Mayor Has Three Proposals

January 30, 2006
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GRAND RAPIDS — A better local economy, the seemingly endless financial shortfall facing the city, and a grand vision as a leading business center shared center stage last week in the third State of the City address by Mayor George Heartwell.

Heartwell, who respectively focused on education and the environment in addresses one and two, said a revitalized manufacturing industry, a growing higher-education sector, and a burgeoning medical field were leading the city’s economic recovery.

“Grand Rapids’ economy is on the rebound. It has been a long struggle this time, but we are beginning to climb out of the hole,” he said.

But while economic conditions are improving, Heartwell noted that the financial situation for the city wasn’t. The mayor said the City Commission will have to cut $8.5 million from the $109 million general fund for the coming fiscal year that begins on July 1, after having already chopped $64 million from the four previous budgets.

He said a tax increase might be needed to help ease the strain.

“Sixty percent of the deficit we solved for in the current fiscal year is the result of reductions in state shared revenue,” he said of Lansing’s decision to hold back sales-tax revenue that he felt belonged to the city.

To make matters much worse, Heartwell said a five-year outlook calls for an impossible spending reduction of $80 million over that period. To combat that precarious situation, the mayor said the city would continue to look for organizational efficiencies to reduce the cost of delivering services and make tactical cuts in expenses.

“Yet simply reducing the work force by the magnitude required to balance the budget would greatly diminish service to our citizens,” said Heartwell, who added that personnel costs make up 68 percent of the city’s total expenses.

“We must address the costs of health insurance and pensions,” he said.

Heartwell added that the city’s health care cost was cut by $5 million last year and that employee co-pays could rise this year. Future employees, he said, would see a different type of retirement plan than the pension system currently in place.

But only so many cuts can be made before services suffer or departments disappear. So Heartwell said the revenue side of the equation must be looked into.

“We are rapidly approaching the time at which we must bring a tax-increase question before the voters,” he said.

Heartwell told the Business Journal that he knew just talking about raising taxes would be an unpopular topic with some. He also said he would only consider such a move in order to prevent the quality of delivering services from deteriorating past an acceptable point. He said he favored an increase in the income tax over raising the property tax in order to protect residents who are on fixed incomes.

Heartwell also said he planned to propose a tax incentive to help firms in the knowledge-based industry move forward, such as advanced manufacturing, telecommunications and the life sciences. He compared his proposed incentive to the tax abatements that industrial firms receive for purchasing new equipment or expanding a plant and to the tax break developers get for building on property that is classified as obsolete.

But the city would need state approval to offer the incentive.

“It lines up perfectly with the governor’s 21st century jobs program. We think that it has great value and we will help underwrite it,” the mayor told the Business Journal.

Heartwell also wants to develop a new business park, possibly two, that would expand the efforts of firms involved in creating environmentally sustainable products, like photovoltaic cell cloth and windmills used to generate solar power.

The mayor felt the Grand Walk area, a former industrial site on the northwest border that the city shares with Walker, is one possible location for such a business park. He said land that Steelcase Inc. plans to vacate on the city’s southwest side that stretches into Wyoming, from 36th Street to 44th Street, is another potential park site.

“I think both could go forward. I’m prepared to work on both,” he told the Business Journal.

Heartwell plans to organize a committee, one he called the Horizon Committee, that will steer the city into becoming a growing and profitable center for knowledge-based industries and sustainable businesses.

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