Renaissance Zone Clock Ticking at The Village

After 12 years of “virtually tax free” life, hundreds of residents and businesses at The Village at Grand Traverse Commons now have their sights on the return of the taxman.

Starting in 2015, tax abatements at the massive redevelopment project headed by The Minervini Group will begin phasing out and be totally gone come 2018. But one longtime tenant says the Renaissance Zone designation has done its job and they aren’t going anywhere.

Trattoria Stella recently renewed its Village lease through January 2023. Why sign on for another 10 – long after the tax exemptions expire?

“We see that it’s going to work,” says Stella co-owner Paul Danielson. “It was definitely a risk at first, but the Renaissance Zone did its job and gave the place a chance to develop and grow … and the project is going to thrive. The coming taxes will also be great for the city… a lot more money to be spent. This was a good investment on the government’s part.”

But as one of the project’s first tenants back in 2004, the decision to locate there came at another expense, Danielson notes – operating in a “construction cloud” and persevering through things like no exterior lighting and other infrastructure inadequacies in the early years.

“Certainly there are trade-offs,” he adds. “But the Renaissance Zone allowed Building 50 to be saved. And with savings of $40,000 to $60,000 a year, we could grow the business rather than pay taxes.”

Renaissance zones were created by the state under Public Act 376 of 1996. “It was intended to lure investment in challenging sites,” says Village developer Raymond Minervini. “This one being very challenging.”

As such, Village residents and businesses have been able to live and operate virtually tax-free: local and school real estate property (92% abated); local personal property (96% abated) as well as state business tax and state income tax (Note: doesn’t include bond debt i.e. TCAPS or NMC).

The Renaissance Zone designation was first established at the site in 1999 (pre-Minervini Group) for Building 50 alone. When the Minervini Group acquired the property in 2002, it started the process to expand the designation to the entire development. That process involved both the City of Traverse City and Garfield Township as the boundary line cuts through the development. Garfield Township went along with the plan (Left Foot Charley, Building 61, Cottage 36), but the City did not (former power plant and the cottages across from it).

“The clock was re-set [on the Renaissance Zone] as of Jan. 1, 2003,” explains Minervini. The phase-out period, however, begins in 2015, with a 25 percent less tax break each year: 2015 (75% abatement), 2016 (50% abatement) and 2017 (25% abatement) before its returns to a regular tax zone on January 1, 2018.

“This has been a slow moving train coming for a long time,” says Minervini of the tax exemption expiration. “It will change economics here. We’ll be tightening our belts a little bit.”

Some of the taxes will be captured by brownfield tax increment financing (TIF) to reinvest in infrastructure (street improvements, water lines) and demolition and cleanup costs for eligible developments on the site – ultimately getting property back on the tax rolls.

To date, the redevelopment project has seen approximately $60 million in investments, primarily real estate and personal property, according to Minervini. It is reportedly the largest mixed-use brownfield redevelopment site in Michigan.

“The Renaissance Zone has done the job it was supposed to do – attract developers like us and other investors,” says Minervini. “The re-phasing in of taxes … rolls into investment in another way, as cash rather than abatements.”