real estate development and reuse - squarespace · pdf filereal estate development and reuse...

Corporate Sponsors:

Real Estate Development and Reuse

Thomas Wackerman, President, ASTI Environmental Member, Bell Tower LLC,

Chair, UM/ULI Real Estate Forum

2015 Economic Development Basic Course September 14th – 17th

Kellogg Hotel and Conference Center East Lansing, MI

Presentation toMEDA Economic Development Course

ASTI Environmental 800-395-ASTISeptember 16 2015 1

Environmental

Real Estate Development and Reuse

Environmental

MEDA Economic Development CourseSeptember 16, 2015

IntroductionTom Wackerman, CHMM, CET, EP

President, and Founder, ASTI EnvironmentalMember, Bell Tower LLCChair, UM/ULI Real Estate Forum

810-225-2800

2015

[email protected]

Class ObjectivesTo understand the real estate

development processTo understand the role of economic

developers in real estate d l t

2015

developmentTo understand the types and uses of

incentives

OutlineMarket Factors – Macro ViewThe Mind of the DeveloperIncentives (One Perspective)Incentive ProgramsA f D l

2015

Anatomy of a DealKey Points in Attracting Development Lessons Learned Case Study Q&AOptional : Due Diligence Process

The Macro View

Environmental

MEDA Economic Development Course



MichiganGrand Rapids Ranked

3rd for US growth, 2nd for Hiring, 1st for Raising a Family

Detroit Area Ranks V L ULI

TraverseCity

Marquette

2015

Very Low in ULI Emerging Markets Survey Grand

RapidsAnnArbor

OaklandCounty

KalamazooJackson Detroit

Real Estate Is Local

Tri-CountyArea

Market Shift

Market Factors

Market Market

…“this recession has given us a chance to think. It’s a wonderful opportunity to get things done that you couldn’t

2015

Financial Mechanisms

MaturityForces done that you couldn t get done just two or three years ago.”

- Mr. Andres Duany of Duany Plater-Zyberk & Co.

Never Let a Good Crisis Go to Waste

Market Shift

Market Factors

Market Market

For Example:Interest RatesDemographicsEconomic ConditionsGovernment PoliciesSubsidiesProperty Location and

2015


MaturityForcesp y

ConditionSocial Environment

Market Shift

Market Factors

Market Market

For Example:Desire for Dense Social

Experience, Vibrant Communities

Desire for Accessible Recreational Options

Reduction in Auto

2015


MaturityForces DependencyAnti-Sprawl FocusEcological AwarenessSustainabilityBuy Local Movement

Market Shift

Market Factors

Market Market

For Example:Risk Based Closure

StandardsLiability ProtectionUnderstanding Urban and

Brownfield MarketsFocus on Creating Place

2015


MaturityForcesg

Area Wide Planning and Incentive Coordination

Creating Authenticity

Market Shift

Market Factors

Market Market

For Example:Deploying Multiple

IncentivesCapital Market Acceptance of

RiskIncentives focused on Place

Making and Economic

2015


MaturityForcesg

ReturnCrowd Funding



The Mind of the Developer

Environmental


Time

(Dependant on type of development, size of development, municipality, market conditions, etc.)

AcquisitionDesign

Financing

Construction

Land

Residential

Office

R t il

Stages of Development

Exit Strategy Exit Strategy Exit Strategy

Marketing/Leasing

Feasibility

……….

3 to 5 Years for Full Cycle

One Year Mind Set

2015

Retail

Industrial

Land Capital

Knowledge Tenants

Must Control at Least One Must Balance All

Cost Timing

Risk Value

TheProcess

Operations/Maintenance ………

Seller

Development Team

Lender (Capital Markets)Regulators

End User/Purchaser

Developer

KeyPlayers

AccountantArchitectAttorney

BrokerCM

ConstructionEngineer

Public

Local Unit of Government

(LUG)

State

(MEDC, MSF)

Other Incentives Providers

EngineerEnvironmentalGeotechnical

InspectorsInvestors

Landscape Market Researcher

MarketingProperty Manager

Public RelationsTransportation

Developer/

End User

Seller

Lender

Rapid site developmentIRRPsychological ROI

Profit on investment

Opportunities forinvestment

Lack of informationOrganized oppositionPhysical, environmental

problems with sitesPotential liabilityHigh development costsFear of env. uncertaintyIncreased time

Fear of env. uncertaintyAffirmative obligationsPrice Renegotiations

Lack of informationPotential liability

Available land parcels,resources, services

Liability protectionAvailable capitalRemediated sitesClear, achievable

requirementsMinimum delayPossible Incentives

Available buyer

Willing buyer/seller

Purchaseand developInvest in the communityCreate jobs

Sell and Reinvest

Approvefinancing

Player Objective Threat Opportunity Outcome

2015

LUG

Public

investmentReturn on investmentLow risk

Economic developmentProvide servicesEnhance quality of lifeClean environmentMinimum riskPlanned development

JobsProperty tax reliefClean environmentMinimum riskSafety, securityMaintain, improve

lifestyleQuality of life

Potential liabilityFear of env. uncertainty

Burdensome processLack of informationPolitical challengesLack of resources (failure)Increased timeLost Tax Revenues

Lack of information orunderstanding

Fear of unknownLack of participation

Available land parcelsWilling buyer/sellerSupporting physical

infrastructureTax RevenuesControlled incentives

Education and trainingActive participationCleaner Environment

financing

Approve plans,permits, zoning

Attract investment

Create placeCreate jobs

Publicacceptance

Modified and adopted from: Brownfields and Michigan Communities, Department of Resource Development, Michigan State University

Real Estate Feasibility – Core ObjectivesBefore Tax and After Tax Cash ReturnsOverall IRRUpvaluing Opportunities for best ROIPsychic Income

2015

yCreate A Sense of PlaceCreate A LegacyCreate a Story

From The Real Estate Feasibility Chart by Peter Allen

The Overriding Success FactorLocation

2015



The Overriding FearUncertainty

Transparency of ProcessSetting ExpectationsExtent and Relevancy of InformationRi k M t

2015

Risk Management

Circle of RisksMacro and Micro

Scale – 13 StepsUnpredictabilityLong Lead TimesSh C

2015

Short Construction Window

The Role of Place

In The End - Does It Pencil Out?

2015

Psychological ROIParticipation in CommunityLasting ValueCreation of Place

2015

2015

Creating Place – Community AttachmentStrong Social OfferingsAestheticsOpennessAuthenticity

EconomySafetyBasic Services

2015

ySense of Discovery

What Makes Metro Detroit Stick (metromode)http://www.metromodemedia.com/features/knightfoundationsurveydetroit0210.aspx

Knight Foundation “Soul of the Community” Surveyhttp://http://knightfoundation.org/sotc/

Common Goal, But Different Objectives



Creating Place - Lifelong CommunitiesNeighborhood CentersWalkabilityLots of Choices for Entertainment, Work,

Education

2015

A Showstopper vs. The Economic Garden1

Note 1:www.littletongov.org/bia/economicgardening/

2015 Does creation of place always work?

Incentives (One Perspective)

Environmental


Incentive ObjectivesAttracting New Investment (including jobs)

Leveling the Playing FieldSeeding a VisionCreating a Catalyst

2015

Attracting New InvestmentTax Base and JobsStretching Limited FundingDemanding Performance

Claw Back Provisions

2015

Remaining CompetitiveLeveling the Playing Field

Leveling the Playing FieldGoal: Soften impediments to (re)development

“It is a game of inches”How do you make it work?

Creative purchasing and developmentP bl h

2015

Public/private partnershipsUse of financial incentivesSequencing Purchase and Redevelopment



Seeding a VisionFirst In

Making a Vision Tangible

2015

Creating a CatalystPopcorn Development v. Critical Mass

Area Wide PlanningCatalytic Project v. Market Demand

The Next Twenty Steps

2015

Area Wide PlanningStops “Popcorn” Development

Increases Chances for SynergyCoordinates All Efforts

Coordinating Incentives Within An AreaE h f G N b f G

2015

Emphasis of Growing Number of Grants

Environmental Concerns InventoryIdentify…

Historical UsesEnvironmental ConcernsExtent of Existing Data

Define…Limits of Existing Data

2015

Limits of Existing DataInvestigation Priorities

Restrictions to DevelopmentPriority of Parcels

Coordinated Incentives Plan

Rochester Hills Planning Area414 Acres59 Parcels9 Landfills

2015

Rochester Hills Planning AreaArea-Wide Incentives

Creating districts and/or using Targeted Redevelopment Area (or Land Bank) will

District 1

2015

(or Land Bank), will permit collateralization of TIF funding

Grant funding• Surface Water features

District 2

District 3



Rochester Hills Planning Area

District 1

2015

District 2

District 3

The Challenges of IncentivesUncertaintyNecessityApplicabilityTiming

2015

g

Prelim

inary –B

asic Assessm

Planning

-V

isioning

Com

mitted –

Packag

e Incen

RedevelopmentReady

Land Control Gap due to

economics, demographics,

brownfield, historic,

encumbrances, titl l

2015

ment

ntives

Co

st

Time Contact ASTI Environmental at 800-395-ASTI

$$title clearance,

time, etc.

Prelim

inary

Planning

Com

mitted –

Packag

e Incen

RedevelopmentReady

Land Control

Increased

2015ntives

Co

st


IncreasedUpfront Costs

Increased SiteDevelopment Costs

Overall Costs

Prelim

inary

Planning

Com

mitted –

Packa

ge Incen

RedevelopmentReady

Land Control

Increased Targeted FundingGrant Funding

RLFGrants and LoansFaçade ProgramsInfrastructure Investment

2015

ntives

Co

st




Overall Costs

LocationRLFTax IncentivesTax AbatementGrants and Loans

MSF

RLFTax IncentivesLower Property CostsLand AssemblyLand Bank

The Key IngredientsMust be an…

Eligible Property developed by an….Eligible Investor who…

• Creates an Eligible Project that …• Incurs Eligible Costs after approval (with exceptions)…

2015

Incurs Eligible Costs after approval (with exceptions)…• Can complete the project within the defined time,

investment or job creation goals



Eligible Properties Include….Perceived Contamination/Impairment“Traditional” Brownfields (aka contaminated)Blighted and Functionally Obsolete PropertiesHistoric Resources

2015

Manufacturing FacilitiesMixed-Use Urban RedevelopmentsProperties in Targeted Areas

PerceivedImpacts

KnownImpacts

Eligibility

Grant/Loan

TIF

Other

Grant

Incentives

ImpactExtent

Assessment Implementation

Control/Remediation

ImpactNature

Types of Programs

2015

Blighted

FunctionalObsolete

Grant/Loan

TIF

Other

Grant/Loan

TIF

Other DueDiligence

TargetedIndustry/

Area

Grant/Loan

TIF

Other

DueDiligence

AAA Key Steps

Assessment

•Does it Meet Criteria?•Is There Sufficient Time?•Is Incentive Worth the Cost?

