Demolition Delayed as Developer Goes Back to Drawing Board

Wednesday, February 1, 2017, 8:38 am
By: 
Alice Dreger

East Lansing’s City Council voted 4-1 last night to let the vacant, blighted buildings along Grand River Avenue remain standing a few more months before being demolished. In the meantime, the developer is going back to the drawing board to rework the whole plan in the hopes of getting to an agreement with the City and also obtaining a $10 million state-level tax credit for its project.

The project will have to go through the planning process all over again—including going through the Planning Commission, the Brownfield Redevelopment Authority, and the City Council.

At last night’s meeting, Mayor Mark Meadows and Councilmembers Erik Altmann, Shanna Draheim, and Susan Woods voted to extend the demolition deadline, this time to April 30, believing this will help the developer potentially secure the $10 million state-level tax credit for the project. (Knocking down the buildings could jeopardize that credit because of the way the credits work.)

Mayor Pro Team Ruth Beier was the lone vote against the demolition extension. Beier said she saw no reason to believe the City can come to any agreement with this developer that will work financially, and so she thought voting for an extension was just postponing the inevitable—namely the City ordering demolition of the buildings.

But Beier’s colleagues on Council thought it was worth “one more try” to preserve the state-level tax credit for the project. All agreed everyone wants the blight gone as soon as possible.

We reported earlier this month that City Council had approved the site plan for the whole area, including properties currently owned by the developer, by the City, and by East Lansing’s Downtown Development Authority (DDA). But the tax increment financing (TIF) plan simultaneously approved by Council provided only for the City’s expenses, and not the developer’s.

The developer said the TIF plan could ultimately cost them as much as $16 million because the City expected, in the plan, to have the developer finance $26 million in costs over 30 years. The developer has suggested that the City Council’s vote on the tax plan essentially killed the deal.

So now that site plan and TIF plan are being thrown out. Having spent what they say comes to over a half-million dollars on the planning process so far, the developer will go back to what they were originally interested in proposing—namely a project focused simply on the land of the blighted Grand River Avenue properties, not including all the other land north of those, as the City Planning staff had wanted. What's known as "Building A" will be reworked; the rest of the planned buildings will be scrapped.

The developer’s representative, attorney David Pierson, told ELi after last night’s vote that he expects that "Building A" along Grand River Avenue will still include a hotel and retail space, but that he isn’t sure what, if any, the residential component of the project will be. We reported last week that MSU has expressed interest in a mass-lease of apartments at this location. But Pierson tells ELi that while there have been talks between the developer and MSU about this idea, there’s been no resolution.

The developer is now expected to create a new proposal even as the City is actively revisiting two controversial requirements. One involves a law known as Ordinance 1384 which currently requires that at least 25% of any large residential project in this area come in the form of owner-occupied housing (condos), senior housing, or some other form of housing not already available downtown.

Some have called Ordinance 1384 unworkable, saying it conflicts with market realities and is therefore untenable. The developer of the Park District only found out about Ordinance 1384 relatively late in the process, and it was one reason their plan morphed last fall, as the developer changed the plans to incorporate owner-occupied housing where rental housing had been planned.

But City Council last night approved establishment of a new Downtown Housing Policy Committee that will revisit Ordinance 1384 and very possibly recommend changes to it. So the developer will potentially be trying to make a proposal while the rule about what the project must contain is changing. (This won’t be an issue if the developer decides to eliminate the residential components of the project.)

The second controversial requirement under review involves parking. Last night City Council voted to ask Planning Commission to consider dramatically reducing how much parking major projects in the downtown area would be required to have.  

How will the developer develop a site plan proposal while these two key requirements about housing and parking--requirements that would necessarily shape the project—are in flux? That remains to be seen.

During public comment at last night’s meeting, citizen Jay Brant told Council that the City and the School District cannot afford to have property tax revenues from new projects diverted into tax deals designed to fund these projects. He said he thought the best thing the City could do would be to put the Evergreen Avenue properties the DDA owes in the Park District on the market, to see what money they might bring in and to see what whoever buys them wants to do with them.

Brant told Council it was time to stop letting the DDA’s $5.6 million debt on its Evergreen Avenue properties “wag the dog” of the Park District redevelopment area. “Make a fresh start,” he told Council.

Mayor Mark Meadows agreed with Brant in his comments that it would make sense to put the DDA’s Evergreen Avenue properties on the market to see what that might lead to. Meadows told those assembled that “we were never motivated by this debt” that the DDA owns on the properties—a debt now over twice what the properties are worth. Meadows said the properties “were purchased for redevelopment purposes and those can be marketed at the right time.”

Until now, Council has been approving plans that have assumed the Evergreen Avenue properties would be used to construct a major new City-owned parking garage. The DDA let Council know that it wanted its debt relieved by this project somehow, and Council had been trying to do that.

Councilmember Erik Altmann said the whole process up to this point had represented “an important round of communication.” He said that, over the last many months, the developer and the Council had learned about each other’s parameters, “and maybe even their own parameters,” in terms of the finances.

David Pierson, representing the developer, indicated to Council that he hoped on this round Council would be engaged throughout the planning process. He suggested that the parties did not end up in the same situation—with months (and hundreds of thousands of dollars) spent on planning, revision, and negotiation, only to have to throw out the entire plan because the parties could not come anywhere close to agreement on terms.

Pierson said the developer hoped to have a new plan to the Planning Commission by March. He indicated that a good deal of effort would have to be expended quickly on new architectural and engineering plans.