Meeting Watch: A2 Brownfield (13 Oct 2008)
At 6 p.m. Monday evening, The Chronicle counted at least 12 residents in the sixth-floor conference room of the Larcom Building who were there to listen in on the discussion of the brownfield redevelopment proposals for three sites: 601 S. Forest, Michigan Inn, and Maple Shoppes.
To briefly summarize the outcome of the meeting, all three projects are being moved forward for consideration by city council at its Oct. 20 meeting, after which they’ll be reviewed by the county board of commissioners. The expected timeline includes final brownfield plans that are in place by Nov. 5, when the board of commissioners meets and can set a date for a public hearing on the plans. That hearing is expected to be on Nov. 19. The brownfield plan for the 601 S. Forest site will be made available on the city of Ann Arbor’s brownfield website as soon as it’s available, (a couple of days) as well as a part of the council meeting agenda packet for its Oct. 20 meeting.
"If you borrow chairs from desk/offices, PLEASE ..." We figure the rest was smudged by people standing against the white board ... because they had nowhere to sit.
Washtenaw County’s brownfield website provides a useful glossary of brownfield terms [.pdf file]
By the time the meeting started, a few more residents had trickled in to join the three city council members who constitute the brownfield subcommittee: Marcia Higgins, Mike Anglin, and Leigh Greden. Also at the table were Matt Naud (city environmental coordinator), Jeremy McCallion (brownfield planner for the county), Tom Crawford (city CFO), Mark Lloyd (city planning head), and Kevin McDonald (assistant city attorney), plus the developer’s team for the 601 S. Forest project, plus some people The Chronicle could not immediately identify.
It was necessary to borrow chairs from adjoining offices and cubicles to seat everyone. The smudged note scrawled on the meeting room’s white board admonishes borrowers of chairs to return them to where they were found. It probably serves as some kind of metaphor for the way brownfield financing is supposed to work: if you take money in the form of a brownfield credit, it’s supposed to be ultimately returned to taxpayers in some form or other – perhaps not in the form of a chair.
Marcia Higgins got things rolling by advising the assembled interested parties that there would be no opportunity for public speaking or questions – because the brownfield subcommittee had no decision-making authority and there would be a public hearing on the matters it was considering at the Oct. 20 council meeting. She announced that the 610 S. Forest project would be considered first, in order to accommodate anyone who was interested only in that project.
601 S. Forest
The brownfield redevelopment plan can be divided into two categories of activities, which total $9.4 million: (i) $3.5 million for environmental remediation of perchloroethylene, a chemical used in dry cleaning, and (ii) $5.9 million for public infrastructure improvements associated with site preparation – demolition of existing buildings.
The brownfield credits are paid out of the increment between the tax revenue currently generated by the properties and the future (increased) taxes paid on the properties due to the improvements undertaken through development. In the case of the 601 S. Forest plan, funding of the brownfield credits through tax-increment financing (TIF) requires sorting out the already-existing TIF districts: the Downtown Development authority (DDA) and a SmartZone administered by the Local Development Finance Authority (LDFA). In response to Higgins, who asked for specifics on how that would work, Tom Crawford characterized the challenge as a normal part of the assessor’s job.
Crawford focused his questions for Jeremy McCallion on the question of the 15% contingency that is built in to the plan. The idea behind the contingency is that when it comes to environmental cleanup, there’s a certain potential for unpredictability, so the contingency is there to account for unforeseen costs that can be covered without requiring a developer to go through an additional application process. It was stressed throughout, however, that all of the brownfield credits are paid only for work actually completed, and costs actually incurred.
Crawford pressed for details about whether there was flexibility at the line-item level with respect to contingencies. That is, if there’s a built-in contingency for every line item, why does there need to be an overall lump sum as a contingency as well? McCallion alluded to a state requirement that a 15% overall contingency be included. Crawford then changed tack, suggesting that if there’s a required 15% overall contingency, then the contingencies in each line item could then be eliminated. The developer team agreed to make those necessary revisions to the plan, which would reduce the maximum amount of brownfield credits by $1.2 million.
In response to Leigh Greden’s question about the broader financial implications for the project if the requested brownfield credits were not given, Crawford said that denial of brownfield credits would have a “significant impact” on it to the point of jeopardizing the success of the project.
Michigan Inn
McCallion summarized the history of the property located on Jackson Road west of I-94 as a public safety hazard dating back 15-20 years. The current plan for brownfield credits reflects a revision from a previous version dating back to April-May of 2008 in a variety of details: (i) the plan makes the case that the property is a public safety hazard, (ii) the plan includes a full 15% contingency, (iii) the calculations for tax capture include interest previously not included, and (iv) capture of state school taxes are included to lessen the impact on other local entities.
Higgins expressed concern that the city has imposed a requirement for demolition by Dec. 1, but the proposed timeline for appproval of brownfield credits seems to be impossible to bring to an end before that date. City council approval at its Oct. 20 meeting would lead to the setting of a public hearing by the county board of commissioners on Nov. 5, with the public hearing held at its Nov. 19 meeting, which would lead to a board of commissioners final approval at its Dec. 3 meeting, with the Michigan Economic Growth Authority (MEGA) projected to give its final approval on Dec. 19. In expressing her hope that the county board of commissioners would find a way to accelerate its process, Higgins said, “The last time I checked, their constituents are still our constituents.”
Maple Shoppes
The site is located on the northeast corner of Maple and Dexter-Ann Arbor Roads. Leigh Greden sought clarity over whether Aldi’s desire to have a sign presence on Maple Road is holding up the project. Answer: it’s not. McCallion floated the idea of departing from current practice of doing the brownfield redevelopment authority capture at the end of the project life and instead “front-end loading” some of it for this project. Higgins said that this would amount to policy change without having had the requisite policy discussion.
If the land for these projects is impaired by pollution and requires clean-up, that should have been part of the purchase price negotiation. It’s like buying a house with a failing foundation – the cost of fixing the foundation is part of the price negotiation when buying the house. No one expects the city to step in and offer the money of other taxpayers to fix the foundation so that the seller does not have to accept a lower price. if the buyer did not perform due diligence when considering the property, or does not want to do the work of price negotiation, that is not the taxpayer’s problem. The seller has an asset that he allowed to become impaired. The rest of us have no responsibility for his problem, any more than for a neighbor who does not maintain his house, then discovers that lack of care has impaired the value of his home. It is not up to other city residents to hold businesses harmless for their own bad decisions.
Brownfield subsidies only make policy sense if land is so impaired that it’s sale price is zero – and no one wants it at that price. Then it may make sense to use pubic funds to restore land that is otherwise unusable. Either the land is impaired to zero price, or the seller can reduce the price enough to pay for the cost of clean up. it is not up to other city residents to hold businesses harmless for their own bad decisions.
Actually, John, these days _everyone_ expects the city to step in when it comes to brownfields. Did you live in Michigan in the 1980′s when the (ahem, Republican-controlled) state government decided that the “polluter pays” concept was bad for business and so the rest of us should cover those costs through our taxes?
Given current state law, it does “make sense” to subsidize brownfield redevelopment in certain cases, such as when the community doesn’t want to wait around any longer for the “market” to work its inestimable magic and induce the redevelopment of a vacant site. The choice between leaving a potentially dangerous eyesore and paying to clean up someone else’s mess isn’t a pleasant one, but we don’t have the option of picking up the contaminated site and dumping it in some CEO’s office to get rid of it.
The 601 Forest site is a less problematic case, though, and the need for the subsidy is debatable.