Council Split on Views of Center City Proposal

Wednesday, May 10, 2017, 12:40 pm
By: 
Alice Dreger

Above: A photograph taken at Lotsa Pizza on Monday afternoon of a rendering said by the Center City proposal developers to represent what may be the new design for the structure along Albert Avenue.

Last night, East Lansing’s City Council held public hearings on the Center City District proposal site plan and tax increment financing plan—or rather, on the former site plan and former tax plan. The plans have been changing, and new plans were not available for the public hearings, even as many people came to Council to comment on the proposal.

Council decided last night that it will hold another round of public hearings on the project on June 13 if plans are ready by May 25. Mayor Mark Meadows said that, in this case, he would insist that all the plans for the site, the tax increment financing (TIF) plan, and the full Development Agreement be completed and made available at least two weeks before the June 13 Council meeting so they can be adequately considered by Council members and the public.

The Center City District proposal, said most recently to involve around $150 million of development and upwards of $55 million in TIF, would include the development of private property on the City’s most lucrative property, Parking Lot #1, along with a major new parking garage. The parking garage would have retail space on the ground level and senior housing above it. The developer would also build a 12-story building on Grand River Avenue with retail space on the ground floor and rental apartments above.

Last night Council heard from many citizens, including some who said they found the project very exciting and others who said they found it absurd to have a hearing on a project that has no publicly-available current written iteration.

While not voting on the plans, Councilmembers did give some indications about how they are thinking about the project. Councilmember Susan Woods told her colleagues, in summary, “I’m just gung-ho. I’m for it.” At that, Councilmember Shanna Draheim said, “Ditto.” They indicated enthusiasm for the density of the project and the attraction of an “urban grocery” downtown.

But Councilmember Erik Altmann said he was throwing “cold water” on the excitement with his concerns about financial risk. Mayor Mark Meadows also indicated concerns about how the money shakes out, and promised “due diligence” on the developers’ ability to get the project financed and completed. Mayor Pro Tem Ruth Beier said “it behooves us to make sure there is enough money” in the project to make it financially viable.

Below: New rendering of the proposed Albert Avenue parking structure, retail, and senior housing.

One question is what the project will really be worth in terms of taxable value once built. While the City’s idea has been to make it the developers’ and other private investors’ financial problem if the taxes fall short of paying for the project’s TIF-approved components, some on City Council are worried about launching a project that may have a shortfall in terms of tax capture and rental market.

Atypical process continues with this proposal:

We have previously reported on the atypical process surrounding this proposal (for example, here, here, here, here, and here). As for last night’s meeting, the TIF plan saw a public hearing even thought there was no estimate of future taxable value available from the City’s tax assessor. (Without knowing that, we can’t know how much tax is likely to be captured through TIF.)

In another unusual development, the site plan saw a public hearing last night without the developer making a presentation on the proposed project. The day before, developer Mark Bell of Harbor Bay Real Estate informed the public at Lotsa Pizza that his project wasn’t ready for these public hearings. Bell did come to the podium briefly last night to say he thought it was “important for us to attend.” He told Council that “the community needs to know all the facts and all the answers and we support that.”

Bell said, “It doesn’t do us any good to be pigheaded or stubborn,” and said they will seek more feedback at another (presumably public, nongovernmental) event hosted by the developer on Monday, May 15. The details of that have not been made available. He said that such events are “great settings” that are “less formal” where the developers could get “good interaction and dialogue.” Harbor Bay has now hired a P.R. firm to manage these events and to communicate with citizens.

Asked by Altmann whether Bell wants public feedback enough to go back to Planning Commission for review of the new design, Bell did not give a definitive answer but indicated he did not want to take the project back to Planning because it would delay the project. On April 26, Planning Commission formally voted against recommending the site plan and focused their objections on the size, mass, and scale of the proposed buildings. (Read our report on the vote.)

Meadows said he trusted City staff to tell them if the regulations required that the project’s alterations mean it must go back to Planning Commission. The developers said on Monday at Lotsa Pizza that the height, massing, and volume of the project had been changed, while the density (that is, the number of rental units) had not.

