GRAND RAPIDS, Mich. — A 'skyline-defining' development planned for downtown Grand Rapids depends on approval of a $565m tax incentive plan that would fund the majority of the $797m project.
Proposed by Fulmar Property Holdings, a company connected to the DeVos and Van Andel families, the development would turn the former Charley's Crab site and an adjacent parking lot into three high-rises: A hotel and condos, a residential building, and an office building.
In order for these to be built, though, developers say they need approval for a Transformational Brownfield Plan, a state tool designed to subsidize mixed-use developments of $100m or more through tax incentives. If approved, a portion of the state and local taxes generated by the 'Three Towers' development would be paid to its developer, Fulmar Property Holdings, over set periods of time.
These taxes include state and local property taxes ($115m and $129m, respectively) and other state taxes (sales and use tax exemptions, construction taxes, income taxes, sales taxes and withholding taxes; $319m). While property-related taxes would be paid out over a 30-year period, income, sales and withholding taxes would be paid out over 20 years and others for two years.
"This is not a philanthropic venture, it's a for-profit development," said Joe Agostinelli, founder of Michigan Growth Advisors, an economic tax incentive consulting firm working on the project. "The size of this incentive is large because the vision for this project is very large."
On Tuesday, the Grand Rapids Committee of the Whole and City Commission approved the Three Towers for the incentive plan, returning it to the Grand Rapids Brownfield Redevelopment Authority before it is sent to the state.
In both votes, one board member voted no: Kelsey Perdue.
"I am not against this project," said Kelsey Perdue, a commissioner for Grand Rapids' Third Ward. "But I am unable to ignore the concerns of the people in this community that I swore to do by best to serve."
As part of the Transformational Brownfield Plan, Fulmar Property Holdings has proposed an $8.5m contribution to the Grand Rapids Affordable Housing Fund. Critics, including Perdue and Together West Michigan, a nonprofit, say the amount is far too small.
READ MORE: Nonprofit pushes back on $565M incentives plan for high-rise development in Grand Rapids
"I don't accept that the residents of the city don't deserve a great deal," said Perdue, who proposed a number of "opportunities" for the plan: A larger contribution to the Affordable Housing Fund, an accelerated payment schedule for the fund, a commitment to include more minority and women-owned businesses in the development and a commitment to connect the development to the "workforce development needs" of the city.
"I would be happy to revisit my vote again," Perdue said. "I'm not against this project, but we must ensure that there are significant public benefits for public financing."
Those behind the proposed build, though, say the contribution, paid out incrementally over several years, "is the largest it could be."
"In order for the project's economics to work, the project must be able to capture 100% of the residential income tax generated by the development," Agostinelli said. "If it only captures 50%, then the project is underwater and can't pay its bills and won't be there."
The $8.5m amount, he says, is a percentage of the state income tax that Fulmar Property Holdings will be paid over a 20-year period by those who live at the towers: 6.25%. As for the $797m total price tag, Agostinelli says the scale and location of the development — on land where the Grand River used to run — have lead to a higher construction cost.
"No real estate investor is going to intentionally take on a project where there where there's no chance of a return on their investment," he said.
While other city commissioners shared concerns about the state of housing in Grand Rapids, they generally considered the Three Towers as beneficial for the city, voting yes on the tax incentive plan.
"We know that affordable housing has been at the forefront of all of our minds, at at the city's minds," Second Ward Commissioner Milinda Ysasi said. "To me, this [development] is about this larger strategic vision of what we hope to have in our community."
"Those are state income tax dollars and this was a state set up program," said First Ward Commissioner Jon O'Connor, speaking to concerns about a loss of revenue to the city. "The state is making the choice to say, 'We're willing to give up our state income tax.' Those dollars don't flow back into our community."
Continuing, Mayor Rosalynn Bliss called Grand Rapids an "income tax-based city," claiming other recent developments, including Studio Park, would not be contributing to the local tax base if not for state-related tax incentives.
"Looking at it holistically, I believe that this project is going to have a positive impact on our community," she said.
