Developer Sees Problems with City’s Management of Park District Proposal

Monday, January 23, 2017, 8:35 am
By: 
Alice Dreger

In response to questions from East Lansing Info, Convexity, the would-be developer for the blighted area of the Park District, has provided a statement indicating dissatisfaction with the City’s handling of the proposal and negotiations. Presented with Convexity’s statement by ELi, Mayor Mark Meadows has declined to respond to it.

The months leading up to the current tensions:

Convexity Properties is the developer for WGR Finance, the company that owns the blighted properties along Grand River Avenue and the site of the now-demolished Evergreen Arms apartments along Valley Court Park.

Convexity has worked through multiple stages of East Lansing’s review and approval processes as they have attempted to reach a development agreement with the City and also secure a State-level $10 million tax credit for the project. As ELi’s Chris Root reported last week, although City Council has approved the site plan and Tax Increment Financing (TIF) Plan, the City and the developer remain far apart on key terms of the negotiations.

Months were spent on the site planning process, while Convexity hoped City Council would soften housing restrictions for the area (which it did) and while Convexity responded to multiple concerns raised by East Lansing’s Planning Commission, Peoples Church, the Oakwood neighborhood, the Downtown Development Authority, the Transportation Commission, and others.

Convexity was hoping to have the deal wrapped up soon. But according to the developer’s statement to ELi, the process has not played out as they expected from November 2016 on. Convexity tells ELi, “The timing is very difficult at this point.”

In statements to ELi, Convexity has said their original plan for the whole deal was just to deal with the blighted corner along Grand River Avenue. But the City wanted to also use this redevelopment opportunity to have a major new parking garage added to the area and to have “additional road and infrastructure work incorporated,” including changing street configurations.

The City wants especially to use the redevelopment to get rid of the $5.6 million debt on the properties the Downtown Development Authority bought years ago along Evergreen Avenue. The City’s larger site/TIF plan has been aimed at dealing with these debt-producing properties.

Convexity made tax proposals to the City on December 5, but the City never answered:

In November, the Planning Commission approved the site plan for the whole area, including what would eventually be a new City-owned parking garage, and, according to Convexity, “A draft Brownfield [tax increment financing] plan was submitted and discussed with staff and the Mayor.”  

This is typical; working with the mayor and staff, developers usually submit TIF proposals, and the East Lansing Brownfield Redevelopment Authority (BRA) reworks them. A detailed plan is then typically approved by the BRA and sent to City Council for debate, possible revision, and approval or rejection.

In this case, however, Convexity provided the details of a TIF proposal on December 5 “for a conference call that day with the Mayor, City Manager, and Planning Director. We understood we would receive a written response soon after that meeting, but never received one.”

Following a failure so far to receive this memo from the City via the Freedom of Information Act (FOIA), ELi asked Convexity’s attorney David Pierson to provide the December 5 memo, and Pierson provided it yesterday. (View it in PDF.)

ELi is working to ascertain whether Convexity’s December 5 memo was ever shared by the Mayor or staff with the rest of Council or with the BRA. This is not clear. Two weeks appear to have passed between December 5 and the next move in the process, again, by Convexity.

This is a two-week gap that mattered to Convexity because the company is trying to secure the $10 million tax credit from the State which appears to depend on the blighted buildings remaining standing until approval, and City Council has made it clear it wants the buildings demolished as soon as possible.

An unusual TIF approval process then emerged:

Convexity indicates in its statement to ELi that what happened subsequently is that Convexity revised its December 5 memo, and resubmitted it on December 20. (View pdf.) This included the terms Convexity wanted to see in the TIF plan and the eventual development agreement. According to Convexity’s statement to ELi:

“Then, with submittal of a formal, revised Brownfield plan, we provided the December 20 update to the development agreement terms, to be considered by the BRA along with the Brownfield plan. These terms included Brownfield Plan allocations, refinement of the numbers and minor edits to the terms for the development agreement.”

But again, it isn’t clear the BRA ever saw this key memo from Convexity. It appears the BRA members, except for the Mayor, may have been unaware of it.

As ELi’s Chris Root reported, on January 5, in an unusual move, rather than developing a specific TIF plan—which normally the BRA would do—the BRA approved what amounted to a shell of a Brownfield TIF plan. What the BRA did was to recommend to Council, without much further detail, that Council pass a TIF of about $25 million that would heavily favor the City—a plan very different from what Convexity had proposed.

