The Blighted Corner Redevelopment: An ELi Reader Guide

Monday, January 9, 2017, 6:43 am
By: 
Alice Dreger

Reporting assistance provided by Chris Root.

Redevelopment plans for East Lansing’s major downtown blighted corner have been going on (and really going nowhere) for at least a decade. Tomorrow, January 10, East Lansing’s City Council is set to take up the new site plan proposal and tax financing proposal for the project—a major step in the process.

The project has a long and complicated history and a lot of moving parts, so as a service to our readers—particularly to those who may wish to communicate with City Council at or before tomorrow’s meeting—we are providing this reader guide.

 

Did you know that, while we tend to call this area “The Park District,” technically this project is still nameless?

Colloquially this project is called the Park District redevelopment plan, but officially it has not been given a name. Applications involving the various parts refer to the properties by their various street addresses. In the past, when the properties were owned by previous entities, this project area was known as “City Center II.” (“City Center I” is the name of the downtown redevelopment project that includes the building that houses CVS, Omi Sushi, and Coldstone Creamery.) Later City Planning staff renamed the area the “Park District,” because of its proximity to Valley Court Park and because “City Center II” had taken on a negative connotation.

 

Why did City Center II never happen at this location?

That’s a long and complicated tale. The short version is this: the individuals and entities who owned and controlled the private properties never did get the project done.

In April of 2015, a majority of East Lansing’s City Council was still supporting the plans by the developer then in charge, an entity known by that point as PDIG (Park District Development Group). PDIG had a legal and financial history that made many people concerned about East Lansing entering a public-private partnership with this entity to redevelop the area. But by two months later, in June 2015, along with many others, East Lansing’s Downtown Development Authority (DDA) had become skeptical that PDIG could ever make the project happen, particularly because of PDIG’s failure to provide complete information to the consultant hired by the DDA to research the developer’s capacity to complete the project.

In July 2015, the East Lansing’s Downtown Development Authority (DDA) effectively voted to stop cooperating with PDIG, as the mortgage lender on the private properties moved to foreclose for failure of payment on the mortgages. The properties were ultimately sold at auction to the lender, who then sold the parcels to a Chicago-based company, WGR Finance. WGR’s representatives are now working on the redevelopment plans. PDIG has tried to gain back some traction on these properties or this project via various lawsuits, but so far has failed.

 

Which properties are we talking about, and what is owned by whom?

The redevelopment plans would involve a large number of properties, some of them publicly owned by either the City or the DDA, and some privately owned by WGR. Here’s a rundown, and you can look at this series of images to understand where these are, what they look like now, and what is proposed.

Privately-owned properties:

  • 100-140 West Grand River Avenue (vacant commercial properties just west of Abbot Road)
  • 341-345 Evergreen Avenue (was the “Evergreen Arms” apartments; now demolished)

 

Publicly-owned properties owned by the DDA:

  • 303 Abbot Road (was the “little bank building”; now demolished)
  • 314 Evergreen Avenue (modern commercial brick building just west of Dublin Square)
  • 328, 334, and 340 Evergreen Avenue (old houses that currently are being rented)

 

Publicly-owned properties owned by the City

  • Evergreen Avenue
  • Albert Avenue
  • Various parking lots in the area

 

See map with the properties shown.

 

What would the project entail?

See this article on the site plan.

 

How come a private company can propose a project that includes publicly-owned properties?

The Downtown Development Authority has given the private developer, Convexity Properties, permission to propose a project that includes the properties it owns that are named above. The City and DDA want these properties redeveloped as part of the project plan.

The City and DDA would not simply give away the publicly-owned properties. In fact, the four properties on Evergreen Avenue would be torn down to make space for a public parking garage that the City of East Lansing would ultimately own and operate. The City would give or sell some the 303 Abbot Road property which the developer needs for “Building A” at the corner of Abbot and Grand River Avenue. This would be spelled out in a development agreement between the City, the developer, the DDA, and the Brownfield Redevelopment Authority (BRA, which has the same membership as the DDA). For this project, the City would agree to “vacate” Evergreen Avenue between Grand River Avenue and Albert Avenue so that the footprint of Building A can extend along Grand River Avenue all the way from Abbot Road to the Peoples Church memorial garden.

 

Has the DDA or the City conducted due diligence about the current developer, as was done with the previous developer?

No. In fact, several members of the BRA noted at their meeting about the tax plan that there has not been any independent review of the financial capabilities of this developer to complete this project.

This kind of due diligence is not a normal or required part of the City’s consideration of a site plan and tax plan on privately-owned property, but it has been done previously for this project area, because it requires a significant partnership by the City with a private developer.

 

Why haven’t the vacant, blighted properties along Grand River Avenue been demolished by now?

The developer believes that a $10 million state tax credit can be obtained for this project but depends on having the buildings standing when the credit application is reviewed. (See email exchange on this matter with the state.) The developer’s hope is to get the tax credit approved soon and then to demolish the buildings shortly thereafter. The developer has indicated the project won’t happen without this large tax credit. The state will not consider the tax credit application until East Lansing’s City Council approves at least a site plan and a tax increment financing plan. Hence the delay. Read more.

