County Opts Out Of DDA Talks Ahead

March 3, 2008
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GRAND RAPIDS — Now comes the hard part.

Seeing that county commissioners followed their economic development participation policy to the letter and decisively voted last week not to allow the Grand Rapids Downtown Development Authority to capture property tax and millage revenues in its expanded areas, the county will now try to negotiate a separate tax-sharing agreement with the DDA like it was able to do with two townships late last year.

And there are at least three obstacles both sides will have to clear to reach that agreement, and one may seemingly be larger than the tax-capture issue itself.

“There is an incredible level of distrust between the city and the county,” said Brandon Dillon last week, one of only three county commissioners who voted against opting out.

A second hurdle to creating an agreement is the DDA would have to stop taking shares of two county millages; the senior services and corrections millages. The county argues that when voters approved those levies they dedicated the resulting revenues to specific purposes and economic development issues weren’t on their lists. It’s a concession the county’s policy requires from the DDA for an accord to be reached.

But if the DDA would agree to the county’s demand to not capture those revenues other organizations may also petition the board to do the same for their millages, as those levies have dedicated spending purposes, as well.

The DDA currently captures millage revenue from the Interurban Transit Partnership, Grand Rapids Community College, and the city’s library system. Those three could also approach the DDA for a capture waiver if it agrees not to collect the county millages.

“We do take our stewardship of taxpayer dollars very seriously,” said Roger Morgan, county commission chairman, after commissioners voted by a 5-1 ratio to opt out.

“It’s not like we turn a blind eye to everything. The DDA already gets more than $1 million from us,” he added.

According to city tax reports received by the county, the DDA captured $1.09 million of county revenue in 2006 or 6 percent more than the $1.03 million it collected in 2005. The DDA is expected to have collected $1.24 million in 2007. The 2007 report is due to arrive at the county in March. If the figure holds true, then the DDA capture in 2007 would be up by 14 percent from the amount of county revenue it captured in 2005. 

The projection for 2008 has the DDA capturing $1.22 million. Had the county agreed to let the DDA collect its revenue in the expanded areas that figure would have dropped by $57,532 to nearly $1.17 million. The difference represents a 5-percent capture reduction for 2008 the DDA is offering to units that allow its taxes to be collected in the expanded areas.

Commissioner Paul Mayhue, the county’s representative on the DDA who urged the commission not to opt out, said figures he received from DDA Executive Director Jay Fowler showed the county would get a DDA rebate of $514,000 in 2034 — the final year of a 25-percent, 25-year, capture-reduction plan proposed by the DDA.

“We’re still plowing money into the DDA,” said Mayhue, who argued that opting out would be a shortsighted move. “We’re talking about our future, not the past.”

But Commissioner Nadine Klein, who presented the case for opting out, said the DDA’s capture-reduction plan wasn’t carved into a stone tablet.

“They can renege on that,” she said. “This is not a regulation.”

Klein, whose district includes a southeast portion of the city, pointed to the third reason why it could be very difficult for the county and DDA to reach a tax-sharing agreement.

She said commissioners had to follow their policy because the city of Grand Rapids is capturing and abating more than 11 percent of the city’s assessed property values. The policy the county approved in May dictates that when a unit exceeds the 10-percent mark then commissioners are required to opt out of a new or expanding plan in that governmental district.

“It is the right thing to do. It is pertinent to our policy,” she said.

Klein, who said the DDA has a reserve of $12.8 million in cash and investments, also questioned whether all the items the DDA was spending its tax captures on were actually related to economic development. She cited the downtown wayfinding sign system (see story page 3) as an example, which the DDA spent $1 million to create and is a maintenance item of $100,000 in its annual budget.

“It troubles me that the DDA can spend $100,000 on sign maintenance,” she said.

County Vice Chairman Richard Vander Molen said the county contributes $6 million of its tax levy every year to captures and abatements, a figure that amounts to 5.8 percent of the county’s total tax levy.

“It does erode the tax base of the county of Kent,” said Commissioner David Morren. “It’s important that we have the ability to support what we’ve committed to.”

Kent County was able to sign a tax-sharing agreement with Grand Rapids and Plainfield townships late last year on the new Plainfield Avenue Corridor Improvement District. It’s a 10-year, dollar-for-dollar pact with a 10-year option and revenue from the two millages will not be captured in the corridor. The county initially opted out of that plan, as it did with the Byron Center DDA.

“We’ve adopted a sound fiscal policy and we’re bound to follow it,” said Commissioner Sandra Parrish.

The DDA expanded its district by 371 acres and doubled its size to 677 acres, but not all of those acres have been designated as tax-capturing districts. City commissioners approved the expansion on Dec. 18, immediately following the close of a public hearing on the matter.

But city commissioners are set to take another vote on the expansion on Feb. 19 because state law requires all governing bodies to wait 60 days after a hearing before voting to add or subtract land from a DDA district.

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