Economic Development and Government

City gets partnership agreement with county

County commissioners transfer tax revenue to meet expected Experience GR payment.

December 13, 2013
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There doesn’t appear to be a loser in this three-way deal.

The Grand Rapids Economic Development Corp. will get the partnership agreement it proposed. Kent County will get its property-tax revenue from the project. And LCL Development LLC will likely get the tax break it is seeking in return for making a big investment in one of its holdings.

LCL Development is part of Leppinks Inc., a company that owns several grocery stores in the area including the Save-A-Lot at 1625 Leonard St. NE. The company plans to invest nearly $1.4 million into the building and its property. About $800,000 will go into the location and another $575,000 will go toward new equipment.

LCL Development will ask the city, most likely next month, to grant it a commercial rehabilitation district. Should city commissioners agree, the value of the Save-A-Lot store would be frozen at its current level and the value of the improved building would be taxed at a reduced rate for the length of the 10-year exemption period.

City Economic Development Director Kara Wood said LCL Development meets the criteria to be awarded the commercial rehabilitation district and added the company’s building would get a bit of a tax break from it. The district would only apply to the store and not the property.

However, approval by the city commission would lower the county’s property-tax revenue from the site, and that type of revenue is the county’s largest source of income annually.

The state law that empowers and oversees these districts, though, gives counties the right to reject, or opt out, of them, which the county has chosen to do over the past several years for tax-exempted projects and tax-capturing entities, especially in Grand Rapids.

A few years ago the county commission adopted an economic development participation policy that limits its yearly contribution to such activities to 7 percent of its annual levy. More specific to Grand Rapids is the county’s policy allows the commission to refuse participation in something like the creation of this district when the originating municipality exempts and abates more than 10 percent of its tax roll.

The county’s annual contribution to economic development hovers around 6.5 percent of its levy; Grand Rapids currently exceeds the policy’s 10 percent threshold.

So Wood offered the county a partnership deal for the Save-A-Lot district in which LCL Development will give the Economic Development Office the county’s share of its property-tax revenue, estimated at $2,000 annually, for each year of the exemption period. Then the city agency will forward the payment to the county.

County commissioners approved the agreement with the city’s Economic Development Corp. last week. What’s left is for city commissioners to ratify the district and for the Michigan State Tax Commission to issue the certificate for the district.

The county commission also appropriated about $250,000 last week from the hotel-motel tax and transferred the money to the expense side of the Lodging Excise Tax Fund. Commissioners took that action to cover the county’s payment this year to Experience Grand Rapids, as the payout is expected to exceed the amount estimated earlier this year because the tax revenue is up.

The lodging tax receipts are now projected to be between $7 million and $7.5 million at year’s end; last year’s total was $6.6 million. Commissioners agreed to reward Experience GR with 16.75 percent of the total tax revenue this year, the first year of a three-year, incentive-type contract they approved a little more than a year ago.

The county is expecting its payment to Experience Grand Rapids will be about $1.26 million this year. Last year, it was $952,124 under a different agreement. Two years ago, it was $783,509.

Guests at hotels and motels in the county pay a 5 percent tax on their lodging bills.

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