City not affected by MEGA issue

October 24, 2009
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When lawmakers agreed recently to give the Michigan Economic Growth Authority more tax credits, the chamber didn’t dole out a dollar amount that the agency can award for the rest of this calendar year.

Those credits are allocated in years — the total number of credit years that the approved job creators have to collect the state tax credits. And MEGA gets a yearly total for each year. Four hundred credit hours had been approved for 2009. The latest legislation, though, boosted the agency’s limit to 485 for this year.

“Each project is negotiated separately depending on the need for the credits. An average is seven years per project but it could go up higher. They were out of credits completely, and now that this bill has passed, it will allow projects that had been waiting in the wings to move forward,” said Kara Wood, city economic development director.

“In January, they will receive another allocation of (credit) years, anyway. So this bill was really intended to get us through the end of the calendar year,” she added.

The three MEGA programs — traditional, high tech and job retention — operate differently than the brownfield redevelopment and industrial tax abatement programs. The latter two have a dollar value assigned to the incentives, while the MEGA programs offer credits that can be collected for an approved number of years. Most of the MEGA incentives are awarded to manufacturers.

“They can associate a dollar amount with those years. But for some reason, this program is based on years as opposed to a dollar value,” said Wood.

A report from the Mackinac Center for Public Policy and an editorial piece in The New York Times claimed the number of jobs the state got in return for its incentive programs fell far short of the tax credits that were awarded.

Since 1998, $3.3 billion worth of incentives have been approved.

But, after raising the credit maximum, state lawmakers called for closer scrutiny of the number of jobs created by companies that received credits — something Wood felt wasn’t necessary. “I think they do a good job of that already. I don’t think that will change their approval process,” said Wood of the agency.

The state call for a tougher inspection doesn’t affect job tracking in the city’s Economic Development Office for local companies that qualified for state tax credits.

“No, all of that information is tracked at the state level because it’s a state tax program. We’ll still continue to monitor our tax abatement companies as we have in the past, with regard to job creation and retention,” said Wood.

The city’s department surveys companies that receive exemptions each year.

“We typically survey the past two years of projects because companies have two years to create their investments in jobs,” she said.

City commissioners approved an industrial exemption last week for Blackmer/A Dover Co., an international manufacturer of pumps and compressors for the bio-fuel, petroleum, chemical, energy and food industries. No new jobs will be created with the abatement, but 30 positions that were headed elsewhere will be retained. Blackmer will invest $1.3 million into upgrading machinery and facilities.

At the same time, the city revoked an abatement for Grand Rapids Sash and Door Co. City commissioners awarded the exemption three years ago, but company officials told the city that the current economy wouldn’t allow it to meet the commitments for investment and job creation that it made in 2005. The city will send its revocation document to the state and request that the State Tax Commission also invalidate the abatement.

In addition, city commissioners adopted a policy last week that gives them the authority to award qualifying grocery stores with a new tax exemption for a renovation project. The taxes that would be exempted for up to 10 years are city and Kent County property taxes, and Interurban Transit Partnership and Grand Rapids Community College millages. The city’s policy is based on state law — Public Act 210 of 2005 — and the county has a right to veto the creation of a district within 28 days after one is announced.

Wood said the city didn’t want to create the policy until the state’s agriculture department defined what type of grocery store would qualify for the tax break.

“It’s a specific type of grocery store. They have to sell food as their primary source of business and not alcohol. So this can’t work for a convenience store. And they also have to sell USDA certified meats and produce. It’s pretty narrowly defined,” said Wood.

Also, the property has to be at least three acres or in a recognized business district. An applicant has to invest a minimum of $30 per square foot in a renovation and not be delinquent on any taxes or in violation of zoning laws, and a building has to be at least 15 years old. A grocery store also has to be located in a qualified census tract as defined by the agriculture department — a requirement that doesn’t include all of Grand Rapids.

“We actually wanted the whole city to be designated, but for some reason the department of agriculture decided to narrow that criterion,” said Wood.

Not including all of the city in the eligible census tract means Meijer Inc. can’t apply for the new store it is building at 28th Street and Kalamazoo Avenue SE.

“The only corner that isn’t in the qualified census tract is the one that Meijer sits on, so they don’t qualify. But all three other corners qualify,” said Wood.

A district can be created from three acres that could include a smaller grocery store, but the only property within those acres that can qualify for the incentive would be the grocer’s.

“It’s not likely that this will get a whole lot of use,” said Wood, “but it is an incentive for grocery stores.”

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