Kent helps Kentwood seek zone
Kent County was the only organization that could complete the task and commissioners gladly did so, even though their action will cost the county more tax revenue than they were initially told.
County board members unanimously agreed last week to file an application with the state for the region’s first Renewable Energy Renaissance Recovery Zone. Commissioners filed it for the city of Kentwood, where the nearly tax-free zone will be located. The state doesn’t define Kentwood as an “eligible distressed area,” so the city couldn’t directly apply for the property’s designation.
The Right Place Inc. Vice President of Business Development Rick Chapla told the Business Journal that the county was the only public body that could apply on Kentwood’s behalf. Had the county not done so, the application process and the potential for the energy zone’s economic activity would have ended in commission chambers last week.
When the application request was first presented to the county’s Finance Committee in mid-March, committee members were told the county would lose $37,179 in personal and real property-tax and millage revenue over 15 years to the zone if the state approves it. But a recalculation now shows the county will actually give up $91,249 in revenue due to improvements planned for the three-acre parcel at 4720 44th St. SE.
Since 2007, the county has chosen not to participate in tax-increment financing and tax-exempting proposals to slow the erosion of its property-tax receipts, which fund a majority of the services it provides. So why did the county step up to the plate for Kentwood?
“Because it complies with our policy on economic development, pure and simple,” said County Administrator and Controller Daryl Delabbio.
Heat Transfer International, a three-year-old firm in Caledonia, wants to develop the Kentwood property. The firm specializes in biomass gasification, which is a carbon-neutral process that heats solid mixtures of animal and human waste into gas for electrical power. The end product resembles natural gas.
HTI currently employs 10, but company president Dave Prouty thinks he can expand his staff to 90 within five years without the tax payments. The zone would exempt an estimate of $676,384 over its 15-year duration for all the involved taxing entities in the county.
The county’s approval, though, is contingent on entering into a development agreement with HTI, a contract that will require the firm to be in compliance with the commitments and representations it made to the county. HTI already has a similar agreement in place with Kentwood.
“We’re not asking for any more or any less than Kentwood has with HTI,” said Richard Vander Molen, county commissioner.
Delabbio said the contract protects the county’s tax revenue should the project not go forward as planned.
“There is going to be a performance bond requirement (from HTI), so we don’t see a loss in revenue. If the project doesn’t move forward, there are certain commitments that the company has to make. They made those to Kentwood, and it seemed reasonable for them to make those same representations to us,” said Delabbio.
Should HTI gain the zone designation, the firm will operate free of most state and local taxes starting next year through 2021. HTI would then have to pay 25 percent, 50 percent and 75 percent of those taxes in 2022, 2023 and 2024, respectively.
State law didn’t require the county to apply for the zone on Kentwood’s behalf, and the county can’t prevent its property taxes and millage revenue from being captured in the zone once the state approves it.