Ren Zone is nearing its twilight

April 29, 2011
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Has it really been nearly 15 years since Franklin Metal Trading Corp. became the first company to take up residence in the newly created Renaissance Zone?

The Grand Rapids City Commission, led by then-Mayor John Logie, opened the zone for business Jan. 1, 1997. Many have said the Ren Zone has been the city’s best economic development tool of all-time in terms of private investment and job creation, and city officials proclaimed that the Grand Rapids zone was the most successful of the 11 established across the state.

Now, however, the nearly tax-free curtain is coming down on the original zone: 536 acres and more than 1,300 parcels in six commercial and industrial areas.

The first move into the zone wasn’t easy. Franklin Metal bought the former Grand Rapids Bumper Co. location at 1860 Alpine Ave. NW. To make the move, Franklin Metal had to sell its property in Walker, and it found a buyer in Progressive Die & Automation.

The Walker City Commission also had to approve the move. One Ren Zone stipulation was that, if a business from outside Grand Rapids wanted entry into the zone, it had to get approval from the municipality it was leaving. One benefit for Walker in the deal was that Progressive Die & Automation would provide more tax revenue to the city because it was a larger employer than Franklin Metal.

Rick Chapla intervened on Franklin’s behalf and helped convince Walker city officials that the deal was good for both cities and both companies. “It’s a straightforward transaction that, in many ways, Walker benefits even more from than the city does,” he told the Business Journal just days before Walker gave the deal a green light on the evening of Jan. 27, 1997.

Chapla, who is now a vice president with The Right Place Inc., was a redevelopment specialist with the organization when the city enacted the zone. Since then, he has played a pivotal role in getting some of the sites developed.

“It was an absolute unique offering that helped develop truly troubled properties,” he said. “The city is going to see a pretty substantial increase in tax revenues as a result of the properties coming back onto the tax roll.”

Grand Rapids city commissioners set a cap of $500,000 on the tax revenue they were willing to lose to the zone, so all that revenue will revert to the city Jan. 1. Kent County also will get an increase in property-tax revenue once the zone ends. A few years ago, then-City Manager Kurt Kimball told county officials they would see about $836,000 in millage revenue come in once the zone’s clock ran out. Of course, Kimball made that estimate a few months before property values started declining.

“When the Renaissance Zone program was available, I don’t think there was any question that it caused some investors to take on challenged properties that would have probably otherwise sat empty or would have caused investment to take place in greenfield locations,” said Chapla.

“The City Commission did a great job when the legislation was developed because they didn’t designate vacant tracts of land with the hopes that something would happen. They were very strategic in how they designated areas, which was very forward-thinking at the time,” said Kara Wood, the city’s economic development director.

“If you look across the state, you’ll find that many existing Renaissance Zones that were not successful are vacant tracts of land in industrial parks where they were just hoping and praying that something would come there as a result of the incentive, and that didn’t happen,” she added.

Wood said another visionary trait commissioners showed when they created the guidelines for the zone was seeing a need to include a residential element in the program in an effort to bring more people into the core city. As a result, residences like Monroe Terrace, Icon on Bond, Union Square and others were developed and largely filled.

“I don’t think others really thought about the true value of attracting residents to their communities, either. They were more focused on jobs and investment. But the reality is, the city of Grand Rapids thought this was an opportunity for us to try to get people to live downtown. In that respect, I think we’re 10 years ahead of some of these other communities that are still trying to get people to move back into the city,” said Wood.

More than $250 million has been invested in the Ren Zone over the past 15 years, according to the city’s economic development office. In the “original six” zones, 1,118 jobs were created.

“It did a great job of stimulating a lot of new activity and also helped attract new residents to the downtown area. So from those standpoints, I think it was a great program that stimulated a lot of new investment and new residents,” said Wood.

“For the city, we can confidently say that the program did what it was intended to do.”

Being in the zone meant property owners and businesses didn’t have to pay the state business tax, the 6 mill state education tax, operating property taxes and state and city income taxes. Residents living in the zone were exempted from the income taxes. Full exemptions from the taxes were good for a dozen years, and then 75 percent, 50 percent and 25 percent were exempted for each of the last three years, respectively.

The original zone will close out its 15-year run at midnight Dec. 31. Four other areas in the city, including a portion of Monroe Center, still offer the tax breaks because they were added later. The city actually designated zones in 10 separate areas.

Most embraced the opportunity they were given and improved their properties, like Sam Cummings, Jack Buchanan, Eric Wynsma and Casper Zubin did with the Brass Works office building on North Monroe Avenue. Some did nothing and simply took advantage of the free tax ride. A few even abused the chances they were given. For example, one woman who bought a condo in the zone actually told planning commissioners she didn’t live there. She freely admitted that she and her husband only used the address to avoid paying state and city income taxes.

By the way, Franklin Metal, a metal processing and recycling firm, left Grand Rapids and now is in Lake Odessa. The Alpine property serves as a maintenance facility for Louis Padnos Iron & Metal.

Although the bulk of the city’s Renaissance Zone is going away at the end of this year, its impact will live on, and its success could breed a clone-type incentive in the not-too-distant future.

“Going forward, as part of a more comprehensive urban strategy, I would predict that there will be some kind of a Renaissance-Zone-like tool that will be available to certain urban communities,” said Chapla.

But chances are good that its next replacement won’t be quite as generous as the Ren Zone — at least not until the economy gets much better.

“Unfortunately, we don’t have as many resources available to us as we once did, and we’re going to have to be more creative as we approach new projects,” said Wood. “This program isn’t one that is necessarily sustainable because it does weigh heavily on this municipality and the state government. With both of our entities being challenged with budget issues, we’re going to have to be more creative.”

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