Park District Plans Change, as $34 Million Tax Deal Is Proposed

Friday, October 21, 2016, 7:12 am
By: 
Chris Root and Ian Hoopingarner

Above: the vacant commercial buildings along Grand River Avenue where “Building A” is being proposed to be built.

As expected, the Park District redevelopment plan continues to evolve rapidly as the developer is seeking to get approvals in place fast before a multi-million dollar Michigan Business Tax Credit previously approved for the area expires.

The new plans, revealed just yesterday, call for a significantly different approach to two of the three proposed structures. Additionally, the developer is suggesting a tax increment financing (TIF) deal of almost $34 million be used to finance the project. The project is now estimated to cost $165 million.

Updates to the site plans and possible tax financing for the redevelopment project were discussed at yesterday’s noontime meeting of the Downtown Development Authority Project and Infrastructure Committee.

Convexity Properties—the developer hired by WGR Holdings, a subsidiary of DRW Finance, which is bankrolling the development—has revised the proposal that was presented at the October 12 Planning Commission meeting. The proposal for “Building A,” along Grand River Avenue, has not changed in any significant fashion. But the proposals for Buildings “B” and C,” north of Peoples Church, have changed.

Building A is still set to house a hotel, rental apartments, restaurants and retail space in a structure that at its tallest reaches twelve stories, as shown below. Parking for the hotel is designed to be underneath the building.

At yesterday's meeting, Downtown Development Authority (DDA) Chair Peter Dewan said he appreciated the developer providing a public plaza, but suggested that, instead of putting the plaza on the northwest corner of Abbot Road and Grand River Avenue, it be moved nouth up Abbot Road, to be on the southwest corner of Abbot Road and Albert Street. This would put the plaza diagnoally across from the small downtown city park recently named Sharp Park, and would, Dewan said, create a "placemaking" space along Albert Street.

David Pierson, locally representing the developer, replied that this would require too large a building along Grand River Avenue. Having the plaza diagnoally across from the MSU entrance, he said, creates an open and welcoming feeling as one enters downtown from the west. He noted the plaza is designed to feel like the Ann Street Plaza, inviting to a variety of activities.

The previous plan called for “Building C” to consist of an eight-story, 175-unit building on Evergreen Avenue across from Valley Court Park, on the former site of the Evergreen Arms apartment buildings. The new plan proposes a significantly smaller, four-story, 50-60-unit apartment complex on this same site. (An image for the proposed revision to Building C was not made available.)

Under the new plan, what had been called “Building B,” the parking garage across from this Building C, would also be reduced in size to reflect the decreased number of residents living in Building C. Instead of a seven-story parking structure with room for 597 cars, the proposed parking structure is now a five-story ramp with 425 parking spaces. This structure would be located on the hill on the east side of Evergreen Avenue, absorbing five properties currently owned by the DDA, including four older houses and a mixed-used brick building just behind Dublin Square.

Another change in the plan is that the first three stories of the west side of the parking garage (facing Building C) would be fronted with twelve apartment units, making the garage less visible from the Oakwood neighborhood north of Valley Court Park.

Above: the redevelopment area, marked in red, as seen from above. The more southern space would be home to Building A, and the northern space home to the smaller apartment complex and parking garage.

The developer has been meeting with representatives of Peoples Church and the Oakwood neighborhood as the project plans move forward. There was some discussion at yesterday's meeting about Peoples Church's parking needs and how to prevent traffic from cutting through the Oakwood neighborhood, just north of the area.

There was also discussion about whether to turn the part of Evergreen Avenue between Oakhill Avenue and Valley Court Drive into more green space, effectively increasing the size of Valley Court Park and making the new apartments more inviting. The new plan makes a new pedestrian space along what is now Evergreen Avenue, between Buildings B and C, more open than under the previous plan.

At yesterrday's meeting, a preliminary proposal for the Tax Increment Financing (TIF) that will fund a portion of the project was given to the Downtown Development Authority (DDA).  Under this proposal, the City would cover $33,810,430 of the development project's costs with a dedicated tax deal drawn from substantial new taxes generated by the redevelopment.

