Council Unanimously Approves Center City District Proposal

Wednesday, June 21, 2017, 8:26 am
By: 
Alice Dreger

In a unified show of support for the project, East Lansing’s City Council unanimously approved the Center City District Proposal last night. Council approved the site plan, special use permits, development agreement, and a $58 million tax-increment financing (TIF) deal that will be used to build public infrastructure, including a new parking garage.

The project is set to include two new buildings. The Grand River building is designed as a 12-story, 132-foot-high building. On the ground floor would be retail space for Target, and above that would be 273 market-rate rental apartments housing upwards of 400 people. These will include small studios, one- and two-bedroom apartments, with some being furnished apartments.

The Albert Avenue building will be constructed on what is now City Parking Lot #1, coming in at 117-feet-high and 10 stories. On the first floor will be retail space operated and rented out by the developer along Albert Avenue. The second through fifth floors will be a parking garage owned and operated by the City. The sixth through tenth floors will have 92 apartments for people aged 55 and over, operated and rented out by the developer.

Four Councilmembers—Mayor Mark Meadows, Mayor Pro Tem Ruth Beier, Erik Altmann, and Shanna Draheim—asked numerous questions of City staff during the proceedings. Councilmember Susan Woods, did not participate much in discussions except to express her enthusiasm for the project before the votes.

The deal is contingent on City staff being satisfied with findings of a forthcoming due diligence review of the developers’ financial situation and the project’s planned finances. City staff will have two days from receipt of the findings to raise any concerns, otherwise the deal will proceed.

The project depends on East Lansing’s Brownfield Redevelopment Authority (BRA) issuing bonds to assist the developers’ construction of public infrastructure, including the parking garage and redo of Albert Avenue from M.A.C. Avenue to Abbot Road. Albert Avenue will be reconfigured to be more pedestrian friendly, with wide sidewalks for gathering space.

The TIF will specifically be used to pay back the BRA bonds and interest on them. The developers will be responsible for any costs of public infrastructure beyond what the City has allocated, and if the tax revenue falls short to pay off the bonds, that will also be the financial problem of the developer.

Council sought and obtained assurance from their bond counsel, Bill Danhof of Miller Canfield, that the City’s assets and credit rating will not be risked through the issuance of these non-recourse BRA bonds. He said the developer will have to get loans from a bank to cover construction before the bonds can be issued, because the bonds can’t be issued until the project is complete. Danhof said that if, when the TIF plan ends in 30 years, there hasn’t been enough tax revenue to pay back the bonds, the developers, not the City, will have to make good on the debt.

For the right to build, own, and lease out retail space and the senior housing on what is now public Parking Lot #1, the developers will pay the City $200,000 per year, adjusted for inflation. City staff expect the project to bring in about $420,000 new revenue per year total (including the lease), which several Councilmembers noted was enough to pay for City services to new residents in the building.

Key materials on the project were still being made public only yesterday, and numerous attachments to the development agreement are either not yet finished or not in existence. City Director of Planning Tim Dempsey explained that is because there are still details of the engineering and site plan to be worked out. Council’s action effectively authorized City staff and the Mayor to work out and approve the rest of the deal.

A few errors and typos were corrected before the development agreement was approved. Most notably, the lease agreement had the developer paying only $150,000 per year. The $50,000-per-year mistake was caught by citizen Jay Brant, not by the City attorney or Council. Speaking from years of professional experience in litigation, Brant warned Council sternly about the high risk deal he said they were undertaking. Brant called the complex development deal “a litigation bomb.”

Before the first of several votes, Mayor Meadows disclosed that he had received numerous contributions over years from Howard and Vivian Ballein, founders of the Ballein family business, co-developers in the project with Harbor Bay Real Estate. He said campaign contributions mean “absolutely nothing to me.” In his remarks on the project, Meadows firmly rejected the idea that the project represents a partnership between the developers and the City.

