Commissioners Defend Zone

December 1, 2006
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GRAND RAPIDS — When the city commission recently agreed to offer extensions to property owners with holdings in the first Renaissance Zone established by the city in 1997, a few commissioners expressed reservations about giving more zone time to everyone.

Commissioners Roy Schmidt, Rick Tormala and Rosalynn Bliss said they would probably hesitate to grant extensions to residential projects in the areas that comprise the initial zone.

Schmidt, who helped design the city’s zone in the fall of 1996, said giving these residences a second nearly tax-free status would tilt the playing field in the housing market too steeply.

“I don’t want to create an unfair advantage,” said Schmidt, who represents the 1st Ward. “The residential is something that I want us to be concerned with.”

Tormala said he doesn’t want a lot of people moving from residential neighborhoods into downtown condominiums that are being billed as offering “tax-free living.”

“I don’t want to create a shell game,” said Tormala, a 2nd Ward commissioner.

Factories and service businesses in the zone weren’t put on notice by commissioners. But Economic Development Director Susan Shannon said owners of office properties won’t be allowed to draw tenants from buildings within city limits, if they apply for an extension. She also said the criteria for any property owner to get an extension were “very stringent.”

Those considering applying for an extension will have to show the city what they’ve done with the property since it has been in the zone. These factors include the amount of money invested in a property, building and personal property; the employment level at the start of the zone; the current employment figure; and an estimate of the tax savings they’re received.

A $5,000 fee must accompany an extension application. An applicant must also agree to pay all the legal costs associated with drawing up a development agreement, which will list the criteria that have to be met to get an extension. Two criteria will be the number of jobs that will be created and the size of the investment that will be made in a property.

“That’s just to get the application in the door,” said Shannon. “Our intention is to use this very sparingly.”

Third Ward Commissioner James White seemed to be agreeable to awarding extensions sparingly. White pointed out that the city is getting close to reaching the property-tax loss cap of $500,000 a year that commissioners set in 1996.

When commissioners approved the extension a few weeks ago, there was $183,000 of property-tax loss left under the cap. At the same meeting, though, commissioners granted MBtech Auto Die LLC a Ren Zone designation for the former Autodie International plant on Coldbrook Street NW, and that award is expected to cost the city $90,000 in property-tax receipts and should count against the cap.

But original zone properties will begin paying an escalating portion of the exempted taxes in a few years for three years before completely falling off the Ren Zone list and the cap will grow. So White said commissioners will have to keep a close tab on the cap amount in the coming years, as the figure will be changing.

“We’re going to have to be careful, as a commission, that the money we’re going to give up we have to recoup,” he said.

White also pointed out that the city’s Ren Zone policy may need to be altered with the Single Business Tax — one of the zone’s exempted taxes — being eliminated at the end of next year. The SBT is also used in other development incentives, such as brownfields.

“I would hope we would find some way to provide incentives to developers,” said Elias Lumpkins, 3rd Ward commissioner.

The Franklin Metal Trading Corp. was the first company to be granted Ren Zone status in early 1997 for the $1 million investment it made at 1860 Alpine Ave. NW. Five months later, six local companies had invested nearly $25 million in the zone. JBI Distributing became the 30th firm to land in the city’s first zone in August 1998.

The first Ren Zone covers 536 acres and contains 780 parcels in six districts across the city. City figures from last August show more than $250 million worth of investment has been made and 2,145 jobs have been created in the nearly tax-free zone, which the city began extending in 2000.    

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