The DDA Committee received the preliminary Brownfield TIF request from environmental consulting firm TriTerra, on behalf of the developer. The TIF request is based on the smaller, revised site plan.

Under this TIF proposal, for 15 years, 100% of the property taxes payable on the increased taxable value of this property would be captured to repay costs incurred by the project. Up to $30.1 million of the captured funds would be used to reimburse the developer, and the remaining $3.7 million would reimburse various government units for costs associated with the Brownfield TIF plan.

David Pierson, representing the developer, asked us to clarify after this story first ran that the great bulk of the TIF amount comes from the City's wish to have a major new parking ramp built for the City. "The developer will provide all of the parking needed for the hotel in the Grand River [Avenue] building," he notes, "and would have used existing parking for the retail and residential in Building A as originally proposed. The City wants to remove all of the existing parking west of Abbot and have the developer build a new ramp for the City on the City-owned property on Evergreen." The City is seeking to use much of the TIF to finance what are effectively its own costs for its proposed new parking garage and for other infrastructure upgrades.

Among the costs that would be eligible for reimbursement are infrastructure costs of $13 million. This would include the rebuilding and enlarging of the sewer system and realigning of Albert Avenue. Smaller environmental-related costs that are eligible under this TIF plan include asbestos removal from and demolition of existing buildings, and environmental assessments. The TIF plan also includes $8.4 million in interest payments on commercial loans to finance the project.

The financial plan calls for the developer to build and finance the parking structure, at a cost of $21 million. After being constructed, the parking ramp would be turned over to the City of East Lansing to own and operate (although this land is currently owned by the DDA, not the City, which would need to be worked out).

This $21 million figure does not include the approximately $6.5 million that the DDA paid to acquire the underlying properties. It is unclear at this juncture how the DDA debt on the loan for the Evergreen Avenue properties will be paid.

Pierson explained in a follow-up to the original publication of this story, "As indicated by the numbers in the story, the greatest part of the TIF is for the parking ramp and the off-site improvements (the realignment, rebuilding, and extension of Albert Ave., along with sewer upgrades for the area, not just for this development)." Pierson says the City could decide not to take on the new ramp at this time, in which case it would still be stuck with the costs of the Evergreen Avenue properties bought years ago by our DDA for the area redevelopment. Pierson says that, as Councilmember Erik Altmann "discussed during the committee meeting, it may make more sense to look at phasing the development — developing Building A as proposed — while taking the time to determine how much parking is really needed." 

A Brownfield TIF of $30 million for this project is much larger than any previous Brownfield TIF agreed to by the East Lansing City Council. For example, Trowbridge Plaza received a $8.2 million TIF, and The Residences on Ann Street Plaza received a $4.4 million TIF. The proposed Park District redevelopment project, consisting of three buildings near the prime intersection of Grand River Avenue and Abbot Road and along Valley Court Park, is much larger than the other projects, and would result in a large increase in taxable value for the properties involved.

This project proposal comes at a time when the City Council is well aware that the City’s budgetary challenges will increase over the next several years.

The developer plans to formally present the TIF request to the Brownfield Redevelopment Authority (BRA) at the BRA meeting in October. (The BRA is comprised of the same members as the DDA.) The developer hopes that the BRA will approve the plan at its meeting on November 24.

According to attorney David Pierson, who locally represents the developer, “it appears likely that the project [site plan] will not be back on the Planning Commission agenda on October 26, but will be pushed to the next Planning Commission meeting on November 16. That should keep it on track to get to the City Council in December.”

Ultimately it is City Council that approves site plans and TIF plans on behalf of the City of East Lansing.

Corrections Note: Parts of this article were corrected and added after initial publication; we have clarified the division of the TIF with regard to reimbursement of City-property-related expenses and private-property-related expenses. Additionally, we incorrectly reported originally that land acquisition is not a reimbursable expense under Brownfield TIF, when under some circumstances, it is. ELi thanks David Pierson and Eliot Singer for corrections on our coverage of the developing TIF plan.