County Likely To Opt Out

January 21, 2008
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GRAND RAPIDS — If county commissioners follow the recommendation made by the Finance Committee last week, then board members will refuse this week to let the Grand Rapids Downtown Development Authority capture any of Kent’s property tax and millage revenues in the DDA’s newly expanded areas.

“They want to do economic development with our money, the seniors’ money, the jail’s money, and the community college’s money,” said County Vice Chairman Richard Vander Molen, who chairs the Finance Committee.

“If we don’t approve this today, we’ll have no say over what the DDA can do,” said Commissioner Dick Bulkowski.

Members of the Finance Committee unanimously agreed to “opt out” and not let the DDA collect county tax revenue in the new districts. Their vote also indicated they were following the economic development participation policy commissioners established last May.

Commissioners enforced that policy when they chose to opt out of the new corridor improvement plan for a stretch of Plainfield Avenue and then entered into separate tax-sharing agreements in December with Grand Rapids and Plainfield townships, the units that created the corridor. Commissioners are likely to adhere to the policy again when they vote on the DDA expansion Thursday.

“When I was a city of Kentwood commissioner, we would agonize over these,” said County Commissioner Harold Mast about abatements, exemptions and captures. “I encourage the staff to see if they can talk with the city about an agreement.”

For the county to successfully arrive at a tax-sharing agreement with the DDA, the city agency would have to stop collecting revenue from the senior and corrections millages. The county argues that voters dedicated specific uses for those revenues when they passed both millages, and economic development wasn’t one of those uses.

The DDA would also have to agree to limit its capture of county property taxes to a set time period like 10 years, with a possible option for another 10 years. Under current state law, the DDA can capture taxes within its district for as long as it is in existence.

Commissioners established the policy because they felt the county needed guidelines to follow when negotiating an agreement, and that the county was getting precariously close to losing too much property-tax revenue to abatements, Tax Increment Financing Authorities and Renaissance Zones established by cities and townships.

The county reported that $6.75 million of its tax levy was captured or abated by cities and townships in the 2006 calendar year, an amount that was 5.89 percent of the total tax roll for its general operating budget that year. The policy limits the overall capture of revenue to the operating budget to 7 percent. When the capture exceeds that figure, the county can suspend any tax-sharing agreement it has made.

County Fiscal Services Director Robert White said last week the total percentage captured in 2007 could rise by another percent and be very close to the 7-percent limit commissioners set with the policy. White said the county wouldn’t know what the exact percentage would be until April, when the total abatements and captures for 2007 are reported to the county.

The policy also restricts the county’s revenue loss from abatements and captures in a specific city or township to 10 percent of the total taxable value in that district. White said the city of Grand Rapids abated and captured 11.7 percent of that taxable value in 2006 by capturing $255 million and abating $297 million of the combined equivalent taxable value.

Five other districts also exceed 10 percent, with the city of Lowell leading the list by capturing and abating 18.5 percent.

“Once you get beyond 10 percent, you can’t afford to participate,” White said to committee members last week.

Nearly $450 million of the taxable value was captured in 2006 by 13 cities and townships in the county, and another $810 million of the taxable value was abated by 20 governmental units that year. There are a dozen state laws that allow units to capture and abate property taxes.

The expansion added 371 acres to the DDA, extending the district to 677 acres, but not all the new blocks capture taxes. As an incentive for taxing jurisdictions to participate in the expansion, the DDA pledged to refund 5 percent of the taxes captured to the units every five years for a total of 25 percent over 25 years. The county stands to receive a refund of $72,000 in the first year if it participates, but no reduction if it opts out.

“That is a promise, not a contractual agreement,” said White of the DDA incentive.

“The only control you have is to opt out.”

The DDA estimated it would capture $1.2 million of the county’s 5.39 mills across the existing district in 2007.

The county chose to opt out of a 1995 DDA expansion that added 36 acres to the district west of U.S. 131 and north of Pearl Street, property now occupied by the YMCA and several parking lots for the DASH system.

A 1994 state law gave taxing jurisdictions that are affected by a DDA expansion 60 days from the end of the public hearing to opt out. Jurisdictions that don’t opt out or do nothing are considered as agreeing with the expansion. City commissioners closed the hearing on the DDA expansion on Dec. 18.

The city enacted the DDA in 1980 for a 30-year term, and then extended that term to 2034 a few years ago. White said information the county received from the city of Grand Rapids indicated that the city plans to keep the DDA active until the year 2100.

“It will capture everything, theoretically, forever,” White said to the committee. “You will never have the opportunity to opt out of the original DDA district.”

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