KALAMAZOO / PORTAGE / BATTLE CREEK | Development Thread

[Sar]

Originally Posted by deja vu

Unfortunately, there's nothing else on my radar that's greater than 7 stories (The Catalyst development that recently broke ground). I agree there's certainly the space for more taller buildings, and the need for greater density downtown. I think Kalamazoo has been trying to put on it's big kid pants and I hope it is successful. A few more 15-20 story towers would be a dream. But I don't expect to see something on the scale of The Exchange for a long time. I think the apparent slow pace is the result of a variety of factors.

1. - The local market - demand for office space and housing is pretty high right now, but it's all relative. The addition of The Exchange and The Catalyst development alone will "flood" the downtown with new, class-A office space, and to a lesser extent, market-rate housing. I think developers are wary to finance much more until they see the market react to this extra real estate, and maybe wait until after the next recession.

2. - Lack of Outside Investors - Most of the development is by developers based right in Kalamazoo, or maybe Grand Rapids. They usually move very slowly and methodically, handling only 1 or two sizable projects every few years. Outside investors have not shown interest in Kalamazoo on a large scale lately. Perhaps they are not willing to take on risk in an unknown market in a smaller-sized, midwest city?

3. - Nature of Local industry - I think a lot of businesses that are economically important to the area locate further south, in Portage, where they can sprawl. There's a big manufacturing presence here, and those operations demand land that is cheap, easily developable, and business-friendly. Portage wins out over Kalamazoo in most cases on this front.

4. - Infrastructure - The city has some deficiencies when it comes to roads, public transit, parking, utilities, and downtown amenities. It's making progress on perhaps all of these (except roads, in my opinion).

5. - Poverty - Last but not least, the poverty rate for Kalamazoo is abysmal. It's around 32 - 33% (source). More than double the rate at the state level, and almost 3 times the national rate. It's hard to attract impressive development to a city where 1/3 of it's inhabitants are considered poor. The homelessness in Kalamazoo is also a big issue. The number is between 300 and 400, depending on where you get the data. Doesn't seem like a lot, but in a city of around 75,000, that's quite a lot. I also read recently that Kalamazoo Public Schools had the highest percentage of homeless or transient students of any district in the state - I think it was 12%! So 1 in almost every 8 kids doesn't have a permanent home.

Yea you are right on on those points for sure. What ever happened to that 20 story building that was being proposed for downtown back in 2013? Pretty sure that it didn't gain enough funds for it.

[deja vu]

Originally Posted by Sar

Yea you are right on on those points for sure. What ever happened to that 20 story building that was being proposed for downtown back in 2013? Pretty sure that it didn't gain enough funds for it.

If we're thinking of the same thing, I think that proposal was pitched after he (Ryan Reedy) couldn't get the funding lined up. I have no idea what Reedy Group has been up to these days. They went whole hog on that "Entertainment District" development about a decade ago (which is really little more than 3 buildings and an outdoor stage), and ever since, it's been...nothing.



Somewhat related to the previous points, the City is making an effort to increase the cash flow to support downtown improvements. Or at least experimenting with different ideas. At Monday night's monthly meeting, the Commission voted to approve the creation of a new Downtown Economic Growth Authority (DEGA) to replace the former DDA. This new authority will oversee the allocation of funds that will be captured from a new, larger TIF (Tax Increment Financing) overlay district. In short, the funds grabbed with the old TIF district have dwindled from millions to a few hundred thousand dollars since 2008. Under this new plan, more businesses will fall within the boundaries of the district, but business owners won't pay a cent more, meaning more local tax revenue will be allocated directly to downtown improvements.

I think it is a good move, and we'll see if it pays off.

