LEGAL GUIDE
Written by attorney John L. Gormley | Mar 9, 2011

Should A Downtown Development Authority Issue a Facade Grant?

In my Opinion, there is no express authority in the Michigan DDA Act to authorize a matching grant program. I have reached this Opinion because I can find no express statutory authority to support the issuance of a grant by a DDA to a private property owner to repair the facade of a building in the downtown district. In rendering this Opinion, I am aware that there is a division between municipal attorneys on this subject. I have reviewed the entire DDA statute, including specifically MCL 125.1657, as amended, which sets forth the general powers of governing body. MCL 125.1657 (l) provides authority for a DDA to accept a grant, but no authority is specifically granted to a DDA to issue a grant in the Statute. In fact, I can find no specific authority within the statute to authorize the giving away the DDA's money to private parties. This is commonly referred to as a lending of credit and is barred under the Michigan Constitution. Further, DDAs have been plagued with legality questions regarding three common projects for some time now: 1) legality of grant programs for facade improvements, 2) legality of rental assistance programs, and 3) legality of revolving loan programs. All three of these programs have the potential to constitute an illegal lending of credit. In July 2008, the Michigan legislature undertook to amend MCL 125.1657 (commonly known as the "Section 7 powers") to specifically grant a DDA the authority to operate a revolving loan fund and an incubator business fund. Given the debate that has been going on between municipal attorneys for some time now regarding the legality of grant programs, why didn't the legislature confer upon the DDA the specific statutory authority to operate a facade grant program in 2008? The most likely answer is that they intentionally did not include it; thus, it is not within DDA's power. My Opinion is based on the current status of the law. However, there are a number of Michigan municipalities that are out front on this issue leading the argument that the authority for a facade grant program is implied in the Section 7 Powers. These arguments are not without merit, but I have not found any issued Attorney General Opinion, nor any state law case, that has specifically ruled on the issue conclusively in favor of facade grants being issued by DDAs. Given that the 2008 amendments mentioned above specifically conferred upon a DDA the authority to make low interest (even below market rate) loans to fix up a building for sale or rent (MCL 125.1657 (1) (q)), I am of the opinion that a DDA's powers are thereby limited to loans (repayment required), but not grants (gifts).

Additional resources provided by the author

The DDA Act, Michigan Public Act 197 of 1975, as amended

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