Application

•Site Plan and Financials•Tenant or Project Plan

C l t A li tiApplication •Complete Application

Approval

•Financial Review•Community Participation•Background Check•Document and Report Performance

Incentives BalanceTime Required to Obtain vs. Construction

ScheduleEffort (Brain Damage) vs. Value of IncentivesValue of Incentives vs. Uncertainty and Risk of

h P (Th C d )

2015

the Project (The Conundrum)Value of Incentives vs. Repayment TimingExtraordinary Costs vs. On-Book Costs

(“True” Benefits v. Off-Set Benefits)

High Priority

The Conundrum

Desirability

cess

Hi h

High

L

Developer SweetSpot

High

Low

Incentive Zone

2015

Low PriorityP

rob

abil

ity

of

Su

cc High

Low

Low

Low

High

Value of Incentives vs. Repayment TimingCost of MoneyRepayment Period vs. Exit StrategyGap vs. Total Reimbursement

2015

Co

st


Grants

CRP, BDP

TIF

Grants and

Loans

p



“True” BenefitsWhen incentives are applied to non-

extraordinary costsWhen it can be used to secure or enhance a

funding source

2015

Offset BenefitsWhen incentives are applied to extraordinary

costs

Project Funding

Investments Total Cost Grant FundedEnvironmental TIF

FundedRedevelopment

TIF Funded MBT CreditDeveloper Investment

Site Acquisition $3,402,500 $0 $0 $0 $0 $3,402,500

Environmental InvestigationRemediation

$121,900 $15,300 $103,500 $0 $0 $3,100

Site Preparation $55,000 $0 $0 $0 $0 $55,000

Public Infrastructure $500,000 $0 $0 $500,000 $0 $0

Summary of Funding Sources

“True” BenefitsOffset Benefits

2015

Demolition $183,000 $0 $0 $183,000 $0 $0

Construction Costs $4,825,000 $0 $0 $0 $603,125 $4,221,875

Other Construction Costs $1,594,600 $0 $0 $0 $2,500 $1,592,100

Total Above $10,682,000 $15,300 $103,500 $683,000 $605,625 $9,274,575Contingency 15% 15% 15% 15% 15% 15%

$1,602,300 $2,295 $15,525 $102,450 $90,844 $1,391,186Total With Contingency $12,284,300 $17,595 $119,025 $785,450 $696,469 $10,665,761

Example Small Project 1

No “Double Dipping”

Project FundingPublic Infrastructure Costs $500,000Developer Eligible Expenses $404,475Developer Tax Credit $696,469BRA Administrative Costs $21,000

DeveloperBenefits

2015

Local RLF Funding $1,304,206Increased Taxes to

Jurisdictions $9,259,461

Example Small Project 1

LUGBenefits

Incentive OptionsGrantsLoansLoan Guarantees and EnhancementTax Increment Financing/Tax Abatement

2015

gTax CreditsIn Kind ContributionsInsuranceProcess Benefits

The Tool BoxTax Tools

Brownfield Tax Increment FinancingTax Abatements

Commercial Rehabilitation DistrictCommercial Redevelopment District Obsolete Property Rehabilitation Tax Abatement

2015

O P p y R T ACorridor Improvement AuthorityDDAs, LDFAsFederal Historic Rehabilitation Tax CreditIndustrial Facilities Tax AbatementNew Market Tax Credits

List of Incentives – http://www.michiganadvantage.org/Fact-Sheets/

TIF Programs – The Increment

Incremental Value $10,000,000

Value

$15M

2015

Base Value

Existing Property 2012

$5,000,000Value

Redeveloped Property 2014

$5,000,000Value

$15MValue



$232,276


$10,000,000$10M Value

=$5M TV

2007 2008Captured Taxable Value 5,000,000$ 5,125,000 Personal Property -$ - Total Taxable Value 5,000,000$ 5,125,000$

CapturedMillage Category Mills/$1000COUNTY 4.5626 22,813$ 23,383$ VILLAGE OPERATING 3.6711 18,356$ 18,814$ VILLAGE REFUSE 2.1051 10,526$ 10,789$

Tax Capture

2015 2016

2015

$ ,Annual

IncrementalTax

$5,000,000

, ,LIBRARY 1.1465 5,733$ 5,876$ FIRE 0.9411 4,705$ 4,823$ POLICE 3.0463 15,232$ 15,612$ TOWNSHIP OPERATING 1.0752 5,376$ 5,510$ COMMUNITY COLLEGE 1.5809 7,904$ 8,102$ MILFORD DDA 1.8879 9,440$ 9,675$ OAKLAND COUNTY ISD 3.3626 16,813$ 17,233$ SCHOOL OPERATING 17.4808 87,404$ 89,589$ SCHOOL SET 5.5951 27,976$ 28,675$ Total Incremental Tax 46.4551 232,276$ 238,083$

Taxes for 2015 (one year delay)

$232,276


$10,000,000$10M Value

=$5M TV

Bonding

2015

$ ,Annual

IncrementalTax

(Year 1)$5,000,000

Bonding@ 5% for

25 yrs= $3,300,000


CapturedMillage Category Mills/$1000COUNTY 0.0000 -$ -$ VILLAGE OPERATING 0.0000 -$ -$ VILLAGE REFUSE 0.0000 -$ -$

Tax Capture

TIF Programs –in a DDA

$10,000,000$10M Value

=$5M TV

$50 387

2015 2016

2015

LIBRARY 1.1465 5,733$ 5,876$ FIRE 0.9411 4,705$ 4,823$ POLICE 3.0463 15,232$ 15,612$ TOWNSHIP OPERATING 0.0000 -$ -$ COMMUNITY COLLEGE 1.5809 7,904$ 8,102$ MILFORD DDA 0.0000 -$ -$ OAKLAND COUNTY ISD 3.3626 16,813$ 17,233$ SCHOOL OPERATING 0.0000 -$ -$ SCHOOL SET 0.0000 -$ -$ Total Incremental Tax 10.0773 50,387$ 51,646$

$5,000,000

$50,387Incremental

Capture

$181,889Incremental

For DDA

The Tool BoxTax Tools (continued)

Neighborhood Enterprise Zones Various Renaissance Zones Empowerment ZonesTool and Die Recovery ZonesBusiness Improvement Districts

2015

B I p DPrincipal Shopping DistrictsBusiness Improvement DistrictHistoric NeighborhoodPersonal Property Tax Relief (328)


The Tool BoxGrants/Loans

Michigan Strategic Fund Grants and Loans• Business Development Program (BDP)• Michigan Community Revitalization Programs (CRP)

Transportation Economic Development GrantsEPA Site Assessment GrantsEPA S S f R d G

2015

EPA Site-Specific Remediation GrantsHUD Sustainable Community GrantsCommunity Development Block GrantsSignature Building Acquisition GrantPrivate Foundation GrantsUSDA Rural Economic Development Loans and Grants


The Tool BoxGrants/Loans (continued)

Venture Michigan FundAngels/Venture CapitalNeighborhood Stabilization Program (3?, 4?)Targeted Research and Development GrantsRural Business Enterprise Grants (RBEG)

2015

R B E p G (RBEG)Revolving Loan FundsLocal Site Revolving Loan FundsClean Michigan Initiative “Small” Grants

• Government - Grants.gov• Foundations - fconline.foundationcenter.org/




The Tool BoxOther

Capital Access ProgramCharter One Job Creation Loan ProgramIndustrial Development Revenue BondsLand BanksEPA Brownfields Area-Wide Planning Program

2015

EPA B A W P g P gIn Kind ContributionsConditional Land Use Transfer


Getting IncentivesIn general…

Must be Eligible Property or Project• Applicant Can Not Be Responsible for Impacts

At the Discretion of the Grant or Loan AdministratorRequires Public/Private Partnership

2015

Requires Public/Private PartnershipSome Provided for Specific Purpose, Others FlexibleSome Are Incompatible (but no Double Dipping)Takes 3 to 6 (24 for federal grants) months to complete

process

TrendsLimiting Incentives to Financial NeedHigh Density, Mixed Use, Walk-able, Transportation

Oriented Development TargetJob Creation and Investment Targets Must Be MetIncreased Competition for Less IncentivesTIF B kl h

2015

TIF BacklashCreative Use of GrantsCollaborative and Area-Wide FocusModifications to the Application (Be Ready to Do It

Many Times)

WOW Factor

2015

2015

203 Acres4,700,000 sq ft -18 heavy industrial buildings

Mixed Use Development$162million investment

2015

1,800,000 sq ft renovated industrial500,000 sq ft new industrial365,000 sq ft of commercial/80,000 R&D400 housing units



$32 million in Brownfield costs$13 million in TIF with 15 year payback$9.9 million in SBT Credit -Phased PurchaseMDOT G t

2015

MDOT GrantPublic Participation in InfrastructurePRP InvolvementGreen Objective

Bread and Butter

2015

2015

3.3 Acre Site25,600 sq ft light industrial platting operationRCRA SiteS il d d t i t

2015

Soils and groundwater impactsCorporate Office

$5-10 million investment

$208,000 Site Assessment Grant$200,000 EPA RCRA Investigation $300,000 EPA CERCLA Investigation $200 000 EPA CERCLA R di ti

2015

$200,000 EPA CERCLA Remediation$100,000 Assessment Grant for Demo

$200,000 Site Remediation GrantWill Use TIF and MSF

Incentive Programs

Environmental




DefinitionsGeneral

Greenfield: Undeveloped, un-impacted landGreyfield: Previously developed land, not requiring

special controls or proceduresBrownfield: Previously developed land requiring

2015

Brownfield: Previously developed land requiring controls or special considerations

Orangefield : Where you can make money (green) on a Brownfield

Brownfield DefinitionFederal (EPA)

“A brownfield is a property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or

2015

pcontaminant.”

www.epa.gov/brownfields

Brownfield DefinitionMichigan

For all Brownfields…• Contamination greater than the applicable Residential

Clean-up Criteria under Part 201, or• Is in a Land Bank Fast Track Authority

In a Qualified Local Unit of Government can be

2015

In a Qualified Local Unit of Government, can be…• blighted or • functionally obsolete• Historic Resource

Adjacent and Contiguous PropertiesTOD Related Development

www.michigan.gov/deq

AdrianAlbionAlmaAlpenaAnn ArborBaldwinBangorBattle CreekBay CityBenton HarborBenton Twp.(in Berrien Co.)Bessemer

ColdwaterColemanCrystal FallsDearbornDearborn HeightsDetroitDowagiacEast LansingEastpointeEcorseEscanabaFerndaleFlint

HartHartfordHazel ParkHighland ParkHollandInksterIoniaIron MountainIron RiverIronwoodIshpemingJacksonKalamazoo

Mount ClemensMount MorrisMt. Morris Twp.(in Genesee Co.)Mount PleasantMuskegonMuskegon HeightsNorton ShoresNorwayOak ParkOmerOnawayOwosso

Saint LouisSault Sainte

MarieSouthfieldSturgisTaylorThree RiversTrentonTraverse CityVassarWakefieldWarrenWayne

2015

BBig RapidsBronsonBuena Vista

Twp.(in Saginaw Co.)BurtonCadillacCarson CityCaspianCenter LineCheboygan

FGaastraGenesee Twp.(in Genesee Co.)GibraltarGladstoneGrand HavenGrand RapidsGraylingHamtramckHarbor BeachHarper Woods

KLansingLincoln ParkLivoniaLudingtonManisteeManistiqueMarquetteMelvindaleMenomineeMidlandMonroe

OPinconningPontiacPortagePort HuronRedford Twp.(in Wayne Co.)River RougeRoyal Oak Twp.(in Oakland Co.)Saginaw

W yWyandotteWyomingYpsilanti

Core Communities

Definitions - MichiganBlighted Means Property That:

Has been declared a public nuisance in accordance with a local housing, building, plumbing, fire, or other related code or ordinance;

Is an attractive nuisance to children because of physical condition use or occupancy;

2015

condition, use or occupancy;Is a fire hazard or is otherwise dangerous;Has had the utilities, plumbing, heating or sewerage

disconnected, destroyed or rendered ineffective for its intended purpose;

Has substantial subsurface demolition debris buried on site so that the property is unfit for intended use

Applicable only in Michigan Core Communities



Definitions - MichiganBlighted Means Property That:

Is tax reverted property owned by a qualified local unit of government, by a county, or by the state (the sale, lease or transfer after inclusion in a brownfield plan shall not result in loss of the property status as blighted); or

Is property owned or under the control of a land bank fast track

2015

Is property owned or under the control of a land bank fast track authority, whether or not located with in a qualified local governmental unit - property included within a brownfield plan prior to the date it meets this requirement shall be considered eligible as of the date the property becomes qualified (the sale, lease or transfer after inclusion in a brownfield plan shall not result in loss of the property status as blighted).

Applicable only in Michigan Core Communities and for Land Banks

Definitions - MichiganFunctionally Obsolete Property: Is property or equipment that is unable to be used to

perform as intended due to a substantial loss in value resulting from:

Overcapacity;Changes in technology;D fi i i d i i d i

2015

Deficiencies or superadequacies in design;Or other similar features that affect the property:

• (Or the property’s relationship with other surrounding property.)

