Economic Development and Government

City approves finance pact with DGRI

The Grand Rapids comptroller objected on legal reasons but was overruled.

April 18, 2014
| By Pete Daly |
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A financial agreement between the city of Grand Rapids and Downtown Grand Rapids Inc. has been approved by the city commission, despite objections by city comptroller Sara Vander Werff.

Vander Werff, an attorney who was elected city comptroller last year, told the commission she felt the proposed agreement violates the city charter because it amounts to giving DGRI cash advances that it then can spend. She said the charter allows only the city treasurer to pay out city funds on checks signed by the comptroller and authorized by the city commission.

The DGRI was established by the city commission a year ago as an independent umbrella organization under the commission’s Downtown Development Authority. It serves as the link between the DDA and the city’s Downtown Improvement District, and the Monroe North Tax Increment Financing Authority. Those authorities receive designated funds, either by special assessment by the city or tax increment financing, for activities that encourage new development and economic vitality in their respective neighborhoods.

Vander Werff wrote in an April 13 email to the commissioners that the “purported” purpose of the agreement “is for the DGRI to open separate impressed checking account(s) to receive advances on its budget, reportedly in the approximate amount of $300,000 quarterly or $1.2M annually.”

She said that “even if the DGRI stays in budget, the controls put in place by the City’s procurement process are easily circumvented by an outside checkbook.”

“Now is not the time to start giving public/private partnerships their own checkbook. We cannot set this bad precedent for the City at a time when our resident taxpayers have given us a millage for neighborhood parks that have been neglected and we are asking our income taxpayers to continue a tax increase for our streets that have been neglected by all levels of government. This is unacceptable and I will not approve cash advances to a DGRI checkbook,” wrote Vander Werff.

On April 15, City Attorney Catherine Mish met with the commission and reported that she and the city’s outside legal counsel, Dick Wendt of Dickinson Wright, had reviewed the city charter and Vander Werff’s objections and did not agree with Vander Werff.

The commission subsequently voted unanimously to approve the agreement.

Mish told the Business Journal that at issue was the process by which the city passes on the funds belonging to the DDA, DID and MNTIFA.

“Is it done only when those authorities submit a request for a check to be cut? Or is a certain amount of funds given over to the authorities, and the authorities can write their own checks?” said Mish.

“For some time, there has already been a separate account set up so that DGRI has the funds to cover its payroll without having to come to the City every two weeks to get a check for its payroll,” added Mish.

Mish said the city is “not loaning or fronting money to DGRI. This is money that belongs to the three authorities.”

“It was my conclusion that these aren’t really city funds. These are special assessment funds or tax increment revenues that belong to the authorities, over which their boards have control. So it is not city tax funds.”

Kris Larson is employed by the DDA as its executive director, and by extension, is also president/CEO of DGRI, which has an independent staff.

He told the Business Journal the opposition to the financial agreement with the city “was a political attack … nothing more.”

Larson said the DGRI operates through three separate budgets — one each for DDA, DID and MNTIFA — and each 2014 budget was approved last July by the Grand Rapids City Commission, along with each of the respective authorities’ fiduciary boards.

The DDA budget for 2014 is about $7.3 million, the DID budget is $795,499, and the MNTIFA is approximately $1 million, according to Larson.

New budget recommendations will go to the city commission in June for the next fiscal year running from July 1-June 30.

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