Kent loses more tax revenue incrementally

January 11, 2010
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With tax revenue disappearing for all governmental units during the ongoing recession, the latest economic development report issued by Kent County revealed that tax-increment authorities in the county raised their captures of county property taxes by 43 percent from 2005 to 2008.

In 2005, 13 governments captured slightly more than $2 million in property taxes that originated from improvements made to sites in designated areas. Three years later, the total tax captured by those units rose by nearly $900,000 to stop just short of $3 million.

The largest gain over that period was made by the city of Grand Rapids. The city increased its tax capture by $572,000, going from $1.2 million in 2005 to almost $1.8 million in 2008. The city's higher capture accounted for 64 percent of the overall three-year increase.

Grand Rapids has a number of tax-capturing organizations like a downtown development authority, a brownfield redevelopment authority, a tax-increment finance authority, and a local development finance authority known here as the SmartZone.

City commissioners also approved corridor improvement finance authorities last year for the Uptown and Madison Square districts. Neither district has begun capturing taxes yet, and the county will have to decide whether to allow either of them to collect a portion of its property tax.

The county has refused to participate in most cases since 2007, but only where the state gives it the right to opt out. That was the year when the county commission established its economic development policy. Instead of agreeing to turn over a portion of its property tax to a new or expanding tax-increment financing authority, the county has offered to create a tax-sharing agreement with municipalities as part of that policy.

The county has done that for the Plainfield Avenue and Division Avenue corridor improvement districts. Both agreements are for a period of 10 years with a 10-year option. The county matches the tax revenue that the townships give for improvements made in those districts. The most recent contract was with Gaines and Byron townships.

"There are a couple of tweaks yet to make. They've been approved, and I think we're all on the same page. It's not going to be any different than we've done in the past," said Daryl Delabbio, county administrator and controller.

But the county doesn't automatically opt out of every request it receives. Last March, it agreed to apply on Kentwood's behalf for the region's first Renewable Energy Renaissance Zone because state law didn't allow the city to file an application. The county stands to lose an estimated $91,000 over 15 years in tax and millage revenue to the zone.

Stepping in for Kentwood did not violate the county's policy. "It complies with our policy on economic development, pure and simple," said Delabbio.

Of the $2.98 million captured in 2008, $2.4 million came from the county's operating millage. Those dollars would have gone into the 2009 general fund, which ended the year with an estimated $2.5 million deficit. Another $406,200 was captured from the corrections millage and $167,000 came from the senior millage. Both are county millages with dedicated spending purposes that voters approved and then renewed.

Besides the tax captures, 21 local governments also exempted $3.2 million in county property taxes for developments in 2008. Grand Rapids abated $1.6 million by itself and largely through its nearly tax-free Renaissance Zone, most of which ends at the end of next year. The total tax exempted in 2008 was up by 5 percent from 2007.

The county's policy limits the capture and exemption of its tax revenue to 7 percent of its tax roll. At the end of 2008, captures and exemptions totaled 6.3 percent of that roll.

"It's still below the 7 percent," said Delabbio.

The policy also gives commissioners the right to refuse to let a municipality capture and exempt county tax revenue where those actions total more than 10 percent of the tax roll in that community. Grand Rapids, Lowell, Rockford, Walker and Cedar Springs all topped 10 percent in the 2009 report, as did Bowne Township.

With the state equalized taxable value set to fall by 4 percent countywide this year — and by more in some communities — the decline will likely push the amount of county tax that is captured this year down.

"It probably will. All the amounts subject to capture, I assume, will go down — if the assessed value and the taxable value go down," said Delabbio.

The report pointed out the county contributes to local economic development efforts in other ways than the $6 million it lost in tax captures and exemptions. Kent also spent about $6 million in 2008 for the marketing efforts of the Convention and Visitors Bureau and the West Michigan Sports Commission, and for the bonds that built much of DeVos Place. The county also gave $80,000 to The Right Place Inc.

County commissioners review the economic development policy every two years, and did so last year. So a review isn't on the agenda this year, at least for now.

Where the capture has gone
The following table lists the amount of Kent County property-tax revenue captured by tax-increment authorities from 2005-2008, along with the increase over those years.

Governmental Unit

2005

Taxes Captured
2006

2007

2008

Three-Year Percentage Increase

Grand Rapids

$1,217,290

$1,351,069

$1,571,893

$1,789,227

47%

Cascade Township

$260,662

$318,193

$366,943

$382,436

47%

Walker

$150,340

$194,539

$202,796

$204,947

36%

Grandville

$91,467

$98,076

$109,109

$102,728

12%

City of Lowell

$73,976

$87,048

$87,680

$101,917

38%

PlainfieldTownship

$80,053

$85,178

$93,194

$90,834

13%

Wyoming

$65,779

$74,336

$84,023

$83,920

28%

Sparta

$49,910

$55,337

$60,819

$67,726

36%

Rockford

$27,829

$36,768

$49,479

$54,203

95%

ByronTownship

$24,942

$30,571

$28,893

$33,136

14%

BowneTownship

$28,986

$32,225

$30,539

$33,136

14%

TyroneTownship

$8,207

$8,385

$12,030

$14,399

20%

Cedar Springs

$4,295

$8,424

$8,998

$8,773

104%

Totals

$2,083,736

$2,380,149

$2,706,396

$2,981,416

43%

Source: KentCounty Fiscal Services, 2009 Economic Development Report

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