At the meeting last night, attorney George Brookover strongly warned Council against continuing to allow this redevelopment proposal to follow an irregular review path. Brookover is representing the owner of the building just west of the project area, a building that includes Urban Outfitters, Rally House, and Lotsa Pizza. Brookover evoked the City Charter and planning regulations in suggesting there could be grounds for a lawsuit brought on his client’s behalf based on failure to follow required process.

Responding to frustration expressed by a number of citizens about how quickly and irregularly this redevelopment proposal has been treated in the review process, Meadows indicated last night that this project will need to have materials available well ahead of when Council may vote on June 13. He also said that these materials needed to include the full Development Agreement, with all attachments (which provide important financial details), and not just a shorter Memorandum of Understanding between the City and the developer, as happened with the Park District deal with DRW/Convexity.

Following the lead of Meadows, Council indicated that if the site plan and TIF plan revisions are not available by May 25, when the BRA meets again, Council would not expect to have the public hearings and take votes on the matter on June 13. Altmann said people in the City need plans to “sit still long enough to be digested.”

Below: New rendering of the proposed Target store along Grand River Avenue.

Target and the other retail components:

Bell told Council he’s under a time crunch because his agreement with Target commits his company to having the project ready for the store to open by March 2019. Target would be the “anchor tenant” in the project, with a 20,000-square-foot “urban” store, with a grocery component, on the ground floor of the proposed Grand River Avenue tower.

Details of the Target deal have not been made public. The developer has been suggesting East Lansing would lose any chance at this urban-model Target if their development is not approved soon. But it is possible the agreement is written in such a way that Target could opt to locate somewhere else in downtown (in another new or in an existing and rehabilitated structure) if it becomes clear that Harbor Bay can’t make this project happen soon enough for Target’s goals.

Bell told Council he needs the Target store to make his project happen, because he does not want to build retail space “on speculation.” The proposal also calls for 20,000 square feet of smaller retail space along the south side of Albert Avenue at the base of the new parking ramp. This would be owned by the developer and leased out.

Based on current leasing rates, the Albert Avenue retail spaces would be expected to rent for upwards of $400,000 per year. City Council has not sought an appraisal of the proposed private elements for the public land, so there is no official estimate of what these components could be worth. The current plan calls for the developer to pay the City $75,000 annually for the use of public land for public development, including the senior apartments and the retail on Albert Avenue.

Senior housing component:

This Council passed an ordinance requiring that downtown housing projects have at least 25% of their units dedicated to something other than “market-rate apartments” such as the typical student rental market. Current Councilmembers are uniformly interested in attracting senior citizens to live downtown. This proposal calls for a dedicated rental building for seniors aged 55 and up above the proposed parking ramp on Albert Avenue.

Although that part of the project is to be built on public land, the developer will not say what the likely rents would be. At the Monday event at Lotsa Pizza, the developer described indoor amenities and a relaxing outdoor deck for the private use of residents of that building. The design of these features is not yet available for review.

Below: An image of the senior housing deck shown by Harbor Bay at Lotsa Pizza, but not yet presented to Council.

Several Council members pushed the question of whether the rents in the proposed senior housing will be so high as to fail to attract residents. Betty Nocera, who, with Ray Vlasin, has researched senior housing in university communities, told Council last night she definitely wants to live in the building, calling it “so cool,” and said she is sure there is a market for these apartments.

Nocera told Council her views of the “demographics and psychographics” of the 55-70 age group of “empty-nesters.” When asked, she said she did not have information about how the rental pricing could impact the marketability to seniors. She declined to say how much would be too high a rent for her to live there.

Downtown business impact:

At last night’s meeting and in written communications, Council heard widely divergent views on how this project could impact other downtown businesses during and after construction. Scott Weaver of the Douglas J companies said he saw this as an extremely exciting project, one that would help his business that employs and educates hundreds of people in downtown East Lansing. Weaver said he saw the project as a “win-win” and said he’d hate to see this opportunity lost.

The owners of Mackerel Sky, Linda and Tom Dufelmeier, have raised many concerns about the project, including its potential to spell the end of small downtown businesses like theirs.