Applicable only in Michigan Core Communities

Definitions - MichiganHistoric Resource:

Is a publicly or privately owned historic building or structure located within a historic district designated by the national register of historic places, the state register of historic sites, or a local unit acting under the local historic districts act

2015Applicable only in Michigan Core Communities

DefinitionsUrban Redevelopment Projects

Downtowns or traditional commerce centers of Qualified Local Units of Government and County Seats

Must..

2015

M• Increase density• Promote mixed use and sustainable development• Address area wide redevelopment• Address underserved markets of commerce

Increased Benefits in Michigan

Definitions - BrownfieldOwned or Under the Control of a Land Bank Fast

Track Authority;An ownership interest in the property, orA tax lien on the property, orA tax deed to the property, orA h h l l bd f h

2015

A contract with this state or a political subdivision of this state to enforce a lien on the property, or

A right to collect delinquent taxes, penalties, or interest on the property, or

The ability to exercise its authority over the property

BFTIF Can Be Applied To…All Brownfields for…

Environmental InvestigationsPreparation of Due Diligence DocumentsRemedial Activities

• Including Exposure Barriers• Oth E i t l R A ti iti

2015

• Other Environmental Response ActivitiesDemolition and lead abatementBrownfield plansReasonable costs of environmental liability insuranceInterest

Eligible ExpensesWhat?



BRTIF Can Be Applied To…Core Community Brownfields, or Property Currently

Owned or Under Control of a Land Bank, for…Infrastructure

• Parking Structures, Urban Storm Water Management

2015

gSite Preparation Not a Response ActivityPlanning and Economic StrategiesBuilding RehabilitationRelocation of public buildings or operations for

economic development purposes.


BFTIF Can Be Applied To…Property Currently Owned or Under Control

of a Land Bank, for…Cost of clearing or quieting title to, or selling or

otherwise conveying, property owned or under the control of a land bank fast track authority

2015

yAcquisition of property by the land bank fast track

authority if the acquisition of the property is for economic development purposes


BFTIFProcess

Initial meeting with LUG and MEDC and/or MDEQ

Prepare Brownfield PlanPublic Notice/Notice to Taxing Jurisdications

2015

Public Notice/Notice to Taxing JurisdicationsReview and Approval by BRA and LUGPrepare 381 Work PlanReview and Approval by MEDC and/or MDEQComplete Reimbursement Agreement

How?

Community Revitalization ProgramGrant, Loan, "Other Economic Assistance“,

or combinationFor Eligible Investment (including look backs)

such as:Al i i d li i h bili i

2015

Alternation, construction, demolition, rehabilitationSite improvementsMachinery, equipment and fixturesProfessional service fees (not soft costs)

What?

Community Revitalization ProgramGrant, Loan or Combination• Up to 25% of Eligible Investment, not more

than $10,000,000 for any project (grants capped at $1,000,000)S P f B d

2015

• Support is Performance Based• Grants and Loans may have claw-back

provisions and are assignable, may have feesEconomic Assistance may include loan

enhancement

What?



Community Revitalization ProgramOn Eligible Property such as:

Facility (aka Brownfield)Blighted (aka Brownfield)Functionally Obsolete (aka Brownfield)Historic Resource (publically or privately owned historic

2015

Historic Resource (publically or privately owned historic building /structure in designated historic district)

Adjacent or contiguous if increases taxable value of subject property

Municipality must have skin in the game: staff, financial, economic commitment

Where?

Community Revitalization ProgramMust Consider:

Revitalization of regional urban areas (promote “desired” revitalization)

Downtown or traditional commercial center onlyImportance of project to the community and catalyst statusFinancial need and extent of other contributionsReuse of vacant buildings or historical buildings

2015

Reuse of vacant buildings or historical buildingsExtent of environmental impactsJob CreationFinancial and economic soundnessDensity, mixed-use, sustainability, rehabilitation of historic

resourcesArea-wide redevelopment and underserved markets of

commerce

How?

Community Revitalization ProgramMust Meet:

Financial ThresholdEnd Use ThresholdLocation Threshold

2015Where?

Community Revitalization ProgramProcess:

Initial meeting with MSF and LUGObtain LUG support (conceptual and financial)Submit Pre-ApplicationReview by CATeamC l N d A l i

2015

Complete Needs AnalysisReview and Approval by MSFComplete Application and Agreement

How?

Business Development ProgramGrant, Loan, "Other Economic Assistance“,

or combinationUp to $10,000,000 per project that….

Creates 25 Qualified Jobs in rural county1 or high tech l g cti it r

2015

technology activity, orCreates 50 Qualified Jobs

1: Rural county with population of 90,000 or less in 2010 Census,See attached for definition of high technology

What?



Business Development ProgramQualified Investment• An investment to a project in Michigan that is

acceptable to the MSF

2015What?

Business Development ProgramFor Grants

Performance Based For Relocation to Michigan or For Expansion in Michigan when another state is

competing

2015

competingFor Loans

Performance Based Need BasedFor Qualified Businesses expanding in Michigan

What?

Business Development ProgramFor Qualified Business making Qualified

Investment(s) or Creating Qualified JobsPreference to businesses that need assistance for

deal-closing and second stage gap financing

2015Who?

Business Development ProgramQualified Business• Is, or will be, physically located in or physically

operate in, Michigan• That submits an application and business

l d

2015

plan, and• Is financially viable

Who?

Business Development ProgramQualified Jobs• A job performed for the Qualified Business

by a resident of Michigan whose state income tax is withheld by employer (or other on behalf

f l )

2015

of employer)• In addition to jobs existing prior to the project• Not transferred from other business in

Michigan

Who?

Business Development ProgramProcess:

Initial meeting with MSFConsideration by MSFComplete Needs AnalysisR i d A l b MSF

2015

Review and Approval by MSFComplete Application and Agreement

How?



Business Development ProgramMust Consider:

No retail projects/No retention projectsOut-of-State competitionNet positive return to MichiganInvestment by business Business diversification

2015

Shovel-readiness and re-use of existing facilitiesJob Creation, wage level, and benefitsLinks to Michigan suppliersLocation in distressed or targeted communityMunicipality must have skin in the game: staff, financial, economic

commitment

How?

ObjectiveCreate Funding for Brownfield Assessments

and Remediation in The LUGProvide Immediate Funding of Eligible

Activities to be Reimbursed from Brownfield TIF

2015

TIF

What?

Eligible CostsEligible activities on eligible properties

Plan must clearly state usageState captured funds

• Require MDEQ or MEDC approved Work Plan• Requires Reimbursement Agreement for TIF

2015

Requires Reimbursement Agreement for TIFProperties located within municipalityMaximizing Funding Sources

What?

Revenue SourcesBrownfield TIF

Must be in Brownfield PlanMust clearly state capture by RLFSegregate Local and State Tax ReimbursementMaximum 5 year capture

Li i S i b d

2015

• Limits State capture to amount reimbursedRLF RepaymentFunds from Other Public or Private Sources

What?

Eligible Criteria (Statutory)Meets the definition of a BrownfieldIdentified in an approved Brownfield PlanAdjacent and Contiguous properties if they are

estimated to increase the taxable value of the Eligible Property

P ti ff t d b l f th Eli ibl

2015

Properties affected by a release from the Eligible Property

Property under the control of the Land BankApplicant must own, lease or have entered into

agreement to purchase or lease eligible property, or be Land Bank

Who?



Private Activity BondsTax exempt finance method secured by

project’s revenuesInterest exempt from federal, state, and local

income tax

2015What?

Private Activity BondsEligible Expenses for Manufactures Include….

95% for land acquisition, building and equipment (not including used) directly related to manufacturing process

Warehouse space and non-core uses are ineligible

2015

W p gunless directly related to process (limited to 25%)

70% must be for core manufacturing costs15% must be for renovation if existing facilityNot applicable to working capital or inventory

What?

Private Activity BondsEligible Expenses for Manufactures Include….

$1 million unrestricted for capital expenditures$10 million subject to $20 million restrictions on

capital expenditures prior to and after issuance

2015What?

Private Activity BondsEligible Applicants Include…• Manufacturing projects• Not-for-Profit Corporation projects• Solid or Hazardous Waste Disposal Facility

2015

p y

Who?

Private Activity BondsProcess:

Initial meeting with MSFApplicant submits Initial Application (before 1st of

month)Committee Review (once per month)

2015

pStructure financing and prepare legal documentsPublic hearingMSF adopts bond resolution

How?



Getting Grant and Loan FundingIn general…

Must Be Known or Perceived BrownfieldApplicant Can Not Be Responsible for ImpactsAt the Discretion of the Grant or Loan

Administrator

2015

AdministratorGrants Provided for Specific Purpose

Revolving Loan Funds (RLF) More Flexible

Site Assessment GrantsAdministered by the LUGProvides services for environmental due

diligence on properties in the community (either community wide or in designated area)

A l d b h LUG

2015

Assessments completed by the LUG, reports provided for developer, and funded by communityPartial or total funding at LUG discretion

Site Assessment GrantsFederal Program

Assessment Grants$200,000 to address sites of hazardous substance

contamination;$200,000 for petroleum sites;$350 000 i il bl f it ifi t

2015

$350,000 waiver available for site-specific assessment$1,000,000 combined for coalitions (3 or more applicants)

Funds may be used to inventory, characterize, assess and conduct cleanup and redevelopment planning and community involvement

Site Assessment GrantsApproval from the community and EPA or

DEQ requiredEligibility DeterminationFunding ApprovalW rk Pl A r l

2015

Work Plan ApprovalLong lead time to obtain and implement grant,

but once in place, project-specific approval can be provided in a few days

Site Specific Remediation GrantsAdministered by the LUGProvides services for remediation of specific

impacts on specific property Must be completed according to the Work Plan

2015

Reports available to the developer, but funded and conducted by community, therefore publically available



Site Specific Remediation GrantsFederal Program

Clean-up Grants$200,000 per site;No more than 5 sites;20 % cost share;Eligible entity must own site

2015

Eligible entity must own site;Funds may be used to address sites contaminated by

petroleum and hazardous substances, pollutants or contaminants

Site Specific Remediation GrantsLong lead time to obtain and implement grantSpecific threat to public health or the

environment preferredFocused on specific impacts

2015

Training GrantsFederal Program

Training Grants$200,000 per grant

Funds for eligible entities and non-profit organizations to provide environmental job training

j t th t ill f ilit t th t

2015

jprojects that will facilitate the assessment, remediation, or preparation of Brownfield sites

RLFFederal Program

Revolving Loan Funds$1,000,000 per eligible entity;60% for capitalizing revolving loan;40% for cleanup sub grants (no repayment);

2015

p g p y20% cost share

Funds may be used to address (cleanup) sites contaminated by petroleum and hazardous substances, pollutants or contaminants

Combining Funding“Competing” Programs

LIHTCDDA

Complementary Programs

2015

198, 328Federal Historic Tax CreditsRenaissance ZoneOther Grants and Loans



Key Points in Attracting Development

Environmental


…Also Retaining

City of Flint“A. Promote Economic Development and Job

Creation Through the Reuse of Underutilized Properties

B. Position Brownfield Redevelopment Projects to be Competitive with Traditional Development Projects

City of Rochester Hills“1. Incorporate a preference for source control,

active remediation, or mitigation;2. Create full time jobs;3. Provide an increase in taxable value to the

property and a potential beneficial effect in th th t ld t h d ith t

Community Specific Objectives

Development Projects C. Maximize the Impact of Incentives by

Encouraging Brownfield Redevelopment that Complements Other Redevelopment Efforts

D. Protect Human Health and the Environment Through the Use of Appropriate Remediation and Due Care Activities, and

E. Maintain Transparency During the Approval Process”

the area that would not have occurred without the incentives; and

4. Use these incentives only after all other sources of funding for eligible activities have been exhausted.”

1 Focus Efforts to Leverage Local Assets

Community Specific ObjectivesPopcorn Incentives v. Catalytic Projects

v. Area Planning

20152 Consider Area-Based Impacts

Return on Investment for Incentive

Threshold Criteria and Performance Criteria“An eligible project can be considered for Brownfield incentives in the City if it meets all of the following criteria:• The project Internal Rate of Return indicates that it

requires incentives to be successful and would not

“Projects will be evaluated based on, but not limited to, the following criteria:• Amount of property tax generated• Amount of investment on a square foot basis• Job retention, creation and quality

2015

occur without the incentives, and• The development will ameliorate threats to public

health or the environment that were caused by site conditions through remediation, mitigation or control or redevelopment of an historic resource.”

