City reluctantly creates bond cap for new building

March 26, 2010
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Grand Rapids city commissioners grudgingly set aside up to $4 million of its Recovery Zone Facility Bond allotment last week to an out-of-town development firm that plans to build a new office structure on the city’s northeast side.

“I’m not happy about it, but I will support it,” said Mayor George Heartwell.

The vote set the allocation cap but didn’t assign the bonds to the project as the developer has to present commissioners with a detailed construction plan, and then a public hearing has to be held on the project and a final commission vote on the actual allocation has to take place. “So we have a couple of stop-loss opportunities before us,” said Heartwell.

An RZF bond allocation would go to Grand Rapids GSA Properties Ltd., a Michigan LLC that was formed last November from Sandusky, Ohio. The firm wants to build a single-story, 25,000-square-foot office building at 3045 Knapp St. NE, also the address of the company’s office.

Here’s the rub for commissioners: GSA Properties has pre-leased the space to the Federal government’s General Services Administration for 10 years in a deal that also includes a 10-year option. If the project goes forward, city officials said the Social Security office, which is currently at 50 College Ave. SE, will move into the new building.

Commissioners expressed concerns that having Social Security shift from a central location in the city to the far northeast side would make it more difficult for some elderly and poorer residents to get there. Heartwell also said moving the Social Security office from its Heritage Hill site would leave a hole in the neighborhood.

The mayor added that the proposed lease reminded him of when the Internal Revenue Service moved “in the middle of the night” a few years ago, leaving its near-downtown location on Front Avenue for a site in Cascade Township that isn’t on the bus route. That ended up costing the city income tax revenue from 300 Federal employees.

City Economic Development Director Kara Wood said the new Knapp Street building would be on The Rapid’s transit line.

Still, 3rd Ward Commissioner James White called for the local Congressional delegation  to create legislation that would require a Federal agency to conduct an economic impact analysis before it moves to determine what the cost would be to a community. Second Ward Commissioner Rosalynn Bliss said it was fiscally irresponsible and environmentally unstable to move to a new building when an existing one already serves an intended purpose.

Wood said the Knapp Street office building will have to be built to Homeland Security standards and those guidelines will increase construction costs. She also said the proceeds from the RZF bonds would not go toward acquiring the property.

The city was given a total RZF bond allotment of $25 million from last year’s American Recovery and Reinvestment Act. The RZF bonds are tax-exempt, private sector securities that have to be issued by the end of this year. Earlier, the city and Kent County each allocated $12.5 million of their respective RZF bond allotments to the Christman Capital Investment Group for its $28 million renovation of the former Federal building at 148 Ionia Ave. NW, a vacant structure the city owns and is responsible for.

Because of that responsibility, the city has to amend the preservation and utilization program it created with the General Services Administration in 1974, the year the city took possession of the building. That agreement lists the building’s occupant as the Grand Rapids Art Museum. But with the art museum now on Monroe Center, the city has to file a new application that will outline the renovation project, which will be done to historical standards, and inform the GSA that Kendall College of Art & Design and Ferris State University will be the new users of the building.

The mayor jokingly told Wood, who is preparing the application with Christman Capital and FSU, to tell the GSA that “we love them.”

A final allocation of $4 million to GSA Properties will leave the city with roughly $8 million in its RZF bond allotment for other projects being done by the private sector.

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