The Council communication records also show an April 26 email from Rob Davis, Midwest Director of Restaurant Operations for Lotsa Pizza, asking Planning Commission “to vote NO to this upcoming project.” Davis said “the impact in lost parking, access to our restaurant, and visibility is causing us great concern.”

Harbor Bay used Lotsa Pizza on Monday to present its latest renderings to the public, so I asked Harbor Bay’s Mark Bell about this message yesterday. He told me that, now, “Lotsa Pizza is in full support of the Center City District project.” Contacted directly, Davis told me yesterday, “At this time we have no position” and added the company “look[s] forward to the growth of the East Lansing community.” Bell has said that many other businesses are also in favor of the project, but those businesses have not directly communicated with the City.

At Council last night, East Lansing developers/landlords Doug Cron and David Krause expressed concerns about the project proposal, particularly about the impact along Albert Avenue, where they own The Residences building that includes HopCat. They said the disruption of construction and the shadows of the new buildings would harm the businesses along Albert Avenue. They said they weren’t against the basic idea but that the designs being proposed were simply too massive for the area.

In questioning Cron and Krause, Mayor Meadows noted that they had themselves benefitted from constructing tall buildings, from building over public land (referring to the Albert Place condominiums), and from being given TIF for their projects. Meadows thanked them for building numerous new buildings in downtown East Lansing, most of which are majority student rentals. Krause later specifically said he did support the use of TIF for building “better” buildings than would otherwise be built.

Pat Riley, owner of Harper’s Brew Pub nearby, pointed out to Krause and Cron that The Residences has shaded his building since it was constructed. He said he is “totally for this project” and welcomes shade as a sign of urban progress. He said he also welcomes many more students living downtown, as that is the nature of a college town, and that he looks forward to feeding hundreds of construction workers during the construction phase.

Below: The tower proposed for Grand River Avenue, as presented by the developers at Lotsa Pizza on Monday.

Labor unions:

Construction labor union representatives have come out strongly in favor of this project and did so again at last night’s hearing. Tyler McCastle of the carpenters’ union told Council the “shadows” they worry about are the shadow workforces that take union jobs. He said they would construct a building that would last 100 years, and praised the developer for working with the unions to prepare for the project.

McCastle told Council that doing this construction at the same time as the Park District will save costs and shorten the time downtown suffers disarray from construction. Several representatives of other labor unions also praised the developer and project. Councilmember Susan Woods later said that listening to the construction workers “almost brought me to tears.”

Parking and traffic:

Planning Director Tim Dempsey says the project plans now call for 613 spaces in the new parking garage, including 316 that would be master-leased to the developer at a discounted rate for tenants of their buildings. That would mean the new ramp would add about 140 more hourly/daily spots than current exist in Lot #1 as a surface lot. The previous plan called for adding only 40 more hourly/daily spots.

The City master-leases parking to major landlords around town at discounted rates, and in fact most of the garages are now full in terms of monthly permits. In a budget meeting earlier in the evening, Council moved to raise monthly parking permit rates to $95, although the Center City proposal calls for providing monthly permits at the rate of about between $60 and $70 per month.

Councilmember Draheim said she would rather see less parking than is being planned for Center City, but indicated she’s comfortable with a ramp for 600 cars. Meadows said he thought the 600-spot plan would give enough room for growth downtown.

Director of Planning Tim Dempsey said he does not expect traffic to become a major problem in the area. He said estimates indicate there will be about an extra 2500 car trips in the area per day if this development happens.

Financial risk:

Prior to the Council’s meeting, some members of Council had discussed with City Manager George Lahanas the need to hire an expert consultant to perform a “due diligence” review of Harbor Bay’s record and financial capabilities. Lahanas said at the meeting that due diligence can be done on this project. The City does not normally conduct due diligence analyses on development projects, but this one is unusually large and involves private development on City property and governmental participation in financing to an unusual extent.

