Construction, Economic Development, and Government

Brownfield board goes ahead with reimbursement

Lack of a loan payment made decision a difficult one.

November 15, 2013
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Members of the Grand Rapids Brownfield Redevelopment Authority debated long and hard before they approved a brownfield reimbursement the project’s developer reportedly doesn’t embrace.

“I want to do what’s fair and appropriate about this, but I just don’t know,” said Mike De Vries, a brownfield authority board member, at the board’s recent meeting.

De Vries didn’t vote to approve the reimbursement resolution, but the rest of the board did.

“We’re not saying ‘no’; we’re saying ‘not now,’” said board Vice Chairman Brian Smits.

The matter involves the Inner City Christian Federation’s Tapestry Square project, which was once known as the Wealthy-Jefferson Development Initiative.

ICCF, a local nonprofit developer, is redeveloping three city blocks off Wealthy Street SE. The project includes residential and retail uses primarily for LaGrave and Sheldon avenues and Logan Street SE.

The work has been estimated as costing roughly $15 million, and part of the financing has come from a $5.2 million Neighborhood Stabilization Program loan the city made to ICCF a few years ago. Although loan payments aren’t expected to be made until the 15th year of the 20-year term, the interest-free loan has a unique feature in that the city can forgive part or all of it at anytime. Forgiving the loan would essentially turn it into a grant from the city.

However, if ICCF doesn’t make a loan payment until the 15th year, it can’t collect development fees for the project over that duration, and ICCF reportedly doesn’t plan to make a payment until that year.

Also, the city approved a brownfield for a portion of Tapestry Square in 2011 that made the work eligible for tax-increment financing reimbursements for approved activities. Reimbursements, though, can’t be made if those activities were paid for by the loan dollars, if payments on the loan haven’t been made.

Brownfield Redevelopment Authority Executive Director Kara Wood said ICCF submitted reimbursement invoices that totaled $440,343. But she said $438,072 of that was paid for by the city’s potentially forgivable loan. So the authority could only reimburse ICCF for the $2,271 difference, eligible work the developer paid for, and that is what the board did.

Board members had two concerns. One was they would be reimbursing activities that really weren’t eligible because ICCF didn’t use its money to pay for that work, as the cash came from the loan. The second concern was they would eventually end up making the same reimbursement twice.

“We can’t reimburse them twice for the same cost,” said board counsel Dick Wendt, who added that he contacted ICCF and said they weren’t pleased with the decision.

The board also set aside the $438,072 that was in the ICCF invoices to accrue. The dollars can be awarded to the organization if it makes loan payments, or if it incurs additional brownfield eligible activities through future work on the project.

“We’re not distributing it. We’re continuing to accrue it,” said Smits of the invoice amount. “So they have two paths to get to that $438,072.”

To make the issue a bit more complex, the city reconstructed Logan Street from Sheldon to LaGrave avenues and installed new utilities along the way in support of Tapestry Square — work that qualified for a reimbursement.

So board members reimbursed the city $231,134 for its work.

“Paying the $2,271 (to ICCF) and the amount to the city seems like we’re not risking anything,” said board member Robert Porter.

“I don’t want to say we’re shutting the door on them,” said Smits of ICCF. “I just want to see a loan payment or additional eligible expenses.”

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