City Planning Staff Mistake Delays Blight Demolition, Could Jeopardize Park District Plans

Thursday, June 22, 2017, 3:55 pm
By: 
Alice Dreger

Above: The blighted area of the Park District redevelopment proposal.

East Lansing’s City Planning staff failed to promptly take care of critically-important paperwork in the Park District redevelopment deal, and the consequence of their mistake is that the demolition of the blighted buildings downtown will be further delayed. The mistake also means the entire $150 million redevelopment project could now fail because of the significant delays caused by the mistake.

The developer, DRW/Convexity, has finally cleared all the steps of City-level approval for their proposal, which has been set to redevelop the long-blighted northwest corner of Grand River Avenue and Abbot Road. DRW/Convexity thought it could therefore move on to the Michigan Strategic Fund Board meeting of July 25 to seek approval of a previously-existing $10 million state-level tax credit for these properties. Demolition was set to start shortly after that meeting.

But to get to the Michigan Strategic Fund Board meeting, City staff was supposed to have notified the previous developer of the properties of termination of a previous Brownfield tax increment financing plan. That was never taken care of. State law requires that the previous developer be given thirty days to respond - and the developer has the right to a hearing, which can further delay the scene.

This would be serious enough if the previous developer were not known to be highly litigious. But he is. Local development professionals advised of the situation tell ELi they fully expect this mistake by City Staff could cause a delay of months in terms of DRW/Convexity getting to the Michigan Strategic Fund Board.

If staff had taken care of this termination months ago, it is highly likely DRW/Convexity would make the July state-level meeting as planned. (The Board requires all legal issues to be fully worked out before putting a project on the Board’s schedule.)

Why does the delay of getting to the Michigan Strategic Fund Board matter? The $10 million tax credit requires that the main portion of the project—along Grand River Avenue—be completed by May 2021. A project of this size requires many years to complete, and so DRW/Convexity has said they are running out of time to obtain the credit.

DRW/Convexity has also said that without the state-level $10 million credit, the project is not doable financially.

City staff, including the City Manager, knew about this problem by this Tuesday’s City Council meetings, but did not advise City Council. At that meeting, City Council approved the development agreement for a separate project valued at $132 million and involving a complex partnership with the City. That is the Center City District project, being developed by Harbor Bay Real Estate and the Ballein family business.

At Tuesday’s meeting, Council repeatedly agreed to follow City staff’s wishes to let staff, the City attorney, and Mayor Mark Meadows take care of remaining key details in that deal—even after a citizen pointed out a mistake in the development agreement that would have cost the City millions of dollars in lost income that wasn’t caught by staff or the City attorney.

City staff waited until today to advise East Lansing’s Downtown Development Authority (DDA) of its major mistake on the Park District deal until after the DDA had followed staff’s request to approve the development agreement for the Center City District proposal. Staff and the City Attorney argued steadily at today’s DDA meeting against the opinion of several DDA members who believed that the Center City District Development Agreement should be amended by one word.

They did not want that change, because even changing one word would mean Council would have to vote again on the development agreement. (Both the DDA and the City Council have to approve the development agreement.) In the case of the Park District, the DDA was willing to request changes to the development agreement, and that meant those developers had to go back to City Council and deal with an unexpected delay.

What was the one-word amendment proposed at the DDA today for the Center City District agreement?

The development agreement calls for giving City staff only two business days to review results of an external consultant’s look at the Harbor Bay and the Balleins’ financial abilities to pull off this project and have it succeed financially. In other words, City staff and the City attorney will have only two days to decide if there is a red flag in the consultant’s report big enough to hit pause on the process. If they don’t raise an objection within two days, the City loses the right to get out of the agreement because of something the external consultant has found.

At the DDA meeting, former East Lansing mayor Doug Jester pushed to have that window extended to five business days—so he moved to change one word in the agreement from “two” to “five.” But lawyers for Harbor Bay joined Steve Willobee of the Lansing Area Economic Partnership (LEAP) and City staff in insisting this addition of three additional days for review would cause too much uncertainty and delay in the process.

Planning Director Tim Dempsey and City Attorney Tom Yeadon said they were sure two days gave them enough time to make this decision on behalf of the City. They said it was hard enough to get what they had gotten out of the developer in the negotiating process.

When Jester attempted the amendment to a five-day window, he was joined by DDA Chair Peter Dewan. But the amendment failed because it was voted against by DDA members Tricia Foster, Lynsey Little Clayton, and James Croom.

Croom indicated he felt the extensive financial review that would be done by possible lenders to Harbor Bay and the Balleins would be very thorough, providing a very good layer of protection to the City (because if the developers can’t get funding they can’t build the project).

City Planning administrator Lori Mullins opted to let the DDA meeting end without telling the DDA about the major mistake made by her and other staff in the case of the Park District. She did this even though the Park District had been on the DDA agenda and was briefly discussed, so she had had the opportunity to tell them.

After the DDA ended and the group took a short break, the same group reconvened as the East Lansing Brownfield Redevelopment Authority (BRA; the DDA and the BRA have the same membership). At that point, Mullins told those present about the Park District problem.

Members of the DDA/BRA expressed shock and concern about the news. Mullins said they were working to move things forward.

One of the members of the DDA/BRA is Brad Ballein, co-developer of the Center City project. (He had recused himself from the vote on his own project.) After hearing the bad news from Mullins about the Park District, he quickly sought assurance from Mullins that what she was saying did not impact his project. She assured him it did not. Center City proceeds forward to the state-level tax credit review system, while Park District is somewhat delayed.

Asked yesterday for comment on City staff’s mistake on the Park District, we received no response from City Manager George Lahanas, Planning Director Tim Dempsey, or Mayor Mark Meadows. We also received no response from David Pierson, attorney for the Park District developers. Mayor Pro Tem Ruth Beier responded to say that because the scene is “still in flux,” she is not ready to provide a comment.

 

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Note: One sentence of this article was edited slightly at 9:30 p.m. to clarify the debate over the amendment proposed for the Center City District development agreement.