Heritage Wants A New Zone

November 21, 2007
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GRAND RAPIDS — City Administrative Analyst Haris Alibasic said for residential blocks to be granted a Neighborhood Enterprise Zone, a sector should have a catalyst project.

At least that has been the pattern for the first three NEZs the city has awarded. The most recent designation went to the residential area known as Turner Gateway, which runs along Turner Avenue between Leonard and Bridge streets on the near northwest side.

Union Station at 600 Broadway Ave. NW served as the catalyst NEZ project for that sector when Parkland Properties of West Michigan turned the former Union High School into a condominium complex with a rooftop swimming pool.

“The NEZ works better with a catalyst project,” said Alibasic.

The latest applicant knows that and has one.

The Heritage Hill Association and Stratus Properties LLC have filed a NEZ application with the city for Heritage Square, an area just north of Cherry Street on the city’s southeast side. A zone designation could mean lower taxes for about two dozen properties situated north and south of State Street, just west of Lafayette Avenue and just east of Madison Avenue.

“These properties are the most in need of development,” said Alibasic.

The proposed catalyst project sits almost in the middle of Heritage Square at State Street and Prospect Avenue. Stratus Properties wants to turn a vacant building at 345 State St. SW into a mixed-use development by renovating the existing two floors for commercial use and by adding two stories with 14 condominiums. Alibasic said Stratus Properties is willing to invest more than $4.5 million in the project, called Heritage View Place, and would “spur additional development and help revitalize the area.”

“I’m totally for it. There is a lot of opportunity in this neighborhood,” said 2nd Ward Commissioner Rosalynn Bliss.

But an Neighborhood Enterprise Zone isn’t like a Renaissance Zone, where a tax break is automatically issued to a property owner within the zone.

“Without improvements, property owners don’t get a benefit. They don’t get one simply by being in the NEZ,” said Alibasic.

There are separate requirements for renovation improvements and new construction under the NEZ. For renovations, a property owner must invest from $3,000 to $5,000 in an owner-occupied unit, a figure that depends on whether an owner or a contractor does the work, to qualify for a tax break. In a non-owner-occupied unit, that investment figure ranges from $4,500 to $7,500 a unit. If an owner hires a contractor, the higher figure applies.

The requirement for new construction is the project must primarily be a residential development and at least one unit must be occupied by an owner as a principal residence.

As for the tax breaks, half of the value of a building prior to a renovation is put on a special tax roll, and that value is frozen for 12 years. The tax is computed for the improved property by multiplying the frozen value by the current total tax rate, so the improved portion does not get taxed for 12 years.

The taxes for new construction are computed by multiplying half the new building’s value by the average statewide tax rate from the previous year, a rate that is determined by the State Board of Assessors. The resulting tax break also lasts for a dozen years.

City commissioners will hold a hearing on the NEZ request for Heritage Square in a few weeks and are likely to vote on the application early next year. Should the neighborhood join Turner Gateway, North Baxter and Belknap Lookout as a NEZ, it would be the smallest of the four to be designated.

“This remains a good tool because a vacant property can be turned into housing,” said 2nd Ward Commissioner Rick Tormala.

The authority for the city to grant a Neighborhood Enterprise Zone comes from P.A. 147 of 1992, the Neighborhood Enterprise Zone Act.

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