Council Puts Last Stamp of Approval on Park District Plan; Blight Could Be Gone This Fall

Wednesday, June 7, 2017, 6:45 am
By: 
Alice Dreger

With East Lansing’s City Council voting 4-0 last night to approve a development agreement with the developers, the Park District project now moves on to state-level review. If all goes as planned, demolition of the long-blighted buildings along Grand River Avenue should commence by early August and be complete by around late September. Construction of the new project would begin in the spring.

City Council had previously approved a Memorandum of Understanding about this development agreement on April 25, authorizing the Mayor to sign the resultant development agreement on behalf of the City. But Council then decided to tackle the whole, complicated agreement after all. Councilmembers have been concerned about protecting the City through this agreement.

In an unusual move, last week the Downtown Development Authority (DDA) also went over the development agreement in great detail, with several members requesting a number of clarifications and changes. A number of DDA members have extensive professional expertise in relevant areas, including hotel management, commercial development, and commercial financing, and they drew on those backgrounds to suggest ways to increase protections for the City in the agreement. Their feedback was used as the basis for further refinement of the development agreement and was provided to Council.

At last night’s Council meeting, questions were raised about various parts of the agreement, including about the developer’s rights in the master lease of public parking spots and about financing. Councilmember Erik Altmann had the most questions and pointed out a few typos in the agreement. Altmann had also been at the DDA meeting last week and last night it appeared he had reviewed the 47-page agreement with a fine-tooth comb.

One of the questions raised by Altmann and also by Mayor Pro Tem Ruth Beier involved how the City could ensure that the developer doesn’t just build “Building A” at the main corner and never build “Building C,” the owner-occupied condos near Valley Court Park. The condo component has been effectively forced on the developer by Council through Ordinance 1384, which requires that at least 25% of residential units in a project like this be "owner occupied, restricted to residents 55 and older, restricted to low to moderate income housing or restricted to some other occupancy that would add diversity to the area."

So Council and others have feared Building C might never happen, as it is perceived as a much trickier deal financially for the developer than Building A. City Attorney Tom Yeadon explained that the City had multiple means by which to hold the developer to the agreement to build Building C if the developer builds Building A. Those include what amounts to a $2.5 million penalty and the ability to stop occupancy of Building A.

Below: The planned owner-occupied condo building, known as “Building C,” for the Park District project, seen as if looking from just north of Peoples Church.

Beier asked about assurances that the hotel component of Building A would be occupied by either The Graduate or a hotel of similar or better quality. Language to that effect had been added by Yeadon following recommendations by the DDA, but the developer rejected that language in negotiations.

Asked about this, David Pierson, attorney for the developers DRW/Convexity, told Council that The Graduate owners “have been partners since the beginning” of this proposal and that the hotel component had been specifically designed to The Graduate’s needs and style. He said language guaranteeing The Graduate or a hotel of similar or better quality didn’t need to be in the development agreement, given that the site plan design ensured a high-quality hotel, and that it would be difficult to word legally what it was the City was asking in the development agreement.

Below: “Building A,” set to include The Graduate hotel, as if one were looking from the MSU Union.

Pierson also suggested he and his clients had just reached the point of not wanting to continue negotiating specific lines in the development agreement after several weeks of back-and-forth. Pierson told Council that there were “things we would like in there,” meaning in the development agreement, “and we gave them up,” and they expected the City to do the same at this point. He asked rhetorically, “Can we just say ‘stop’ at some point? And that’s where we came to on this one.”

Pierson told Council the site design meant The Graduate hotel couldn’t just be switched out for a cheaper-model like Motel 6. Mayor Mark Meadows agreed with this reading. Meadows, a lawyer, said he felt “pretty comfortable” that the City was guaranteed a good quality hotel occupant.

Altmann asked what would happen if the buildings get halfway built and the developer goes bankrupt. Yeadon said that’s always a risk with construction, but if it happened, the City could move to have the half-constructed buildings demolished. Yeadon added, with a smile, “It’ll look a lot nicer than what’s there [now] no matter what happens.”

Councilmember Shanna Draheim asked about one item that had been changed in the development agreement and was told by Yeadon it was “a relic” of an earlier version and didn’t belong in this version. She and other Councilmembers were satisfied with the answers they received, and they ultimately voted 4-0 to pass the development agreement as it had been presented to them. (Councilmember Susan Woods was absent.) The DDA will formally vote on the agreement at its June 22 meeting and is expected to approve it.

After the Council vote last night, Meadows asked Pierson to explain what comes next, “for the cameras.” Pierson said electricity and gas had been disconnected to the vacant buildings in anticipation of demolition, and noted that the City’s water crews had been out yesterday to work on turning off the water for demolition. He expects asbestos abatement to begin on June 30.

Below: City work crews out yesterday turning off water in preparation for demolition.

Before demolition can happen, Pierson has said, the developer has to obtain assurance from the Michigan Strategic Fund Board that the project will be awarded a $10 million tax credit associated with an earlier proposal for this land. That meeting is set for July 25, and according to Pierson, the Board will act at that meeting on the issue.

Pierson said demolition of the structures would begin within about 10 days of state-level approval, and that demolition would take about eight weeks. Pierson cautioned this meant demolition would be happening “when students are coming back,” so he said the demolition contractor would have to be extra vigilant and work quickly.

Asked why construction would not start until spring, Pierson explained that it takes several months to do fine-grained engineering plans and to bid out the job for construction.

Pierson told ELi after the meeting, “We are very pleased to have the City’s approval and to have a development agreement put to bed. We think it is a fair agreement.”

He cautioned, as he has before, that the developers “still have to get the [state-level tax] credit to make it go.” He appears optimistic the state will approve it. He said, “Our sense is that this project is a general outline of the project that the Michigan Strategic Fund board agreed many years ago was important for downtown East Lansing. We think we have a better project.”

City Council is set next week to take up the other very large redevelopment proposal for downtown, the Center City District project. If both projects happen, there will be significant disruption downtown for several years. In anticipation of that possibility, City staff have put out a call for proposals for public relations firms to work with those who will be affected locally.

 

ELi has put together a comprehensive guide to the Park District redevelopment plans. Find it here.