• Location• Existence of abandoned, blighted or functionally

obsolete buildings• Amelioration of threats to public health or the

environment• Whether the project will provide additional beneficial

effects on the surrounding area and the community as a whole.”

3 Communicate Performance Expectations

The Basic E4 Equation

Eligible Property + Eligible Activities +Eligible Taxpayer = Eligible Project

(B f ld I L d l bl

2015

(Brownfield+ Investment Listed as Eligible+Innocent Landowner= Eligible Project)

4 Eligibility is a Condition Not a Criteria



Eligible Project (Brownfield):Contaminated Above ResidentialFunctionally ObsoleteBlightedHistoric ResourceIn a Land BankAdjacent and Contiguous

The Basic E4 Equation Problem

2015

Desirable Project (Incentive Target)Create JobsSufficient Investment for IncentiveDefined Need (Financing Gap)Contribute to Density and Area Wide RedevelopmentCan Will be Successfully Completed

5 Economic Considerations First

AssistanceMEDC CATRegional OrganizationsOther CommunitiesPrivate Companies

2015

pConsultants

Anatomy of a Deal

Environmental


Example Financial Evaluations$73M Investment30 New Jobs$8.2M TIF

12 Years

2015

$10M MBT

3750 and 3800 Woodward, Detroit

But For TestWhat is the Financing Gap?

Equity vs. DebtDebt to Equity RatioAre Extraordinary Costs the Cause?

Wh t th Oth I ti d Th

2015

What are the Other Incentives and are They “First In”?

But For Test 73% Debt8% Equity

8.9:1 Debt to Equity

19% Incentives

20156 See Who Has Skin in the Game



What If Not Test (the But Not Test)

20157 Look at Tax Impact with and without Project

Evaluate Need v. IncentiveAssess Need Based on long term IRR not just

Financing GapSet Base Incentive on NeedAdjust Base Incentive For Other Criteria

2015

Be Consistent with Policy and Objectives

8 Balance Incentives and Need

Custom IRR Table

2015

2015

MEDC IRR Worksheet

Eligible Costs IncludedThreshold IRR v. Extraordinary CostsUsing Interest

Extraordinary CostsAll Eligible

2015

Limited by Threshold IRR

Interest Included

Local ShareCoordinating with

State Programs

2015

Proportional Local Share

Additional Local Capture

9 Leverage Local Commitment Amount



State ShareConsider Entire

Incentive Package

2015

Proportional State Share

Additional State Capture

Match Payment Period to PredictionAssumed Future Taxable Value

Assumed Total Costs to Capture

Assumed Annual AppreciationAssumed Completion Schedule

2015

Results in Final Payment Date

Evaluate Revenues v. IncentiveLook at 30-yr Tax Revenues

$8.4M In Base Taxes Means $23.2M in Additional Tax Revenue (176% Increase)

2015

$8.2M to Applicant (19%)$31.6M to Jurisdictions (71%)

10 Look at Tax Impact to All Jurisdictions

Evaluate Total ImpactLook at 20-yr Impact

201511 Consider Other Relevant Financial Contributions

$35.7M Impact $18.2M Incentive$9.3M Local Taxes

Timing“Unless otherwise agreed to in writing by the BRA, this

Plan will expire and no longer be valid if the applicant does not execute a Reimbursement Agreement within one hundred and eighty days of the date the Plan is approved by City Council. To remain eligible for the

d i ti li ibl ti iti t t t ithi

2015

approved incentives, eligible activities must start within eighteen months of Plan approval, construction must start within five years of the executed Reimbursement Agreement, and construction must be completed within three years of the estimated completion date.”

12 Demand Performance

Clawback ProvisionsHow much investment is substantially compliant?Rigorous review of content and date of

reimbursement requests

2015



12 Step Program Summary1. Focus Efforts to Leverage Assets 2. Consider Area-Based Impacts 3. Communicate Performance Expectations 4. Eligibility is a Condition Not a Criteria 5. Economic Considerations First 6. See Who Has Skin in the Game

L k T I h d h P

2015

7. Look at Tax Impact with and without Project 8. Balance Incentives and Need9. Leverage Local Commitment Amount 10. Look at Tax Impact to All Jurisdictions11. Consider Other Relevant Financial Contributions 12. Demand Performance

From Subsidies Anonymous

Focus on ProcessSingle Point of Contract for Entire ProcessTransparent, Predictable and Timely ProcessEarly Screening of Incentives

Build Incentives Team

2015

Communicate AdvantagesListen to Advantages

Be Developer ReadyReduce Uncertainty

Publish and Implement Policies and ProceduresManage Timelines

Coordinate MeetingsO l R l I C

2015

Only Real Incentives CountControl the Incentives = Control the Conversation

The Real Estate Essentials Have Not Changed

Keep in Mind the Final OutcomeCreate Sense of Place and Great DesignDrive Appropriate Clean-UpDrive Appropriate Site DesignCoordinate and Leverage Incentives

2015

gCatalytic Projects v. Consistent Development

Focus on Area-Wide PlanningSingle Sited-ness Is OutCoordinate Efforts Around Redevelopment

Hubs Economic Gardening on Local Clusters

2015

Coordinate Efforts Between Communities

Lessons Learned

Environmental




Lessons LearnedFor urban redevelopment, it’s a question of how

much uncertaintyThe full financial benefits are rarely available In many states, commercial and residential are

h d ff l b b f b

2015

the most difficult to obtain benefits, but are a major component of urban redevelopment demand

A bad deal is still a bad deal

Additional ReadingULI Advisory Services Panel Report –

Baileys Crossroads, VirginiaULI Emerging Trends in Real EstateThe Option of Urbanism by Christopher

L b

2015

LeinbergerThe Brookings Institute: Turning Around

Downtown: Twelve Steps to Revitalization by Christopher Leinberger

Environmental

Additional ReadingLast Harvest by Witold RybczynskiReal Estate Development, Principles and

Process, Edited by Mike Miles et alNortheast Midwest Institute: The

E l d E I f

2015

Environmental and Economic Impacts of Brownfields Redevelopment

Energy Benefits of Urban Infill, Brownfields, and Sustainable Urban Redevelopment

Environmental

Additional Resources• Michigan Laws – www.legislature.mi.gov• MEDC – www.michiganadvantage.org/• MDEQ Land Issues –

www.michigan.gov/deq/0,4561,7-135-3311---,00.html

2015

g g / q/ , 5 ,7 35 33 ,• EPA Brownfields - epa.gov/brownfields

Environmental

Additional Resources• Urban Land Institute at www.uli.org/• International Council of Shopping Centers at

www.icsc.org/• National Brownfield Association at

www.brownfieldassociation.org/

2015

www.brownfieldassociation.org/• Brookings Institute Metropolitan Policy

Program at www.brookings.edu/metro.aspx

Environmental

Class Case Study Questions

Environmental




Q&A

Environmental

Tom [email protected]

Bonus Material: Due Diligence

Environmental


What You Really Need to KnowThree key stepsProcess is iterativeProcess is specific to

development planProvides documentation of due

d l d

Due Diligence

Site Optimization

2015

diligence process to provide protection for “innocent landowner”

Provides assessment for use in determining compliance with closure standards

S te Opt at o

Site Development

Buyers Approach - TraditionalAssessment Risk Management Value Creation

Site Selection

Due Diligence

Objectives

Phases

Screening Tools (GDR,Transaction Screen, ECI)

Phase I ESA*Phase II Investigation

Hazardous MaterialsAssessment

ComplianceAssessment

EcologicalAssessment

2015

Planning

Construction

Operation

g

Baseline Environmental Assessment *

Post Closure Plan

Remediation OptionsAnalysis

Due Care Plan* orDDCC

Brownfield Incentives

Remediation, Closureand Restoration

No Further Action Rpt.Certificate of Completion

Operation andMaintenance

OwnerExit Strategy

* Indicates the three key liability protection documents

Hazardous MaterialsClearance Report

Operating Permits, Plans and Programs

Pre-Construction Phases - Buyer

Due

Diligence

Risk

Management

Value

Creation

DocumentationIdentify Issues

Identify Limitations(Physical and

Fi i l)

Funding Sources

roce

ss

2015

Financial)Decrease

UncertaintyControl Costs

Clean-upDue Care

Reduce TimeTo Market

Financial Assistance

Appropriate Investigations

Site Specific Closure/ Long

Term Care

Time v. Benefits

Ob

ject

ive

Key

Issu

esP

r

Due DiligenceLiability ProtectionEvaluating Development Options and Costs

Nature and Extent of ContaminationDetermining Due Care Requirements

2015

Appropriate Site Use and MaintenanceIdentifying Compliance Requirements

Underground Storage Tanks, Asbestos, etc.Municipal Environmental Ordinances



Due DiligenceBasic Documents

Transaction ScreenEnvironmental Concerns Inventory Phase I Environmental Site AssessmentPh II I tig ti

2015

Phase II InvestigationBaseline Environmental Assessment (BEA)

Phase I ESA

Site Selection

Functionally ObsoleteOr Blighted?

Basic Due Diligence

No

Yes

Environmental

End Process

Phase II Investigation

Is Property a Facility?

Recognized EnvironmentalConditions?

Go ToSite Optimization

No

No

Yes

Yes

Site OptimizationObtaining Funding and Grants

Tax CreditsInvestigation and Remediation GrantsSpecial Grants

L d/A b t A t

2015

Lead/Asbestos AssessmentsHazardous Substance AssessmentsMold and Indoor Air Quality ManagementPre-Demolition Assessments

Appropriate UseSingle Family Residential vs. Multi-Family

Compound (Soils)Direct Contact

Residentialug/kg

Commercialug/kg

Arsenic 7,600 37,000

2015

A 7,6 37,

Lead 400,000 900,000

Benzo(a)pyrene 2,000 8,000

Part 201 Closure Requirements

Site OptimizationBasic Documents

Construction Readiness ReportRemediation Options AnalysisExit Strategy SummarySit D l t Pl

2015

Site Development Plan Grant Application or Work OrderBrownfield Plan381 Work PlanMBT Credit Application

Review Business PlanAnd Financial Projections

Is Funding AvailableFor This Project?

Can Plan ChangeTo Capture Funding?

Can Current Plan CaptureFunding?

Go ToOperation and Documentation

Site Optimization

Yes

No

Yes

Y

No

Environmental

Is Work Plan Approved?Prepare Applications,

Schedule Funding

YesNo

Go ToSite Development

No

Submit to BRA and/or MDEQ

YesModify?

