City officials outline benefits of approving tax breaks for businesses, development

Apr. 20—HOLLAND — City officials are working to clear up misconceptions about tax breaks.

Tax breaks, or credits, are opportunities that begin at the state level. They are made available to businesses or developments that meet specific parameters. And, as a whole, they are designed to encourage growth in areas where growth might not otherwise be possible.

"The incentive toolbox is designed to help overcome barriers to growth in our communities and our states," said Jennifer Owens, president of local economic development organization Lakeshore Advantage and planning commissioner for the city.

"If you look at the tools we can use for incentives, they're really laser-focused on two categories. The first is companies that could be located anywhere in the state or the world, but we want to attract them here. The second is designed to overcome a barrier for a particular piece of land."

While there are a variety of tax credits available, two of the most commonly requested in Holland are Brownfield Credits and Industrial Facilities Exemptions.

In 2020, the city approved more than $16 million in credits through these programs — encouraging the expansion of businesses like Hudsonville Ice Cream and the redevelopment of multiple properties on River Avenue in downtown Holland.

Brownfield Credits

In 2020, the city approved roughly $6.8 million in Brownfield Credits for two development projects: Towers on River and The River Place.

The River Place, a senior living community by Resthaven currently under construction, is located on the corner of River Avenue and Ninth Street in the former lot of Harbour Bay Furniture Co. — which closed in late 2018 after 16 years in business.

The building will include 21 apartments for independent senior living and at least one retail space. Resthaven expects to open the location by late 2022.

Towers on River is a five-story retail and condominium development currently under construction at 159 S. River Ave. — where a vacant building was demolished in January.

The mixed-use project will include nearly 31,000 square feet of retail space on the first floor, dental offices on the second floor and 27 condominium units on the top three floors.

Under the Brownfield Credit, agreement holders are reimbursed for a portion of development costs over a period of years. GDK Properties, for example, can be reimbursed under its agreement for items at The River Place like asbestos abatement, demolition, site preparation, infrastructure improvements, plan preparation and contingency.

"When you think of a brownfield, it's kind of a descriptive term," said City Manager Keith Van Beek. "It's saying there were additional costs to development because there may have been contamination or the property may have been developed before.

"Expanding on those properties is more expensive than other parcels. We use this financing mechanism to basically reimburse developers in a place where it otherwise doesn't make financial sense to expand."

The credit can also be used to encourage the construction of public amenities that otherwise wouldn't be financially feasible for the city. This is true for parking decks on Seventh Street and Ninth Street.

"Holland has used quite a bit of this tool to clean up distressed properties and bring them back to life," Owens said.

Industrial Facilities Exemption

Then, there's the Industrial Facilities Exemption, also known as PA-198. In 2020, the city approved more than $10 million for PA-198 projects, including two expansions for Hudsonville Ice Cream and one for Perrigo.

"This is the tool we use most commonly at Lakeshore Advantage," Owens said. "These abatements are only available to manufacturers and high-technology businesses. It allows them to reduce their future taxes by up to 50 percent for a maximum of 12 years. But it can't be triggered unless the company makes a significant investment."

The abatement is used to encourage businesses to choose Holland for expansion projects. Owens noted when "base" businesses like Haworth, Gentex and Herman Miller invest in the community, there's a ripple effect.

"For every job those businesses create, three to five other jobs are created in our community," Owens said. "Those employees buy homes and shop in restaurants, and those companies buy goods and services to produce their products. Almost none of their customers are located in our region, but they choose to invest here."

Clearing up misconceptions

Owens and Van Beek pointed out there are a series of misconceptions about tax abatements and credits.

"First of all, dollar amounts given are a mix of state and local taxes," Van Beek said. "And if the developments didn't happen at all, we wouldn't have anything. Fifty percent of something is better than 100 percent of nothing."

Owens agreed.

"There's this idea that companies are going to expand anyway, so why give up the money?" she said. "But I've seen, so many times, when the toolbox isn't available, businesses will look outside specific cities and townships — or even states — for their projects.

"If we choose not to participate, we become one of those areas. Fortunately, our local units of government are, hands-down, the most business-friendly in the state."

— Contact reporter Cassandra Lybrink at cassandra.lybrink@hollandsentinel.com. Follow her on Instagram @BizHolland.

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