Ren Zone decision must be made soon

October 5, 2008
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Kent County Commissioners once again stayed true to their 16-month-old economic development participation policy when they recently decided not to allow county property tax and millage revenue to be captured by a new downtown development authority in Ada Township.

Commissioners may get another chance this week to keep their record unblemished as the city of Grand Rapids has asked them to make a decision on three requests to extend the Renaissance Zone for a trio of projects situated on properties that have been nearly tax-free since 1997.

But unlike making a decision on a DDA or any other tax-increment financing authority, county commissioners do not have to vote on a Ren Zone extension to deny it. According to Public Act 116, which became state law in April, an extension fails if commissioners don’t take up the matter.

“They don’t have to take any action. By not acting, it’s like a pocket veto,” said Daryl Delabbio, county administrator and controller.

City Economic Development Director Kara Wood said county commissioners could amend their policy to allow the zone extensions and still adhere to their guidelines.

“For example, they could increase the percentage limit that we’re having trouble with. They could put in another exception to the policy. But I don’t know what they’re interested in doing at this point,” she said.

The county’s policy requires commissioners to nix a request for additional tax revenue from a city or a township when that governmental unit captures and abates 10 percent or more of the unit’s taxable value.

Grand Rapids tops that number at 12.3 percent. So commissioners would have to raise the taxable-value limit to 13 percent to let the extensions go forward.

“But I don’t think that we’re recommending that, or that they’re willing to consider it. But they could,” said Wood.

“I think that policy change is a broader discussion we need to have. I think in the short term, that’s not going to be a solution for us or for them, because it was quite clear at the last Finance Committee meeting that the commissioners wanted to stick with the policy that they have in place,” she added.

The policy also sets a limit of county revenue that can be captured and abated in a single year to 7 percent; that number stood at slightly more than 6 percent at the end of 2007, when the county lost $7.3 million in property-tax and millage revenue to developments, up from $6.8 million in 2006.

Commissioners were scheduled to make a decision on the extensions late last month after the county Finance Committee recommended that the board stick to the policy and deny the requests. The vote at the commission meeting, however, was set aside to give county and city administrators time to iron out an agreement that would let board members approve the zone extensions.

Wood, City Manager Kurt Kimball and The Right Place Vice President Rick Chapla met several times with Delabbio and County Fiscal Services Director Robert White over the past two weeks to discuss various options to solve the dilemma. Both Wood and Delabbio said they couldn’t disclose what was discussed at the meetings when the Business Journal spoke with them last week.

Delabbio said he also met with County Commission Chairman Roger Morgan and Vice Chairman Richard Vander Molen to inform them of what had been discussed.

It’s widely believed that commissioners would approve the zone extensions if either all or a significant portion of the county’s property-tax and millage revenue that would be captured during the zone’s extended duration was reimbursed by the city, the developers, or both.

The extensions are expected to be for 12 years, with a full exemption for nine years and a declining partial exemption for three years. The county would likely lose about $89,000 over that period.

The city would also lose property-tax dollars to the extensions but would collect income-tax revenue from the jobs that are expected to come from the three projects.

True North Architecture, Construction and Investments, Via Design and Wealthy Street Historical Development have asked for the extensions. The three plan to invest a total of $3.5 million in three renovation projects on three different properties in the city’s Ren Zone, but those investments will likely only be made if the extensions are approved.

Wood said she hopes the issue gets resolved when the county’s Finance Committee meets on Tuesday, Oct. 7, which is two days before the matter might reach the full board. The extension issue, though, isn’t on the committee’s agenda.

“We’re still working out some details, but we’ll get there,” she said. “I don’t have any details on how it’s going to be resolved yet; we’re still working out several different options.”

As for the Ada Township DDA, Delabbio said his staff and township officials will get together soon to try to create a separate agreement that would allow the DDA to capture county property-tax revenue, but only an amount equal to the tax the township gives up. Revenue from the corrections and senior millages would be exempt from capture. The agreement would be for only 10 years, not for the life of the DDA, with an option for another decade.

The contract being discussed is like the one the county entered into earlier this year for a corridor improvement district along Plainfield Avenue on the northeast side of the county.

“We will be looking at a separate agreement, an agreement similar to the one that we have with Grand Rapids and Plainfield townships,” he said.

Delabbio expressed confidence that the county can reach an accord with Ada Township officials

“As Bob (White) explained to me, they wrote their DDA plan based on our policy. We sent our policy out to folks when we adopted it so that everyone was informed,” he said.

When commissioners chose not to participate in the Ada Township DDA two weeks ago, it marked the sixth consecutive time board members stuck to their policy by denying a TIFA a direct capture of the growth portion of the county’s property-tax and millage revenue.

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