Michigan is unlike any other place on Earth. With over 3,000 miles of shoreline on four of the five Great Lakes, the state is second only to Alaska in coastline with a greater proportion of coastline to land area than Hawaii. Its lush forests, copper, iron ore and gold deposits, and vast waterways shaped Michigan’s history, making it an industrial powerhouse—home of the automotive industry and the crucible of manufacturing and industrial technology for the world.

These natural resources represent ready transportation of raw and finished goods to world markets. They provide Michigan’s residents a with natural beauty that has made it a leading tourist destination, attracting resourceful people and capital throughout the centuries. More than that, there is a uniting sense of place that has helped move its people to action when challenged.

Michigan’s residents face economic and societal effects from globalization of markets and manufacturing efficiency improvements that have begun to erode its heavily industrial economy. Unemployment rates and mortgage foreclosures are among the highest in the nation. While the U.S. population grows, Michigan’s population is declining as people migrate for opportunities elsewhere.

But the state’s innovative approach to brownfield redevelopment demonstrates its resiliency. To address the environmental legacy in its urban industrial and resource- based communities, Michigan has adopted a unique blend of environmental liability reforms and risk-based cleanup standards. This regulatory environment is complemented by diverse financial incentives that empower municipalities to clean up and redevelop brownfield properties and encourage public-private collaboration. Local and state agencies provide incentives that encourage private investment and reuse of impaired properties.

Regulatory Reform
Michigan’s version of the federal CERCLA cleanup law was adopted in 1982. Like CERCLA, one unintended consequence was the warehousing of brownfield properties. By 1994, the state had inventoried over 6,800 leaking underground storage tank (UST) sites and nearly 2,800 other contaminated properties. When brownfield properties were inventoried in each of its 83 counties, nearly 20 percent were identified in the Detroit metro area. By 1995, cleanups had been undertaken at only 6 percent of brownfield sites, and the state’s fund to address leaking UST sites had become insolvent.

Photo courtesy of the Michigan Department of Environmental Quality/Susan Sandell. The Ironworks Boardwalk along the Boardman River in Traverse City. This redevelopment is an excellent example of the type of community and state and local government cooperation that is helping to reshape Michigan’s brownfield landscape.

In response to these challenges, Michigan adopted the Natural Resources and Environmental Protection Act (NREPA) of 1994. The strict, joint and several cleanup liability scheme was replaced by a two-tiered causation-based liability standard for releases of hazardous substances, with a status liability standard for those who acquired contaminated properties after the amendments were passed in June 1995.

These revolutionary reforms include provisions that exempt purchasers from status liability during contaminated property acquisition if they perform a Baseline Environmental Assessment (BEA) and disclose it to the state. Cleanup standards were modified from an inflexible three-tiered system to a risk-based system, wherein flexible cleanup approaches can be tailored to intended land use scenarios.

Such protections from environmental liability have not been matched by any other state or the federal government. These regulatory reforms provide brownfield developers a clear, simple and expeditious process to acquire and reutilize properties without environmental liability, so long as they exercise due care to prevent exacerbation and mitigate unacceptable exposures to hazardous substances.

Financial Incentives: Tax Increment Financing
If liability reform and risk/land use-based cleanup standards are the wheels of Michigan’s brownfield redevelopment vehicle, the redevelopment financing and incentive programs adopted in 1996 are the V8-Hemi powering it forward as a national leader in brownfield redevelopment.

The Brownfield Redevelopment Financing Act (Act 381), enacted in 1996, empowered local governments to form Brownfield Redevelopment Authorities that direct the financial incentives provided by the act to brownfield properties within their communities. Twelve years later, over 250 Michigan counties, cities, townships, and villages have created such authorities.

One of the principal financial tools available under Act 381 is Tax Increment Financing (TIF). A brownfield property initially has a very low taxable value. However, after remediation and development, the site can bring in significant local tax revenue to the community. Local brownfield authorities are authorized to capture the property taxes generated as a result of the new development through TIF and utilize those funds to reimburse the cost of the remediation and redevelopment activities. These revenues can be used to pay for environmental assessment and BEA costs, demolition, lead paint and asbestos abatement, due care response activities, and remedia tion. Administrative and operating costs are also eligible activities.

