SmartZones Not Enough

August 7, 2006
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GRAND RAPIDS — The city hasn't given up on its desire to turn part of the Monroe North Business District into a base for companies in the medical devices and information technology industries.

But according to a recent report compiled by Civic Economics — a strategic planning and economic analysis firm with offices in Chicago and Austin, Texas — the city needs to offer more incentives than are available through the Monroe North SmartZone designation if it wants to convert its desire into reality.

"It's a fascinating report," said 3rd Ward Commissioner James White.

Using ATEK Medical Manufacturing as its example, Civic Economics pointed out that the firm's location at

620 Watson St. SW
is situated in a "precisely targeted Renaissance Zone." Ren Zone status exempts most state and local taxes for up to a dozen years and partially abates those levies for three additional years, which reduces operating costs and makes space more affordable for companies.

The city included a small portion of Monroe North in the Furniture Center Ren Zone, one of six areas that made up the first tax-exempt round back in 1997. But most of that zone only runs along

Monroe Avenue
from Newberry south to Trowbridge streets, and the Civic Economics report suggested extending it deeper into the district.

"We recommend that the city explore further expansion of this zone to the north and east, encompassing existing industrial space," read the report.

The report went on to acknowledge that throughout the country some of these tax-based incentive programs have been overused and haven't provided the economic boost and jobs that cities were expecting. In many cases, the only result has been a significant loss of tax revenue to these cities.

"As a result, extension of such programs is a challenge, even in a compelling case such as Monroe North. As the city moves through an evaluation of the full menu of local incentive programs, Renaissance Zone expansion may be precluded. Should that occur, alternative incentives may be necessary," read the report.

Tax incentives, though, aren't the only factors that will determine whether companies set up in Monroe North. The district needs to offer low-cost space, especially to start-ups, and have an infrastructure that caters to both transit and pedestrians.

City Economic Development Director Susan Shannon said the average sale price for a square foot of property in Monroe North is $43, lower than the $55 downtown square footage but higher than the average suburban price of $38. She added that a square foot in one of the district's former industrial buildings leases for an average of $2.50.

One site that may draw some interest is the Baker Furniture building at

1661 Monroe Ave. NW
, just south of
Ann Street
. Although not officially in the district, the structure may be close enough to pull attention to Monroe North. Baker plans to vacate the 350,000 square feet sometime within the next year.

"I think it's positioned as a loft office space. It's less expensive than downtown space and we can do a brownfield there," said Shannon

The city has a capital improvement project on the burner for the district, involving street redesign and reconstruction, flood wall repair, utility relocation and park development. The cost of the work has been estimated at $24 million. The city is hoping to get a $2.5 million federal grant for the project and has the necessary local match to qualify for the grant.

Shannon believes the infrastructure work will generate $17 million worth of private investment in Monroe North.

The city has hired JJR to help develop a strategy for Monroe North. JJR is an urban design and civil engineering company with offices in Ann Arbor, Chicago and Madison, Wis. The firm worked with the city to develop its master plan.

The Civic Economics report highlighted that there were "cheaper places to do business than in West Michigan" and that start-up companies in these industries would not be able to afford space in the

Michigan Street
development. But at the same time the consultant did not suggest that the city should abandon its SmartZone designation for Monroe North.

"Tax-increment mechanisms like SmartZones provide less direct benefits to tenants [than Ren Zones]. However, to the extent that it promotes the development of infrastructure and amenities desired by technology-driven firms, the SmartZone program is certainly a valuable contributor to their needs."    

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