GR Likes Mini DDA Authorities

November 16, 2007
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GRAND RAPIDS — In the near future, more business owners in the city will have a chance to improve their properties through captured property taxes.

At the same time, other jurisdictions that rely on revenue from property taxes will have to decide whether they want to participate in the latest tax-increment financing authority and turn over a portion of that property tax to a new TIFA.

City commissioners adopted a Corridor Improvement Authority last week, which lets business associations create an organization in their commercial districts and operate like the Downtown Development Authority — with city approval.

These mini DDAs would be able to collect a share of the increase in property taxes that is generated by new developments in their sectors and invest those dollars in improvements to buildings and infrastructure in their districts. The city can authorize up to four of these corridors each year.

"I think this is a really good policy that is good for everyone: the neighborhood business districts, the neighborhood business owner, the city — everyone," said Kimberly VanDyk, the executive director of Neighborhood Ventures, part of the Neighborhood Business Alliance that joined local businesses in helping the city shape its policy.

Of the city's 20 commercial corridors, only the Monroe North Business District has a TIFA, and much of the Heartside Business District is within the DDA boundary. Both are already capturing tax dollars. But now the 18 other business districts, along with the segment of Monroe North not in the TIFA, can do the same.

"Several of them are kind of poised right now to use this as soon as it gets adopted, and probably more will be looking at it, too," said VanDyk. "Now that we have the state-enabled legislation and the city policy that I think is going to work really well, I think we can go forward on the neighborhood level and start forming these."

The commission's power to adopt the Corridor Improvement Authority comes from PA 280, which state lawmakers passed in 2005 as a tool to stop the deterioration of property values, revitalize urban commercial areas and encourage historic renovation.

"I think it's going to be an incredibly useful tool, because right now there just isn't much out there for business districts to utilize. I think this will help them to move forward much faster than they're doing now," said VanDyk.

KentCounty is one of the jurisdictions that can lose tax revenue from new districts if it agrees to participate. CountyAdministrator and Controller Daryl Delabbio said Kent will handle all Corridor Improvement Authority requests that come from business districts the same way it handled the one that came earlier this year from Plainfield and Grand Rapids townships.

County commissioners voted to opt out of that new corridor and chose to retain the tax revenue. But then Kent began negotiations with officials from both townships to form a separate tax agreement for the

Plainfield Avenue
corridor. Delabbio said that agreement is likely to go before the Finance Committee next month.

"At this point in time, what we will do is opt out and then enter into an inter-local government agreement," he said of a request from a business district.

"If we don't opt out, then we're stuck. But if we opt out and then work toward an agreement like we're doing — and relatively successfully — with Plainfield and Grand Rapids townships, that's our preferred route," he added.

An opportunity for business owners who are currently on the fringe of downtown to improve their properties may be next as the DDA looks to expand its boundary. The DDA approved the expansion plan last week, and city commissioners set Dec. 4 as the date they will hold a hearing on the expansion.

DDA Executive Director Jay Fowler said he will meet with the affected jurisdictions like KentCounty next week and explain the incentive the board has put together to entice those units to participate in the expansion. It consists of five 5-percent reductions to be made over the next 24 years in the property taxes the DDA collects.

By 2032, the DDA would capture 75 percent of the available property-tax revenue that state law entitles it to collect. But a unit has to agree to opt into the expansion plan for the reduction process to go into effect on its portion of the tax revenue. The DDA would still capture 100 percent in jurisdictions that opt out of the expansion. The board has collected all of that available revenue since its inception in 1978.

Fowler will also try to convince the jurisdictions that participating in the expansion is in the units' best interest, as the investments made in the sector raise the overall tax base.

"The investment that is made through this DDA and the others in the county is creating economic vitality and, therefore, we're creating a stronger tax base. When downtown Grand Rapids is strong and vital, the impact of that is property values in surrounding communities are stronger," said Mayor George Heartwell, also a DDA member.

But for county commissioners, who have watched the reserve in the general fund drop by $50 million over the last five years, the question is how much revenue should the county give up?

Delabbio said Kent loses $6 million in tax receipts annually to TIFAs, abatements and Renaissance Zones, and spends about another $6 million each year from lodging-excise tax receipts on

DeVos Place
and the convention business.

Delabbio said his office will make a recommendation soon to the county commission as to whether the county should participate in the DDA expansion or opt out of it. If it opts in, Delabbio said the county would receive an additional $72,000 in tax revenue from the first 5-percent reduction. The clock starts ticking on that decision right after the city holds the Dec. 4 public hearing on the matter.

"Within 60 days of the public hearing," said Delabbio, "the county will be making a determination."     

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