Construction, Economic Development, and Government

616 to get first shot at new city policy

Michigan Street project goes to commission for NEZ status.

November 15, 2013
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616 Development will be the first in line this week when Grand Rapids city commissioners consider granting the firm the initial Neighborhood Enterprise Zone designation under the policy’s new guidelines they approved last week.

The firm has filed the first application for the new NEZ for its 616 Lofts on Michigan project, a new four-story, mixed-use structure it plans to build at 740 Michigan St. NE. The finished product will offer 54 market-rate apartments, 9,700 square feet of ground-floor retail space, and 95 yellow-outlined parking spaces, with 68 of those below ground. It is investing about $16.2 million into the project.

The changes commissioners made to the policy make it beneficial for 616 to file an application. Under the previous NEZ policy, developers that wanted to build rental housing couldn’t apply for the tax break offered by the policy, but the changes city commissioners adopted now allow for that type of development.

“I think it’s a very good tool,” said Commissioner James White, the recent winner of the John H. Logie Neighborhood Business Champion Award from the Neighborhood Business Alliance and Neighborhood Ventures.

Another change is that now a NEZ can be awarded to a single blighted property. Under the old policy, a series of parcels had to be present.

Commissioners adopted the updated policy to conform to the new state NEZ law.

“The purpose of the legislation is to improve the housing stock in distressed or declining urban areas where little or no new construction is occurring and where housing is in need of repair,” said Haris Alibasic of the city’s office of energy and sustainability.

It would seem the Michigan Street site 616 Development has chosen for its latest endeavor fits that description. The property includes a dilapidated building that several decades ago was a popular restaurant with an apartment above it.

The rest of the construction site, which measures about seven-tenths of an acre, is a vacant parking lot, and new housing construction hasn’t occurred recently in that immediate area.

The city’s Brownfield Redevelopment Authority recently declared the parcel an obsolete property under state law and also awarded the project a brownfield designation.

“To date, NEZs have been used effectively to advance city strategies for homeownership, economic development, mixed-income development, sustainability, infill and elimination of blight,” said Alibasic.

The payoff of a NEZ designation for a developer is a tax break. City Economic Development Director Kara Wood said it could save up to 28 percent on a property-tax bill, which could assist with finding financing for a project.

“The banks understand the reduction of taxes. There is a lot more certainty with this program, and the savings are significant,” she said.

Alibasic added that a developer could benefit from the tax reduction for six to 15 years.

616 Development plans to spend about $3.3 million to get the property ready for construction, an investment that will be reimbursed to the firm over 21 years through the tax capture allowed by the state’s brownfield statute.

City commissioners will review the 616 Development NEZ application Tuesday. They also have to approve the firm’s brownfield, which will come before them at a later date.

616 Development hopes to begin construction on the 94,000-square-foot building early next year and finish within 15 months.

616 Lofts on Michigan is the firm’s first build-from-scratch project.

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