Tax credits, brownfields adding up
In a year when the poverty rate rose and the unemployment figure topped 13 percent in the city — not to mention the overreaching wave of home foreclosures that struck Grand Rapids — an amazing number of requests for tax abatements and Brownfield Redevelopment projects reached the desk of the city’s Economic Development Director Kara Wood in 2010.
The number of projects approved by city commissioners this year totaled 51, a staggering figure that nearly equaled the 58 projects approved in 2009 and 2008 combined. If all 51 projects are completed, the outcome would mean an investment of $235.3 million, the creation of 1,964 jobs, and new tax revenue to the city of nearly $1.6 million.
The Business Journal asked Wood if, when the year started, she expected that many projects to flow across her desk in 2010.
“No, not at all. We didn’t expect near the number of requests that we got. Nor did we expect the number of expansions that actually took place,” said Wood.
“I think there definitely have been some bright spots in the city of Grand Rapids’ economy, and those bright spots deserve some support from the city. And that’s how we ended up with so many projects,” she said. “Companies are diverse here in the city, and the growth is probably a direct result of that.”
Wood said some of the projects wowed her — like Kellogg Co. moving the production of its Special K Breakfast Bars from Illinois to the Keebler plant on 28th Street SE. Kellogg is investing $18 million and will bring 45 new jobs to the city that will pay an average of $23 per hour.
“That is definitely a wow project,” she said.
Another “wow project” is Thierica Inc. The company, which makes interior auto components and interior manual guidance instruments for the aerospace industry, is buying $661,000 worth of new machinery and will create five new jobs. What impressed Wood is that the firm made an even larger investment last year, and this year has grown its work force to 130 employees from the 41 it had in 2009.
“That was a surprise because they just did an expansion project late last year. That’s a fortunate thing for Grand Rapids because they have so many new jobs right now as a result of that project,” said Wood.
“I think the volume of projects alone was a surprise to all of us. We had big investments from Bentler Automotive and Butterball. Founders (Brewing) was a pretty substantial surprise, too. Then Dematic was another huge one,” she added.
Dematic Corp. plans to invest more than $11 million into its two Plymouth Avenue facilities over the next five years and add 505 jobs to its work force that will pay an average of $21.80 an hour.
“We’ve got a good cross-section of businesses. But it’s pretty clear that there is still a lot of manufacturing growth and a lot of food processing growth here in the city of Grand Rapids,” said Wood.
Commissioners approved Thierica’s latest tax break just last week. At the same time, they also ratified a tax exemption for Able Manufacturing and what appears to be the city’s 14th brownfield request this year, which would be three more than last year. The H Development Group LLC is investing $1.7 million to renovate 1350 Lake Drive SE into the Eastown Veterinary Clinic. At first, the developer was going to raze the vacant structure and build new, but then decided to restore the existing building.
With the installation of the state’s new administration taking place Saturday, Gov.-elect Rick Snyder has promised to eliminate the Michigan Business Tax and, of course, the tax credits that originate from the levy. But Wood felt a loss of the tax credits wouldn’t have a negative effect on the state’s Brownfield Redevelopment program, which offers developers state credits and which the city heavily relies on to promote the restoration of vacant and contaminated properties.
“I don’t think that the tax credits for the brownfield program would go away necessarily because that program is one of the more substantial programs that delivers good projects to the state of Michigan. If it was transformed, I think that would be OK. But I still think that it’s important to incentivize the redevelopment of existing old, contaminated buildings. That won’t happen, I don’t think, as a direct change in the business tax credit,” she said.
“A majority of those that are taking advantage of the Brownfield Redevelopment Program don’t pay business taxes, anyway. They typically monetize those tax credits for equity into the projects. If we sat down and looked at the list of brownfield projects, those LLCs that are established to do those projects, most don’t pay the business tax. It typically flows to their personal tax statements, and a majority of those LLCs don’t make money, anyway,” she added.
“I hope the brownfield program will be one of the mainstays the new governor keeps around.”
The Michigan Economic Developers Association elected Wood to its 2011 board of directors a few weeks ago. Wood joined the MEDA in 2007 and has been active with the group’s Education Committee since then. She has also worked with the MEDA legislative taskforce the past two years. Wood told the Business Journal that she didn’t feel the position would help her at work. Instead, she saw being on the board as a way to repay the association for what it does for developers.
“I don’t think it helps me with my position with the city and the board. I think it helps me to give back to the association that supports all the economic developers throughout the state of Michigan. So I hope to help improve advocacy, education, and those aspects of the association statewide to help bring training programs to economic developers in Michigan and also support the association’s efforts,” she said.
Wood is hoping 2011 mirrors the very successful 2010. But her office, which has Eric Soucey handling the industrial requests, doesn’t have a backlog of tax break and brownfield requests waiting to be submitted to commissioners to jump start the New Year next month. That situation, though, could be temporary.
“We’ve got a lot of applications out, as companies have requested applications. But we haven’t received any in yet. So our agenda for the first meeting in January is very light. We have, maybe, one agenda item,” Wood said.
“But I will tell you, I think there are companies that will be submitting applications either before the end of the year or the first of next year.”