YesNo

Consider CoreCommunity Funding

Prepare BrownfieldWork Plan



Site DevelopmentSite Optimization Threatened and Endangered Species

ManagementWetlands Mitigation and Banking

2015

Greenway Development/Habitat RestorationEcological Storm Water ManagementBio-RemediationLEEDS Buildings

Site DevelopmentBasic Documents

Due Care PlanResponse Activities PlanRemedial Action PlanCl R t

2015

Closure Report• Engineering, Administrative and Institutional Controls

Disposal DocumentationFinal Assessment Report

Control, Demo,

If Facility, InvestigateNature and Extent of Impacts

SiteDevelopment

Obt i F di

Prepare Appropriate BEA(Category N, D, or S)

Prepare Due Care and/orRemediation Plan

If Obsolete or Blighted,Prepare Corrective Action Plan

Environmental

Control, Demo,Renovate, Remediate

Install Infrastructure

Obtain Funding

Obtain Core CommunityFunding

Construction

Obtain Certificate ofCompletion

Utilization of Credits

The ProcessNo. Task 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

Conduct Due Diligence1 Conduct Phase I ESA2 Prepare Phase II Sampling Plan3 Conduct Phase II Sampling4 Identify Site Development Options5 Evaluate Site Control/Remediation Options6 Prepare BEA and Due Care Plan

Brownfield Tax Credit Program7 Identify Brownfield Funding Options8 Initial Meeting with Agency

Weeks

2015

8 Initial Meeting with Agency9 Prepare Brownfield Plan10 Brownfield Plan Review 11 Public Hearing12 Remedaiton Work Plan13 381 Work Plan Review 14 Prepare MBT Application Part I15 MBT Application Review 16 Prepare MBT Application Part II17 MBT Part II Review

Site Operation18 Install Controls/Conduct Remediation19 Restroation20 Operation and Maintenance

The Real WorldUncertainty of ConclusionsUndiscovered ImpactsNo Liability But Total ResponsibilityThings That Are Not Protected

2015

gPublic/Buyer PerceptionUSEPA Overwrite

Example Project 1- Changing Scope

Environmental




Emagine Royal Oak

Environmental

Parcel No. 25-15-356-025In Brownfield Plan

Par

cel N

o.

25-1

5-35

6-00

7In

Bro

wn

fiel

d P

lan

No

te:

Mis

lab

ele

d o

n B

row

nfi

eld

Pla

n M

ap

s

Parcel No. 25-15-356-023

In Brownfield Plan(Former Bus Service

Garage)Unclassified in Brownfield Plan

Un

cla

ssifi

ed

in B

row

nfie

ld P

lan

Adjacent and Contiguous to a Facility

2015

Parcel No. 25-15-356-014 and 25-15-356-013In Brownfield Plan

Par

cel N

o.

25-1

5-35

6-02

0In

Bro

wn

fiel

d P

lan

(Fo

rmer

Go

od

yea

r T

ire)


(Former Oakridge Market)

Notes:

Part of Larger Brownfield Plan

Adjacent and Contiguous to a Facility

Facility per Part 201 (BEA Filed))

Fa

cilit

y p

er

Pa

rt 2

01

(B

EA

File

d))


Par

cel N

o.

25-1

5-35

6-00

7In

Bro

wn

fiel

d P

lan

No

te:

Mis

lab

ele

d o

n B

row

nfi

eld

Pla

n M

ap

s

Parcel No. 25-15-356-023

In Brownfield Plan(Former Bus Service

Garage)

2015Notes:

Parcel No. 25-15-356-014 and 25-15-356-013In Brownfield Plan

Par

cel N

o.

25-1

5-35

6-02

0In

Bro

wn

fiel

d P

lan

(Fo

rmer

Go

od

yea

r T

ire)


(Former Oakridge Market)

Final Project Location

Required Portion of Facility Parcel

2015Obtained from ALTA/ACSM Survey dated September 25,2009 and provided as part of

Project Location

Required Multiple Splits and Combinations

Emagine Theater ProjectLocal Participation was DDA ContributionLEED Features RequiredObtained Tax Credit at $1,250,000

2015

Example Project 2 – Going Forward

Environmental




Site RedevelopmentWhat Would You Do?

Demolition of former funeral home• Approximately 1.86 acres

Construction of senior independent living community• Construction starts 2013

2015

Construction starts 2013• All funding is in place

$24M investment not including land costs• Creates 27 full time and 38 part-time jobs

Site is a facility, but impacts are minor

Project Financing – Example Project 3

2015


2015


2015

Developer/ Rapid site developmentIRR

Lack of informationO i d iti

Available land parcels,i

Purchased d l

Player Objective Threat Opportunity Outcome

End UserIRRPsychological ROI

Organized oppositionPhysical, environmental

problems with sitesPotential liabilityHigh development costsFear of env. uncertaintyIncreased time

resources, servicesLiability protectionAvailable capitalRemediated sitesClear, achievable

requirementsMinimum delay

and developInvest in the communityCreate jobs

Seller Profit on investment

Increased time

Fear of env. uncertaintyAffirmative obligationsPrice Renegotiations

Minimum delayPossible Incentives

Available buyer Sell and Reinvest

Lender Opportunities forinvestment

Return on investmentLow risk

Lack of informationPotential liabilityFear of env. uncertainty

Willing buyer/seller Approvefinancing

LUG Economic developmentProvide servicesEnhance quality of lifeClean environmentMinimum riskPlanned development

Burdensome processLack of informationPolitical challengesLack of resources (failure)Increased timeLost Tax Revenues

Available land parcelsWilling buyer/sellerSupporting physical

infrastructureTax RevenuesControlled incentives

Approve plans,permits, zoning

Attract investment

Create placeCreate jobs

Public

p

JobsProperty tax reliefClean environmentMinimum riskSafety security

Lack of information orunderstanding

Fear of unknownLack of participation

Education and trainingActive participationCleaner Environment

j

Publicacceptance

2015

Safety, securityMaintain, improve

lifestyleQuality of life

Modified and adopted from: Brownfields and Michigan Communities, Department of Resource Development, Michigan State University

SMART NAPKIN - April 26, 2008LAND COST ASSUMPTIONS Pessimistic Realistic Optimistic FINANCIAL ASSUMPTIONS Pessimistic Realistic Optimistic

Land Cost $1,155,000 $1,100,000 $1,045,000 Interest Rate 8.80% 8.00% 7.20%Land Area in sf 10890 10,890.00 10890 Pre const land holding duration - months 3.8 3Land Area in Acres 0.25 0.25 0.25 Construction duration - months 11.3 9.0 6.8

Months to sell after construction 6.0 3.0 1.5CONSTRUCTION (HARD) COST ASSUMPTIONS

Demolition $11,000 $10,000 $9,000 GENERAL SALES DATAClearing $11,000 $10,000 $9,000 Sales Commissions (%) 3% $591,960 $295,980 $147,990Utilities $44,000 $40,000 $36,000 Closing Costs $49,500 $55,000 $60,500Landscaping $11,000 $10,000 $9,000 Title - Recording $13,500 $15,000 $16,500Paving (% of lot cover) 10% $4,792 $4,356 $3,920Building cost / sf - units $193 $175 $158 UNIT DATATotal cost - units $5,103,175 $4,639,250 $4,175,325 Description SF/Unit # of Units Total SF

Covered parking sf (cars) 24 9,900 9,000 8,100 A - Old West Side Café & Bistro 3,270 1 3,270

Building cost / sf - covered parking $55 $50 $45 B - Walkout/Garden live work units 1,770 2 3,540

Total cost - covered parking $544,500 $450,000 $364,500 C - Below grade basement parking 375 24 9,000

Common area (% of total) 18% 7,031 6,392 5,753 D- Smaller 1 bedroom on 2nd & 3rd floor 650 2 1,300Building cost / sf - common area $165 $150 $135 E- Larger 1 bedroom on 2nd & 3rd floor 750 14 10,500Total cost - common area $1,160,112 $958,770 $776,604 F- 2 bedroom on 4th flr with mezzanine Loft 1,000 7 7,000

SOFT COST ASSUMPTIONS G- Small 2 bedroom with loft 900 1 900Survey $5,500 $5,000 $4,500Soil Investigation $11,000 $10,000 $9,000 TOTALS 51 35,510Site Engineering $55,000 $50,000 $45,000Architectural (% of Const) 8.0% $532,226 $483,842 $435,457 A- Sales Price Per sf $315 $350 $385Environmental $11,000 $10,000 $9,000 B-Sales Price Per sf $315 $350 $385Legal $27,500 $25,000 $22,500 C-Sales Price Per sf $108 $120 $132Insurance $11,000 $10,000 $9,000 D-Sales Price Per sf $293 $325 $358Prop taxes/year (mil rate) 15 $9,075 $8,250 $7,425 E-Sales Price Per sf $293 $325 $358Permits / fees $110,000 $100,000 $90,000 F-Sales Price Per sf $293 $325 $358

G-Sales Price Per sf $293 $325 $358

PRO FORMA SUMMARYPessimistic Realistic Optimistic

Gross sales income $8,879,400 $9,866,000 $10,852,600 AVE PRICE / SF $273 $303 $333Land cost $1,155,000 $1,100,000 $1,045,000Sitework cost $81,792 $74,356 $66,920 A-Sales Price Per Unit $1,030,050 $1,144,500 $1,258,950Building cost $6,807,787 $6,048,020 $5,316,429 B-Sales Price Per Unit $557,550 $619,500 $681,450Soft cost $772,301 $702,092 $631,882 C-Sales Price Per Unit $40,500 $45,000 $49,500Pre const holding costs $244,184 $197,320 $0 D-Sales Price Per Unit $190,125 $211,250 $232,375Construction Financing costs $537,761 $352,628 $212,854 E-Sales Price Per Unit $219,375 $243,750 $268,125Sales Financing Costs $422,348 $169,488 $65,458 F-Sales Price Per Unit $292,500 $325,000 $357,500Sales commission / closing costs $654,960 $365,980 $224,990 G-Sales Price Per Unit $263,250 $292,500 $321,750GROSS PROFIT / (LOSS) ($1,796,732) $856,116 $3,289,066(ProfitI %) -17% 10% 43% AVE PRICE / UNIT $370,479 $411,643 $452,807(Ave Land cost / unit) $22,647 $21,569 $20,490(Total Construction (Hard) costs) $8,044,578 $7,222,376 $6,428,349 Total sales - Unit A $1,030,050 $1,144,500 $1,258,950(Total project costs) $10,676,132 $9,009,884 $7,563,534 Total sales - Unit B $1,115,100 $1,239,000 $1,362,900

Total sales - Unit C $972,000 $1,080,000 $1,188,000Tota; Costs Per Square Foot Total sales - Unit D $380,250 $422,500 $464,750

Land $31 SF Floor Area Ratio 326% Total sales - Unit E $3,071,250 $3,412,500 $3,753,750

Hard $172 SF Total sales - Unit F $2,047,500 $2,275,000 $2,502,500

Soft incl fin & co $50 SF Including financing and commissions Total sales - Unit G $263,250 $292,500 $321,750

Profit $24 sf

TOTAL SALES $8,879,400 $9,866,000 $10,852,600

Pre

Pla

Com

RedevelopmentReady

Laneliminary –

nning -V

is

mm

itted –

nd Control Gap due to –

Basic A

ss

sioning

Package

peconomics,

demographics, brownfield,

historicsessment

Incentives

$$

historic, encumbrances, title clearance,

time, etc.s

Co

st

2015 Time Contact ASTI Environmental at 800-395-ASTI

Pre

Pla

Com

RedevelopmentReady

Laneliminary

nning

mm

itted –

nd ControlP

ackage Incentives

Increased Overall Costs

s

Co

st




Pre

Pla

Com

RedevelopmentReady

Laneliminary

nning

mm

itted –

nd ControlP

ackage

T t d F di

RLFGrants and LoansFaçade ProgramsIncentives

Increased Overall Costs

Targeted FundingGrant FundingRLFTax Incentives

ç gInfrastructure Investment

s

LocationRLFTax Incentives

Lower Property CostsLand AssemblyLand Bank

Co

st



Tax AbatementGrants and Loans

MSF


Project Funding “True” BenefitsOffset Benefits

Project Funding

In estments Total Cost Grant FundedEnvironmental TIF

FundedRedevelopment

TIF Funded MBT CreditDeveloper Investment

Summary of Funding Sources

Investments Total Cost Grant Funded Funded TIF Funded MBT Credit InvestmentSite Acquisition $3,402,500 $0 $0 $0 $0 $3,402,500

Environmental InvestigationRemediation

$121,900 $15,300 $103,500 $0 $0 $3,100

Site Preparation $55,000 $0 $0 $0 $0 $55,000

Public Infrastructure $500,000 $0 $0 $500,000 $0 $0

Demolition $183,000 $0 $0 $183,000 $0 $0

Construction Costs $4,825,000 $0 $0 $0 $603,125 $4,221,875

Other Construction Costs $1,594,600 $0 $0 $0 $2,500 $1,592,100

Total Above $10,682,000 $15,300 $103,500 $683,000 $605,625 $9,274,575Contingency 15% 15% 15% 15% 15% 15%

