City OKs Steks Ren Zone Transfer

September 22, 2003
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GRAND RAPIDS — City commissioners agreed Tuesday to amend and assign the Renaissance Zone development agreement for the former Steketee’s building downtown to Rockford Development, which plans to convert it into corporate offices for Blue Cross Blue Shield of Michigan.

The amendment gave Rockford Development ownership of the building at 86 Monroe Center that Steketee’s Department Store vacated about five years ago.

Blue Cross has negotiated a 10-year lease with Rockford for eight floors of the nine-story building, to be used for its regional call center and offices.

The move will bring 266 Blues employees downtown that are presently working in two Blue Cross locations in Cascade Township.

Blue Cross also will lease about 3,000 square feet of the 17,000-square-foot ground floor. Rockford will make the remaining ground floor space available for retail lease.

Rockford Development is purchasing the property from local real estate broker Ray Kisor, and because of the Renaissance Zone designation, will be able to renovate the building without paying property taxes on it until 2017.

Rockford further agreed not to lease space during the duration of the Renaissance Zone tax abatement period to any existing downtown office user and backed that promise with $100,000 of its performance bond.

The Blues will not benefit from the zone status because the insurer only pays federal taxes, while Renaissance Zone status exempts most state and city taxes.

Two previous efforts to re-utilize the building have failed.

To allow the Rockford-Blue Cross deal to go through, the city had to transfer the Renaissance Zone development agreement it struck last fall with the original development group, 86 Monroe Partners LLC, over to Rockford.

Commissioners had granted Renaissance Zone status to the building largely because 86 Monroe Partners had promised to convert four floors of the building into 16 apartment units.

The original proposal would have netted $9,000 in additional income tax revenue for the city.

With the Blue Cross project, the city will see an annual net gain of $74,334 in income taxes when all 260-plus Blues employees are relocated to new headquarters.

Commissioner Roy Schmidt of the city’s 1st Ward said he was excited about the Blue Cross-Rockford deal because it represented “another major investment in downtown” and one that will bring jobs to downtown for the long term.

First Ward Commissioner James Jendrasiak seemed to have some reservations about the building being developed as strictly commercial, as well as some reservations about giving Blue Cross any special treatment.

“As a city we’ve had trouble with Blue Cross Blue Shield as far as our insurance package and getting accurate information about the true cost of our health care plan, and you are all aware of that,” Jendrasiak remarked. “Now they’re going to get Renaissance Zone status. They just come here with their hands open, saying, ‘We need this.’ It’s just a point I want to make.”

Mayor John Logie, a long-time advocate of expanded housing opportunities downtown, responded that when the City Commission originally approved Renaissance Zone status for the Steketee’s building, it was with the hope that housing units would be part of the development plan.

“What has happened is that this opportunity to bring these jobs down (here) came in and literally took the place over. I don’t think that’s necessarily a bad thing,” he said, pointing out that Blue Cross had the option to stay in Cascade. “They said they want to be more of a player in the community and want to be more a part of the community.”

Logie acknowledged the city had had “challenges” as a consumer of Blue Cross services, but said the company has partnered very well with the city on this project.

Rockford Development will continue to be the owner, he explained, and the Renaissance Zone status allowed them to put together an economic package that was competitive with other lease offers Blue Cross had in the suburban office market.

“I think the Renaissance Zone designation has allowed us to bring this business downtown, and the 266 employees that will be coming here all will begin paying city income tax.”

Second Ward Commissioner Lynn Rabaut said deciding whether a building is good for residential, business or commercial use didn’t much matter to her.

“Hopefully people will look at it with a lot of ideas in mind so that when someone comes along and finally wants to use a building that’s been sitting cold for many years, they have a full array of options to choose from,” she said. “This one just happens to be a combination of office and commercial. That’s fine by me. It gets more people downtown.”

Commissioner Robert Dean of the city’s 3rd Ward agreed with Rabaut’s assertion that Blue Cross’s relationship with the city as its health insurer and the company’s desire to occupy the Steketee’s building were two separate issues.

Schmidt said he thinks Blue Cross has done a good job overall for city employees. He said there are always challenges when it comes to insurance and that the city and Blue Cross were going to work them out.

“I think this is another step to making Grand Rapids a better place to live and work,” he added. “Our downtown will really project out into the neighborhoods to give people jobs.”

Jendrasiak said he was just trying to bring out the points the public needs to know.

“We all know that we were being overcharged for services,” Jendrasiak said of Blue Cross. “I’m glad that you are aware of that and I want Blue Cross to be aware of that. We’re not going to stand for that kind of nonsense anymore, and the general public has to know about that.

“It’s not only happening with them, but it’s happening with other insurance companies. We as customers deserve to be treated fairly and that’s the point I’m trying to make.”

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