Tom Wackerman, president of ASTI Environment, sees the free evaluations as a first step in a business relationship. Courtesy ASTI Environmental
Following the loss of the Michigan Business Tax last year and the credits that drove a lot of property redevelopment through the state’s brownfield restoration program, some might think there aren’t any real incentives available for reviving contaminated sites in the region.
But that’s not the case.
First, there is the Brownfield Tax Increment Financing Program, which can help cover certain eligible costs such as demolition work, asbestos removal and making infrastructure upgrades in redeveloping a toxic parcel. Then there is the Community Revitalization Program. It offers grants, loans and other forms of assistance to developers through the Michigan Economic Development Corp.
Another is the Brownfield Redevelopment Fund. It, too, covers eligible costs and offers up-front funding with repayment coming from a project’s TIF dollars. Then there are the grants from the U.S. Environmental Protection Agency, awarded annually to and administered by local municipalities. The grants are valuable as the awards can pay for the full cost of remediating a site.
Also, there is the Local Site Remediation Revolving Loan Fund offered by municipalities. The program is generated through the Brownfield TIF.
So incentives are available, but it is a matter of whether a property or a developer can qualify under the new guidelines, and that answer can be arrived at for free.
“All the incentives are highly targeted, so it’s no longer kind of formula based. It’s a question of whether a property is eligible, whether a taxpayer is eligible, whether a property is incentivizable, and whether or not a project can capture those incentives within its timeline,” said Tom Wackerman, president of ASTI Environmental, which has offices in Brighton and Grand Rapids.
“So, before we ever give a proposal to get started on a project, we sit down with a developer and we ask questions. One: Is it eligible under the legislation? That depends on which incentive a developer is going for, of course. Two: Is the taxpayer or the entity that is going to receive the incentive eligible?”
The third question ASTI asks goes directly to a developer’s bottom line. It deals with trying to sort out the likelihood a project will qualify for an incentive. If it does, then the discussion moves to the amount of an incentive a developer needs in relation to what he or she is likely to capture. “What’s the target? What are we likely to hit?” said Wackerman.
ASTI needs a developer’s pro-forma and a conceptual site plan to make an initial assessment of whether a project qualifies. The firm will do an evaluation, create a time-based repayment schedule for the incentives, and look at a project’s net-present value of its cash flow and its offsetting extraordinary costs.
“Now, we don’t include things like the phase-one and the phase-two, but if there is a cost a developer wouldn’t have if he didn’t go for the incentives, we include that in there. And then we do an evaluation of that net amount and tell them what we think it’s worth to them. Then they can decide whether to pursue it or not,” said Wackerman.
“It also sets a target so we don’t have somebody coming in thinking there is $10 million there for them when there is really only $500,000. And, more importantly, people don’t understand incentives, and this allows them to see a vision.”
Wackerman said the typical evaluation takes about an hour. Sometimes one determines a project isn’t worth doing, but on other occasions the process has revealed that a larger incentive is available than originally was conceived. “I think we’ve done enough of these that we have a good gut feel for what a plan needs to be to get that incentive.”
The best part for a developer is ASTI doesn’t charge for the initial evaluation, and the firm has been offering these freebies for at least the last eight years. So how can the company afford to give away its insight into its core business?
“We have found that every developer who is worth their salt is going to call and pick your brain to try to figure out what their strategy is. We always, in our world, consider that sales. We’re talking to a client. We’re building a relationship. We’re always putting this down to a sales cost,” said Wackerman.
“But instead, we started asking a client for the information and then gave them a real answer. It’s still a sales cost. It’s a little bit more expensive but not a lot more expensive, and we end up with a much better idea of what that client can go after and whether or not it’s worth pursuing,” he added.
“So we’re really just shifting the sales cost from these kinds of vague questions people always have when they call. Instead, we say we’ll be happy to work with you. You have your pro-forma ready, you have your site plan ready, and we’ll be able to give you a real answer rather than just dance around.”
Brownfield incentives aren’t the only area in which ASTI offers this service. The firm also performs free initial reviews for transactional documents and all the due diligence that is part of a property transaction.
“The reason we do that is because parties have a bunch of material on most properties today — they have phase-ones and others. So by looking at the existing documents, we can certainly scope out what a client has to do on a much better basis,” said Wackerman.
“So, for free, we go through their existing documentation before providing them with services. It doesn’t change the price, but it helps us understand what the strategy needs to be for the client.”