City Approves SmartZone Financing Authority

June 21, 2002
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GRAND RAPIDS —The City Commission on Tuesday unanimously approved a designated district for the Grand Rapids SmartZone and the creation of a Local Development Finance Authority (LDFA) authorized to capture property tax growth within zone boundaries to fund infrastructure enhancements, incubator space and marketing for the zone.

Designed to stimulate the growth of technology-based businesses and jobs, the local SmartZone encompasses the Van Andel Institute (VAI), Grand Valley State University’s Center for Health Professionals and the North Monroe Business District, which offers potential development sites in close proximity to the institute.

For up to 15 years, the LDFA can capture 50 percent of school operating taxes, and 100 percent of the county tax, the Interurban Transit Partnership transit tax and city property tax, including the senior millage. The state reimburses the school district for any school tax increment captured.

Susan Shannon, the city’s business advocate, stressed that the authority would not take away any taxes from any entity.

“This is only new tax that would be created if we have new investment,” she said. “Our projections on investment are very conservative at this point but we would hope that it would be substantial over the coming years.”

First Ward Commissioner James Jendrasiak expressed concern over the LDFA tapping into new property tax revenue for the senior millage, and Second Ward Commissioner Rick Tormala questioned whether the amount captured from the senior millage could be made up somehow, possibly through the city budget.

Although Tormala said he was skeptical about voting for something that targets new taxes, he voted in favor of the LFDA “because it’s a step in the right direction.”

Mayor John Logie added that the intent of the zone and its financing authority is to “stimulate something that might not otherwise happen.”

Similar in operation to the Downtown Development Authority, the LDFA will advise the City Commission on a development plan and budget for the zone.

The Michigan Economic Development Corp. selected Grand Rapids this spring as one of 10 of the state’s designated SmartZones. The city, the VAI, The Right Place Program, Grand Valley State University and Grand Rapids Community College worked together to craft the application for SmartZone designation.

The local zone will target the biotechnology industry and stimulate business development related to the VAI. The VAI is central to the strategy for developing high tech — particularly biotech — companies in Grand Rapids, Shannon said, adding that creating incubator space for startup companies is a strategic priority.

GVSU’s Center for Health Professionals building will house wet lab incubator space on its top floor. Shannon said the city is already getting calls for wet lab space.

Establishment of the LDFA received considerable support at a public hearing Oct. 9.

Birgit Klohs, president of The Right Place Program, said there already is a fairly large, impressive life science cluster in the area of the VAI and that will make marketing of the zone easier for The Right Place. The zone is in the Life Sciences Corridor and is tied to three major universities as well, which gives it another competitive advantage, she said.

Klohs and Jack Frick, chief financial officer for the VAI, are looking into the availability of venture capital in the region, working closely with some venture capital firms in the state as well as potential investors here and in Ann Arbor to create a venture capital fund for startups that might spin off from the VAI.

Incubator space is tantamount to the commercial development sequence of events that occur when a spin-off becomes a commercial idea and eventually a commercial enterprise, Frick said.

“The ability to commercialize these ideas has become probably as important as funding, modern equipment, space, mentorship and our ability to attract and retain scientists.” He added that scientists are now entering a world where they’re judged not just on their ability to publish and patent, but also on the number of commercial enterprises launched based on their inventions or research.

Bob Partridge, GRCC’s chief financial officer, said the college stands ready to deliver educational services for businesses that might be attracted to the area by the SmartZone.

John Gracki, GVSU’s interim provost, noted that the university’s proximity to the VAI and the SmartZone initiative has helped it attract faculty that it otherwise would not have been able to attract, and what’s drawing them here is the opportunity to commercialize their inventions.

The city will have seven appointees to the LDFA board. GRCC, Grand Rapids Public Schools and Kent County also will have representation on the board.

According to a tentative schedule, the authority would capture its first tax increment revenues on July 1, 2002.

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