DDA must first define its structure

January 28, 2011
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Quite a few questions need to be answered before the Grand Rapids Downtown Development Authority can seriously begin its restructuring effort.

Progressive Urban Management Associates President Brad Segal suggested that the board become a holding company — just one of many recommendations that came out of the Framing the Future plan commissioned by the DDA to provide insight into the direction it should take.

“It’s a framework. It’s a picture. It’s a view. It’s not a master plan,” said Brian Harris, a board member who heads the taskforce that will be looking at ways to implement the consultant’s recommendations.

The standard private-sector definition of a holding company is one that has a controlling interest in one or more other companies through the ownership of their stocks or bonds. But the DDA is a public entity, a public corporation, in fact, and Segal felt the Downtown Alliance is one organization that could be held by the DDA because the board provides much of the alliance’s annual funding. He said having the alliance and possibly other organizations under its umbrella could create efficiencies the DDA currently doesn’t have.

The DDA, however, is somewhat limited in what it can do: It has fewer organizational options than a private corporation. A state statute, Public Act 197 of 1975, defines its powers and outlines its structural form. DDA counsel Dick Wendt, a partner at Dickinson Wright PLLC, will be charged with directing the legal aspects of the board’s restructuring.

Before he can do that, Wendt said he needs to know exactly what is meant by a “holding company.”

“In the enabling statute there are some pretty specific requirements as to the formation of the DDA and its board,” he said. “I told Brian Harris when he gets his committee together to implement this that he let me know so I could be in attendance, and let him know what is or is not permissible under the state law. He said he would do that.

“Is this sort of a form over a legal structure sort of thing that they’re talking about? I don’t know that for sure. I guess maybe they don’t know that for sure, at this point, either,” he said.

Wendt said the state law requires a DDA to operate within a defined district and conduct its business operations according to a development plan and a tax-increment financing plan. Those plans describe what the board can do and how it can spend its money.

“What’s going to be done here has to tie into its plans, and it has to be done through a public process. A new plan would have to reflect how they’re going to use their tax increment,” he said, adding that the plans can be amended and have been about 20 times in the past 28 years.

“Beyond that, I didn’t see too much in the consultant’s proposed short-term commitments that wouldn’t be eligible under the plans. It all looked to be legally possible,” he said.

DDA Executive Director Jay Fowler said models of holding companies do exist; Downtown Kalamazoo Inc. is the closest. DKI is a private nonprofit organization with Downtown Tomorrow Inc., Downtown Kalamazoo Association Charities, the DDA, eight committees including one for capital improvements, and the Downtown Development Area Citizens Council under its umbrella.

But Fowler added that he didn’t want the board to simply copy an existing model. DDA Chairwoman Kayem Dunn said the board is facing restructuring limitations.

Another recommendation from Segal was that the DDA establish retail incubators in the district, first along Monroe Center and Division Avenue. The state statute allows the board to do that. But as Wendt pointed out, retail incubators in the district would be a whole new concept for the board. Segal said the spaces would be for local, independent retailers.

According to state law, the DDA can lease space for incubators and provide some financial support for those businesses. But the board would have to give preference to retailers that would provide “goods or services that are not available or that are underserved in the downtown area.” There are additional conditions the DDA would have to follow.

“If you get into the state law, there are some pretty strict requirements, all of which have to be complied with,” said Wendt.

Segal suggested the DDA make $150,000 available for the incubators. Segal also recommended that the DDA realign its annual budget into three categories that would fund downtown’s economy, environment and experience.

Fowler said he will do that for the next fiscal year that begins July 1. “It’s fairly easy to relocate the budget into three categories,” he said.

Wendt said there wasn’t anything in the state statute to stop the DDA from doing that.

“Most of the things, as I recall, could be eligible costs,” said Wendt. But he added that the City Commission would have to approve the budget’s new format. In fact, city commissioners would need to approve every change the DDA made, including any new structure the board might adopt. Wendt said the changes would not need state approval.

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