A Local Site Remediation Revolving Fund can also be established to finance remediation and redevelopment expenses on other brownfield properties within a jurisdiction. A Brownfield Redevelopment Authority may continue to collect TIF revenues for an additional five years after the initial costs are recovered—up to the amount equal to the initial project costs—to capitalize the Revolving Fund. This allows communities to create and direct their own brownfield redevelopment fund independent of state authority.

In urban core communities such as Detroit, Flint, Grand Rapids, and Traverse City, Brownfield Redevelopment Authorities can use TIF revenues at eligible properties to improve or develop infrastructure, and demolish structures to prepare a site for redevelopment. These activities can be performed on properties that are not contaminated, but are blighted or functionally obsolete.

Financial Incentives—Grants and Loans
Michigan’s redevelopment initiatives are matched by grassroots support from citizens in funding brownfield redevelopment through the sale of state bonds.

In 1988, Michigan voters supported the Quality of Life bond, a $900 million general obligation bond for environmental protection. The bond allocated $45 million for an innovative brownfield grant program, the first of its kind in the U.S. Funding was made available to local units of government to assess the nature and extent of contamination at sites with economic potential and conduct response activities at sites with confirmed contamination and a redevelopment plan that would provide job creation and private investment. Ten years later, Michigan voters overwhelmingly approved a second environmental bond, the Clean Michigan Initiative (CMI). The landslide vote authorized the state to sell $675 million in bonds for environmental and recreational projects, including $75 million for new brownfield redevelopment grants and loans.

The goal of these initiatives is to encourage and facilitate brownfield redevelopment by leveling the playing field between brownfields and greenfields. Environmental activities necessary to reuse a contaminated site are eligible for grant or loan funding. Because funds are awarded to the local unit of government or the Brownfield Redevelopment Authority, community support for the proposed project is assured—another example of the state-local-private collaboration.

Brownfield Incentives Facilitate Success
The Site Assessment Fund (SAF), created under the 1988 bond, has been particularly successful in Michigan. The unknown risks and incalculable expenses associated with brownfields are a major obstacle to redevelopment. For example, sampling, analysis, remediation, waste disposal and other due care costs stymie business planning and financing.

The Site Assessment Fund was designed to remove or reduce such barriers by providing funding for environmental assessments, reducing some of the variables in the redevelopment financial equation. Local units of government utilize the fund to conduct environmental assessments before a property is marketed or in response to potential developer interest. This transforms a site with uncertain redevelopment costs to a known commodity. Developers with a reuse plan for a brownfield site can apply for additional grant funds to address the environmental issues.

The SAF has provided over $8.6 million to 44 communities for hundreds of projects. Because these grants require only economic potential, there is no guarantee that a redevelopment will follow. When it does, it may be several years after the assessment work is conducted. However, studies show that properties that have been evaluated are more likely to be redeveloped.

A 2006 Wayne State University study¹ looked at 30 completed SAF projects in southern Michigan. The study found that more than half the sites—all but one located in economically depressed communities—were redeveloped and the undeveloped sites were cleared of buildings and ready for reuse. The study also found that that the presence of contamination on a site was not the only factor in determining whether a site would be redeveloped.

The Wayne State study found that the assessment funds have successfully facilitated transfers of publicly-owned property to the private sector. Gross property tax revenues for the project sites totaled about $6.5 million, more than seven times the $907,593 in grant funds spent for the 30 projects studied. The researchers identified a total of 124 new jobs that resulted from those brownfield redevelopment projects.

Over all, Michigan’s Brownfield Grant and Loan Program has provided over $94 million for 223 projects since 1992. The projects have leveraged over $3.1 billion in private investment and created more that 17,000 permanent jobs.

Michigan’s support for brownfield redevelopment has been rewarded through grant dollars from the U.S. EPA’s Brownfield Pilot and Assessment and Cleanup Grant initiatives. Since 1996, EPA has awarded over $41 million in grants for brownfield initiatives for education and community outreach, as well as assessment activities at properties throughout the state.

