DDA funding of city services disputed again

June 11, 2010
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For the second year in a row, the Downtown Development Authority agreed last week to give money to the city of Grand Rapids for services the city will perform within the district this coming fiscal year.

Also for the second year in a row, Kent County Commissioner Jim Talen said it was inappropriate for the DDA to allocate funds in that manner. This time, though, he voted against making that allocation.

“I’m simply not convinced that it’s appropriate for us to designate revenue generated by our operations as non-tax increment funds that can operate outside normal DDA rules,” said Talen, who represents southeast Grand Rapids on the county commission and is the county’s appointed DDA representative.

But by a 7-1 margin, DDA members authorized giving the city $500,000 to pay for police patrols and for the upkeep of parks and open public spaces in downtown. A year ago, when the DDA first authorized that amount to help the city balance its general operating budget, the money went for police and fire services and park maintenance.

This year’s supplement doesn’t include the city’s fire department, as more of the board’s revenue will go toward maintaining the district’s eight parks and half-dozen public spaces. “I know we’re investing more in the downtown parks than what the DDA is contributing,” said Eric DeLong, deputy city manager.

And like last year, this year’s funds will again come from the DDA’s non-tax revenue budget.

The DDA’s non-tax revenue fund receives its income from parking fees, rental fees, investment interest and interest on the promissory note it has for The Gallery on Fulton project going up at Division Avenue and Fulton Street. About $380,000 in revenue is expected to come to the fund from those sources in the new fiscal year. Its projected expenditures are $1.1 million, so almost half of the fund’s spending will be with the city. The fund’s balance is expected to begin the fiscal year with nearly $4.9 million.

The county opposes having the DDA contract for services with the city for two reasons. First, the county claims the board’s spending should be limited to items that directly impact economic development and not be used to pay for standard city services like park maintenance that are already paid for by taxes.

Second, the county claims there is no such thing as a non-tax revenue fund for a tax-increment financing authority like the DDA. Kent said the income going to the non-tax account originates from the spending of dollars raised through property taxes. The county has argued those property-tax receipts allowed the DDA to buy the property and build the parking lots that has generated the revenue that goes to the non-tax fund.

“I hope you can understand that this request from the city doesn’t sit well with me or my county colleagues,” said Talen.

Talen also reminded his fellow board members that the DDA captured $1.5 million in property-tax revenue from the county over the last fiscal year. He said that money could have gone to services the county provides downtown, such as physical and mental health services.

Talen also pointed out that the county financially supports the Convention and Visitors Bureau, which attracts meetings to downtown that benefit the hotels and restaurants in the district, and pays for the bond that built much of downtown’s convention center. He also expressed strong support for the work the DDA has done and continues to do.

After last year’s allocation to the city, DDA Chairwoman Kayem Dunn and Executive Director Jay Fowler began a series of closed-door discussions with county leadership regarding the board’s tax-capturing policy and its spending of those dollars.

During that period, Talen said DDA counsel Dick Wendt provided the county with a legal opinion that supported the board’s position of paying for city services with non-tax revenue. He also said that Kent County Corporate Counsel Dan Ophoff wrote a dissenting opinion and argued that the non-tax fund was illegal. The result was that both sides agreed to continue their discussions, but none have been held recently.

Dunn and Fowler, however, did make a public appearance before the county commission last year.

DeLong and Fowler will get together to decide how much of the DDA’s $500,000 will be dedicated to police patrols in the district and how much will go to the parks. Last year, the police department got $200,000 and parks and fire each received $150,000.

DeLong said much of the park maintenance will be contracted with private firms because the Parks and Recreation Department won’t have a staff large enough to do the work after the upcoming round of job cuts takes place. He also said a city groundskeeper would oversee the maintenance of downtown parks.

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