Kalamazoo passes taxing tool for downtown development
By Kayla Miller | MLive
October 15, 2018

KALAMAZOO, MI -- A new tool intended to collect taxes for development of Kalamazoo's downtown was approved Monday. The Kalamazoo Downtown Economic Growth Authority was approved as a replacement to the former tax collection mechanism, Monday, Oct. 15 by the Kalamazoo City Commission. Kalamazoo's Downtown Development Authority uses tax increment financing (TIF) to reinvest taxes into a specific part of the city. DEGA will replace this mechanism, which is no longer a sustainable source of revenue, according to the recommendation approved by commissioners...

Also somewhat related, I noticed from other news sources covering this story that Downtown Kalamazoo Inc. seems to be in the process of quietly rebranding itself as Kalamazoo Downtown Partnership. At least, I think they are...it's the same people involved, but a new website. The old website seems to have dissapeared in the past few days...I don't really know why they had a name change, although it does sound more like a non-profit now. The new website has some additional info on the proposed (now adopted) DEGA. Scroll to the bottom of the webpage, if interested.

https://www.downtownkalamazoo.org/about-dki

[LMich]

Originally Posted by deja vu

Somewhat related to the previous points, the City is making an effort to increase the cash flow to support downtown improvements. Or at least experimenting with different ideas. At Monday night's monthly meeting, the Commission voted to approve the creation of a new Downtown Economic Growth Authority (DEGA) to replace the former DDA. This new authority will oversee the allocation of funds that will be captured from a new, larger TIF (Tax Increment Financing) overlay district. In short, the funds grabbed with the old TIF district have dwindled from millions to a few hundred thousand dollars since 2008. Under this new plan, more businesses will fall within the boundaries of the district, but business owners won't pay a cent more, meaning more local tax revenue will be allocated directly to downtown improvements.

I think it is a good move, and we'll see if it pays off.

Also somewhat related, I noticed from other news sources covering this story that Downtown Kalamazoo Inc. seems to be in the process of quietly rebranding itself as Kalamazoo Downtown Partnership. At least, I think they are...it's the same people involved, but a new website. The old website seems to have dissapeared in the past few days...I don't really know why they had a name change, although it does sound more like a non-profit now. The new website has some additional info on the proposed (now adopted) DEGA. Scroll to the bottom of the webpage, if interested.

https://www.downtownkalamazoo.org/about-dki

This whole thing confuses me the more I read. Most articles done on this seem to imply that this is more than an expansion of the DDA boundaries; that there is a change on the mechanism of funding that allows for more state dollars to be leveraged. In fact, the DEGA FAQ says this:

The new Downtown Economic Growth Authority is an innovative update to the DDA TIF funding model, with an ability to leverage additional state matching dollars for investments in downtown. The new authority will reset the funding base according to today’s downtown landscape, allowing for continued investment in locally determined economic development priorities that will keep the positive momentum growing.

The Downtown Economic Growth Authority is a continuation of the DDA TIF funding model, with an ability to leverage additional state dollars for investments in downtown. The new authority will realign the funding model for future investments in locally deter mined economic development priorities.

It may just be development-ese/development jargon, but it sures does seem to imply that the state legislation to create the DEGAs are different from the legislation that creates DDAs. What I'm not clear on is what the benefit of the DEGA is over the DDA. More than that, and even more confusingly, the DDA isn't going to disappear:

The DDA will work in partnership with the new Downtown Economic Growth Authority, coordinating strategic investments in Downtown. The DDA TIF district will be dissolved, but the DDA will continue its current responsibilities, which include management of the City’s Downtown parking system and oversight of investments through an existing levy Downtown.

Seems really complicated or rather they just didn't explain it how they needed to. I'm also still a bit unsure why the old Upjohn/Pfizer lands (Zoetis) were carved out of the district, unless Zoetis lobbied to be taken out. It seems to me that this would be a major contributor to the TIF as that land continues to be developed. I just looked up 333 Portage; the taxable value of the property is something like $25 million. Looking at the taxes they've paid in 2017, it was nearly $1.7 million. Why Zoetis isn't in this new district is beyond me.