Investing In The Future

November 2, 2007
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GRAND RAPIDS — When the Downtown Development Authority captures a portion of the property taxes that would otherwise go to other jurisdictions, board members say they are investing those taxes in relevant economic development matters that eventually increase the total revenues those jurisdictions receive from the tax.

“We’re creating economic vitality and therefore we’re creating a stronger tax base,” said Mayor George Heartwell, the City Commission’s representative on the DDA.

“When downtown Grand Rapids is strong and vital, the impact of that is property values in surrounding communities are stronger. If downtown fails, then that has a rippling effect into our neighboring cities and townships,” he added.

The city of Grand Rapids, the Interurban Transit Partnership, Grand Rapids Community College and Kent County are units that lose revenue to the board’s tax-capturing authority.

“We’re convinced that the kind of investment the county makes through the capture of their taxes by the DDA is very much an economic development investment by the county, and it pays dividends to them, as it does to all of us,” said the mayor.

DDA Executive Director Jay Fowler said some may think all the private investments that have been made would have happened anyway if tax-increment financing authorities, like the DDA, and other tax incentives, like industrial abatements, didn’t exist.

“I don’t think that’s true. I think it’s been proven that this is an investment in the future and in the growth of our economy. Tax abatements, in particular, are very important to the industrial investors in this county,” he said.

Fowler said some of the riskier developments being planned for downtown, such as The Gallery project that has been proposed for Division Avenue and Fulton Street, probably wouldn’t ever get off the drawing board without help from the DDA.

Heartwell said the board’s spending of public dollars has helped to convince the private sector to invest roughly $2 billion in the district, and just over the last dozen years.

“While some of that investment might have very well happened anyway, I’m convinced that much of it would not have happened. So the DDA is a relatively small but powerful lever to attract private investment,” he said.

DDA Chairwoman Kayem Dunn said the investments the board has made have made downtown a better place, and the proof of that is there for everyone to see.

“I think the redevelopment in downtown Grand Rapids is so remarkable. You can walk all over the downtown area and see the benefits. You can point to specific buildings that have had a grant, or some sort of support, and have been improved because of DDA funds,” she said.

Fowler said the success the DDA has achieved is the driving force behind the proposed expansion of the board’s district. The plan, which is being finalized, would push the DDA’s reach into areas adjacent to its current and longstanding boundary. And Fowler said a few of those new sectors, east of Division Avenue and south of Fulton Street along the east bank of the Grand River, could be developed faster if the DDA could offer some financial assistance to property owners on those blocks.

“The genius, I think, of the expansion plan is that, on the one hand, it expands the boundaries and therefore ends up capturing more tax base. But on the other hand, for those tax jurisdictions that don’t opt out on the expansion, they begin to see overall reductions in their capture and that begins immediately with the first 5-percent reduction and continues until we hit the 25-percent reduction,” said Heartwell.

Kent County has told the DDA that not all of its tax capture is being spent on items the county sees as related to economic development and has asked the board to cut its capture.

“This is a direct result of us listening to the concerns of the county,” said Fowler of the reduction plan.

But if a jurisdiction opts out of the expansion plan, the DDA will continue to capture 100 percent of that unit’s tax. So a jurisdiction has to agree to the expansion plan to have its tax capture reduced.

“In the existing district, their share of capture will not decline,” said the mayor of units that choose to opt out.

Heartwell said some have told him that because the DDA has been so successful it isn’t needed anymore and should fold up its tent for good. The mayor said a Van Andel Arena construction bond the DDA is liable for prohibits the authority from closing. But besides that legal commitment, Heartwell wondered why someone would even make that remark.

“Why would we risk that when we’ve got something so good going for us in downtown Grand Rapids? And the DDA plays an integral role in that ongoing development,” he said.

“Why would we risk that when something is working? It just doesn’t make sense to me.”

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