DDA trying to encourage downtowns economy

February 5, 2011
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When the Downtown Development Authority received the final report on the Framing the Future plan last month, Progressive Urban Management Associates President Brad Segal told board members they had to use their funds in a more strategic manner.

Toward that end, Segal recommended the DDA invest $150,000 to support business incubators in the district, spend $50,000 on a retail merchandising plan, and start a venture capital fund with an initial investment of $500,000. Segal felt the DDA’s seed money could draw another $2 million into the loan program from other philanthropic groups and individuals that are interested in bringing more businesses downtown and furthering the district’s economy.

The DDA, however, faces a hurdle to fund the venture capital program at that level, at least to do so in a single budget year. The state statute that governs the DDA likely won’t allow the board to use any of its tax-increment revenues for that purpose, so the DDA would have to reach into its non-tax revenues fund.

“You probably can’t use tax-increment revenue for the loan program. They’re proposing this public-private seeding of loans using non-tax increment for that,” said DDA Counsel Dick Wendt, also a partner at Dickinson Wright PLC.

The difficulty in being restricted to using non-tax revenues is that fund is a thin shadow of the local tax-increment account, which is funded by downtown property owners in the district. The tax-increment fund began this fiscal year July 1 with a projected $8.34 million in revenue.

In contrast, the non-tax fund started the year at $1.14 million, slightly more than double the proposed seed amount for the new capital account. Much of that amount comes from the DDA’s parking lots and other properties, a promissory note and investment interest. But the largest revenue source for the fund this year arrived via a transfer from the fund’s reserve; $766,241 went from the reserve onto revenue side of the account’s ledger.

“This is going to put some stress on the non-tax revenues,” said County Commissioner Jim Talen, also a DDA board member.

The DDA allocated all $1.14 million to be spent this fiscal year, with the largest expenditure, $500,000, going to the city of Grand Rapids for police, fire, and parks maintenance services in the district. Nine other expenditures, including $221,000 for asset maintenance, also were funded by non-tax revenues.

If the DDA is going to start the venture capital program with $500,000 in a single budget year, board members are probably going to have to dig a little deeper into the non-tax fund reserve if they want to maintain the current spending level. Funding for the retail marketing plan likely will have to come from the non-tax account, too.

“We want to populate downtown with more businesses. We’ve seen that downtown has the ability to be that magnet,” said Segal, who referred to himself and his associates as real estate economists who also do planning.

If the venture capital fund gets running, DDA Chairwoman Kayem Dunn said the board wouldn’t make arbitrary loan awards. She said Segal has left the board with a list of criteria to follow for making any investments in the district. “We’re not going to try to control what happens,” said Dunn.

DDA Executive Director Jay Fowler said the board isn’t interested in picking the proverbial winners and losers with the venture capital money. He said the board’s goal is to create partnerships that have a desire to see downtown’s economy move forward.

DDA Vice Chairman Brian Harris said the market needs to be encouraged, and he sees the board as being an enabler to bring that encouragement to the forefront.

“The first step is being an enabler. It’s not a matter of control. We want to enable,” said Harris, who also chairs the DDA task force that is charged with implementing the framework plan.

“We have to be sustainable,” he said.

Dunn also said that the DDA wouldn’t stick with a loan program that wasn’t meeting its goals. “If we get down the road and see it’s not working, we’ll make alterations,” she said.

The board meets Wednesday, and the chances are pretty good members will discuss some aspects of the plan then. “We do have the courage to propose the right thing. We have been authorized to pursue this, and we will,” said Harris. “To not evolve is counter to what we stand for.

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