DDA May Drive More Street Work

June 16, 2008
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GRAND RAPIDS — While the Downtown Development Authority adopted a 2009 budget last week, the agency’s Priority Committee had taken a look at future expenditures a few weeks earlier. And they concluded that making improvements to downtown streets could play a more prominent role in those outlays.

The DDA could spend up to $8 million over the next three fiscal years on what the board calls “streetscape improvements,” with nearly $4.3 million of that amount being spent two years from now. In contrast, streetscape spending is expected to only total about $1.3 million this year.

So why might the board spend more money on streets?

“The city has no street fund,” said DDA Executive Director Jay Fowler. “This represents the DDA picking up a high level of the street work,” he said of the increased spending projections.

Right now, the money for road work comes from the local-tax increment fund, the taxes property owners pay. The increased spending on streets would help to wipe out the fund balance at the end of FY11.

DDA policy requires a minimum of $1.5 million in the fund balance after each fiscal year. At the meeting, the fund balance was projected to have a deficit at the end of FY11. The account’s reserve is expected to close out this fiscal year with a surplus of $5.2 million.

Fowler told committee members that he would try to secure enhancement grants to help pay for the street improvements. But he added that these financial awards are harder to get because more cities are applying for the grants. Bonding or borrowing are two other options Fowler said the board had.

“Or we can change the policy,” said DDA Chairwoman Kayem Dunn of dropping or lowering the fund’s $1.5 million minimum reserve requirement.

Fowler also said that the $4.3 million targeted for the streets in the 2010 budget wasn’t likely to be all new tax money the DDA collects in 2009. Some street dollars, he said, were likely to be carryover monies from previous budgets.

Committee member David Cassard asked if the board could use dollars from the DDA’s non-tax increment fund to pay for the street work. Almost all of the revenue to that fund comes from the rent the DDA gets from the parking lots it owns and from interest income. That fund has a projected surplus of more than $5.2 million through FY11.

Pushing the payments for the street work into this account would keep the tax-increment fund from being completely exhausted, and Fowler said he would check with DDA counsel Dick Wendt to see if that was an appropriate use of the non-tax increment dollars.

“If the numbers were turned around and we were spending our non-tax increment fund balance, I’d be more worried,” said Mayor George Heartwell.

Money from that account is used for a variety of things including marketing downtown, ice skating at Rosa Parks Circle, expanding the DASH parking lots, maintaining the wayfinding signs, and covering the cost of police overtime at downtown events.

The DDA loaned Two West Fulton LLC $898,848 from the non-tax fund so the firm can buy half of the former City Center parking ramp property on the southwest corner of Fulton Street and Division Avenue from Parking Services for roughly $1 million. Two West Fulton plans to build the $34 million The Gallery On Fulton there.

“This is really a loan to cover the purchase of the property at 2 West Fulton,” said Fowler. “I thought the use of this fund made sense for The Gallery On Fulton.”

Using the non-tax increment fund for street work seemed to meet with the committee’s approval and Fowler said he will offer that idea to the entire board.

“One of the things we’re responsible for is downtown development, and this is doing that,” said Dunn.

Cassard added that improving and maintaining the condition of downtown streets is something the private sector can’t do anything about on its own.

“I think the original intent of the DDA was to take care of the infrastructure,” said Fowler.

Making improvements to Lyon Street, Oakes and Commerce avenues, and two sections of Cherry Street are the major projects the DDA will consider over the next three fiscal years, starting with the one that begins July 1.

Chances are the increase in street spending the DDA might undertake won’t be a three-year anomaly never to be done again. Now that the board has expanded its district, it has more pavement to care for. Plus, some of the work the DDA did over the past decade is beginning to show signs of wear and tear.

Fowler said the DDA may need to revisit Fulton Street in the future, after it paid to have the street rebuilt from the Grand River east to Division Avenue about 10 years ago.

“It’s a question of spending $100,000 to maintain what we’ve done,” he said, “or spend $1 million to re-do it.”

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