DDA May Cook Up New Policy

June 16, 2008
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GRAND RAPIDS — After they indirectly decided not to fund a new catering kitchen for the Public Museum of Grand Rapids last week, members of the Downtown Development Authority directly decided that they have to review how they should respond to funding requests from tax-exempt organizations.

“We need to have further board discussions about that,” said DDA Chairwoman Kayem Dunn.

Museum officials asked the DDA for $205,000 to buy the necessary kitchen equipment and pay a contractor to carve out an area in the building for its fledgling catering business. Museum Director Mary Esther Lee told the DDA their plan was to offer its catering services to those who hold events in the museum, and the revenue the service would generate would help to replace a portion of the income the nonprofit lost when the city stopped funding the museum a few years ago. The city had annually supported the museum with $2.5 million.

“None of the $205,000 is going to operations; it’s all for capital,” said George Heartwell, Grand Rapids mayor and DDA board member. “Expanding the food service in-house is a good thing to do.”

But other board members didn’t agree because the museum doesn’t pay property taxes. They saw the museum’s request as unfair to the taxing-paying private sector, which includes properties that are home to restaurants and caterers, by subsidizing a non-tax-paying entity that would compete against the private businesses.

“It’s easy to say, ‘Let’s do it for the museum.’ But to do it with tax dollars from private sector businesses is another thing,” said DDA member Joseph Tomaselli, also president of the Amway Hotel Corp. “That’s the rub.”

Board member Cathy Mueller, who represents the Grand Rapids Public Schools on the DDA, said she couldn’t come up with a reason why the DDA should give the museum the money for a catering business when the private sector already offers this service.

“Putting money into this is not what the DDA is intended to do,” she said.

Mueller has questioned some of the DDA’s recent spending decisions. In May, she said it was wrong for the DDA to award the Grand Rapids Community Foundation a $50,000 grant for the renovation of its new Oakes Street headquarters because GRCF is a well-funded, tax-exempt organization.

“If they were really poor, if they were a small business, or if they were a developer, then it would be different,” she said then.

Mueller also didn’t support the DDA giving $1,500 in March for six bronze plaques that highlight the relationship the city has with six sister cities. She said the DDA’s money should be spent on economic development activities and couldn’t see how this award met that task. Mueller felt the City Commission should have picked up that tab.

Because no board member seconded the motion Heartwell made to grant the museum’s request, a vote wasn’t taken and the museum’s funding application was denied — indirectly.

But at the same meeting, the DDA agreed to give Dwelling Place Inc. a $50,000 building-reuse grant because the nonprofit property management firm has a for-profit entity that will pay property taxes on a portion of the project that received the award.

Dwelling Place is doing business as the KBC Limited Dividend Housing Association for the $19 million Verne Barry Place development on South Division Avenue. Construction of the two new buildings in the project is done, but renovation of four existing structures isn’t.

Dwelling Place CEO Dennis Sturtevant told the Business Journal the renovation work will cost about $1.8 million more than initially estimated because some unexpected structural “surprises” surfaced during the work. Sturtevant said the commercial spaces in the project will be taxed, while the development’s housing units will be exempted under a city program.

“This is offering ad valorem taxes,” said Mueller. “And Dwelling Place has a good record of completing its projects.”

The DDA grant will go toward façade restoration, utility upgrades, a fire-suppression system and barrier-free access. The DDA expects to receive $3.48 million in property-tax revenue during the new fiscal year that begins July 1.

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