DDA Ready For New Expansion

November 21, 2007
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GRAND RAPIDS — Jay Fowler has been busy making the rounds around downtown for the better part of the past month, and he still has a few more stops to make.

The executive director of the Downtown Development Authority has met with business groups and property owners in recent weeks and will meet with the representatives of four taxing jurisdictions this week. Next week, Fowler will go before the City Commission at a public hearing being hosted by commissioners.

In all of those meetings, Fowler has a single purpose: to promote the expansion of the DDA’s district.

The DDA has already approved the expansion plan, and city commissioners have to do the same if the district is to expand for the ninth time since 1979, and if the agency’s tax-capturing reach is to be amended.

The expansion would add 371 acres to the DDA boundary — mostly to the east, but also to the south, west, and north into part of the Monroe North Business District.

Not all those acres, though, would give the board additional tax revenue, as not all would be included in the DDA’s tax-capturing district.

“Certain areas on the fringe are not included in the taxing district,” Fowler said.

Fowler said certain fringe areas such as the Michigan Street hill sector, a section along the east side of the Grand River south of Fulton Street, and an eastern portion of Monroe North would be redeveloped more quickly by the city’s Brownfield Redevelopment Authority than the DDA. And brownfield tax credits take precedence in the tax-increment pecking order.

If city commissioners give their blessings to the expansion, then the taxing jurisdictions that will be affected by the DDA’s larger tax-capturing reach will have to decide whether to participate in the plan or opt out of it.

The city, including its library system, and Kent County, Grand Rapids Community College and the Interurban Transit Partnership will have 60 days to make a decision on whether to let the DDA have a larger slice of their property taxes or millages.

“It makes no sense for them to opt out. It makes sense for the county not to opt out because they get more money,” said Mayor George Heartwell, a DDA member.

The mayor referred to an incentive Fowler put together and the board approved to help sway those jurisdictions to opt in. It would lower the DDA’s capture of the jurisdictions’ tax revenue through five 5-percent reductions and eventually lower the DDA’s capture from its current state-allowed 100 percent of the tax-increment portion of the tax revenue to 75 percent of those taxes starting in tax year 2028.

But a jurisdiction doesn’t get a reduction if it opts out of the expansion.

The DDA reports those reductions would let the city, county, GRCC and ITP share an additional $186,592 of tax revenue beginning in FY09 when the DDA capture would fall to 95 percent, and would split another $1.4 million in FY29 when the capture drops to 75 percent.

“We’re actually giving up money with this plan,” said DDA member David Cassard.

“Yes, and we’re taking on additional responsibilities,” added Fowler.

The mayor also specifically mentioned the county because county commissioners opted out of a DDA expansion in 1995, when the board added 36 acres to its district just west of U.S. 131 across the Grand River.

Those 10 blocks were a residential area a dozen years ago and now contain parking lots for the DASH shuttle service and the new YMCA.

More recently Kent County chose not to participate in either the Byron Center DDA or a corridor improvement district along Plainfield Avenue NE in Grand Rapids and Plainfield townships. But the county is near finishing negotiations on a separate agreement with the townships for the corridor.

Kent County Administrator and Controller Daryl Delabbio told the Business Journal that the county hasn’t decided yet whether it will opt in or out of the DDA expansion plan.

Fowler said much of the feedback he has received from business and property owners in the new areas about the expansion has been positive.

“We’ve had a number of requests from Bridge Street property owners to be included in the plan,” he said of a commercial strip in the Stockbridge Business District.

City commissioners will host their hearing on Dec. 4. Somewhat surprisingly, the DDA wasn’t required to hold one.

“It’s odd that state law requires the City Commission to hold a public hearing,” said Fowler, “and not the DDA.”    

Cutting Back Capture

The expansion plan approved by the Downtown Development Authority would reduce the board’s capture of tax-increment property taxes in the district from 100 percent to 75 percent over 25 years through five reductions of 5 percent every five years. Those reductions would increase the revenue other taxing jurisdictions would receive from property taxes within the downtown district.

The following table shows the total local tax-increment revenue captured by the DDA, the percent the DDA captures, the amount returned to the taxing jurisdictions, and the amount the DDA retains for the corresponding fiscal years, which are the first years of each new 5-percent reduction.

Fiscal Year

Tax-Increment Revenue Captured

Percent Captured

Returned to Local Units

Retained by the DDA

2009 

$3,731,837

95%

$186,592

$3,545,245

2014 

$4,202,655

90%

$412,025

$3,708,225

2019 

$4,549,088

85%

$682,363

$3,866,725

2024 

$5,022,561

80%

$1,004,512

$4,018,049

2029 

$5,545,313

75%

$1,386,328

$4,158,985

Note: Figures are estimates based on a 30-year projection if the city, Kent County, the Interurban Transit Partnership and Grand Rapids Community College participate in the expansion.

Source: Downtown Development Authority, November 2007

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