Grand Rapids city commissioners will adopt more budgets than the 2011 general operating fund this week, including one for the city’s Downtown Development Authority.
DDA board members approved their proposed budget two weeks ago and will officially adopt their 2011 spending plan at their next meeting next month. The board can’t give final approval until the city commission acts on it.
As the budget now stands, the DDA will spend more in the coming year than it will receive in tax receipts. The deficit will be covered through reserve funds that contain more than twice the dollars of the general operating fund balance.
The DDA budget is separated into four funds with the local tax-increment fund likely being the most notable. Most of its revenue comes from property owners in the district and the fund pays for the bulk of the improvements the board makes downtown. DDA Executive Director Jay Fowler said projected revenue to the fund is $4.9 million; the projected expenditures from it are $6.3 million.
The tax-increment fund will offer about $2.2 million in development support through a dozen programs, with the biggest expenditure being $850,000 to replace some DASH shuttle buses. Nearly $1.3 million will go to parks and open spaces, with $559,000 of that being spent on repairs and improvements to Ah-Nab-Awen Park. About $2.7 million is set aside for street work, including $1 million in upgrades to Grandville Avenue SE between Weston and Oakes streets. Another $190,000 will be spent on four infrastructure improvement projects in the district.
The fund balance, or reserve account, for the local tax-increment fund has been projected at $5.6 million for the start of the fiscal year, which begins July 1.
Revenue to the board’s debt tax-increment fund has been projected at $8 million, roughly the same amount as the fund’s expenditures. The revenue comes from portions of the Grand Rapids and Kent Intermediate public school millages that the state allows the DDA to capture. But for the next fiscal year, Fowler said revenue to the fund will be down by about $500,000 from this year due to a decline in local property values and a decrease in the GRPS millage.
The fund will cover the principal and interest on the 1993 bonds for the public museum parking ramp on Front St. NW ($268,000) and the 1994 Van Andel Arena bonds ($3.5 million), along with the interest on the 2009 refunding of the arena bonds ($1.4 million). Fowler estimated that the DDA will return almost $2.8 million to GRPS, KISD and the state next year as it can only capture enough property-tax revenue from school millages to cover its debt load. Any excess must be returned to the schools.
The debt-tax increment fund will start the fiscal year with a fund balance of $1.4 million.
The DDA expects to receive about $380,000 in revenue for its non-tax fund, the smallest of its three accounts, in the coming year. The board plans to spend $1.1 million from the fund, with $500,000 going to the city for police patrols and park maintenance. The revenue comes from rental payments and from interest earned from investments. The non-tax fund will begin the year with nearly $4.9 million in reserve.
In all, the DDA has $11.9 million in reserve for the coming year.
The DDA will also close out a temporary fourth fund in 2011 that was established in 2009 when the board successfully refunded the arena bonds. The DDA received $1.8 million from that action and is required to spend those dollars within three years. So those funds will be used to pay for roughly $1 million in work to Cherry Street and Commerce and Ionia avenues. Interest revenue to the fund is estimated at $3,835 for the fiscal year.
As for the city’s general operating budget, commissioners are looking at revenue and expenditures of $110.7 million for a deficit of $990,500 for the coming year. The shortfall is expected to be covered by the fund balance. The reserve will begin the year with $4.6 million and end the year with $3.6 million, which is roughly three week’s worth of general operating fund expenditures.
DDA doing deficit spending
The Downtown Development Authority will dig into the fund balances of its local tax increment and non-tax funds for nearly $2.2 million this coming fiscal year to cover the spending from both accounts. Here is a snapshot of the projected revenues, expenditures and surpluses/deficits for the board’s three major funds for fiscal year 2011, which begins July 1.
Debt tax increment
Surplus/(Deficit) Local tax
Source: Grand Rapids Downtown Development Authority, June 2010