New Development to Get Discounted Parking

Thursday, February 18, 2016, 6:45 am
By: 
Michael Teager

Above: The boarded up old Taco Bell building (left), where the redevelopment will occur

At Tuesday’s meeting, East Lansing’s City Council unanimously passed an agreement to provide discounted parking to a new downtown development, but under a less generous plan than the one first presented by City staff. The project at issue is to be built at 565 E. Grant River Avenue, where "the Old Taco Bell building” currently stands. As ELi previously reported, the last City Council approved a $1.5 million tax increment financing plan for this project.

At Tuesday’s meeting, Planning Director Tim Dempsey presented a proposed 10-year “declining discount” parking agreement to be entered into with developer David Krause. Per the staff memo, the agreement was modeled after a similar one for The Residences (the HopCat building) which uses permit parking in the Grove Street garage, behind The Residences.

In the proposed agreement between the City and Krause’s company, the City would sell permit parking spaces in the Division Street garage at a discounted rate that diminishes over ten years, beginning with a 30% rate in the first year and ultimately becoming a 100% rate in the tenth year. In this proposed arrangement, the developer would agree to purchase at least 60 permits annually, with the possibility of an additional 20 more (for 80 total).

Dempsey cited increased project costs at 565 E. Grand River Avenue as a reason for the developer’s request for discounting. Dempsey assured Council that the Division Street garage had enough spaces to accommodate the potential allotment of 80.

Council offered skeptical responses across the board. Mayor Pro Tem Ruth Beier asked for evidence that the redevelopment is financially challenged and also suggested shrinking the subsidy from ten years to three.

Councilmember Erik Altmann estimated that the revenue lost by discounting rates would be approximately $200,000 over ten years, insisting that there’s an “inelastic demand” for parking.

Councilmembers Beier, Altmann, and Susan Woods each referred to the arrangement as a subsidy, to which Dempsey replied that regardless of whether it is called a subsidy or foregone revenue, “it’s clearly a discount.”

Councilmember Shanna Draheim asked about parking capacity, to which Dempsey replied that East Lansing averages 50-65% capacity, with an optimum target being 85-90%. Given that, Dempsey said, there would be room to accommodate the redevelopment if it achieved maximum occupancy and purchased 80 spaces.

Beier asked about a possible renegotiation, citing her frustration with what she saw as City staff presenting a finalized proposed agreement for consideration without input.

“We do sort of have a finished product here,” said Mayor Mark Meadows.

Krause, the developer, took the podium to address Council’s concerns. He said that he had been expecting to have a similar agreement as The Residences, which his company also developed.

Reiterating that “this building will not be feasible without parking,” Krause said that construction rates have gone up approximately twenty percent since The Residences opened. 

After a brief exchange with Council, the issue quickly deflated as Krause and staff had already discussed a shortened timeline in anticipation of a possible rebuttal from Council.

Krause, City Manager George Lahanas, and Council quickly agreed to an amended five-year schedule, with the discounted rates beginning in the original plan’s fifth year. Dempsey clarified that this equated to:

  • Year 1: 75% rate
  • Year 2: 80% rate
  • Year 3: 85% rate
  • Year 4: 90% rate
  • Year 5: 95% rate
  • Year 6: 100% rate (discounting ends)

 

The amended schedule passed unanimously.

Council also considered four easement agreements for the same development. They were passed unanimously with little discussion. They included two permanent easements – for air rights and a transformer pad – and two temporary easements for construction of both the plaza space and for a shared refuse enclosure.