Kent views tax capture proposals

August 6, 2010
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Kent County commissioners will decide this week whether to let two new tax-increment financing authorities on the southeast side of Grand Rapids capture a portion of the county’s operating, corrections and senior millages for an indefinite period.

Members of the county’s Finance Committee recommended last week by a 6-to-2 vote that the board follow the county’s economic development participation policy and not allow the Uptown and Madison Square corridor improvement authorities to collect shares of its tax revenue. The county’s revenue loss would come from improvements made to properties in the districts.

Commissioners Jim Talen and James Vaughn, however, wanted to make an exception to the policy and let the authorities capture the revenue.

Talen, whose district includes the Uptown CIA, said Madison Square is in need of help and that it will take a long time before the area will see improvements. “This is really important to that neighborhood district,” he said. “The need in that neighborhood trumps the county’s policy.”

Vaughn, whose district includes Madison Square, said the revenue the county would lose would be a small amount. “It’s a step in the right direction,” he said. “I need those dollars in this district.”

But a majority of committee members felt they had to adhere to the county’s established policy. “For me, it’s a policy issue. If we’re going to change it, then we should change the policy,” said Commissioner Richard Vander Molen.

“This is the only leverage we have,” said Commissioner Roger Morgan of protecting county revenue. “I don’t think (a ‘no’ vote) precludes any type of negotiation after we opt out.”

In the past few years, the county commission declined to let the Division Avenue and Plainfield Avenue corridor improvement authorities capture tax revenue. But then county officials negotiated separate tax-sharing agreements with the townships that oversee those districts.

The agreements allow both authorities to collect revenue from the county’s operating millage for a 10-year period. The contracts, however, exclude the capture of the corrections and senior millages, which the county considers as revenue that voters dedicated for specific purposes.

A little more than a year ago, county commissioners unanimously agreed to allow Kentwood to capture tax revenue for the city’s Renewable Energy Renaissance Recovery Zone. A projection showed the county would lose more than $90,000 in tax revenue over 15 years to the three-acre site on 44th Street SW. If commissioners hadn’t supported the zone, Kentwood wouldn’t have been able to create it.

County Fiscal Services Director Stephen Duarte reported in May that the county is supporting economic development efforts this year with roughly $6.4 million in tax revenues. The majority — $6.3 million — geso to financing the DeVos Place convention center and to marketing the county as a destination through the Convention and Visitors Bureau and the West Michigan Sports Commission.

The county also regularly funds The Right Place Inc., the region’s economic development organization. This year the county gave The Right Place $85,000.

County Administrator and Controller Daryl Delabbio said the $6.4 million represents 6.3 percent of the county’s total tax levy. The economic development participation policy that commissioners adopted a few years ago limits the county’s annual contribution to 7 percent of that levy. The county also participates in 33 tax capture and exemption programs approved by cities and townships in the county.

In his May report, Duarte noted that the uncommitted amount the county has left to contribute fell by $16.6 million from 2009 to this year; the balance dropped from $162.7 million to $146.1 million.

“This available margin will allow the county to continue to negotiate new tax-sharing agreements with city and township governments for the purpose of stimulating additional economic development with a ‘long term’ goal of obtaining increased growth rates in the ad valorum tax roll,” Duarte wrote in his report.

Another element of the county’s economic development participation policy allows the county to refuse to participate in a program when the originating city or township is capturing and abating more than 10 percent of its tax roll. Delabbio said the city of Grand Rapids is at 14.46 percent this year, or nearly 4.5 percent above the county’s policy limit. 

Delabbio said the tax captures in the Plainfield Avenue and Division Avenue CIAs have been less than what was projected, as the economy has hindered growth in both districts. But he couldn’t put a figure on how much county revenue the Uptown and Madison Square CIAs would collect.

“All we have are projections because we don’t know what the growth will be,” he said.

“I just think we have to stick with our policy,” said Commissioner Art Tanis.

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