This article appeared in the July 2019 issue of MiMfg Magazine. Read the full issue and find past issues online.

If your company is considering a business expansion, here are four key topics that should be considered from an environmental perspective prior to undertaking such an important investment:

1. Complete Environmental Investigations — If financing is planned to support business expansion, your lender may require an environmental assessment as part of the underwriting process. The type of environmental assessment could vary from a desktop review to a more comprehensive Phase I Environmental Site Assessment (ESA). The appropriate assessment is often dictated by lender policies based on risk tolerance, type of property, appraised value, loan amount, and previous assessments among other factors. If you are acquiring new property, a Phase I ESA would be recommended regardless of your lender’s requirements. If the initial assessment reveals environmental concerns with the current or historical use of the property, a Phase II ESA (soil, groundwater, or other sampling) may be required to satisfy the lender. Although these environmental assessments are necessary to satisfy lenders, they can also mitigate unforeseen construction delays and added costs.
2. Revisit Regulatory Compliance — An expansion in operations may result in a process change or an increase in product use or waste generation, which could alter the regulatory requirements of your facility. Fiscal prudence is the first benefit of addressing regulatory obligations, so proactive compliance consideration while planning facility expansion is time well spent. This audit may also serve as an opportunity to review your compliance strategy and make positive adjustments.
3. Survey for Asbestos and Other Regulated Materials — An asbestos survey is required prior to demolition or significant renovation of structures. It is also prudent to survey other regulated materials (e.g., polychlorinated biphenyls (PCBs), mercury electrical devices, refrigerants, etc.) at the same time to avoid liability, potential project delays and added costs.
4. Seek Out Economic Development Incentives — If the expansion of your business will result in new jobs, equipment, and tax revenue, there may be incentives available at the local and state level to help minimize financing gaps.

There are the two agencies that provide incentives to Michigan businesses, which include the Michigan Economic Development Corporation (MEDC) and the Department of Environment, Great Lakes and Energy (EGLE). Both agencies utilize grant, loan and tax increment financing programs to assist redevelopment of contaminated, blighted, functionally obsolete or historic properties.

MEDC manages the Jobs Ready Michigan program to assist with the costs of recruiting and training individuals for high-wage, high-skill or high-demand jobs. The Good Jobs program permits withholding state tax revenues for 5 to 10 years depending on the location and number of jobs, and the new jobs must exceed the average wages of the surrounding area.

Michigan also has a variety of local tax abatement programs. For example, local taxes (and some state taxes) can be abated for 6 to 12 years for commercial and industrial projects that involve renovation or new construction of obsolete properties, so it’s worth your time to investigate economic development incentives.

The risks associated with any business expansion can be very high, whether that expansion is through property/facility acquisition, retrofit or modification, and/or new construction. Addressing these key topics will go a long way toward minimizing your risks and maximizing your returns, helping to ensure your company’s continued prosperity and growth.

AKT Peerless is an MMA Premium Associate Member and has been an MMA member company since August 2014. Visit online: www.aktpeerless.com.

About the Author

Timothy J. McGahey is vice president of environmental due diligence services for AKT Peerless. He may be reached at 800-985-7633 or McGaheyT@aktpeerless.com.