Numerous citizens came to speak for and against the project. Proponents praised the project’s density and what it will offer in terms of retail, including an urban Target store, and rental housing for people aged 55 and up. They also praised the “walkability” of the project. Representatives of the construction unions came to hail the project as an economic boon.

Critics raised concerns about risk to the City, potential harm to or even loss of local businesses, congestion, and the large windowless walls that will be facing east towards the City Center condos located above CVS and Omi Sushi. Concerns were also raised about the height of the buildings and the massiveness of them, as well as the large amount of vacant retail space around town, which they said indicated the City doesn’t need more retail space as this project provides.

The development agreement gives the developers the right to a master lease of 312 spaces in the 620-space parking garage. The developers will get discounted parking for thirty years and the City will get guaranteed income from those spaces. In the event the developers fail to build the senior housing, the developers still have to pay for the parking lease.

Dempsey told Council that the coordinators of the folk, art, and jazz festivals are adjusting their plans for future years to deal with construction. He said construction of the garage is anticipated to take about a year. The developers have said the whole project would be complete in about two years, but it is unclear whether that would include the senior housing.

Councilmembers offered their reasons for being in favor of the project. All said they were comfortable with the financial aspects of the plan and that the project was set to bring in enough revenue to the City to convince them that this was a good use of public Parking Lot #1. They felt the development of public infrastructure was a good use of the $58 million TIF.

Altmann said he liked the site plan and that the “buildings look pretty good” on the Albert side and “okay” on the Grand River side. He appreciated senior housing and said he thinks that attracting 150 seniors to live downtown will change the dynamic of downtown. Altmann said he doesn’t understand the attraction of Target but hears people saying they want it.

Beier said she had worked with the developer and had come around on the plan, particularly since there had been set-backs introduced on Albert Avenue to make the parking garage less “monolithic” on a street with two other parking garages nearby. She said she trusts the due diligence process to protect the City. She said she appreciated that the City got “all the data” before the votes. She said she was happy with the labor agreements, which call for using local construction workers, and with the senior housing, but that she isn’t sure the density won’t be “too much.”

Draheim said she disagreed with people who said the process had been too fast or rushed. She said she felt “there is a little of everyone’s viewpoints” in the final product and that the project supports the goals of the City. She spoke strongly in favor of the density and the place-making approach in the redo of Albert Avenue. She praised the “huge economic benefits” of the $125 million project and said she thought it would be great for small local businesses. As to the risk issue, Draheim said she was comfortable risk had been minimized as much as possible and that life is never without risk.

Woods said she was glad to speak after her colleagues so she wouldn’t “have to say all that.” She said she supported all they had said and had been supportive of the project “since the beginning.” She praised the Ballein family and the intelligence of the people of East Lansing. Woods also praised City staff and said she hoped that everyone who isn’t supportive of the project will see it as a great development.

Meadows said he saw this project as akin to University Place, where the Marriott Hotel is located. He said he was glad to get the parking garage and have it funded through revenue generated by new taxes from the project. He also said he was pleased that the Grand River Avenue building would have furnished “microunits” (small studios) which are not currently available in the City. He said he thought the two-bedroom units high up in the Grand River Avenue building might well attract non-students given the great views of campus.

The developers never appeared at the podium to present or discuss the project—an approach to review at Council we have not seen before—although they were present and visibly pleased with the outcome.

Among issues not yet worked out, and presumably to be worked out by staff, are the landscaping plan, the lighting plan, details of the condominium agreement (by which the developer will build private properties on public land), and who will pay for and maintain the pedestrian tunnel running through the parking garage from Albert Avenue to the alleyway. Dempsey suggested he thought that cost and management would likely fall on the City.

In a separate meeting held after this one ended, City Council voted to put a City income tax with a concomitant property tax reduction on the ballot in November. A majority of voters will have to approve that to pass. We’ll be bringing a separate report on that issue, but you can read background here.

 

Want to know more about the site plan and history of the Center City District proposal? Check out our dedicated page on the project.

Note: This article was amended to correctly reflect the nature of Jay Brant's professional background.