$111M incentive package for ‘transformational’ housing, retail project in Grand Rapids approved
Posted By: mlive on February 1, 2023. For more information, please click here to read the source article.
The Grand Rapids City Commission has approved a tax incentive, valued at $103 million over 27 years, to help transform a former industrial site on Godfrey Avenue SW into a mixed-use development with hundreds of apartments, commercial space and more.
The tax incentive, known as a Transformational Brownfield, has been awarded to three developers from metro Detroit — Dennis Griffin, Scott Magaluk and Ben Smith — leading the project, known as Factory Yards.
“It’s a part of our city whose potential has been overlooked for a long time, so I’m especially excited to see a big transformational project happening there,” said First Ward City Commissioner Drew Robbins, who represents the neighborhood, Roosevelt Park, where Factory Yards is located.
In addition to the Transformational Brownfield incentive, the project was also awarded an Obsolete Property Rehabilitation Exemption Certificate. The certificate is valued at $8.2 million over 12 years, and essentially limits the growth of new taxes associated with the development. That brings the incentive package for the project to about $111 million.
Factory Yards is planned for a 15.6-acre property, just south of the intersection of Market Avenue SW and Godfrey Avenue SW, that’s home to five, aging industrial buildings and warehouses.
Those buildings would be renovated, and one additional building would be constructed there as part of the project.
In all, it’s expected to include 467 apartments, ground floor commercial space, a food hall and event space, fitness and recreation area, and self-storage. Factory Yards is expected to be fully complete by June 2027, and carries an estimated price tag of $147 million, according to city documents.
As part of an agreement with the city, 94 of the project’s apartments would be reserved for residents earning less than Kent County’s area median income.
Specifically, 48 units would be reserved for residents whose income is up to 80% of Kent County’s Area Median Income. Another 46 units would be reserved for residents at 60% of the area median income. For a one-person household, 80% of the county’s area median income translates to $53,040.
The income restrictions will remain in place for 20 years. Third Ward City Commissioner Kelsey Perdue said she was “really excited to support the project and see it come alive.”
Speaking more broadly about affordable housing, she said it’s important that the city strives to preserve income-restricted housing units after subsidies or agreements paving the way for that housing expire.
“I really hope to see this body continue to have conversations in that area so that we’re not essentially moving around affordability with new project to new project but really preserving it in the long term,” Perdue said.
City leaders say Factory Yards is important because it would help meet demand for more housing in the city, and neighborhood leaders have said the project would breathe new life and energy into the area. It’s also the first project to be awarded a Transformational Brownfield incentive by the city of Grand Rapids.
The original Brownfield program was designed to help facilitate the redevelopment of contaminated, blighted, functionally obsolete, or historic properties. It uses property tax revenue generated by the development to reimburse developers for expenses such as demolition, lead and asbestos abatement, environmental assessments, site preparation and more.
The Transformational Brownfield program builds on the approach.
It vastly increases the amount of taxes that are captured to and used to reimburse developers. That includes state withholding taxes and state income taxes of people who live and work at a development subsidized by the Transformational Brownfield program.
It also includes taxes paid by a project’s construction workers and an exemption on sales taxes on construction materials.
“The fact that this is the first Transformational Brownfield in Grand Rapids I think speaks to the significance of the project,” said First Ward Commissioner Jon O’Connor, who represents the portion of the city where the project is located.
The breakdown of taxes captured to reimburse the developers over a 27-year period are as follows:
- Sales and use tax: $4.1 million
- Construction period income tax: $1.7 million
- Income tax capture: $56 million
- Withholding tax capture: $6.5 million
- Local property tax capture: $16 million
- State property tax capture: $18.6 million
- Obsolete Property Rehab Exemption: $8.2 million
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