 

If the project happens, will it all be built at once?

No. The plan is to first construct the major building (Building A) at the corner of Abbot Road and Grand River Avenue and the parking garage. The developer has submitted plans for how the “staging” of demolition and construction would work.

 

Why does the plan call for owner-occupied condominium apartments?

City Council wants to diversify housing options downtown—to not have all new construction be directed primarily at students renting. As a consequence, they’ve used a law called Ordinance 1384 to require projects like this to have at least 25% of its housing units be something other than student rental-type apartments. (Read more.) The Senior Commission has wanted senior housing. The developer has so far proposed that the smaller building to be built on Evergreen Avenue (“Building C1”) plus the west side of the parking garage structure (“Building C2”) consist of what would be a total of 64 owner-occupied condos.

That said, the developer Convexity Properties has made clear the market for condos in downtown East Lansing is very weak, and Convexity will not construct the condos until a number of them are pre-sold to potential owners and adequate financing is thus obtained. If Council approves a site plan with condos and the pre-sales don’t come through, the developer is likely to come back to Council to ask for some amendment to the site plan. Convexity has stated its intention to build Building A first.

 

Why would we need a parking garage over there?

City Planning staff and the DDA have consistently said that the west side of downtown needs a parking garage to support commercial development. Peoples Church has also needed more parking and will particularly need it if, as planned, many parking lot and on-street parking spots are lost to this project.

Additionally, the plan for Building A calls for underground parking in that building only for the hotel guests, not for the residents of the 177 rental apartments of Building A. There is also no other parking planned for the 64 planned condo apartments.

The Staff Report sent to Council says the residential parking needs of this project (beyond the hotel) can be “provided through parking permits in the municipal parking system,” including the public parking ramps on Division Street and Charles Street, and needed commercial parking spaces can be accommodated in the public parking lots on Abbot Road and other nearby metered spaces.

The City of East Lansing has not wanted developments like this to build and operate their own parking, which is one major reason the City takes on providing parking for projects like these. The idea is to support the City’s parking system and to have more control over parking in the downtown area. City development staff and many members of the DDA have favored adding parking capacity on the west end of town for projected additional dense development here.

 

Can the City afford to do this? Can the City afford not to this?

Many people feel the blighted corner is a drag on East Lansing’s economy. It surely is the case that the City is obtaining very little revenue from the properties themselves because they are worth so little with no current economic activity there. Blight probably also depresses nearby property values, although there are no estimates of this impact.

Additionally, the City faces the challenging problem of about $6 million in debt on the Evergreen Avenue properties that the DDA bought years ago for area redevelopment purposes. As of October, the City owed $5,630,000 on those properties, and it is paying interest only on the loans. In Fiscal Year 2019, the DDA (for which the City is financially responsible) will have to start paying on the principal, and the annual payments will jump from about $113,000/year to about $375,000/year. The DDA can’t just sell the properties off to relieve this debt, because the properties are worth only about half of what the DDA owes on them. (Read our recent report on the City’s almost-$200,000,000 debt.)

But it’s not clear right now how the City can afford to pay the debt on this land, construction of a new parking garage, plus the major infrastructure improvements—to sewers, streets, etc.—that this project would require.

One option is for the City to use tax-increment financing (TIF). What the Brownfield Redevelopment Authority (BRA) proposed last week, as we reported, is that the developer would finance these costs and would then be reimbursed for them from future increased property taxes (TIF) generated by the project. Those tax revenues would otherwise be paid into the City general fund and other nearby taxing authorities, if the project were built. It isn’t clear the developer will agree to do this.

Some believe that, given the City’s high and growing debt, the City cannot afford to build a parking ramp (at a cost of approximately $11 million) and make major changes to roads and underground infrastructure in this area, no matter how it is financed.

 

So most of the $25 million “tax rebate” would actually go to pay for City properties and not the developer’s private properties?

What tax plan the City Council will approve remains to be seen, but right now, the TIF plan as sent up by East Lansing’s Brownfield Development Authority (which, again, has the same membership as the DDA) is vague yet suggestive of the idea that the City, not the developer, would chiefly benefit from the TIF by including in the plan mostly components that will ultimately be owned by the City.

In fact, the developer’s representative has questioned the suggested plan, indicating that the City is essentially asking the developer to lose money on the TIF by providing funds up-front for City costs without being reimbursed for interest. (Read more.)

 

So this isn’t a done deal?

Not at all. The City Council and developer still have to come to an agreement on the site plan, on the tax plan, and then on a complicated development agreement, which has not yet been drafted. Other entities will be involved as well and will have a say in what happens—everyone from potential lenders to the state agency dealing with the possible state tax credit to the Lansing Board of Water and Light, which has key utility services running through the area.

 

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