MEDC Says Park District May Yet Obtain Tax Credits Developer Calls Necessary

Thursday, August 31, 2017, 4:31 pm
By: 
Alice Dreger

Above: The vacant, blighted buildings that DRW/Convexity is seeking to replace with a major redevelopment project, which the developers say is dependent on State level tax support.

In response to questions from ELi, a staff member for the Michigan Economic Development Corporation (MEDC) said today the agency is still working with East Lansing and the would-be redevelopers of the blighted area downtown to arrange state-level tax incentives to get the project done. But MEDC staff will not say whether the state-level review will happen in September, as the developers and City leaders have been hoping.

According to DRW/Convexity’s representatives, the redevelopment project can’t happen without state-level support, and the existing vacant buildings can’t be knocked down until state-level groups make their decisions. DRW/Convexity says knocking down the existing buildings would jeopardize a possible $10 million Michigan Business Tax credit because of how the laws work. DRW/Convexity has agreed in writing to demolish the buildings no matter what the state decides, and has been preparing for demolition, but the state hasn’t made the decision yet on the tax credit.

That Michigan Business Tax credit had been set up under the previous owner of the private properties along Grand River Avenue, namely companies owned by troubled developer Scott Chappelle. Chappelle has been trying, via his attorneys, to lay some remaining claim to state-level tax incentives for these properties, even though he lost them via foreclosure action two years ago.

MEDC and Chappelle’s attorney Arthur Siegal have declined to answer questions from ELi about why they would think Chappelle still has any claim to these properties or associated credits, given that the courts ruled against him having any remaining stake in the properties. Yet via his attorney, Chappelle has been looking to hold up progress in East Lansing and at the MEDC, delaying state-level consideration of the current owners’ project, apparently in a bid to continue to try to profit from the properties he left blighted and lost to foreclosure.

Otie McKinley, Media and Communications Manager for MEDC, told ELi today, “While the redevelopment of this particular property is in the best interest for the City of East Lansing and the State of Michigan, additional time is necessary to make sure that all the proper parties are involved and the proposed actions do not jeopardize the incentives available to complete the redevelopment.”

McKinley’s message suggests MEDC’s staff may now be asking various agencies of East Lansing, including City Council and the Brownfield Redevelopment Authority (BRA), to push through yet more paperwork before state-level decisions are made on the $10 million tax credit and the Brownfield tax increment financing plan associated with the $150 million project.

Back in April, East Lansing’s City Council and BRA agreed to a $19.6 million Brownfield tax increment financing (TIF) plan that would capture new taxes generated by the property to pay for various costs associated with redevelopment of the area. That TIF plan would pay off the debt owed on the Evergreen Avenue properties purchased by the City’s Downtown Development Authority years ago, under a plan to work with Chappelle’s companies (about $7.2 million).

It would also pay for public infrastructure improvements for the project (about $6.4 million plus $3.4 million to reimburse the developer for interest costs associated with putting up those funds) and would pay about $2.5 million of the developers’ expenses related to demolition and redevelopment of the private properties.

Below: What DRW/Convexity hopes to build to replace the blight downtown, looking northeast across Grand River Avenue towards Abbot Road.

Because the TIF plan calls for an 80/20 split in terms of where newly-generated taxes would go—with 80% going to the TIF plan reimbursements and 20% to the usual taxing authorities—the City of East Lansing would immediately see hundreds of thousands of dollars a year in new tax revenue from these properties once they are completed. City Council members have said they see this as a good deal, not only because of the new taxes, but because the plan results in paying off the Evergreen Avenue debt, an ongoing financial challenge for the City.

Peoples Church, next door to the project, has strongly endorsed the DRW/Convexity project and has been cooperating with the developers in moving the plans forward.

According to McKinley, MEDC’s Media and Communications Manager, “Because the original [Brownfield TIF] plan is also the basis of previous authorization of Michigan Business Tax credits issued to a prior developer,” namely Chappelle’s company, MEDC “staff is reviewing the request to make sure there is no unintended impact on the availability of the credits which are a valuable incentive for the redevelopment of the project for any developer.”

McKinley indicates MEDC is working with DRW/Convexity, “the identified developers of the project,” as well as the City of East Lansing, “to address all remaining items necessary for the Michigan Strategic Fund Board to consider the capture of State and school taxes eligible for the redevelopment.”

But McKinley declined to answer questions about when this project will reach the Michigan Strategic Fund Board’s agenda.

Chappelle has one remaining lawsuit relating to the history of these properties, that one involving a claim about a confidentiality agreement. No lawsuits remain that question the ownership of these properties.

Asked a few days ago on what basis Chappelle continues to make claims about some components of the Park District project, and asked what exactly Chappelle is hoping to achieve by attempting to involve himself in the MEDC’s management of the DRW/Convexity plan, Chappelle’s attorney Arthur Siegal did not respond.