The motion for this shell TIF recommendation came from Mayor Mark Meadows, who by virtue of his office serves on the BRA. Rather than referring to a detailed plan as is normal, Meadows’ motion simply stated that the BRA approve “the amount of Brownfield Plan #23 with the suggestion that City Council take a look at all elements of the plan to identify those components which are clearly a public benefit.” The BRA also indicated they wanted the Evergreen Avenue properties’ debt covered somehow.

Says Convexity about the January 5th BRA meeting, “the BRA only discussed the total TIF amount; we do not know if the development agreement terms [in Convexity’s December memos] were provided to the BRA.”

If they were, they weren’t provided to the public, as would normally happen with materials of this type given to the BRA.

The Convexity memo also wasn’t made public before (or after) the City Council acted on the project:

Convexity tells ELi the lack of public airing of their detail-laden memo continued into the next step: “The development agreement terms should also have been provided to Council, but were not in the Agenda packet” for the Council public deliberation and vote on January 10. This was the day Council heard from citizens and voted to approve the site plan in a 5-1 vote and the TIF plan in a 4-1 vote.

Convexity says, “We also submitted alternative scenarios for the TIF [for Council’s January 10 meeting], which we told the Council we hoped we could discuss with them.” But “we were not offered that opportunity” at that meeting to discuss the TIF plan.

Meanwhile, the public never even knew about memos from Convexity at the time of the key January 10 Council meeting; Convexity’s memos and attachments were never provided in the public packets. ELi only found out about them by triangulating public statements by the Mayor and Convexity and then pushing Convexity and the Mayor for details.

Council saw what the public and the BRA apparently never did:

Communications between Council members and ELi indicate that Council members, at least, had been given the December 20 version of Convexity’s memo by staff by the time of the decision meeting of Council on January 10. But none of them openly referred to this memo so far as we could ascertain, and the public was left unware of it.

Convexity’s representatives have told ELi they were surprised by what happened at the January 10 Council meeting. They had thought they would have a chance to engage in open public discussion of their TIF proposal at that point.

Immediately after the TIF vote happened at Council, the developer called the plan unworkable. The $26 million TIF plan passed by Council deals with the City’s expenses for the project, and presumes the developer will finance those expenses. Convexity claims this TIF plan would cost them about $16 million. Developers seek TIFs to gain financial incentives, not to lose millions.

Convexity had been seeking a much sweeter deal:

Not surprisingly, it seems likely that Convexity’s plan, based on their memos, was to craft a deal that would be of significant financial benefit to the developer. The TIF as Convexity wanted it would have given the developer a much better deal.

Additionally, as ELi reported last week, in its memo, Convexity had suggested the City make a lucrative “give” in the development agreement—namely that the City agree to allow Convexity the right to a long-term lease to the parking lot just south of Dublin Square, with the understanding that Convexity would ultimately build there “an eight or nine story building with approximately 100,000 leasable square feet”.

If the City were to agree to this, it could be worth a substantial sum to the developer. It would certainly sweeten the pot for Convexity. But this has never been discussed at Council, Planning Commission, or the BRA—and its unclear how it could have been discussed publicly, so long as these documents were not shared publicly.

What’s next?

Convexity tells ELi, “We hoped that the [draft] development agreement drafted by the City would respond to our other economic proposals.” This is a possible reference to that parking lot long-term lease deal.

But Convexity notes that the development agreement draft produced this past week by the City Attorney “only includes the TIF. So we have to figure out how to respond, either by changing the terms, changing the TIF, or changing the project. All of which may take time.”

I provided Mayor Mark Meadows with Convexity’s full statement when I received it on Friday evening. I asked him for his response by late Sunday morning.

Meadows quickly answered, “I have not received this statement from them and if I were to receive the statement, I would comment on it at a public meeting.”

I replied, “You received it from me — it was submitted to ELi because I asked them a bunch of questions over the last 10 days, many of which this answers. So I’m asking you for your response to their statement for our readers.”

Responded Meadows, “And I'm telling you that I respond to those type[s] of things at council meetings. I don't have any comment at this time.”

Council’s next meeting is January 31. At that time, Council is expected to discuss the project and possibly approve what it wants in a development agreement. Council is also expected to decide whether to give Convexity more time to leave the vacated buildings standing—which, again, is necessary for Convexity to secure the $10 million State tax credit.

Convexity can’t apply for that large State tax credit until it comes to terms with Council, the DDA, and the BRA on the development agreement—and the development agreement draft is at the moment, in the words of the City Manager, “a shell.”

Meanwhile, the DDA and the BRA—which have the same membership, including the Mayor—meet this Thursday, January 26. Both bodies have on their agendas plans to discuss the development agreement.