Council Approves Trowbridge Hotel with $1M Tax Deal

Thursday, April 20, 2017, 8:03 am
By: 
Alice Dreger

Above: Architect’s rendering of the approved hotel, set to be a SpringHill Suites.

The vacant Howard Johnson’s hotel on Trowbridge Road near Route 127 will be demolished and replaced by a new SpringHIll Suites hotel and a separate new retail space including a drive-through. On Tuesday evening this week, East Lansing’s City Council unanimously approved the site plan application from United Hospitality Group East Lansing, LLC.

In a 4-1 vote, Council also approved a tax increment financing (TIF) plan for about $1 million, which was about $800,000 less than the developer requested.

The site plan:

According to City staff’s report to Council, the hotel is set to “have 88 extended stay hotel rooms with kitchenettes accessible from inside the building.” (It will be hotel-style, whereas the existing building is motel-style.) An indoor swimming pool and fitness center would be on the first floor.

The separate retail building is designed to have a full-service, sit-down restaurant that is expected to serve alcohol (which will require separate permission from Council) plus a fast food location with drive-through, currently said to be planned as a coffee shop.

The retail building would be closer to Trowbridge Road, with the hotel sited near the back of the lot, as shown in this rendering looking northwest:

Points of debate and Council’s amendments to the proposal:

While everyone weighing in on the proposal favored replacing the abandoned, derelict hotel with redevelopment, main points of debate have been the height of the planned hotel (four stories, 49 feet high at the tallest point), the drive-through for the planned separate retail space, and whether activity at the redevelopment would be disruptive to those who live nearby.

East Lansing’s Planning Commission, which is advisory to Council, voted 6-2 to recommend approval of the site plan, 6-2 to recommend approval of the height, but 4-4 to recommend approval of the drive-through. That counts as Planning Commission not recommending the drive-through.

The current site looks like this:

Ruth Ann Stump, President of the Red Cedar Neighborhood Association, told Council the neighborhood was in favor of redevelopment and that they see it as a benefit to the City and neighborhood. But, she said, the neighborhood “would be much more comfortable seeing development of a hotel at three stories rather than four.”

She also said the neighborhood wanted the water pressure problem that has been facing the Ivanhoe Neighborhood for many years to be solved with this redevelopment by extending the twelve-inch water lines to the Ivanhoe neighborhood. She named it as a “matter of safety for fire [emergency service] as well as the comfort of the homeowners.”

Two representatives of Arbor Forest Apartments came to advocate for more trees as buffers between the redevelopment and the apartments. That apartment complex is just to the west of the redevelopment area and has many green spaces and balconies. Representatives of the Boji Group, Lansing-based commercial redevelopers, told Council the Fire Department required adequate access in the back of the buildings, limiting how much green space could be added between the project and the apartments.

George Brookover, attorney for Arbor Forest, challenged the four-story height of the hotel, saying he believes the “City is hell-bent to make buildings as high as they possibly can in this town.” Only Councilmember Erik Altmann was willing to limit the building to three stories, however.

Debi Robinson, the manager for Arbor Forest, also expressed concern about noise from trucks emptying dumpsters or making delivery. In response, Council voted unanimously to limit trash and recycling pickup from the hours of 9 a.m. to 5 p.m. They also voted unanimously to limit outdoor seating at the full-service restaurant to the hours of 7 a.m. to 10 p.m.

Terry Fitzpatrick, CEO of the Boji Group, told Council her company had had numerous meetings with residents and business owners in the area, including with the Red Cedar Neighborhood Association. She said the developers had been responsive to feedback, including agreeing to the suggestion from the neighborhood that the fast-food retail space be used for a coffee shop. The drive-through can be seen on the left-center of this rendering. Woody's Oasis is shown in the right-center.

The Council decided to limit the hours of the drive-through coffee shop to 6 a.m. to 9 p.m., which Fitzpatrick said would be the likely hours. Council also voted unanimously to require that the wall behind the project, between it and Arbor Forest, be continuous, and that the same material used on the front of the buildings be used on the back, where they would be visible to some neighbors.

The tax plan:

The developers had requested a Brownfield tax increment financing (TIF) plan of about $1.8 million. According to the developers, the existing hotel building is “infested with asbestos,” including in the concrete block, the plaster, floor coverings, and roofing. According to the developers, this significantly adds to the uncertainty and cost of demolition.

East Lansing’s Community and Economic Development Administrator Lori Mullins told Council the whole project will cost about $10 million and that the developer had requested a TIF of $1.8 million. She then summarized reasons for and against the TIF.

Mullins named reasons to favor the TIF as creation of 30 permanent new jobs from the businesses to be housed there, public improvements including to the water main, redevelopment of the blighted area, and that the redevelopment would bring in about $41,000 per year in additional taxes during the duration of the TIF plan, after reimbursements to the developer, and full taxes after the TIF plan ended.

Mullins noted these possible reasons against giving a TIF: there might be better ways to use the site; the City would be giving back about $40,000 in tax revenue each year from newly captured taxes for up to 27 years under the proposed plan; the plan didn’t get the Ivanhoe Neighborhood a solution to their water flow problem; and the improvements to be reimbursed for were mostly for private property, owned by the developers.

Mullins also told the Council that the hope is that the Michigan Strategic Fund will provide state-level support for this project. In that event, the TIF plan would be reduced and completed in about 19 years rather than 27. (That’s the period during which some captured taxes would be used to reimburse development-related expenses, after which the taxing jurisdictions would get the remaining amounts due to them.)

Councilmembers debated which portions of the tax plan to fund. Their discussion was extensive, even for a plan that is small compared to the two unprecedentedly-large brownfield TIF plans for the Park District and Center City District that are heading to the Council soon. Mayor Pro Tem Ruth Beier wanted to strictly limit tax-capture reimbursement in the TIF plan to what the City’s own consultant, hired for application review purposes, said were expected environmental clean-up costs plus the cost of fixing the water main.

The developer’s environmental consultant, Pete Bosanic of PM Environmental, told Council that demolition costs were really part and parcel of the environmental clean-up costs, because there is so much asbestos in the existing building.

Ultimately Council reduced the TIF plan total by about $800,000, to a maximum of about $1 million, and agreed to the 75%/25% split. Under that split, when the redevelopment is complete, 25% of the new taxes will “pass through” to the taxing jurisdictions, including the City, and 75% of the new taxes will be used to reimburse allowable expenses documented with appropriate receipts.

Here are the maximum expenses Council agreed to reimburse: baseline environmental assessment ($10,400), building demolition ($145,000), foundation removal ($20,000), asbestos remediation ($400,000), professional geotechnical fees (related to air quality monitoring during removal of asbestos; $15,000), infrastructure improvements ($295,000), brownfield plan development ($15,000), and a 15% contingency ($135,050) for a total maximum of $1,035,460.

The vote on this reduced TIF was 4-1, with Beier voting against. The revised and approved TIF plan is expected to be completed somewhere between eleven and seventeen years from the start, depending on whether the Michigan Strategic Fund provides funding.

City Council’s vote on the site plan and TIF plan did not accomplish the goal of fixing the Ivanhoe neighborhood’s water pressure problems because the water main expansion will only reach the new development, not Ivanhoe. The new twelve-inch water main for the redevelopment area will be useful if the City decides to spend the money to further expand the water main to Ivanhoe.