$1,602,300 $2,295 $15,525 $102,450 $90,844 $1,391,186$1,602,300 $2,295 $15,525 $102,450 $90,844 $1,391,186Total With Contingency $12,284,300 $17,595 $119,025 $785,450 $696,469 $10,665,761

No “Double Dipping”

2015Example Small Project 1

TIF Programs The IncrementTIF Programs – The Increment

$10,000,000$10M Value

=$5M TV


CapturedMillage Category Mills/$1000 Tax Capture

2015 2016

$232,276Annual

Incremental

$5M TV g g y /$ 000COUNTY 4.5626 22,813$ 23,383$ VILLAGE OPERATING 3.6711 18,356$ 18,814$ VILLAGE REFUSE 2.1051 10,526$ 10,789$ LIBRARY 1.1465 5,733$ 5,876$ FIRE 0.9411 4,705$ 4,823$ POLICE 3.0463 15,232$ 15,612$

C p

IncrementalTax

$5,000,000

TOWNSHIP OPERATING 1.0752 5,376$ 5,510$ COMMUNITY COLLEGE 1.5809 7,904$ 8,102$ MILFORD DDA 1.8879 9,440$ 9,675$ OAKLAND COUNTY ISD 3.3626 16,813$ 17,233$ SCHOOL OPERATING 17.4808 87,404$ 89,589$ SCHOOL SET 5.5951 27,976$ 28,675$ T t l I t l T 46 4 1 232 2 6$ 238 083$Total Incremental Tax 46.4551 232,276$ 238,083$

Taxes for 2015 (one year delay)

2015

TIF Programs in a DDATIF Programs –in a DDA


CapturedMillage Category Mills/$1000 Tax Capture$10,000,000

$10M Value=$5M TV

2015 2016

g g y /$ 000COUNTY 0.0000 -$ -$ VILLAGE OPERATING 0.0000 -$ -$ VILLAGE REFUSE 0.0000 -$ -$ LIBRARY 1.1465 5,733$ 5,876$ FIRE 0.9411 4,705$ 4,823$ POLICE 3.0463 15,232$ 15,612$

C p$5M TV

$50,387Incremental

TOWNSHIP OPERATING 0.0000 -$ -$ COMMUNITY COLLEGE 1.5809 7,904$ 8,102$ MILFORD DDA 0.0000 -$ -$ OAKLAND COUNTY ISD 3.3626 16,813$ 17,233$ SCHOOL OPERATING 0.0000 -$ -$ SCHOOL SET 0.0000 -$ -$ T t l I t l T 10 0 3 0 38$ 1 646$

$5,000,000

Capture

$181,889Total Incremental Tax 10.0773 50,387$ 51,646$ Incremental

For DDA

2015

But For Test 73% Debt8% Equity

But For Test 19% Incentives

8.9:1 Debt to Equity

20156 See Who Has Skin in the Game

Eligible Costs IncludedEligible Costs IncludedThreshold IRR v. Extraordinary CostsUsing Interest

Extraordinary Costs

Limited by Threshold IRR

All Eligible

Interest Included

2015

Local ShareLocal ShareCoordinating with

S PState Programs

Proportional Local Share

Additional Local Capture

p

20159 Leverage Local Commitment Amount

Match Payment Period to PredictionMatch Payment Period to PredictionAssumed Future Taxable Value

Assumed Total Costs to CaptureAssumed Total Costs to Capture

Assumed Annual AppreciationAssumed Completion Schedule


2015


Evaluate Revenues v Incentive$8.4M In Base Taxes Means $23.2M in Additional Tax Revenue (176% Increase)

Evaluate Revenues v. IncentiveLook at 30-yr Tax Revenues

$8.2M to Applicant (19%)$31.6M to Jurisdictions (71%)

201510 Look at Tax Impact to All Jurisdictions

Basic Due Diligence

Site Selection

Functionally ObsoleteYes

Phase I ESA

Or Blighted?

No

End ProcessRecognized Environmental

Conditions?

No

Phase II Investigation

Yes

E i t l

Is Property a Facility?No

EnvironmentalGo To

Site Optimization

Yes

Review Business PlanA d Fi i l P j ti

Site OptimizationAnd Financial Projections

Is Funding AvailableGo To

p

No

For This Project?

Can Plan ChangeCan Current Plan Capture

Operation and Documentation

YesYes

NoCan Plan Change

To Capture Funding?Can Current Plan Capture

Funding?

YesNoConsider Core

Community Funding

Go ToSite Development

Submit to BRA and/or MDEQ

Prepare BrownfieldWork Plan

E i t l

Is Work Plan Approved?Prepare Applications,

Schedule Funding

NoYesModify?

YesNo

Environmental

If Facility, InvestigateN t d E t t f I t

Site If Obsolete or BlightedNature and Extent of Impacts

Development

Prepare Appropriate BEA(Category N, D, or S)

If Obsolete or Blighted,Prepare Corrective Action Plan

Prepare Due Care and/orRemediation Plan

Control, Demo,Renovate, Remediate

Obtain Funding

Install InfrastructureObtain Core Community

Funding

E i t l

Construction

Obtain Certificate ofUtilization of Credits EnvironmentalCompletionUtilization of Credits

Project Financing Example Project 3Project Financing – Example Project 3

2015

Table 1Brownfield Funding Options

StateNo. Element Assm't Remd. All Core CRP BDP Local State BRF

Eligible Activities (6)1 Phase I Environmental Site Assessments X X X X X X2 Soil and Groundwater Investigations X X X X X X X3 Baseline Environmental Assessments X X X X X X4 Remediation Options Analysis X X X X X X5 Assessment of Intended Use X X X X X X6 Due Care Plans X X X X X X7 Due Care Activities X X X X X X8 Response Activities Work Plans X X X X X X9 Response Activities X X X X X10 Unanticipated Response Activities X X X X X X11 Additional Response Activities X X X X X X

12Other actions necessary to protect the health, safety, welfare, environment, or natural resources X X X X X X

13 Remediation X X X X X X14 Engineered Controls X X X X X X15 Eligible Activites on Properties Impacted by Release X X X X X16 Brownfield Plan Preparation X X X X X X17 381 Work Plan Preparation X X X X X18 Demolition X (7) X (1) X X X X (2) X19 Lead Abatement X (1) X X X (2) X20 Asbestos Abatement X (1) X X X (2) X21 Site Preparation (not a response activity) X X X (2) X22 Infrastructure Improvements X X X (2) X23 BRA Administration Expenses X X X X X24 Environmental Insurance X X X X X25 Interest Incurred by Developer for Eligible Activities X X X X (3) X26 Interest on Bonds X X X X (3) X27 Title Clearing and Land Sale for Land Banks X X X28 Property Acquisition by Land Banks X (8) X (2) X29 Title Clearing and Land Sale for Core Commnunity X X X30 Property Acquisition by Core Community X (8) X31 Evaluation Necessary to Facilitate Redevelopment X X32 Relocation of public buildings or operations X (8) X (8) X X (2) X33 Funding for an RLF X X X X

Eligible Investments34 Site Improvements X35 Building Restoration or Alteration X36 Building Renovation and Improvements X37 Construction Hard Costs X38 Architect, Engineering ,and Survey Costs X39 Machinery, Equipment and Personal Property X

Other40 Job Creation (>50, or >25 in special circumstances) X41 Costs of Relocation to Michigan X42 Costs of Expansion in Michigan vs. Other X42 Area Wide Planning X43 Community Outreach X X44 Community Education X X

Notes1 Eligible in non-core communities under specific circumstances per Sec. 2 (o)(v)2 Requires an approved Work Plan, Development Agreement and Reimbursement Agreement3 Only for BEA, Due Care and Additional Response Activities4 May be captured prior to Brownfield Plan approval for local and state taxes56 See Table 2 for additional detail

May be captured prior to Brownfield Plan approval, for local taxes only

Funding Options for Eligible PropertiesTIF MSFEPA Grants LSRRF

Provided by ASTI Environmental 800.395.ASTICopyright ProtectedPrinted 4/11/2013

ACRONYM LIST

ACM – Asbestos Containing Material

ACBM - Asbestos Containing Building Material

AHERA – Asbestos Hazard Emergency Response Act

ASTs – Aboveground Storage Tanks

ASTM – American Society for Testing and Materials

BDP – Business Development Program under the MSF

BRA – Brownfield Redevelopment Authority

CO – Consent Order

CFR – Code of Federal Regulations

CNS – Covenant Not to Sue

COC – Chain of Custody

CRD – Commercial Revitalization District

CRP – Community Revitalization Program under the MSF

DDCC – Documentation of Due Care Compliance

DQOs – Data Quality Objectives

DRO – Diesel-Range Organic Compounds

ESA – Environmental Site Assessment

GRO – Gasoline-Range Organic Compounds

HASP – Health and Safety Plan

HUD – U.S. Department of Housing and Urban Development

IRR – Internal Rate of Return

LCSs – Laboratory Control Samples

LUG – Local Unit of Government

MDEQ – Michigan Department of Environmental Quality

MDLs – Method Detection Limits

MSF – Michigan Strategic Fund

MS/MSD – Matrix Spike/Matrix Spike Duplicate

NELAP – National Environmental Laboratory Accreditation Program

NVLAP – National Voluntary Laboratory Accreditation Program

O&M – Operation and Maintenance

Op Memo – Operational Memorandum issued by Agency for Clarification of Regulations

OSHA – Occupational Safety and Health Administration

PARCCS – Precision, Accuracy, Representativeness, Completeness, Comparability, and

Sensitivity

PCBs – Polychlorinated Biphenyls

PE – Performance Evaluation

Phase I – Phase I Site Assessment completed before purchase according the ASTM standards

PID – Photoionization Detector

PNA – Polynuclear Aromatics

PPE – Personal Protective Equipment

QA – Quality Assurance

QAPP – Quality Assurance Project Plan

QA/QC – Quality Assurance/Quality Control

REC – Recognized Environmental Condition as defined by ASTM Standards for Phase I Site

Assessments

RBSLs – Risked Based Screening Levels

ROI – Return on Investment

RPD – Relative Percent Difference

RSD – Relative Standard Deviation

SAP – Sampling and Analysis Plan

SOPs – Standard Operating Procedures

SVOCs – Semivolatile Organic Compounds

TIF – Tax Increment Financing

TIR – Tax Increment Revenues

TOC – Total Organic Carbon

TOD – Transportation Oriented Development

TV – Taxable Value

ULI – Urban Land Institute

U.S. EPA – United States Environmental Protection Agency

USTs – Underground Storage Tanks

VOCs – Volatile Organic Compounds

Case Studies in Environmental Issues

Fact and Fiction September 10, 2014

For More Information Contact Tom Wackerman, ASTI Environmental [email protected] 1-800-395-ASTI

1

Overview of Changes Background The new standard for Phase I Environmental Site Assessments (referred to as E1527-13) was issued by the American Society for Testing and Materials (ASTM) the week of November 4, 2013 and replaces the ASTM E1527-05 standard. The EPA, reversing its earlier decision, accepted the use of this standard on December 30, 2013 for satisfying the "all appropriate inquires" (AAI) requirements (40 CFR Part 312) for landowner liability defenses under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). This is the first update to the ASTM standards in eight years. AAI is a critical element for establishing liability defenses under CERCLA. Without the defense, CERCLA imposes strict liability for purchasers of contaminated property. AAI requires that the landowner make reasonable inquires to determine whether a property has historical contamination. Generally, the ASTM standard establishes the requirements for conducting an AAI inquiry by preparation of a Phase I ESA. Of course, the Phase I ESA is not the exclusive means of establishing the AAI Rule, since other elements, such as continuing obligations for land use restrictions, must be considered, and compliance will depend on the specific circumstances of the subject property. In addition, in Michigan, the requirement of completing a Baseline Environmental Assessment and Due Care Plan for properties with impacts above residential criteria still applies.




