DDA Looks Five Years Out

May 25, 2007
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GRAND RAPIDS — Members of the Downtown Development Authority approved the upcoming fiscal year budget recently and also set the direction for spending through 2012.

Board members will spend just under $15.6 million in the coming fiscal year that begins July 1. Nearly half that amount, about $7.5 million, has been earmarked for streetscape and infrastructure improvements, parks and support for developments within the district.

Another $5.3 million will be spent next year on bond payments for Van Andel Arena and the parking ramp on

Front Avenue
near the Van Andel Museum Center.

Revenue to make all that happen will come from three different sources. One is the local tax-increment fund, which is the growth portion of the property tax property owners in the district pay. Revenue to the account is expected to reach nearly $4 million next year and will be used to support capital improvement projects.

By 2012, the fifth year of the five-year plan, revenue to the fund should reach almost $4.8 million and total $22.2 million over the next five years.

But Executive Director Jay Fowler pointed out that next year, and for the first time in the last few years, the DDA will have to reimburse some of the taxes. About $162,000 will go to the owners of three downtown projects: the JW Marriott hotel, River House and Tall House. The last two are new condominium buildings.

Over the next five years, these reimbursements should total $2.9 million.

Another first for next year has the DDA setting aside $800,000 for downtown parking. Previously, the money was set aside for parking and transit. But since voters approved the transit millage, and because the downtown system is nearing capacity and the Interurban Transit System is close to buying a lot from the DDA, the board felt the funds should be designated only for parking.

The DDA plans to set aside $2 million for parking uses over the next five years.

Reducing the fund's balance will be another first for the local tax-increment fund this year. The DDA has kept the reserve at a minimum of $1.5 million in past years, which was about half of the annual increment revenues. Now the board will let it drop to $1 million in coming years in order to meet some future spending goals.

"There is no reason not to reduce the fund balance to $1 million," said Fowler.

The account will begin the new fiscal year with a balance of almost $7.7 million. About $4.7 million of that reserve, though, will be added to $4 million of new tax revenue and go into the FY08 budget, meaning the local tax-increment fund will supply $8.7 million of next year's $15.6 million spending plan.

Revenues to the non-increment tax fund, the DDA's second income source, will total $520,000 and will mostly come from rental payments to the board and interest income. These dollars are used for marketing, promotions, maintenance and special events.

"The revenues are fairly stable here," said Fowler.

But when the DDA sells ITP one of its DASH lots this year, Fowler said half of the revenue from that sale will go into this fund.

The board expects to collect $2.7 million in this fund over the next five years.

The third revenue source is the debt-increment fund. The DDA collects this revenue from school millages; income for the coming year is expected to total $6.3 million. But the board can only spend these dollars on debt payments for the arena and museum parking ramp, two expenditures that will amount to almost $5.3 million in the coming year.

The DDA can't spend more from this fund than the amount the bond payments total. And because property values have risen downtown, the millages are now producing more revenue than the DDA needs to service its debt. So the board has to reimburse the school systems the difference, which is slightly more than $1 million for FY08.

DDA Chairwoman Kayem Dunn said property values have risen in part because of the investments the board has made in downtown over the years through improvement outlays, building re-use grants and other financial assistance programs. She said those programs, in turn, have helped increase millage revenue to the schools.

The DDA expects to return $6.1 million to the schools from the debt-increment fund over the next five years.     

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