Developing County Brownfield Authorities

[XLFD]

One thing I've noticed in looking at local school boards, city councils and other committees.  It seems that you can fill these groups with smart and learned folks with histories of accomplishments and wise deeds, and once they act together, condensing those great minds into one direction, all the wisdom and common sense clears from the room.

Four groups gathered in the community room at Ludington City Hall on Tuesday night (May 31), three of those, featuring about eight people each, sat in a horseshoe-shaped arrangement of tables:  the Ludington City Council to the south, the Pere Marquette Township Board of Trustees to the west and the Scottville City Commission to the north.  

The fourth group was smaller and sprinkled throughout the modest audience to the east, the Mason County Board.  Observing this group was more interesting than seeing what the others were about to do, due to the nature of the meeting.  Tonight, the three public bodies were together in order to hear a presentation from a consultant from Fishbeck, Susan Wenzlick, a 'senior brownfield specialist' in a seminar which she summarized as akin to a college course, "Brownfields 101".

One could believe the attendees of the three municipalities considered themselves much like our forefathers during the time just before the Declaration of Independence was signed, gathering together to show their defiance of the County's Brownfield Authority.  The county had rules that governed the amount of tax breaks and outright subsidies the smaller municipalities could dole out.  These groups wanted to give out even more public money to encourage development of distressed property in their jurisdictions and they have publicly decried the county's tyranny in denying them this freedom to subsidize.

Ms. Wenzlick would briefly touch upon the basics of Brownfields, rather than rehash the basics you can read more here.  Beyond the basics, she focused on the concepts of using revolving funds to extend tax increment financing (TIF) up to 5 years beyond the 30 years that the Brownfield Act allows. 

TIF allows a developer to continue paying the same rate of property taxes that the blighted, obsolete, or contaminated property was at originally for up to 35 years, the expected increase of taxes that the rehabilitation would normally incur are used to pay off the original development; effectively, it goes back to the developer who has already spent it.  A massive development with a 35-year TIF in a small community can seriously affect the solvency of the whole community, especially if it does not live up to expectations of growth, which often happens.

Wenzlick also explained that Ludington had an advantage over the other two municipalities in that it could use the TIF money to help pay for costs beyond environmental cleanup, demolition, and lead/asbestos abatement.  Because of the city's population it could also allow companies to claim TIF money for infrastructure and site preparation.  She explained further that the other two could potentially do the same, but they would have to go through a process that involved putting the blighted property in the Michigan land bank.  

Ludington's leaders will use their new 'freedom' to increase the subsidies for the 106 Laura project that originally seems to have caused this rift.  One can infer that they might try to use it further for developing the Foster School property, and once again, amend the Brownfield TIF for the Lofts on Rowe project a million or more dollars to reflect rising costs since its inception and to mitigate unexpected contamination issues that have reportedly arose. 

Wenzlick would not be using Ludington as a local example, she was more keyed in on Scottville's exemplary blighted property, the long abandoned high school on North Main Street.  Referencing how their newborn "freedom" would allow them to actually do something constructive with the property, one could almost sense Scottville's official's hearts go aflutter with the prospect of sinking a lot of funds in that money pit. 

 

Her most telling statement of the night, made after explaining the land bank process:  "The cost of free money is time."  And whereas the officials of the three municipalities heard and nodded receptively at statements like this, I was able to notice that the county board members showed mostly non-verbal expressions of disfavor.  

They allowed a public comment period after her power point presentation concluded, I was the only one to offer a statement, and if you couldn't have guessed by now, I was critical of the new development:

XLFD:  The Brownfield Redevelopment Act was signed into law back in 1996.  A performance audit from the auditor general 15 years later found that the Department of Treasury "did not have sufficient performance information available to evaluate the effectiveness of the Brownfield Redevelopment Financing Program."

The Brownfield Redevelopment Financing Program allows municipalities to create Brownfield Redevelopment Authorities, which use Tax Increment Financing to redevelop properties deemed “contaminated, blighted, historical, or functionally obsolete.” Tax Increment Financing is used to subsidize redevelopment through expected future gains in tax revenue.

The auditor general estimated that 79 percent of the brownfield authorities had not submitted annual financial status reports from 2008 through 2010. Brownfield authorities are required by law to submit annual financial reports and the Department of Treasury is required by law to collect the reports.

Additionally, the Department of Treasury is required by law to compile and analyze seven metrics in the annual reports. The auditor general found that only one metric was consistently monitored.  The Department of Treasury also did not submit annual reports to the Legislature regarding the effectiveness of the brownfield program, though required by law.

Among the unmonitored metrics was the captured taxable value. Since the goal of the program is to increase property tax revenue, this metric is the primary measure of the brownfield program’s effectiveness.

I mention this as a backdrop to illustrate that the goal of Brownfield Redevelopment is not jobs, growth, or development, which it consistently underperforms in all categories.  Brownfield redevelopment gives wealthy developers money on the back of all other taxpayers and has very little difference from other corporate welfare programs.  At the end of the day, Brownfield Authorities are just politicians picking winners and losers with other people’s money.  It stunts free market capitalism and doles out public money to politically favored businesses rather than to public services.

A case in point was the Lake House.  Outside developers brought a tract of land from multimillionaire Bob Manglitz, who could have easily reduced the property cost by a couple hundred thousand or did site cleanup by himself, but that didn't happen.  The local Brownfield Authority created a mechanism wherein the public paid for the cleanup rather than either of the politically connected elites.  That is morally wrong, and everyone involved should be deeply ashamed of themselves.  But you aren't, you're just chomping on the bit, as are the new prospective players, to hand out more political favors in your new regional authorities in the county."

The meeting would end with a discussion, which was basically a question and answer period with the consultant.  Ms. Wenzlick noted that the authority has control over how long a TIF will last and whether a revolving fund should be used.  She noted authorities can be disbanded either by official action or just inaction.  She was able to offer advantages for having a combined authority, but couldn't offer any disadvantage when pressed.  The only real discussion among the three public bodies were in regard to the make up of the combined 9 member authority.  

After adjournment, I talked with some of the county board members about the meeting and the issues.  They were not too impressed, they believe the municipalities are making a mistake and that they will likely learn that only after learning it the hard way.  Mistakes at a cost of millions to their constituents, undoubtedly.  

One cannot help but think that developers who are primarily interested in how much money they can get from government favors at the expense of local taxpayers are not ones you want to welcome into your community.

[Willy]

"One thing I've noticed in looking at local school boards, city councils and other committees. It seems that you can fill these groups with smart and learned folks with histories of accomplishments and wise deeds, and once they act together, condensing those great minds into one direction, all the wisdom and common sense clears from the room."

You have brought up a very good point. Why do many ordinary citizens change for the worst when elected to public office? Freud would have a field day with this topic.

Excellent presentation X on the Brownfield situation. It's a shame about Scottville's beautiful old school. It has been left to rot. Instead of building new schools why don't communities work at maintaining older structures not only for cost savings but for keeping the past alive.  Europe is full of buildings that were built hundreds and even a thousand years ago.