City Extends Ren Zone

November 22, 2006
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GRAND RAPIDS — Companies located in the city's very first Renaissance Zone have a chance to extend their nearly tax-free status, while a German firm got its very first zone last week, as city commissioners continued to show their willingness to trade tax breaks for jobs.

The 10-year-old Ren Zone the city established on Jan. 1, 1997, covers 536 acres and 780 parcels over six areas, which back then largely contained under-utilized properties and vacant industrial buildings. Since then, the city has been cited as having the most active job-creating and investment-fueled zone in the state.

The six districts include a far northwest area near Alpine Avenue that borders the city of Walker; a stretch on the northern banks of the Grand River that includes properties on and near Monroe and Broadway avenues; an area on Grandville Avenue SW; and three southeast side districts at Division and Buchanan, Wealthy, Eastern and Franklin streets, and Madison Street.

But the extension commissioners agreed to last week differs from the original zone. This time Ren Zone status wouldn't be granted to properties, as it was in 1997, but to specific businesses in the zone that make additional investments and create more jobs. City officials admitted earlier this year that some property owners in the zone haven't made any upgrades to their sites but still have received the tax breaks.

"It is expected that this tool will be used sparingly and, as in the past, the property owner will need to enter into a development agreement which guarantees investment and job creation," said Susan Shannon, city economic development director.

It will be used sparingly because in 1997 commissioners set a $500,000 cap on the tax revenue the city could lose each year from the zone. Shannon said the city has room under the annual cap for another $183,000 in property and income-tax losses.

An extension can be given for up to 15 years and property owners have until 2011 to apply for one. The Economic Development office has the applications and a list of criteria that have to be met to qualify. Being in the zone means the Single Business Tax, state personal income tax, city income tax, and operating property-tax levies are exempted.

Through last August, more than $250 million worth of investments have been made in the city's zone and 2,145 jobs have been created.

Commissioners also granted MBtech Autodie LLC, a division of German automaker Mercedes Benz, a seven-year zone following its recent purchase of Autodie International, a tool-and-die shop at

44 Coldbrook St. NW
. But the company has employment guidelines and other standards it has to meet to keep its non-tax status.

MBtech has to create 150 jobs by 2008, 175 by 2009 and 200 by 2010. If the firm fails to meet those numbers in any of those years, MBtech will have to pay the city and state income tax from those jobs.

The average employee is expected to earn $27 an hour plus benefits. The firm reportedly negotiated an agreement with the United Auto Workers union for the existing work force.

MBtech also has to pay the tax-increment financing arm of the North Monroe Business District $29,464 each year and post a $4 million performance bond with the city to guarantee tax payments if the firm decides to leave during the seven years. Should the company do that, it will have to reimburse the city and state all the abated taxes, except for income taxes that were paid.

Shannon said MBtech will have taxes fully abated for the first four years of the zone and then receive a declining exemption for each of the following three years of 75 percent, 50 percent and 25 percent.

Deputy City Manager Eric DeLong said the city will lose over $93,000 in property taxes each year by giving MBtech zone status. But he estimated the city will receive from $60,000 to $80,000 each year in income taxes generated by the new jobs, which will help soften the real and personal-property tax loss.

MBtech, which bought the struggling Autodie plant from Fiat, needs the tax breaks to offset the investment it will make to retrain employees in new manufacturing methods. The state also has to approve the zone designation.    

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