Center City Developers Propose $52 Million Tax Incentive
Above: The project area along Grand River Avenue as it exists now and an artist's rendering of the proposed 12-story building for that area.
At a three-hour meeting last Thursday covering several projects, the Downtown Development Authority’s (DDA’s) Project and Infrastructure Committee received its first presentation about the City Center District redevelopment proposal. The project is set to undergo more review this week, including review of a new $52 million tax incentive plan.
As ELi reported when the project had its public hearing at East Lansing’s Planning Commission last week, the City Center District project would include two 12-story buildings, one on the 100 and 200 blocks of Grand River Avenue and the other six stories of apartments above an additional six-story structure on what is now the City-owned Parking Lot #1 on Albert Avenue. The northern building, along Albert Avenue, would have retail on the first floor along Albert Avenue with storage and maintenance areas behind that, a parking garage on floors 2-5, and rental apartments for people aged 55+ on floors 7-12. In total, the whole project (including both towers) would add housing for about 550 people.
Mark Bell of Harbor Bay Real Estate Advisors told the DDA’s committee that the site plan will be altered somewhat in response to comments at the Planning Commission. He said the Grand River Avenue building would be turned toward Grand River Avenue, so that the “amenities deck” would now face south rather than being continuously in the shade of the northern building.
Lansing Economic Area Partnership (LEAP) President Bob Trezise appeared before the DDA committee to laud the City Center proposal, as he did at the press conference in February when it was launched. Trezise said he came to “lend his full credibility to the project” and described it using multiple superlatives.
Trezise told the committee this is the most lucrative deal for any municipality in the whole State, that it will transform Albert Avenue into an incredible main street, that it is an amenity that will bring in more corporations, and that there is no risk to the City of East Lansing – only benefits. He urged the City to “seize the time” to work with Harbor Bay Real Estate Advisors, in partnership with the Ballein family, on this project.
Bell said that the market study the development team contracted for found no other developments comparable to the 55+ downtown rental units they are proposing for the Albert Avenue building. He said that, while this is a risk, he understands the purpose of East Lansing’s ordinance requiring that at least 25% of units in a major downtown redevelopment project be other than market rentals, and that he believes there is a market for it. According to Bell, in a recent market rental development by Harbor Bay in Duluth, Minnesota, 70 percent of the occupants are 55 or older, so, Bell said, his team understands what this group is interested in.
The Central City District project will be reviewed tonight at East Lansing’s Transportation Commission and will go back to the Planning Commission this Wednesday. The Brownfield Redevelopment Authority (BRA) will consider a Brownfield Tax Increment Financing (TIF) plan for the project at its meeting this Thursday, March 23.
The TIF plan proposed by the developer totals $52.2 million. The biggest component of the eligible expenses is $23.3 million for construction of the new six-story parking garage on what is now the surface parking Lot #1. The TIF plan says that the parking deck will be “privately owned and publicly operated and maintained.” The DDA was told that the City will continue to own the land, but, according to this document, the developer will own the parking deck itself.
Other public infrastructure costs that are eligible to include in the TIF include water mains and service lines, relocation of electrical work in the alley, sanitary and storm sewers (if necessary), and changes to the sidewalks and street on Albert Avenue.
The TIF plan calls for a 30-year tax capture to support the project. Ninety percent of the new taxes generated during those 30 years would go to reimburse the developer for allowable expenses. Ten percent of the new taxes will pass through to local taxing authorities, including the City.
The TIF plan states that the East Lansing BRA will issue and then sell revenue bonds to pay for the reimbursable expenses under the TIF. It goes on to say: “Neither the [Brownfield Redevelopment] Authority nor the City will make advances or incur any note or bonded indebtedness to finance the purposes of this Brownfield Plan and the City will not incur any indebtedness to finance the purposes of this Brownfield Plan. The proposed bonds, while issued by the Authority, will be financed privately and shall create a first lien on TIR [Tax Increment Revenue] generated by the Project.”
The second largest component of the TIF is $20 million to cover interest on financing expenses. The TIF plan states, however, that “it is projected that insufficient tax increment revenue will be produced … to fully reimburse the interest amount.” (Interest reimbursement from TIF was not included in the last two TIF plans approved by City Council – for the Park District and White Oak Place.)
Lori Mullins, the City’s Economic Development Administrator, has told the DDA that the developer will pay the city a “land lease” to build on the Lot #1 land that would continue to be owned by the City. We have not learned the projected amount of that lease.
Understanding how the City’s finances will be affected by this project also will need to take into account the lost revenue to the City from parking Lot #1 being unusable for up to two years, while it is either being used as a staging area for the building on Grand River Avenue or the Albert Avenue properties are being built. Annual revenue from this lot is about $550,000; it is by far the most lucrative of the City’s parking facilities.
Note: This article was corrected after publication in terms of (a) the description of the proposed north building; we had reported that it would have parking on six floors, but parking is on floors 2-6 with the first floor containing retail space, maintenance space, and storage areas, and (b) the description of the change to the south building in terms of its rotation.