the city. Richardson would like to see Brownfield incentives used to create more affordable housing, for example, although the Randolph Street project did not feature affordable housing.

BRA Chairman Mark Eckhoff said the authority is charged with evaluating whether a project meets the standards set by the legislature.

"I think there’s a feeling on the county board that the city gets a disproportionate amount of Brownfield dollars," he said. "The reality is that the contamination is in the city. That’s where industry was and that’s where contaminants are."

Like them or not, Brownfield projects have reinvigorated the city, Eckhoff said.

"The benefits to the community, especially in Traverse City, are pretty evident," Eckhoff said.

The Brownfield program also ensures sites are cleaned up. If the BRA isn’t involved, the state Department of Environmental Quality only requires developers to cap the contamination, not clean it up. That could mean covering a contaminated site with a concrete slab.

"We know what happens with anything that is contaminated," Estes said. "It doesn’t sit on one piece of property."

The Brownfield program also gives the city some say in what the project looks like.

"We can do things like green roofs if that’s what we want; we can request certain improvements to sidewalks; there’s a whole litany of improvements we can request if we write the Brownfield plan," Estes said.

PUBLIC FUNDS HANDED TO DEVELOPERS

Traverse City attorney Grant Parsons questions the benefit of many of the Brownfield projects.

"Nobody’s taxes in this city ever go down," he said. "All of this development – either it’s costing us a lot of money or we’re not getting any benefit out of it."

Parsons said he doesn’t dislike all Brownfield projects. The River’s Edge/Midtown development, for example, was positive, because that industrial site would never have been transformed without something like Brownfield. He also liked the use of tax incentives to help restore the Village at Grand Traverse Commons, a sprawling, crumbling old state hospital property that’s come back to life, but he scoffs at many of the other projects.

"Basically, it’s a subsidy for private developers to develop property that was probably undervalued anyway," Parsons said. "Here’s the question: Has anyone analyzed the public benefit of this use of tax money?" Proponents say the Brownfield program is responsible for the vibrancy of Traverse City.

"I think it’s had a phenomenal impact on the redevelopment of contaminated properties," said Russ Soyring, the city’s planning director.

Brownfield appeared at a time when people began to value city density and talk about smart growth. Soyring said Brownfield projects have enabled Traverse City to become a better place while protecting outlying areas from over-development.

"It also helped to make a more interesting community, a community that’s enjoyable to bike along, and walk along, and to motor along," Soyring said.

TRAVERSE CITY BROWNFIELD AUTHORITY?

Derenzy is confident the county board will study the issue and understand the value that Brownfield projects can bring.

"I think that education is always key on everything," Derenzy said.

Estes said, when he took office in 2007, one of the first things he did was request that the city have a say in who gets appointed to the BRA. The county board used to make all of the appointments. Now, the county makes five appointments and the city board makes four.

Estes said he was shocked by the Randolph Street rejection.

"This is the first time the county board said no after the Brownfield board said yes and the city said yes," Estes said. "What you have here is 17 people voting yes and four voting no and, again, the county makes the majority of appointments to the Brownfield board."

Estes said he has considered proposing the city establish its own Brownfield authority so that city projects would not need approval from the county, but he said he would rather not do that, as it would cost "a few thousand dollars" and require a city commission vote to accomplish.

"I have been interested in that for some time," he said. "My preference is not to do that. I would much rather have this be a cooperative effort between the city and the county."

BROWNFIELD PRIMER: HOW THE PROGRAM DEVELOPED

Brownfield programs were created by the state to encourage redevelopment of environmentally blighted properties. Grand Traverse County’s Brownfield program began in 1998 and expanded as the state broadened the scope of what could be considered a Brownfield. Communities like Traverse City later won an "urban core" designation from the state, which meant the city could fund projects unrelated to environmental problems in order to develop the downtown.

HOW IT’S FUNDED

Brownfield funding comes from two sources –grants or loans from the state and local tax increment financing, a mechanism that captures the property taxes of the improved property value over a period of years. That means no loss of taxes to the county because taxes on the base property value are still collected.

Derenzy said Brownfield programs do not represent handouts to developers.

"There’s no pot of money," she said.

"They have to invest, make that investment, they have to clean up the site, and they upfront that cost."

In non-environmental cases, the money is used to pay for parking decks or infrastructure in order to get developments constructed in downtowns rather than in undeveloped out-of-town land.

WHAT’S GOING ON ELSEWHERE

Traverse City has the most Brownfield projects completed and under consideration in northern Michigan, but other communities, like Petoskey and Kingsley, are also looking at the program.

Emmet County Planner Tammy Doernenburg said Petoskey has seen just one Brownfield project so far, but there is another on the horizon at the longstalled Petoskey Pointe property.

The county’s first project was at the site of Petoskey Manufacturing on West Lake Street, where three-story townhouse-style condos occupy what was once an industrial site.

Former Kingsley Village Manager Mitch Foster said the Brownfield Redevelopment Authority has been helping the village identify possible sites, after talk of the program began five months ago. Foster said it’s too early to publicly identify any properties under consideration, but once they are identified and remediation costs are known, it will be easier to entice developers.