Project Enters The No Zone

December 22, 2006
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GRAND RAPIDS — Not even a strong last-ditch sales pitch from the city’s departing economic development director could convince commissioners to extend a Renaissance Zone to a building that hasn’t had improvements made to it for the 10 years it has sat in the zone, despite the lure of a $30 million investment to revive it.

“This one has not met our hopes and dreams for investment,” said Susan Shannon, who is leaving the post in February for a similar job in Seattle.

Shannon gave commissioners a laundry list of compelling reasons last week to grant a zone extension for the mostly underused Sligh Building — a massive structure that has two addresses: 446 Grandville Ave. SW and 211 Logan St. SW.

Shannon began by saying that Parkland Properties of West Michigan LLC, owned by developer Jon Rooks, had met all the criteria the city recently established to qualify for a zone extension and that the project fits within the city’s Master Plan.

She said the building would produce $190,000 in property taxes when it came back on the tax rolls, and the city currently loses $9,000 a year in tax revenue from the property.

Shannon then said the market-rate apartments Parkland Properties plans to build there wouldn’t compete with downtown units because there aren’t many apartments for rent in the district, especially with the units at The Boardwalk being converted into condos. She added that the building also was far enough from downtown that it wouldn’t compete with that market.

She then explained the building needs the zone extension to draw residents to that southwest niche of the city, as their state and local income taxes would be exempted for the zone’s duration. She capped her pitch by saying if Parkland Properties, which holds an option on the building until next week, didn’t get an extension, it was unlikely that the 650,000-square-foot building would ever be developed.

“This is a tough decision,” said Shannon. “But we have a history of making tough decisions for the last 10 years in the Renaissance Zone.”

Shannon made that remark because three commissioners said they would have a tough time granting an extension to a residential project. When the commissioners approved the extension policy last month, they said a residential development doesn’t create many jobs, but does gain an unfair marketing advantage in competing with other developers in a soft housing market and that it isn’t fair to residents who pay property and income taxes.

And those reasons held true, as commissioners denied Parkland Properties an extension by a 4-3 vote. Mayor George Heartwell and commissioners Roy Schmidt, Rick Tormala and James Jendrasiak voted against giving the Sligh Building more zone time.

The Sligh, which has a few tenants but is largely a warehouse, was part of the city’s initial Ren Zone that began in 1997 and expires in 2012. That zone includes 780 parcels on 536 acres in six underutilized areas of the city. Most state and city taxes are fully exempted for the first 12 years and are partially abated for the last three years.

Parkland Properties wanted to build 400 apartments in the upper levels of the Sligh and retail space on the ground floor. The firm agreed to give the city a $3 million letter-of-credit and promissory note to guarantee the project.

Rooks told the city that a 95 percent occupancy rate for the apartments would give him a 10 percent return on the $30 million investment, while an 85 percent rate would let him break even. But without the zone, he said only 60 percent to 70 percent of the units would be occupied.

“These occupancy rates are estimated by using the market rental rates currently charged at The Boardwalk,” said Rooks, who owns that Monroe Avenue building. “This investment would never occur without Ren Zone status, as it would never be feasible.”   

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