In most cases, a number of incentive and funding mechanisms are brought together to leverage private investment in brownfield properties. This template for redevelopment is used across the state to further job creation, economic development and cleanup goals. The following examples from two very different coastal communities highlight how Michigan’s innovative approach is transforming communities across the state.

Photo Courtesy of The Detroit Riverfront Conservancy. LaFarge Cement’s silos prior to relocation to a redeveloped brownfield site down-river. The site is now home to Tri-Centennial State Park, Michigan’s first urban state park.

A Detroit Renaissance
The Detroit Riverfront is one example of the momentum that can occur from a small start. Over three centuries, Detroit’s waterfront has evolved from forts and farms to an unsightly web of railroad tracks, industrial plants, steel mills, cement silos, shipping and tire companies, warehouses and workshops, leaving a legacy of pollution. All of Detroit’s shining office towers couldn’t create a hoped-for renaissance without the redevelopment of its heavily industrialized riverfront.

For the last several years, community leaders have worked to transform Detroit’s greatest natural resource into a recreational asset for families and downtown workers.

A major catalyst for the transformation was the demolition of three cement silos dominating 12.5 acres along the east riverfront. The City of Detroit, in partnership with the Detroit Economic Growth Corporation, targeted the property for redevelopment and acquired all the parcels over several years.

But before the silos could be demolished and the property readied for redevelopment, the LaFarge Cement operation needed to be relocated to a more appropriate industrial area. The Michigan Department of Environmental Quality (MDEQ) funded the remediation of a site for the new facility in southwest Detroit, near Zug Island, with an additional $2.7 million for demolition of the silos.

Detroit’s Riverfront subsequently became the center of many new developments. The former LaFarge site is now Michigan’s first urban state park, Tri-Centennial State Park. The 31-acre park, which opened in 2004, includes a marina with 51 boat slips and a 63-foot light tower marking the entrance.

The park is a cooperative effort between the Michigan Department of Natural Resources (DNR) and the Detroit Riverfront Conservancy, a nonprofit organization established to oversee riverfront development.

A riverwalk promenade will eventually extend five miles between the Ambassador and Belle Isle Bridges.

Other developments include Harbortown, Stroh River Place, Talon Center, Omni Hotel, and the Rivard Plaza.

The @Water Lofts residential and retail development will mark the former LaFarge silo property. The Watermark, a luxury residential condominium development, will be located where the Medusa-Cemex silo previously stood and the Holnam cement silo site is now Chene East, a residential-retail-restaurant development.

This transformation required public-private partners working in concert toward a common goal of environmental, economic and social improvements for the area.

In addition to the City of Detroit, the MDEQ and DNR, other partners include the Kresge Foundation, General Motors Corp., the Greenways Initiative, the Wayne County Port Authority, and other local private and public agencies and volunteers.

Community Partners
The redeveloped Traverse City Ironworks site is another example of a cooperative relationship between a community and state and local government to successfully enhance a downtown area and convert a former industrial site into a mixed-use urban infill.

Traverse City is located on the shores of a 250 mile-long embayment on northern Lake Michigan in Michigan’s lower peninsula. It is the major urban center of a rural county with a beautiful shoreline, rolling hills, wineries, extensive bike paths, ski resorts, and inland lakes and streams for fishing and boating. Traverse City has transformed from a northern Michigan tourist destination to a nucleus of growth for the next-generation economy in Michigan.

Service and high-technology companies have bloomed along the shores of Grand Traverse Bay, with quality of life a driving force.

Photo: Michigan Department of Environmental Quality/Susan Sandell. River’s Edge West, part of a larger brownfield redevelopment, is the first in the Grand Traverse region to be built with cooperation between city, county and state government.

Since the new millennium, the community’s growth rate has outstripped Michigan’s as a whole by a whopping 450 percent. The resulting demand for space, combined with environmental policy reform and innovative brownfield redevelopment tools, has focused development into areas previously deemed untouchable.

A world-renowned blue-ribbon trout stream, the Boardman River meanders through Traverse City, discharging into Grand Traverse Bay. The natural river ecosystem, already severely degraded by logging and lumber milling, worsened in 1871 when the sprawling eight-acre Traverse City (TC) Iron Works commenced operations along the river in downtown Traverse City. TC Iron Works vacated the property in the early 1980s, leaving abandoned and blighted buildings, casting sands, slag, and other wastes throughout the complex and along the riverbanks and river bottom.

