The two city officials on the Downtown Grand Rapids Inc. board of advisors were puzzled last week at how the organization’s costs were allocated.
“I’m sorry, I’m lost,” said Mayor George Heartwell.
“Something doesn’t seem right to me, that’s all I’m saying,” added City Manager Greg Sundstrom.
DGRI is the relatively new nonprofit organization that has the Downtown Development Authority, Downtown Improvement District, Monroe North Tax-Increment Financing Authority and the city’s Office of Special Events under its umbrella.
However, unlike its members, DGRI doesn’t have an annual budget or an established revenue source. Yet, DGRI has expenses and bills to pay, and its four members will have to pick up those tabs based on an allocation formula created in tandem with some city officials and two financial consultants.
“DGRI does not have revenue to support its share of the costs. We need to split that accurately across the organizations,” said Kristopher Larson, DGRI president and CEO.
A portion of the somewhat complex cost-allocation formula was based on fixed expenses, such as rent. DGRI just moved into a new ground-floor suite at 29 Pearl St. NW for seven years at a monthly charge of $5,195.
Another part of the allocation was based on how much time various personnel will spend working on DGRI matters. Each DDA, DID, Office of Special Events and past Downtown Alliance employee became members of the DGRI staff, which numbers about 10. All have checked out of their previous worksites and are stationed in the DGRI office.
In a nutshell, the allocation has the DDA paying the largest share of the costs at 64 percent. The DID will cover 18 percent, with the Monroe North TIFA contributing just under 4 percent. The city is on the hook for about 14 percent. Specifically, the city has to pay 13.55 percent of personnel costs and 13.94 percent of other expenses, such as work done by consultants.
“This is creating a very fair distribution of the indirect costs,” said Larson.
Sundstrom questioned how DGRI arrived at the allocation. He wondered why personnel costs were included in the calculation because the city already pays Todd Tofferi, who directs the Office of Special Events.
“So 13.55 percent of your allocation provides him with a desk?” asked Sundstrom.
“I don’t see the numbers in our (agenda) packet, so I don’t know how the 13.94 percent was arrived at,” added Sundstrom.
The city’s concern is that it will cost more to operate the Office of Special Events as part of DGRI than it did as a stand-alone agency. The office had a space in the city’s Police Department building on Monroe Center.
“I’m not saying the number 13.94 is wrong. If I can have some understanding that this will come back to us at some time, I can support it,” said Sundstrom.
The board agreed to bring the cost-allocation issue up again before the fiscal year ends June 30, and then approved the formula. Heartwell and Sundstrom supported it.
The DGRI board also appointed 47 individuals who have agreed to serve on three of the organization’s alliances.
The Alliance for Investment will provide advice on economic matters and downtown planning issues. The Alliance for Vibrancy will offer input on marketing, promotions, communications, special events and work-force initiatives for the district. And the Alliance for Livability will advise DGRI on programs and services related to downtown’s cleanliness, safety and mobility.
DGRI also added Jon Nunn as a board member and Jana Wallace as its treasurer. Nunn is the executive director of the Grand Action Committee, which has partnered with the DDA on some of downtown’s biggest projects, such as the Van Andel Arena and Downtown Market. Wallace is a bond officer in the city’s Fiscal Services department and holds the same position with the DDA, the city’s Economic Development Corp. and the Brownfield Redevelopment Authority.
DGRI board member Bob Herr said the DID board will soon add the nine remaining members of the alliance board to its table.
Larson told the Business Journal prior to the board’s meeting that the backbone of DGRI is to remove the uncertainty from downtown’s governance. He said the Downtown Alliance, which has been all but phased out, held board meetings that were closed to the public, which created an air of uncertainty.
“People didn’t understand when things started and where things stopped,” he said.
Larson also said DGRI will bring more public input into downtown’s governance, largely through the organization’s three alliances and the action groups affiliated with the DDA. He said mobility and affordable downtown housing were the major issues that need to be addressed.
“Grand Rapids is doing a lot of great things for itself,” said Larson. “What we need is a more articulated vision for downtown.”