Retail receives attention

February 28, 2009
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State Sen. Jason Allen was warmly welcomed at a downtown economic development roundtable hosted recently by the Grand Rapids Area Chamber of Commerce.

The Traverse City Republican was there to discuss the latest legislation aimed at creating new business opportunities throughout the state.

“Our goal was to come up with a set of tools,” said Allen of the nine pieces of legislation that cleared both chambers last year.

Allen, who once managed his family’s clothing store in his hometown, said some of those incentives were targeted at drawing new retail to urban cores. He said one of those, letting downtown development authorities start retail incubators in their districts, came from a tour of downtown Grand Rapids — one of 10 cities he visited in 2007 to get a better grasp of what could be done to further develop business and housing opportunities in urban centers.

Allen was the primary sponsor of the incubator legislation, which essentially makes a DDA a landlord. It gives these boards the power to construct, improve and operate buildings they own or lease, as long as the structures are used as incubators to develop retail businesses.

But there is a catch: It doesn’t apply to every type of retail. The tenants must be businesses that offer goods and services that either aren’t available in the district or are lacking in a sufficient number to satisfy the current market demand.

Allen said the city of Detroit was pursuing retailers that have been successful in other markets. But Grand Rapids DDA Executive Director Jay Fowler said he wasn’t certain how the board could get involved with incubator space because the DDA isn’t a building owner or a landlord.

“It’s an interesting idea. It isn’t exactly clear how we will do this because we don’t own a building that is likely to be used in that manner,” he said.

But Fowler said the incubator idea could be tied into the effort the DDA started last fall to draw retailers into the district, a strategy that came from a pilot program the board began in September 2007.

The most recent addition to that effort surfaced last month. The DDA unveiled a listing of the district’s available storefronts in February on the Downtown Alliance’s Web site at downtowngr.org. An interested retailer who goes there can get a space’s square footage, lease price, terms, and a name to contact for more information.

“One of the main ways that we can help new retailers come to downtown Grand Rapids is to showcase the prime storefronts that are available,” said Fowler.

Allen said the legislative efforts to spice up retail stopped short of creating Renaissance Zones for merchandisers. He said installing a nearly tax-free area in a downtown district could disrupt the existing tax-increment financing network that is a vital revenue source for a DDA. He felt having a Renaissance Zone in a downtown would hurt a DDA financially, as most state and local taxes would be exempted in the designated area for up to 15 years.

“We ran out of time to put that together,” he said. 

But the Grand Rapids DDA has had a Renaissance Zone in play since 2003, when Jim Knack was the board’s executive director and John Logie was the city’s mayor.

“This is an acceptable risk if we can bring these buildings back to life,” said Logie in 2002.

The zone is small and limited to two portions of Monroe Center, but it is key property that has much value to the DDA. The buildings in that zone are now home to retailers like Schuler Books and Music, Grand Central Market and Jimmie John’s Gourmet Sandwiches, along with dozens of condominiums.

When the City Commission approved the downtown zone, the DDA estimated it could absorb an annual tax loss of $200,000 from it. So far, the hit has been — closer to $150,000. The zone has been developed by Rockford Development, Belford Development, Virgin Soil Properties and Parkland Properties of West Michigan, which transformed the People’s Building from an office address into 26 residential and four commercial condominiums.

“This building will pay $200,000 in property taxes in 15 years, at a minimum, and it has only paid $30,000 a year in the past,” said Jon Rooks, owner of Parkland Properties, in 2003. “I did a calculation that shows the city will break even in the 17th year, and the property taxes will profit $160,000 per year after that.” he added.

Retail will take center stage at DeVos Place when the International Council of Shopping Centers presents its seventh annual West Michigan Alliance Program on Tuesday from 8:30-12:30. The keynote speaker is Hank Meijer, co-chairman of Meijer Inc. Meijer will talk about what he sees in the future for his family’s growing retail business.

Next will be a panel discussion on why retailers should choose West Michigan, with Battle Creek Limited CEO Karl Dehn, Southwest Michigan First CEO Ron Kitchens, Lakeshore Advantage President Randy Thelen and The Right Place Inc. President Birgit Klohs. Grand Valley Metro Council Executive Director Don Stypula will moderate.

“The message that I think we will be able to convey between the four expert participants on the panel is that while things are down, the economy is hurting, and we have seen some cutbacks in areas of the state, including here, this place that we call home in West Michigan is in better shape for the retail climate than any place else in the state of Michigan,” he said.

The Metro Council is one of the event’s many sponsors, a role it has played for years.

“We continue to believe in what they are attempting to achieve with this conference, especially in the past couple of years. We just want to make people understand that while things are bad, they are poised at some point to get better, and they will start getting better right here,” said Stypula.

“The lift-out will occur first here in West Michigan,” he added.

Fowler and Steve Deisler of Downtown Kalamazoo Inc. will host a roundtable discussion on the new DDA legislation, and Ross Nykamp of the Lumir Corp. will reveal how a central business district can attract retailers. Thirteen other 40-minute roundtables are on the agenda including one with Darel Ross of Lighthouse Communities and Rob Peterson of Downtown Kalamazoo Inc. on retail incubators. Each roundtable will be presented twice.

Personal property taxes are another legislative tool Allen said could help downtowns lure shop owners to the district. A DDA can exempt these levies if a blighted property — defined as vacant or functionally obsolete and zoned for mixed-use — gets redeveloped.

Another one allows a Neighborhood Enterprise Zone in a downtown district, which can lower property taxes by as much as half.

Yet another lets a DDA create and operate a loan fund to help property owners redevelop buildings in the district, which could become a strong incentive if the credit market stays tight. Right now, the Grand Rapids DDA offers grants to qualifying building owners for several types of improvements, including façade upgrades.

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