MSU report: Businesses--not taxpayers--should carry burden for cleaning up abandoned factories
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EmailTaxpayers often end up footing the bill for demolishing abandoned factories and other buildings to make way for new development. Researchers at Michigan State University say that's not fair.
By Melissa Anders
Mlive.com Business
EAST LANSING—Taxpayers often end up footing the bill for demolishing abandoned factories and other buildings to make way for new development.
Researchers at Michigan State University say that's not fair. A new report suggests businesses should cover those costs through mandatory factory insurance. While supporters say it would cut down on blight, critics contend it would hinder business growth.
The economic downturn and decline of the auto industry in the last decade left many municipalities dealing with shuttered plants and facilities. In some cases, cities have been unable to force companies to address their abandoned property because of bankruptcy.
About 108 auto plants in Michigan have closed, including 56 that remain shuttered, 45 that have been repurposed and seven that are in transition, according to the Center for Automotive Research. An estimated 36 percent of all commercial properties in Detroit are vacant, according to the Detroit Works Project.
"We see that abandonment continue among expanded periods of times, and anyone in Michigan knows what that looks like," said Rex LaMore, the study's lead author and director of MSU's Center for Community and Economic Development.
Some types of properties already have to provide financial assurance for their safe removal, such as wind turbines, cellular towers, landfills and oil rigs.
LaMore recommends local, state or federal rules requiring businesses to purchase insurance for new commercial and industrial properties. The insurance would cover the costs of deconstruction and restoration once the sites are no longer useful.
He said businesses would pass that cost to consumers, shifting the burden away from the general public and people who may have never used the businesses' products. Governments could justify the insurance mandate as a matter of public health and safety, he said.
"It's a much fairer way of allocating the cost of deconstruction," he said.
Manufacturers argue it would hurt business growth by pushing companies to build new facilities where there's no insurance mandate. The state already has too many business regulations, said Michelle Cordano, executive director of the Capital Area Manufacturing Council in Lansing.
"The more regulations that you pile on, the less competitive that we become in what is now a global market," she said.
The proposal may have appeal on paper, but it could have unintended consequences, said Charlie Owens, Michigan state director of the National Federation of Independent Business.
"It's another reason not to locate a project in Michigan if it's state-based, and frankly if it's a national effort, it's a reason not to locate a project in the United States," he said.
The insurance also could discourage mixed-use buildings and increase building costs.
The additional cost for new construction may encourage businesses to move into existing vacant buildings instead.
"Often it's not that every old building needs to be demolished, because often it's more affordable for a development company to come in and use what's there," said Valerie Sathe Brugeman, who has researched the issue of closed manufacturing sites for the Ann Arbor-based Center for Automotive Research.
The insurance proposal is worthy of discussion by policymakers, said Dan Gilmartin, executive director and CEO of the Michigan Municipal League.
"Blighted property is a significant issue for Michigan communities that impacts safety, property values and quality of life," Gilmartin told MSUToday. "It is a problem we must tackle if we're going to have vibrant places that attract talent."
http://www.mlive.com/business/index.ssf/2013/07/michigan_state_university_repo.html