This blight and contamination was to change very quickly following the environmental liability reforms passed in 1995. In 1997, Grand Traverse County formed what was to become one of the most active and successful experiments in Michigan’s brownfield redevelopment story—the Grand Traverse County Brownfield Redevelopment Authority.

By 1999, collaboration between a local developer, the county redevelopment authority, the City of Traverse City, the MDEQ, and the Michigan Economic Growth Authority, resulted in over $41,000,000 in private investment and 370 new jobs with the completion of River’s Edge. The commercial-residential, riverfront urban infill development includes retail shops, dining, commercial space, and residential units with parking.

A $1.6 million Site Reclamation Grant from the DEQ paid for some of the developer’s due care obligations, including installation of a sheet pile barrier between the river and the casting sand and slag that was 20 feet deep along the bank. The piling stabilizes the fill, keeps contaminated materials from entering the river and supports a beautiful river walk and docking facilities.

To support redevelopment activities not included in the grant, the county redevelopment authority developed a brownfield plan that included a TIF reimbursement pledge to help with the extraordinary costs associated with demolition, site preparation, infrastructure, and additional cleanup. The plan received approval for the use of TIF from local tax levies and up to $6 million from state school tax levies approved by MDEQ and the Michigan Economic Growth Authority.

The development has been nationally recognized for the partnership between the developer and a nonprofit organization which purchased eight condominiums for use as affordable housing. Traverse City, like many tourist and resort communities, has a shortage of affordable homes for the people who work seasonal, frequently low-wage jobs to support the tourist economy. Offering eight of the 45 units as affordable housing was a strategic planning effort to integrate mixed incomes that was worked seamlessly into the project.

River’s Edge was the first project in the Grand Traverse region where city, county and state government worked together to clean up and redevelop a brownfield site. Since then, Traverse City and the county redevelopment authority have facilitated several other brownfield redevelopments, most using brownfield grant or loan funds, TIF or a combination of incentives. This approach combines environmental protection, economic growth and community goals to create real results, both environmental and economic. It represents a shift from command-and-control regulation to collaboration. River’s Edge is proof that sustainable development with collaboration can achieve success.

Change is Certain
These are transforming times for Michigan. The challenges present opportunities and stimulate the transformation and diversification of Michigan’s economy away from manufacturing and industry, welcoming entrepreneurial enterprises and new alternative energy technology businesses. The realignment of labor markets is already underway as evidenced in recent collective bargaining agreements between labor unions and manufacturers. Change and adjustment from state and local government is also in progress. Collaboration between the private and public sectors has resulted in improved efficiency in state government.

Retooling of Michigan’s business tax code in late 2007 with additional improvements designed to provide more assistance to redevelopment projects highlights the commitment by state government to restructure the business environment in light of these changing times.

It is certain that Michigan will adapt to the challenges it faces, especially when it comes to brownfield redevelopment. It is our character. After all, Cadillac, who founded Detroit in 1701, was the name of a developer long before it was the name of a car.

For further information on Michigan’s innovative brownfield programs, please visit our Web site at www.Michigan.gov/deq and click on LAND and then Land Redevelopment.

Jean Derenzy is coordinator for the Grand Traverse County Brownfield Redevelopment Authority; Susan Sandell is a grant administrator for the Environmental Stewardship Grants and Loans Unit, Environmental Science and Services Division, of the Michigan DEQ; Susan Erickson is chief of the Environmental Stewardship Grants and Loans Unit, Environmental Science and Services Division, of the Michigan DEQ; and Andrew Smits, P.E., is manager of Environmental Engineering for Inland Seas Engineering, Inc.

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¹Rayman Mohamed and Brendan Dancik. April 2007. Priming the Pump: Assessing the Investment Impact of Michigan’s Site Assessment Fund. Wayne State University, Department of Geography and Urban Planning, Detroit, Mich. An Urban Revitalization Case Study Report prepared for the MSU Land Policy Institute, Report #CS-2007-01.