Construction, Government, and Real Estate

Brownfield agency’s 2020 budget is a mixed bag

Budget reflects continued growth of program, but it also revealed deficits that may cause long-term problems.

May 17, 2019
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The Grand Rapids Brownfield Redevelopment Authority’s budget for fiscal year 2020 represents some changes for the organization, both positive and negative. While the budget reflects the continued growth of the program, it also revealed deficits that may cause problems for the program in the long term.

The budget, recently approved by the Grand Rapids City Commission, contains total resources and combined appropriations of $11,456,793, which also includes the use of $1,727,081 from the BRA’s available fund balance.

Included in the budget are revenues and appropriations for both the BRA operating fund and the Local Brownfield Revolving Fund.

FY2020 represents the first year in which the BRA reviewed these funds separately, which it said is necessary due to the increased project activity in the LBRF.

The FY2019 year-end estimate prepared by staff showed revenues for the LBRF will be slightly above budget due to a transfer of revenue from the operating fund to begin paying off a loan made to 1205 West Fulton LLC in 2012.

The LBRF provides grants and/or loans to developers to reimburse them for the cost of eligible activities as approved by the BRA. The amount in resources requested for FY2020 is $3,213,241, which includes estimated FY2020 tax increment revenues from completed brownfield projects, repayment of loans made with the 2010 U.S. Environmental Protection Agency revolving loan fund grant and $1,570,025 of available fund balance.

As the program has been generating substantial revenue for the past two years, the fund balance has grown and will be deployed in FY2020 to support eligible activities for priority projects.

Total revenues for FY2020 are anticipated to be $1,643,216. Appropriations in the FY2020 budget are $3,213,241, which include expenditures for approved projects as well as a remainder amount equal to 85% of the anticipated resources available from all years of the fund. 

This budget will allow the BRA to approve and fund projects while maintaining a reasonable fund balance for “unexpected circumstances.”

Nine new brownfield redevelopment projects were added in 2018, and 48 projects have been approved, representing commitments of over $1.1 billion in private investment and 3,616 new jobs since 2013.

Additionally, $206 million of tax increment financing and over $46 million of grants and loans from the state of Michigan and the EPA have contributed to the success of the program over the same time period.

According to city documents, 2016 experienced the most brownfield activity with $475.8 million in private investments and 1,983 new jobs.

The FY2019 year-end estimate for the BRA reflected a deficit in the brownfield operating fund of $123,923. The cause of the deficit was directly related to legislative limitation on the amount of tax increment revenues that may be retained by the BRA for administration, which is currently $500,000.

This is the first time in many years a deficit in the BRA’s operating fund was projected. Additionally, the FY2020 budget projected an operating deficit of $157,056. The budget includes revenues of $8,086,496, a 25% increase from FY2019 budget, and expenditures of $8,243,552, a 29% increase from FY2019.

The BRA currently has a sufficient fund balance to cover the deficit in the short term, but the organization currently is exploring legislative amendments to allow the program to remain self-sustaining.

BRA staff currently administer 57 active project agreements with an additional 27 agreements approved and pending completion of construction. The BRA also administers the development agreements between the Grand Rapids Downtown Development Authority and various developers, which is currently another 17 agreements. This work is funded directly by the DDA.

In related business, the city commission also approved the DDA’s FY2020 budget in the amount of $20,466,475. The DDA recommended budget approval to the city commission during a regular meeting May 8.

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