DALLAS -- The Michigan Senate advanced a series of bills designed to offer financial aid to "transformational" development projects.
The five-bill package, approved Tuesday with bipartisan support, would allow developers of major projects to capture sales and income taxes related to the projects to offset the costs of redevelopment.
Senate Bills 1061 to 1065, which passed in a 29-8 vote, would create a brownfield tax credit in a new category specifically for large-scale "transformational" projects that would allow developers to capture sales and income taxes tied to the projects in exchange for a minimum amount of private capital invested in the project.
"Communities like mine and Saginaw that have been losing population -- 10% of the population every census for the last 50 years -- and the people left behind have had to pay taxes on that infrastructure," said Sen. Ken Horn, R-Frankenmuth, who sponsored one of the bills. "We need to get people moved back into these cities with market rate developments and new retail spaces."
The bills move to the House of Representatives for consideration and could be considered in committee on Thursday.
"Jobs are still the top priority for Michigan residents, and House Republicans will look at any plan that can provide new opportunities," said Gideon D'Assandro, press secretary for Michigan House Republicans. "But we must also study them closely to make sure Michigan taxpayers are getting the best deal possible."
The bills are backed by Rock Ventures, owned by Detroit businessman Dan Gilbert, which has invested $2.2 billion in projects to revitalize Detroit.
"The logic is simple," said Rock Ventures Principal Matt Cullen in his testimony before the Economic Development and International Investment Committee in September. "In addition to a traditional property tax capture, it allows the capture of the sales tax generated on that site only and part of the state income tax generated by new residents living on the site in order to make large scale projects possible."
Cullen said that Rock Ventures is prepared to move forward with another $2 billion to $3 billion of projects if the initiative is passed.
Although Michigan already provides economic incentives for redevelopment projects, they're for smaller-scale projects. For example, total appropriation for the state's community revitalization project by accelerating private investment in areas of historical disinvestment is only about $40 million, said Cullen.
Under the initiative the developer would put up all of the capital and take all of the risk.
Projects would start with local approval before making their way up to the state-level Michigan Strategic Fund. The MSF could approve five such projects per year.
The legislation also requires an economic impact analysis for each project and it can be approved only if it is projected to generate statewide benefits.
An analysis by the Senate Fiscal Agency showed that the bills would reduce state general fund revenue by "an unknown, but likely significant amount."
The amount of the revenue reduction would depend on the characteristics of the developments, the number of approved projects, the terms of the project, and the interpretation of the definition of "sales and use tax capture revenues", which would be based on increases in sales and use tax revenue collected from within or attributable to transactions within the eligible property, according to the analysis.
The bills would also reduce individual income tax revenue to the general fund by an unknown and potentially significant amount.
Gov. Rick Snyder's spokeswoman Anna Heaton said the governor has noted concerns about the bills as they were introduced, but will wait to decide whether he will sign them until after the bills finish moving through the legislative process.
