City working toward Recovery Zone
City Economic Development Director Kara Wood told members of the city’s Economic Development Project Team last week that commissioners should designate the entire city as a Recovery Zone.
Wood explained that the city qualifies for that status under federal guidelines as its June unemployment rate reached 17 percent and home foreclosures have risen by nearly 11 percent since 2004.
Declaring the city a Recovery Zone would allow any qualifying private-sector project within its boundaries to be considered for lower-cost financing through federally backed recovery bonds.
“We’d like to have the whole city represented. We have a team working on this,” said Deputy City Manager Eric DeLong.
Through the American Recovery and Reinvestment Act, the city has been allotted $25 million in Recovery Zone Facility Bonds that can be awarded to developers and businesses for new construction, renovation projects and property acquisitions. The RZF bonds are tax-exempt, which reduces a borrower’s cost of financing through a lower interest rate, and the bonds are available at a time when credit remains tight.
“The key is tax exempt for private purposes,” said City Manager Greg Sundstrom.
The city has created some guidelines that businesses must meet to qualify for the bonds, including having a credit-worthy project, being a catalyst for development, and creating new tax revenue for the city within three years of a project’s completion. In addition, a qualifying property has to have been vacant, or a building half empty, for at least a year.
There also is a list of factors the city will use to evaluate proposals including the amount of investment that will be made into a project and the amount of new taxes that will be generated to the city through new jobs, among others.
Applicants must be current with all real and personal property taxes to be considered.
The city’s Economic Development Corp. would issue the bonds, but the city would not have any financial liability.
“There is no cost to us other than staff time. So it’s a no-lose proposition for us,” said Mayor George Heartwell.
The ARRA, which Congress passed in February and is known as the stimulus bill, has also allotted $16.7 million in Recovery Zone Economic Development Bonds to the city for public infrastructure and building projects. These bonds are taxable to buyers and will carry a higher interest rate than the usual tax-free municipal security.
But the federal government would reimburse the city for 45 percent of the total interest it would pay to bondholders, which would lower the city’s cost of borrowing to the level of a standard tax-exempt security.
City officials did not indicate an intention to apply for a RZED bond. But the mayor has said the city will bond to buy wind turbines to power the city’s water filtration plant along Lake Michigan.
Wood said the city will hold a “recovery” workshop for interested bankers and developers Aug. 26 from 10 a.m.-noon in DeVos Place. She added that a few developers have expressed interest in learning more about the financing.
Kent County commissioners designated the county a Recovery Zone last week. The county has been allotted $36.5 million in RZED bonds and $54.8 million in RZF bonds. The county is considering using RZED bonds to finance the renovation of its jail, a project that may cost as much as $30 million. But County Administrator and Controller Daryl Delabbio added that the public allotment wasn’t only for the county.
“It is also for any city, school or township in the county,” he said.
As for the private RZF allotment the county received, businesses within Grand Rapids can apply with the county, too. The county and city can also work together on a request made by a developer located within the city limits.
“The Right Place Program is developing the criteria we will follow for the private sector side,” said Delabbio.
In another bond matter, the county chose tax-exempt securities last week for its new recycling center that will be built by the Department of Public Works. The bond package is worth $11.895 million, has a 20-year term, carries an interest rate of 4.19 percent and should close on Sept. 1. The county had considered selling the Buy America Bonds to finance the construction project.
The DPW will hold a groundbreaking ceremony for the new recycling center Thursday at 9 a.m. at 977 Wealthy St. SW.