Lahanas said it is still too early for this to occur, but it could be done when Council is ready. At this time, it’s unclear when this will occur and thus unclear what mechanism Council could use to back out of the deal were the review to find what Council considered to be too high a risk. Mayor Pro Tem Beier suggested there be an “introductory due diligence” started now.

Beier said that even though the City is trying to structure the deal so that there will be no financial recourse to the City, “we can’t afford to have it fall apart. It’s huge physically. We can’t have it not get built or let” (meaning leased). She said she “needed confidence” that the rental prices for the senior apartments would be reasonable to seniors interested in living downtown or that there be some “plan B” in case those apartments don’t rent.

Saying the City had “gotten into trouble” overestimating taxable values of proposed projects, Beier told her colleagues, “It behooves us to make sure there is enough money.” Dempsey said Planning staff and the City Attorney are working to make sure there would be no financial problems to the City if the project doesn’t come off as planned, including in terms of ultimate taxable value.

Immediately after Beier expressed her concerns, Councilmember Woods said, “I don’t really have any questions. What I have is all the positives that this development has.” She said the developers had listened to Planning Commission, adding, “they didn’t give up and say we’re spoiled little brats.” She praised the proposal for bringing dense housing to downtown and for the attraction of a Target with a grocery component.

Below: the current East Lansing City Council (from left, Meadows, Draheim, Woods, Beier, Altmann).

Woods said the project would have a ripple effect, adding, “It’s a lake, guys.” She said this was a better approach than selling Parking Lot #1 because under this plan “there will be continuous revenue for our City, which we need.” (Council has not sought an appraisal or called for alternative proposals for this public land. Revenue projections are not yet available.)

Councilmember Altmann pressed the issue of “risk management.” Quoting a correspondent without using that person’s name, Altmann asked, “Do we know how we might get hurt down the road?”

Dempsey answered that the non-recourse revenue bonds taken out to do the construction would protect the City. He also said there would performance bonds to make sure at least the public infrastructure was completed. He also said that the Development Agreement would be a key tool for protecting the City.

Meadows said he believes there is adequate demand for general rental housing downtown. He said he doesn’t see “a real issue” in terms of being able to rent to seniors. But, he said, the developers should “confidentially” share with Council their evidence for the market. Meadows reiterated he wants “a conservative evaluation” of the taxable value and said he felt the Development Agreement would be key to managing risk.

Plans continue to evolve:

Many people weighing in on this project are not simply “for” or “against.” Many say they believe the properties being considered for redevelopment are greatly underutilized, that more dense housing downtown would be good, that attracting seniors to live downtown would benefit everyone, and that having a grocery store would be a huge asset. But many also express concerns about the sheer size of this proposal as well as the general design.

After last night’s meeting, ELi received a communication to this effect from Dan Bollman, a local architect and member of Planning Commission. Bollman recused himself from the Planning Commission vote because his offices are in a building that would be demolished for this project.

Bollman tells ELi, “Mr. Cron and Mr. Krause, who consistently develop high quality, well-designed buildings have offered thoughtful, reasonable objections. I don't feel as if those who are enthusiastically supporting the project have considered the tremendous physical and financial impact it could have. This is true of both the general public and some of the public bodies reviewing the project.

Bollman expressed some frustration that, “After considering the series of local trades [unions] speaking in favor of the project, it occurred to me that the same early involvement was not extended to local design consultants, especially architects and urban planners. And I think that goes to the heart of the issue.” He says, “The first version of the design that was presented would fit in well on Wacker Drive or LaSalle Street [in Chicago], but it was far too massive for Grand River in East Lansing. The developer and architect changed the massing for the better—a few times now—but it remains too large for the site.”

According to Bollman, “Issues of massing, scale and location would have been noted, had local input been sought earlier in the design process.” He says, “The City has a Design Assistance Team, intended to offer free design advice to applicants preparing information to the Historic District Commission. While I hesitate requiring an additional level of bureaucracy, perhaps a similar service could be offered as an option for developments of a particular scale or in a sensitive location, especially when public monies are involved.”

Last night, Councilmember Altmann specifically asked for better drawings and renderings of the project, so that Council and the public can adequately envision what is really being proposed.