July 2019
Premium
Associate
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MiMfg Magazine
Key Environmental Considerations
for Any Expansion
By Timothy J. McGahey • AKT Peerless
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 environ-
mental 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 assess-
ments 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.
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Timothy J. McGahey is vice president of environmental due
diligence services for AKT Peerless. He may be reached
at 800-985-7633 or [email protected].
AKT Peerless is an MMA Premium Member company
and has been an MMA member since August 2014.
Visit online: www.aktpeerless.com.
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