DDA Likes Downtown Ren Zone Idea

September 16, 2002
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GRAND RAPIDS — The Downtown Development Authority learned last week that six properties within its district have applied to be included in the city’s Renaissance Zone.

Designation of all or some of the downtown properties would mean a loss of tax revenue for the board, which captures shares of the district’s property tax and school millage tax.

DDA Executive Director Jim Knack told board members that for every $1 million lost in taxable value in the district, the board would lose $45,000 in tax revenue — $29,000 from the school tax and $16,000 from the local increment tax.

“The DDA is virtually totally dependent on property taxes,” said Knack. “We can handle a loss of tax revenue to an extent.”

So board members agreed that Ren Zone designations would be beneficial for the district, and authorized a maximum annual tax loss last week of $200,000 for up to 15 years.

“That is an acceptable risk if we can bring these buildings back to life,” said Mayor John Logie.

“I suspect that 15 years from now this will have a tremendous impact on downtown,” added DDA Chairman Verne Barry.

The $200,000 figure allows for all six projects to be added, but city staff is expected to recommend that only four of the downtown projects be added to the zone.

The DDA captures about $8.5 million in tax revenue each year. Of that total, $5.5 million comes from the school tax, and $3 million comes from local property payments within the district.

The board can only use the school tax money to pay off bond debt. The DDA currently has outstanding bond payments of $50 million, with almost all of that money owed for the construction of the Van Andel Arena.

Knack said receipts from the school tax have been large enough to make the bond payments, but the excess has been decreasing over the last few years. He expects that the school tax margin will be $160,000 above the board’s bond payments this year.

Knack, however, also said the board could expect an increase in taxable value in the district. If so, the excess from the school tax would top $260,000 in FY03 and leave the DDA with a cushion to make bond payments.

Of the $200,000 loss the board agreed to, about $125,000 of that would come from the school taxes. The other $75,000 would be lost in local increment tax; money the board uses to help downtown building owners make improvements to their properties.

The six downtown addresses requesting admission into the Renaissance Zone are 60 Monroe Center, the People’s Building; 77 Monroe Center, the Michigan National Bank building; 86 Monroe Center, the former Steketee’s Department Store; 26 Monroe Avenue, a city-owned parking lot adjacent to The BOB; buildings at 38 Oakes-100 Ionia SW; and 212-216 Grandville SW, the former Kentwood Office Building.

Mixed-use projects are planned for all but the city-owned parking lot, where the Gilmore Collection hopes to build a multi-use theater as an extension of The BOB, and at 38 Oakes-100 Ionia, where Rockford Development wants to build an entertainment center. Housing is part of the Steketee’s and People’s applications.

The mayor said city staff was almost certain to recommend applications for the People’s Building, Steketee’s, the Oakes-Ionia project, and the Kentwood Office Building. The four would result in $19.5 million worth of investment, would create 165 new jobs, and would cost the DDA $114,900 in annual tax revenue.

City commissioners will likely decide next week which applications will be added to the zone. City Business Advocate Susan Shannon told the Business Journal that up to four zones can be added this year and the Steketee’s and People’s buildings can be submitted as a single zone. Shannon said the city received a total of 22 requests for inclusion into the zone and has to inform the state of which projects it has accepted by Sept. 30.

Businesses allowed into the zone are exempted from most state and local taxes. Residents living in the zone don’t pay state and city income taxes. Under the state’s current law, this is the final call for applications. The city began its Ren Zone in January 1997.  

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