GRAND RAPIDS — Legislation expected to be reintroduced this session could address the question of whether downtown residential property owners should help pay for the services currently funded only by assessments on commercial businesses.
Although former Gov. Rick Snyder vetoed similar legislation, lawmakers could revive bills this year that would allow local taxing authorities to decide whether residential owners in business improvement districts should also pay the assessments that commercial property owners pay. The funds go to provide services and amenities in those districts.
“Those residents are getting to use those services. It does make sense that they help contribute to that,” said Jennifer Rigterink, legislative associate at the Michigan Municipal League, which supported the bills.
The MML expects the legislation, which has the support of officials in larger cities like Grand Rapids and Detroit, to come up again this year in the form of one bill.
The vetoed legislation, House Bills 5325 and 5720, sponsored by former state Reps. Chris Afendoulis and Rob VerHeulen, would have revised the Principal Shopping District Act and modified business improvement zones to allow local economic development entities to levy special assessments against certain residential real property.
In his veto notice, Snyder said the matter needed further discussion to determine whether it’s appropriate for residential tax to be assessed in this manner.
In Grand Rapids, Downtown Grand Rapids Inc. — another of the bills’ supporters — manages the Downtown Improvement District funding tool. DGRI uses the funds to keep the city’s urban core clean, put on events and staff a uniformed Clean Team that cleans sidewalks daily and works on landscaping. The funding also goes toward retail-oriented marketing and promotions.
The only revenue source for the improvement district, which was established in 2000, is a special assessment on real property voluntarily approved by commercial property owners within the district. Owners of residential property in the district do not pay the assessment.
Supporters of the changes note about 2,000 new residents moved into downtown in the last five years, which sparked the interest in having owners of those properties contribute to the services from which they benefit.
“In the ’60s, when these tools were created, there weren’t residents down here, so you didn’t think about it,” said Andy Guy, chief outcomes officer at DGRI.
A matter of scale
Some smaller communities are not yet on board with assessing in this way, since many are just beginning to see residents move into their downtowns, Rigterink said.
Kalamazoo’s Downtown Economic Growth Authority has identified creating a business improvement district as a “potential next step” after it absorbed the city’s Downtown Development Authority and enlarged its tax increment financing district. Very recently, developers have focused on adding residential units in downtown Kalamazoo.
“We’ve had some very early discussions, but ultimately have to better understand what property owners feel like they need that goes beyond what we’re able to provide now,” said Andrew Haan, president of the Kalamazoo Downtown Partnership.
DGRI’s Guy said demand exists for more services in Grand Rapids. As well, downtown residential owners also create more stakeholders who could make decisions about what the assessments could fund in the business improvement district.
“It’s very important for us to have those voices around the table so we can make sure we’re managing the tool and the district in a way that residents want to see,” Guy said. “We would like to have the option to have that conversation with condo owners in downtown.”
How it would work
In Grand Rapids, residential owners currently are expressly excluded from paying the assessment, although an owner could pay voluntarily. Further legislation would give the bodies that run the districts a choice in assessing these properties.
To implement the changes, 60 percent of the people in the zone would need to approve, Rigterink said. If the future legislation were to pass, nothing would change unless locals vote for it.
Ben Hoppe, who owns a condo on Monroe Center in downtown Grand Rapids, said he would be willing to consider paying an assessment with certain stipulations, namely the creation of better parking solutions and a seat at the decision-making table for residents.
“Grand Rapids does a pretty good job as it is with keeping downtown, for the most part, a pretty clean city,” he said.
Hoppe added that although he’d like to see residents help make decisions on how the assessment is used, commercial property owners likely would still wield the most influence.
According to its 2019 fiscal year budget, the Downtown Improvement District in Grand Rapids is expected to bring in nearly $1.2 million, with most revenue coming from assessments paid by commercial property owners in the district. Most of the more than $1.1 million in expenditures go toward maintenance and beautification.
Grand Rapids’ Downtown Improvement District renews every five years, when the budget is rebuilt and forecasted out over the next five-year period.
Condo owners have never participated in this process, Guy said, so it’s unknown how much revenue they would contribute.
Editor’s Note: This story has been updated from its original version.