2

For a short period, from its announcement in August until it withdrew its direct final rule on October 29, the EPA intended to permit use of either the ASTM E1527-05 or the E1527-13 standard for AAI. Based on negative comments to the direct final rule, and specifically the concern that two standards would lead to implementation of the older, less costly, standard, the EPA focused instead on the new standard. Since the final ASTM E1527-13 standard was not available during that period (the final standard is consistent with the draft standards released in February 2013), most Phase I ESA continued to be completed with the earlier standard. However, if a Phase I was completed according to the new standard, it would also comply with AAI, since the new standard incorporates the requirements of the previous standard. Now, all new and updated Phase I ESA reports must be completed using the E1527-13 standard.

The Phase I ESA has always been the basic tool for liability protection, but it has also functioned as the first step in determining impediments to site redevelopment. By identifying "recognized environmental conditions", it allows the purchaser to

focus on historical impacts that may interfere with the intended future use of the property. However, it is only one step in balancing liability protection, site assessment and value creation. Summary The new standard is not significantly different from the previous standard, and most reputable consulting companies have been conducting most of these items as part of a complete Phase I ESA. However, three changes are key for




3

purchasers: 1. Updates and changes to the definitions of recognized environmental

conditions; 2. The addition of requirements to assess the potential for vapor intrusion;

and 3. The inclusion of additional steps in the regulatory file-review process and

mandatory user responsibilities Key Changes The new Phase I ESA continues to provide liability protection and site assessment to property purchases, but now provides more emphasis on prior closures, adjacent land uses and the possibility of impacts from volatilization to indoor air. The most significant changes include:

An emphasis on User responsibilities is now specifically included in the standard. The User (aka purchaser) must provide the results of a search of liens and "activity and use limitations" (AULs) through a review of recorded land title records. The requirements for information regarding sales price, specialized knowledge, and commonly known or reasonably ascertainable records did not significantly change, but were not always provide, and are now mandatory.

Revisions and clarifications to the "recognized environmental conditions" (REC) designations include the terms "in" and "at" a property (formerly only included "on" a property) and also refine the definition based on defining the terms "release" and "environment" as part of the standard. "Release" now has the same meaning as the definition in CERCLA.

An REC is defined as: "The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment. De minimis conditions are not recognized environmental conditions."

The new REC definitions may require that suspected historical impacts

receive different, or additional, evaluations. The revised definition of an historic REC (HREC) now requires an evaluation to determine if the HREC




4

should be considered a REC based on changes in regulations. It also limits the HREC definition to situations where impacts have been controlled to unrestricted residential criteria at the time of the investigation and under current residential closure standards. So a release that was previously investigated and closed may need to be reevaluated to determine if the closure satisfies current closure criteria, and if not, it could be considered a REC.

A new definition, called a controlled recognized environmental condition (CREC), has been added. This definition applies to closures on properties that do not meet unrestricted residential closure criteria and includes restrictions and/or controls in place (engineered, institution and administrative controls). In some circumstances, such as changes in closure criteria, a CREC may be considered a REC.

A CREC is defined as: "The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment. De minimis conditions are not recognized environmental conditions."

Migration is defined in the new ASTM standard to include the term vapor.

The new standard requires the inclusion of a vapor migration investigation by conducting a Tier 1 non-invasive screening assessment for potential vapor encroachment conditions (pVECs). This can be completed by implementing the E2600-10 standard to determine if there is a potential for volatile chemicals of concern to reach the property. Sites identified up to ⅓- mile from the Property that may contain contaminants of concern (COCs) are assessed through review of reasonably ascertainable records pertaining to the extent of contamination, area lithology including soil and groundwater conditions, and other factors that may affect migration of vapors. A positive finding will likely be considered a REC.

Vapor migration differs from vapor intrusion in that it refers to migration onto the property itself whereas intrusion refers to migration of vapors into a structure. However, if a vapor migration issue or pVEC is identified, this may ultimately lead to a vapor intrusion assessment, dependent on




5

proposed use of the property.

Clarifications to regulatory file reviews place an emphasis on review of the subject property and adjoining property database listings. ASTM E1527-13 does not require the review of these listings, but provides that justification for not reviewing these records be made by the EP and that significance of limitations/data gaps associated with lack of a review be clearly identified. Alternative sources can be used if sufficient information is obtained.

Impacts The emphasis on User responsibility places additional requirements on the purchaser. Timely responses to the user questionnaire and additional required information will impact report delivery. More importantly, the User responsibilities are now mandatory. A Phase I ESA may reevaluate a HREC or CREC as a REC based on changes in closure criteria since the closure was completed. This may lead to a requirement for additional investigation. Completion of the vapor migration screening assessment may identify adjacent or local sources that will be listed as a REC and may require additional investigation. In addition, a Phase I ESA updated or created for refinancing may now find additional RECs (previous HRECs, previously de minimis impacts, or uninvestigated sources) based on the vapor migration requirements, specifically in those cases where gas stations or dry cleaners were located on or near the subject property. As a result of the new emphasis on volatiles, additional research has identified other materials that should be evaluated at former dry cleaner locations. These include white gas, naphtha, carbon tetrachloride, kerosene and stoddard solvent. This may result in a need for additional investigation, or for reevaluation of existing site data. With the changes in closure criteria in Michigan (specifically for trichloroethylene and perchloroethylene (PERC)), and the pending additional criteria changes this year, previously closed impacts may now become RECs.




6

Timing and Cost Completion of the Phase I ESA will still require three to four weeks. Unfortunately, "quick" Phase I ESAs must now note significant data gaps if sufficient time is not provided for agency response and file review. This does not change the requirement that the Phase I ESA must be completed prior to purchase. Costs for the Phase I ESA will probably change somewhat from the typical price, due to the additional file review requirements for the pVEC. Any price increases for a specific property will depend more on historical uses in the area around the subject property than on the size or historical use of the subject property. It is unlikely that the "bargain" pricing of recent years will be able to produce an AIA compliant Phase I ESA under the new standards. Other cost increases, unrelated to the new standard, should also be expected as the economy continues to improve. These include the recent increase in EDR costs. Unfortunately, additional costs for Phase II investigations will be required for some sites. Site with HRECs or CRECs that have become RECs, sites with potential vapor migration issues, or sites were closure was completed under previous criteria may require more extensive soils and/or groundwater investigations.

ASSESSMENT AND INCENTIVES A S T I E N V I R O N M E N T A L

Client Ashley Capital Contact Susan Harvey 734.957.1000 Location Grand Rapids, MI Project Dates 2007-Present Project Cost $170,000 Key ASTI Staff Tom Wackerman

ASTI Environmental assisted in the redevelopment of 4,700,000 square feet of obsolete heavy industrial buildings on the 206 acre campus of Steelcase Products in Grand Rapids, Michigan. To address financing gaps, this project required ASTI to develop a Brownfield Redevelopment Plan and an Act 381 Brownfield Work Plan, as well as an MBT Credit Application to qualify the project for Brownfield Incentives. ASTI secured over $20 million in various incentive programs for this project. Assessment activities included a Phase I ESA, Phase II Environmental Investigation, asbestos inspections, and a Baseline Environmental Assessment covering the entire campus, followed by individual Baseline Environmental Assessment for subsequent purchasers and tenants. A Due Care Plan was also prepared for both construction and operation. ASTI also assisted with project scheduling, changes to the purchase agreement language, and coordinating an exit strategy for the selling which included contingencies for impacts that could be discovered during site preparation and construction. ASTI Environmental finished the project under budget, and continues to assist with site redevelopment, environmental issues, and tax credit accounting to support the phased redevelopment of this property.

PHASE I ENVIRONMENTAL SITE ASSESSMENT A S T I E N V I R O N M E N T A L

Client Conner Creek Greenway Association/ Subconsultant to Hamilton Anderson Associates Contact Sam Lovall 313.887.6281 Location Detroit, Wayne County, MI Project Dates 2004 to 2006 Project Cost $15,000 Key ASTI Staff George Kandler Carey Kratz* Dianne Martin *Indicates Project Manager

The Conner Creek Greenway is part of the GreenWays Initiative of the

Community Foundation for Southeast Michigan and was initiated by the Detroit

Eastside Community Collaborative (DECC). The Conner Creek Greenway will

stretch from 8 Mile Road south to the Detroit River, tracing the original Conner

Creek. The Greenway will provide pedestrian and bike paths, beautification

with plants and flowers, historical signage, and other opportunities linking

people, businesses, schools, and shops. The entire Conner Creek Greenway is

expected to be completed in 3 to 5 years.

ASTI Environmental was retained by Hamilton Anderson Associates (Project

Engineers and Designers) on behalf of the DECC to conduct Phase I

Environmental Site Assessments of three areas of the Greenway to date.

ASTI’s role in this grant-funded project was to identify known and/or potential

environmental hazards that could represent a health risk to the pedestrians and

workers, and to provide recommendations if such hazards were determined to

exist. Areas researched and investigated included nearby existing or historic

underground storage tanks and the nearby industrial facilities. ASTI’s findings

have assisted in continued receipt of funding from the Michigan Department of

Transportation and the Greenways Initiative and in the project design process to

provide a healthy environment for the workers and pedestrians.

ECOLOGICAL EVALUATION A S T I E N V I R O N M E N T A L

ASTI Environmental performed an ecological evaluation and

identified regulated natural features on 891.56 acres known as

the former Detroit House of Corrections property. ASTI

assessed development constraints on the property with regard

to wetlands, woodlands, rivers/streams, floodplains, and

threatened/endangered species. This entailed both on-site

fieldwork to determine the extent of the stream, wetland and

woodland features and in-office reviews/analyses of floodplains

and endangered species.

As part of the inventory, ASTI also flagged all wetland

boundaries, totaling over 200 acres, on the property. ASTI also

identified a potential wetland mitigation area on the property. A

final report described the natural features identified on site and

the local, state, and federal regulations applicable to each

feature, thus determining the ecological constraints

encountered on the property. This information was used to

bolster the prospective sale of the property.

Client City of Detroit Contacts Bruce King 313-471-5103 Location Wayne County, MI Project Date 2002 Project Cost $48,000 Key ASTI Staff Dianne Martin* * Indicates Project Manager

ENVIRONMENTAL CONCERNS INVENTORY A S T I E N V I R O N M E N T A L

Client City of Ferndale Oakland County Contacts Mr. Derek Delacourt City of Ferndale Community and Economic Development Director 248-546-2363 Mr. Brad Hansen Oakland County Environmental Grant Program Coordinator 248-858-8073 Location Ferndale, MI Project Date 2011 Key ASTI Staff Thomas Wackerman* Sarah Pavelko Brian Earl * Indicates Project Manager

ASTI Environmental conducted an Environmental Concerns Inventory (ECI) of 193 light industrial parcels located along the east side of the rail road in the City of Ferndale. The objective of the ECI was to identify specific environmental impacts that may affect redevelopment and to provide a basis for beginning the discussion on area-wide redevelopment. The inventory included a review of publically available databases, site inspection for all properties (from the right-of-way or on the City owned property), and a review of agency files. ASTI utilized this information to prepare a ranking of redevelopment potential based only on environmental impediments (both known and perceived). An interactive map was provided that allows the user to see an overview of the entire project area while identifying the environmental concern(s) on each parcel. The user can select from multiple layers featured on the map for additional analysis of existing site conditions and actual or assumed impediments to redevelopment. The ECI supported the City's commitment to redevelopment in their industrial core by providing information on potential future uses that would require minimum environmental remediation or control. A site specific evaluation to support property purchase or redevelopment is the next step in this long term process. This project was partially funded by the Oakland County EPA Site Assessment Grant.

