Brownfield Pilot For Tech High

May 6, 2005
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GRAND RAPIDS — Grand Rapids Public Schools intends to apply the economic development tool of brownfield legislation to the Grand Rapids Tech High School facility in an effort to generate revenue from the sale and redevelopment of the property.

It will mark the first application of the "Build Schools & City" brownfield plan that was conceived by fellow 3rd Ward city commissioners Robert Dean and James White. The plan, which some refer to as the White Commission's brownfield plan, gives the school district access to the same tax breaks businesses receive with brownfield designation.

Dean and White spent nearly a year researching the concept and talking with attorneys, CPAs, developers, real estate specialists and municipal finance experts on its viability and merit. As city commissioners, they were concerned about the city's economic health and the fact that the city's image and economy are directly affected by the quality of its public schools.

"If our schools go down, there will be an economic drain on our whole city," Dean pointed out.

GRPS will apply brownfield legislation to only one school property initially, said Superintendent Bert Bleke. He said GRPS felt the Tech High facility on Ball Avenue near the Leonard Street intersection seemed a good fit for the brownfield concept.

"We also had some questions as to what we would do with the facility. So with the combination of its uncertain future for us and its location, it seemed to make some sense. We just thought that property might be the best pilot for the concept."

The school district will put the Tech High property on the market and sell it to a developer for a mixed-use, residential or commercial redevelopment project.

Bleke said GRPS thinks the Build Schools & City plan has real potential and that the district is particularly appreciative of the work Dean and White did in bringing it forward.

"We aren't closing our eyes to any opportunities, and this might be a nice one for us. It's an interesting concept. I think it may have great potential, and I'll be delighted if it works."

He said it's unclear whether the district will encounter any legal snags as it moves ahead with the plan.

"We don't know if there are any legal issues out there," he said. "We want to use Grand Rapids Tech as a kind of Trojan horse and get it out there and find out if there are any obstacles with Lansing or any laws, or issues like that. It's a brand new idea. We just need to see if it passes muster with everybody.

"If the concept makes sense to us economically and makes sense for the board in terms of the right thing to do for the school system, then we could expand on it. We just have to wait and see."

Bleke said he doesn't know when the property will actually go on the market or how much the district will ask for it.

The City Commission unanimously approved the Build Schools & City plan in January.

Under Michigan's brownfield law, the city can offer a specific tax increment financing option to help developers pay for cleanup of a property that's vacant, blighted, under utilized or contaminated.

On top of that, the state provides Single Business Tax credits to help with the expense of demolition and any remedial actions needed to pave the way for reuse of a property.

A developer can receive credits of as much as 10 percent of eligible investment up to a limit of $30 million.

Under Dean and White's Build Schools & City model, GRPS can recapture 100 percent of taxes generated from redevelopment of functionally obsolete, under utilized or vacant school properties. GRPS, in fact, is the largest landowner in the city.

According to the model, GRPS requests and is granted brownfield status for an obsolete property, sells it to a developer, receives proceeds from the sale, and also avoids the costs of having to demolish the facility. It then relocates and builds a new school.

The developer, in turn, builds a mixed-use, residential or commercial development and pays city, county and state taxes on the property, White explained. That total tax increment goes to the city's Brownfield Authority, which then directs 100 percent of it back to GRPS.

A designated brownfield school property that's sold to a private developer for $500,000, for example, would generate $87,000 a year in taxes, at an increase of 3 percent a year. The annual revenue stream would typically run about 30 years, which is considered the general "lifetime" of a new development.

Under another scenario, for the same $500,000 property, instead of taking $87,000 a year for 30 years, GRPS could opt for a lump sum by selling rights to the value of the property to a bank. In this case, the sale of yearly receipts would be valued at about $2.1 million. So the sale proceeds plus sale of yearly receipts would total about $2.6 million in ready cash.

Nobody is out the money because it's all new tax dollars, White pointed out.

"The alternative is to leave the property sitting there, and nobody is going to get any benefit out of that," he said.    

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