DDA sets fiscal year budget
Members of the Downtown Development Authority adopted their annual budget last week, which is really comprised of three spending plans with one being divided into three categories to match the panel’s transformation from the Framework Plan it completed in January.
The board’s fiscal year budget, which will go into effect July 1 if city commissioners approve it before then, has three revenue sources.
The first and most prominent of those budgets gets its revenue from the local tax payments the DDA collects from downtown property owners each year. Although tax revenue is expected to be down by roughly 5 percent due to a drop in property assessments, income to the local tax fund is projected to reach nearly $7.4 million for the fiscal year, well above the $4.4 million for this fiscal year.
The DDA plans to sell the 3.5 acres it owns on Ionia Avenue just south of Wealthy Street this year to the Grand Action Committee for $2.4 million, and revenue from the sale will go into that account. The property has been designated as the future site of the much-anticipated Urban Market that the board and the committee have agreed to develop together. But the property tax revenue for the coming year is expected to be just under $4.2 million, about $200,000 short of this year’s take. Still, the local tax fund should have $7.4 million in overall revenue to spend.
“We took the DDA’s budget and tried to fold it into the three categories: economy, environment and experience,” said Jay Fowler, DDA executive director, of the local tax fund.
Of the three, the largest is the environment category. It has $5 million in expenditures for the upcoming year, all of it going to street work and debt service on earlier street projects.
“The really difficult thing about the environment budget is there’s no shortage of things to do, but we have constraints. The city doesn’t have enough money to match federal grants,” said Fowler.
“We’re throwing a lot of money here at projects. I think in the next few years, we’ll have to be more cautious,” added DDA member Joseph Tomaselli.
The economy category, which mostly contains the development incentives the board offers, has $2.6 million to spend. The building reuse grant program will offer $800,000 over the next year, well up from the $295,000 that was spent this year. There will be $950,000 in tax reimbursements going to finished projects like the JW Marriott Hotel and the River House condo building next year, a total of $200,000 more than this year.
“We have made fairly high commitments to those programs,” said Fowler, who added that the DDA is considering creating an incentive for sustainable development.
The experience category is the smallest with $250,000 worth of spending planned for the next year, but still $95,000 more than this year. The $100,000 marketing campaign for downtown and a planned $85,000 upgrade of the wayfinding signs in the skywalk that runs from DeVos Place to three of the downtown hotels will receive the bulk of those dollars.
The total expenditures for the local tax fund, which includes $615,000 for administration, over the three categories come to $7.9 million, or about $500,000 above the expected revenue total. The shortfall will be covered by the local tax fund balance, which has been projected to close the 2012 fiscal year with $4 million.
The DDA’s second budget is for its non-tax fund. Revenue to this fund largely comes from rental income on properties the DDA owns, such as parking lots. It is expected to have $332,853 in revenue, while the fund’s expenses should total $786,500. The fund balance will cover the deficit of $453,647 and should have $3.8 million in the account at the end of the year.
The third budget is the debt tax increment fund, which gets its revenue from school millages and the money is used to mostly pay the debt service on Van Andel Arena. Revenue and expenditures are $7.4 million for 2012. At year’s close, the fund balance should be $3.8 million.
In addition to dividing the local tax budget into three categories, the DDA created three action groups to help set the priorities for their representative spending plans. Each action group met three times last month.
“Over the course of the coming year, we’ll have to keep an eye on the action groups to see if they add value. If they don’t add value, we’ll end the action groups,” said DDA Chairwoman Kayem Dunn.
The five-year forecast for the local tax fund has $902,715 in rebates going to the city of Grand Rapids and the Interurban Transit Partnership from 2012 through 2016 because both agreed to allow the board to capture portions of their tax revenue when the DDA expanded a few years back.
The rebate percentage is 5 percent through 2014, and then goes up to 10 percent for 2015 and 2016.
“We’re over $1 million in rebates,” said Dunn, when this year’s rebate amount is included.
“Is the county sorry it didn’t get in?” asked Mayor George Heartwell. Heartwell was referring to a decision Kent County commissioners made to not let the DDA capture its property-tax revenue in the expansion area, so the county didn’t qualify for the tax rebate.