Business investment in GR good but not stellar

January 27, 2012
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Business owners in Grand Rapids invested nearly $2 billion in their operations from 2003 through last year via the programs the city’s Economic Development Office offers them.

Over those nine years, more than 13,500 jobs and residents were added, while the city’s tax coffers collected more than $8 million from the 357 projects done during that timeframe. The banner years over that stretch came prior to the Great Recession; $346 million and $361 million were invested in 2005 and 2007, respectively.

Although 2011 had the third-most projects approved by the city over that nine-year period at 50, the total investment made by businesses last year was the lowest of the nine years at $130 million — just under the $131 million that came from 37 projects in 2003. The number of jobs created by last year’s investment, 552, was the second-lowest figure since 2003. Only 2009 was lower in job creation when 480 jobs came from an investment of $142 million.

The economic development program that had the biggest clout last year was the industrial and high-tech tax abatement, which led to $61.4 million in 2011 investment and a promise of 382 new jobs over the coming years. The Brownfield Redevelopment Program was next; it helped direct $38.2 million in investment last year and delivered a pledge for 72 new jobs.

Other programs such as the Tool and Die Recovery Zone, the Commercial Rehabilitation tax abatement and the Corridor Improvement Districts had little or no effect on private investment in the city last year.

“There are two existing corridor improvement districts with another on the way,” said Kara Wood, city economic development director. The Obsolete Property Tax Abatement, though, helped make three projects a reality last year and led to $2.4 million of investment. Wood said this abatement is used in conjunction with the brownfield program.

Still, Commissioner Walt Gutowski noted that the city abated almost $230,000 in property taxes last year at a time when the Great Recession and changes to the state funding level have cut revenue to city operations. He wanted to know how the city ensures that the promises businesses make to create jobs in order to get the benefits the city programs provide are being kept. “I think that is something we have to look into,” said Gutowski, who added that the city can’t rely on an “honor system.”

“We do a survey each year,” said Wood of how her office contacts each company annually.

“We look at it, but there is no practical way of doing it,” added Deputy City Manager Eric DeLong.

But Gutowski, who owns Swift Printing & Communications at 404 Bridge St. NW, said firms normally cut jobs when they buy new equipment rather than add employees, because the modern machinery’s technology makes production less labor intensive. “I just want to caution you that those that are promising jobs may just be saying what you want to hear,” he said.

Wood said the city has changed the way it looks at tax abatements over the last few years. She said in the past, the city automatically granted an abatement for 12 years, the maximum state law allows. But now her office has tried to align the abatement period with the depreciation schedule of an investment. “Before it was always 12 years, but now some are for eight years,” she said. “With the brownfield projects, we don’t abate a lot of taxes there.”

“Is it possible to have gotten this $8 million in new taxes without having to give up so much?” asked Gutowski.

“It’s performance based. If they don’t make the investment, they don’t get the abatement,” answered Wood. “We don’t throw everything on the table. We do evaluate.”

Wood also said the city is looking to add yet another economic development tool to its array, with help from The Right Place Inc., by establishing the Next Michigan Development Corp. The NMDC has been designed to advance the marketing and development of certain types of real estate, specifically sites served by multi-modal transportation.

Wood said The Right Place Vice President Rick Chapla is putting together a work group that consists of several units of local government to explore the idea of creating a new regional development agency, and he has told the Michigan Economic Development Corp. of his intent.

DeLong said an example of a site within the city that could qualify for this type of development is the former Steelcase Inc. property at 36th Street and Eastern Avenue that Ashley Capital purchased several years ago and has been redeveloping. DeLong said the property is served by rail, along with other modes, and that makes it a contender. Wood told commissioners they would hear more about the NMDC in the near future.

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