DDA May Get Bigger

October 15, 2007
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GRAND RAPIDS — Members of the Downtown Development Authority agreed last week to buy 3.7 acres of property just west of Ionia Avenue between Wealthy and Logan streets on the south fringe of downtown.

The DDA would pay slightly more than $2 million for the land and eventually convert the property into a parking lot for the DASH system to provide shuttle service for what the board sees as an area that will be further developed in the future.

“There has been some development interest in this neighborhood,” said Pam Ritsema, Parking Services director.

But there is a catch to the property transaction. The sale will only go forward if the DDA expands its boundary, as the land is outside its district. Board members gave Executive Director Jay Fowler the green light last week to develop an expansion plan.

Fowler gave the board a peek at what the DDA’s larger boundary might be. The district would grow to the north, south, east and west, but mostly to the east from Division Avenue to a block or two short of Jefferson Avenue.

The district would reach Newberry Street to the north, cross the Grand River just past Front Avenue on the west side, and include Michigan Street east to Lafayette Avenue. To the west, the boundary would primarily extend to Seward Avenue and run from Second to Wealthy streets. A section to the south, from Oakes to Wealthy streets, would be included.

But not all the blocks in the proposed expansion plan would be added to the district as DDA-tax-capturing sectors, because in some sections the SmartZone and the Brownfield Redevelopment Authority already take a portion of property taxes for improvements.

The DDA, though, would be able to capture tax dollars from a majority of the parcels in the proposed expansion, if property owners agree. Fowler said the benefit to owners that do agree is they could ask the DDA for financial assistance to develop their buildings and get improvements made to sidewalks and streets. He said an expanded boundary would also spread out the incentives the DDA offers to more property owners.

Currently, property owners on the north side of Cherry Street from Division to Oakes avenues qualify for monetary help, while those on the south side of Cherry don’t. Building owners on Commerce Avenue from Fulton to Cherry Street can get DDA assistance, but those located south of Cherry to Wealthy Street can’t.

Downtown Planner Eric Pratt reported that the DDA provided financial assistance to 19 of the 33 projects completed in the district last year and so far this year, and to 10 more that are either under construction or in the planning stage. Board members awarded Heartside Real Estate LLC a $50,000 grant last week for its $1.5 million renovation of a building at 45 S. Division Ave.

Other tax-collecting units like Kent County would have to decide if they want to give up their share of the higher property tax that would be generated by improvements made to the sectors in an expanded DDA. Each unit would be given a chance to exclude themselves or “opt out” and retain the tax revenue.

“The county, in particular, has been interested in this topic,” said Fowler.

That’s because county commissioners have opted out of new tax-increment financing districts, and county administrators have said Kent loses about $4 million each year in tax revenue to these tax-capturing authorities.

A 1994 state law gives the county and other jurisdictions the right to refuse to give up that revenue. A refusal means the DDA wouldn’t be able to collect that unit’s share of the tax. If all jurisdictions opt out, the DDA won’t expand.

In an effort to prevent that from happening, Fowler has put together a plan to reduce the amount of tax revenue the DDA would capture throughout the district. The DDA currently captures 100 percent of the tax-increment total, which state law allows. But under Fowler’s plan the DDA would lower its capture by five, 5-percent reductions starting next year until the DDA cuts its capture to 75 percent of the total available tax beginning in the year 2031.

“If they choose not to opt out then this ratchet-back would go into effect,” said Fowler of his 25-percent, tax-capturing reduction plan.

“We would be committed to living with the resources from the ratchet-back schedule.”

Fowler said he has spoken with some property owners and taxing jurisdictions about the proposed expansion and plans to make more visits in the coming weeks. He also said there was more work that needed to be done before he could bring a final proposal to the board, something he hopes to do in a few months.

“I think that this approach is very reasonable,” said Mayor George Heartwell.

If the DDA expands its boundary, the board would buy the Ionia Avenue property from SOHAGO Inc. and West Michigan Leasing Inc. SOHAGO owns three of the 3.7 acres and is selling its parcel for about $1.3 million. West Michigan Leasing is selling seven-tenths of an acre for almost $736,000.

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