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Ann Arbor Spark

March 20, 2018

What is a SmartZone / LDFA?

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In 2001, the Michigan Economic Development Corporation (MEDC) created 11 SmartZones throughout the state, including Ann Arbor/Ypsilanti. While SmartZone is the programmatic name given by the Michigan Economic Development Corporation (MEDC), the district is technically called the Local Development Finance Authority (LDFA).

In August 2017, the Michigan Department of Treasury awarded a 15-year funding extension to the SmartZone designated to support entrepreneurial activity in Ann Arbor and Ypsilanti. The Ann Arbor/Ypsilanti SmartZone was one of only three in Michigan whose funding was renewed for a 15-year period.

The state provides money to the LDFA specifically for economic development, for the purpose of creating new companies and diversifying the economy. This funding is made available from a tax increment financing (TIF) district that captures a small amount of incremental property tax increases.

The Ann Arbor/ Ypsilanti SmartZone is funded by tax revenue collected within the geographic boundaries of the Ann Arbor DDA. The tax capture is based on the increase in taxable value due to new development and appreciation above the base year of 2002. So in effect, the state funds the LDFA which then provides SmartZone funding. The Ann Arbor / Ypsilanti SmartZone (LDFA) received approximately $2 million of revenue in FY2014.

Per Ann Arbor SPARK’s LDFA contract, SPARK is required to report to the LDFA every quarter on our results, including specific metrics such as the number of companies that received services that were funded through the LDFA funds. Here is the most recent annual report.