ASSESSMENT AND INCENTIVES A S T I E N V I R O N M E N T A L

Client 965 Wanda, LLC Contact Jeff Denha 248.542.9258 Location Ferndale, MI Project Dates 2013 Project Cost $87,000 Key ASTI Staff Tom Wackerman

ASTI Environmental (ASTI) assisted in the redevelopment of a 20 acre former industrial facility that included a 212,000 square foot blighted building. The site had been used for manufacturing steel piping since 1929, and had been vacant for eight years. Impediments to redevelopment included an historical spill, transformers, asbestos containing building materials, oil soaked wood block floors, and a perception that the site would require extension remediation prior to use. ASTI conducted the environmental due diligence to define the existing historical impacts, and to evaluate redevelopment scenarios. Based on this review, the effectiveness of existing engineered controls was evaluated, remediation costs were estimated and the financing gap identified. ASTI then prepared an incentives package including a loan from the local revolving loan fund and reimbursement of eligible activities from tax increment revenues to permit the purchaser to obtain sufficient funding to redevelop the property for industrial use. The final redevelopment plans included removal of asbestos containing building materials only in those areas where remodeling was being conducted and implementation of an operations and maintenance plan for all other locations, removal of contaminated wood block floor and installation of new floors, removal of impacted soils in a crawl space and along a railroad siding, and closure of all other impacts using engineered controls and deed restrictions. The site was redevelopment for multiple industrial tenants and new construction on the north potion of the property is now proposed.

BROWNFIELD RESTORATION IN MICHIGAN

TECH BITSASTI EASTI E N V I R O N M E N T A LN V I R O N M E N T A L

ENVIRONMENTAL INFORMATION FOR YOUR BUSINESSENVIRONMENTAL INFORMATION FOR YOUR BUSINESS

March 2013

incentives, there are five main programs that every developer and community needs to know about. To be eligible for these programs, a project must be a facility (contaminated above residential criteria), an historic resource, blighted, functionally obsolete, part of a landbank, a transit oriented development, adjacent and contiguous to any of these types of properties (if the adjacent property increases the taxable value of the subject property), or a previously developed property with historical impediments to redevelopment.

The first program is the Brownfield Tax increment financing (TIF) program. This is one of the most flexible and direct tools to off-set extraordinary costs. In addition, it still provides opportunities for both the developer and the community to obtain incentives from the incremental value of investment in real estate development, and for communities to create and fund local site remediation revolving loan funds (LSRRF).

The list of eligible costs differs depending on the type of community you are in, but there are some notable new eligible costs that will assist in urban redevelopment; specifically, the costs associated with underground

ENVIRONMENTAL

Urban and Brownfield properties remain tremendous

redevelopment opportunities because of location, existing infrastructure, and in many cases, an authentic sense of place. But these opportunities require a clear plan to address environmental and infrastructure management, and a method to obtain gap financing for extraordinary redevelopment costs and challanges. For the right type of project, Brownfield incentives can provide the assistance necessary to fill those financing gaps.

The Basic StepsWith recent changes in the legislation, both the environmental assessment and Brownfield incentives programs in Michigan have new steps and requirements. Assessments are more focused on how impacts affect air quality, and although the Baseline Environmental Assessment still exists, there is more emphasis on Due Care Plans and the associated maintenance and control requirements. Agency review is now limited to Response Activities Plans and No Further Action Reports, two new steps.

Contrary to popular belief, incentives for urban and Brownfield redevelopment still exist, and, although there are numerous focused

www.asti-env.com

Central Great Lakes 810.225.2800

West Great Lakes 616.957.5601

ServicesAsbestos, Mold and

Lead AssessmentsBaseline Environmental

AssessmentsBrownfield and Historic

RedevelopmentCompliance Permitting

and AssessmentsDue Care PlansEcological SurveysEnvironmental

Concerns InventoriesEnvironmental Due

DiligenceHabitat RestorationIndoor Air QualityNEPA ReportsPhase I ESAsReclamation PlansRedevelopment

IncentivesRemediationRestorationSHPO AssessmentsSoils/Groundwater

InvestigationsStormwater

ManagementTransaction ScreensUST ClosuresWetland Mitigation and

Banking

Tech-Bits is intended to provide information concerning current environmental issues, and is not intended to provide technical or legal advice regarding any particular situation. Specific questions should be addressed to your environmental professional. ©2012 by ASTI

Tech-Bits is a publication of ASTI ENVIRONMENTAL, P.O. Box 2160, Brighton, Michigan, 48116-2160. For a free subscription call 800.395.ASTI or visit www.asti-env.com

and multi-level parking structures and urban storm water management systems. The basic eligible costs still include: environmental assessments and investigations, response activities, remediation, engineered controls, demolition, asbestos and lead abatement, site preparation, infrastructure improvements, and various additional incentives for land banks and core communities.

The second program is the Community Revitalization Program (CRP), which provides grants, loans and other assistance to help close financing gaps on eligible projects.. The incentives are based largely on the amount of the investment as determined by the construction costs. However, when approving applications, the MEDC will consider whether the project provides revitalization of a regional urban area, is located in a downtown or traditional commercial center, is important to the community and has the community’s support (both conceptually and financially), and, most importantly, if it requires incentives to succeed. Additional considerations include, but are not limited to, development density, job creation, and reuse of vacant or historic buildings.

The incentives can be no more than 25% of the eligible investments. The incentives can be a combination of a grant and loan, but there is a maximum grant amount of $1,000,000 per project and a total limit of $10,000,000 per project. Allocation and repayment of the incentive is performance based, with grant repayment required under some circumstances.

There are communities that have used the last few years to fund their local site remediation revolving fund (LSRRF) and these provide the third incentive source. The types of costs that are eligible include assessment, remediation, site improvement and demolition - in fact, anything that is eligible under the TIF program. Allocation and financial mechanism are determined by the local unit of government, but funding can be

provided as a loan or grant, with the option to provide it in a single payment, with repayment provided over time by the Brownfield TIF.

The fourth option is the new Brownfield Redevelopment Fund which will permit the state to provide funding for eligible activities. More importantly, as with the LSRRF, this funding can be provided up front with repayment obtained from the Brownfield TIF.

The fifth mechanism is the EPA grant program. Grants are available in various communities to cover the full cost of environmental assessment, or, for specific properties, the cost of remediation. These grants are allocated annually, and are administered by the municipality.

Next Step?A combination of appropriate assessment, control, and site design can help make an urban or brownfield project a success, but incentives are typically required. Incentives are available for projects in Michigan, but not all projects will qualify, and depending on the community, the definition of eligible costs may vary. The recommended approach is to review project costs early to identify those that are eligible, and then approach both the local community and the MEDC to determine eligibility for the project. Only after you have a sense of the local and state support for the project, and the level of eligible costs relative to your funding gap should you start preparing the reports and applications necessary for the approval process. ASTI can provide free initial assessments for any project in Michigan.

For more information about urban restoration contact Tom Wackerman at 810.599.5463 or [email protected].

ENVIRONMENTAL

Investigation • RemediationCompliance • Restoration

Since 1985

TECH BITSASTI ENV I RONMENTA L

ENVIRONMENTAL INFORMATION FOR YOUR BUSINESS

June 2013

Initiative funds have been shifted from the DEQ loan program to the DEQ grant program, and the Com-munity Revitalization Program is focusing on specific types of urban Redevelopment. There is now great-er flexibility in the management and relocation of contaminated soil on site which minimizes transportation and disposal costs.

CommercialThe management of the Above/Un-derground Storage Tank program has been shifted from the DEQ to the Dept. of Licensing and Regula-tory Affairs (LARA) and is closely following the provisions of Part 201 with respect to corrective action ac-tivities for venting groundwater.

Liability exemptions continue for lessees that do not cause impacts, but other changes have occurred. Seven chemicals, including Per-chlorethylene (PERC), commonly used by dry cleaners, have revised criteria for soil and/or groundwa-ter. Of these seven, two have less restrictive criteria while the remain-ing five have slightly to signifi-cantly more restrictive criteria. The PERC criteria changes were all for

ENVIRONMENTAL

With recent changes in legislation, both the environmental assessment and brownfield incen-tives programs in Michigan have new options and requirements. As-sessments are more focused on soil gas and vapor intrusion from histor-ical impacts, and although the Base-line Environmental Assessment is still the key document for state li-ability protection, there is more em-phasis on Due Care Plans and No Further Action (NFA) Letters, and on the associated maintenance and control requirements. Incentives are still available, but are now fo-cusing on traditional downtowns and commercial corridors and on projects that have clear financing gaps.

What all of this means is that you have more options when choosing site closure and you will need to consider these options earlier in the development process. Accordingly, the following are some key points by specific asset classes for Real Estate developers to consider.

Downtown Mixed Use$12.5MM in Clean Michigan

www.asti-env.com

Central Great Lakes 810.225.2800

West Great Lakes 616.957.5601

ServicesAsbestos, Mold and Lead AssessmentsBaseline Environmental

AssessmentsBrownfield and Historic

RedevelopmentCompliance Permitting

and AssessmentsDue Care PlansEcological SurveysEnvironmental Concerns

AssessmentsEnvironmental Due

DiligenceHabitat RestorationIndoor Air QualityNEPA ReportsPhase I ESAsReclamation PlansRedevelopment I IncentivesRemediationRestorationSHPO AssessmentsSoils/Groundwater

InvestigationsStormwater ManagementTransaction ScreensUST ClosuresWetland Mitigation and

Banking

ENVIRONMENTAL DUE DILIGENCE FOR REAL ESTATE DEVELOPMENT IN MICHIGAN

Tech-Bits is intended to provide information concerning current environmental issues, and is not intended to provide technical or legal advice regarding any particular situation. Specific questions should be addressed to your environmental professional. ©2013 by ASTI

Tech-Bits is a publication of ASTI ENVIRONMENTAL, P.O. Box 2160, Brighton, Michigan, 48116-2160. For a free subscription call 800.395.ASTI or visit www.asti-env.com

the volatilization pathways which is indicative of the DEQs focus on this issue for due care. Therefore, properties that might not have had a soil vapor concern according to the previ-ous criteria might now exceed the new more restrictive criteria and therefore require more investigation, remediation or the installation of engineering controls. This requirement is expected to undergo additional modifications in the next year or two.

IndustrialSeven chemicals, Including Trichlorethylene (TCE), a common degreasing agent, have re-vised criteria for soil and/or groundwater. Two are less restrictive criteria but the remaining five have slightly to significantly more restric-tive criteria. The TCE criteria changes were all for the volatilization pathways which is indica-tive of the DEQs focus on this issue for due care Therefore, properties that might previously not have had a soil vapor concern according to the previous criteria might now exceed the new more restrictive criteria and therefore require more investigation, remediation or the installa-tion of engineering controls. This requirement is expected to undergo additional modifica-tions in the next year or two.

Michigan Occupational Health and Safety Ad-ministration (MIOSHA) standards, often less restrictive than DEQ, can now be used to eval-uate and close manufacturing facilities, where volatilization to indoor air is the only criteria. This change should prove to be more helpful in closing manufacturing facilities with potential indoor air issues.

Senior and Affordable HousingAlthough not required by the regulations, an NFA Letter may be necessary to satisfy fund-ing agencies. Alternatively, a Certificate of Completion can be requested from DEQ fol-

lowing the completion of any response activity when using controls to achieve closure, but it is still not yet clear whether MSHDA will ac-cept this strategy. HUD is now requiring Ra-don testing in nine counties in Southern Lower Michigan known as Zone 1 (high risk) and in 30 counties in Mid and Lower Michigan, Mon-roe County and the Upper Peninsula known as Zone 2 (medium risk) for all environmental reports submitted to HUD after June 4, 2013 (regardless of the date of the report).

Residential CondominiumsThere is a new liability exemption for residen-tial condominium owners as long as hazardous substance use within the unit is consistent with residential use.

Local Units of GovernmentThe due care exemption for public use prop-erty has been eliminated, resulting in the need for Due Care Plans and operations and mainte-nance of due care controls. Also, Municipali-ties no longer have to pledge their full faith and credit for Brownfield Loans.

These changes are largely the result of a col-laborative effort between regulators, the reg-ulated community, and professionals. ASTI views these changes as logical and timely and moving in a direction that will streamline the maze of regulatory requirements and shorten the Real Estate development process.

Contact George Kandler today at 800/395-ASTI to discuss your next project.

ENVIRONMENTAL

Investigation • RemediationCompliance • Restoration

Since 1985