By Rachel Beard
Lansing Township News Staff Reporter
In order to develop commercial areas to their fullest potential, it is common for governments to rely on bonds to pay for these developments. Lansing Township is no exception.
But at the end of the day – or fiscal year – who is responsible for paying off these bonds?
“The DDA (Downtown Development Authority) pays all of the bond payments,” Lansing Township Treasurer Leo Rodgers said. “No bond payments are made from Lansing Township’s operating budget.”
What exactly does this mean? DDAs have been a part of Michigan towns since the Downtown Development Authority Public Act 197 of 1975 was passed. DDAs collect property taxes from designated areas in a township or city and use them to build public improvements. These funds have been used to improve many areas of Lansing Township.
“They [the DDA] get authorization from the city to act, and what they do, of course, is look for special tax deals or things that they can combine,” Professor of Michigan Economics at Michigan State University Carl Liedholm said. “Tax write-offs or special subsidies to put different investors together and try to do stuff. Sometimes they work, and sometimes, like downtown East Lansing here, they don’t work. Those empty buildings – the developer hasn’t been able to put together a package that makes sense.”
Fortunately for Lansing Township, the Lansing Township’s Eastwood DDA has been more successful.
“The parking garage that’s behind the movie theater where the Heights is? That parking garage was funded with bonds,” Lansing Township Supervisor Kathleen Rodgers said. “And that’s where most of the debt in the DDA is, and then they also constructed a road in 2007. They constructed the roundabout, and the new Chamberlain Road. That was a bondage project through the Downtown Development Authority also.
“So those are bonds that are being paid by tax income and financing from the DDA authority, but the full faith and credit of the Lansing Township is behind those bonds. Even though the payment of that does not come out of our general fund money. It comes out of DDA authority money.”
The Eastwood DDA may work in concert with the township, but it is still an independent organization.
“You need to understand that the DDA operates as its own entity, and it takes in taxes and financing but it also owns property in the downtown district,” Kathleen Rodgers said. “So the Eastwood – not the Towne Center, but behind the Towne Center at the Heights at Eastwood, the parking garage, is owned by the DDA. The land is owned by the DDA and is being leased to build some of these buildings. So the DDA makes money.”
The bonds that are used to pay for these improvements in the downtown district are developed by the Eastwood DDA independently of the township.
“There’s a bond market, so the city is selling the bonds to somebody, and there are people like you or me or institutional investors will be the purchaser of those bonds,” Liedholm said. “Just like there’s a demand and supply for apples, there’s a demand and supply for these bonds.”
Since the DDA is its own entity, it functions differently than a government does and it is responsible for paying off these bonds on its own.
”The DDA is an economic corporation,” Kathleen Rodgers said. “So it can buy, sell, lease – all kinds of transactions. So the bonds are being paid by the taxes and the tax increment financing and the rental fees from these properties. Those businesses that operate out there are paying rent to the DDA. That rent is paying bonds.”