Above: The blighted properties along Grand River Avenue at issue, with a sign about a "Cool City" being in progress dating back to Governor Granholm's administration.
Just when it looked clear that the Michigan Economic Development Corporation (MEDC) was set to make the next decision on the Park District redevelopment plan, the MEDC has once again kicked the matter back to East Lansing’s City Council. The MEDC is now asking City Council to go through another round of legal motions before state-level decisions will be made on tax incentives for the proposal. The Mayor tells ELi he’s “frustrated” by this latest twist.
The MEDC has raised two issues—the procedure for adopting the Brownfield Tax Increment Financing (TIF) Plan for the new project and the claim by the former owner of the blighted properties that he owns the right to a $10 million State credit associated with the land he lost to foreclosure. The City Council will address the first issue at its September 19 meeting. The MEDC will decide the second.
East Lansing Mayor Mark Meadows says he’s still “pretty confident” that the state-level decision will be made this month, after City Council follows what MEDC wants done now. But he’s clearly tired of the situation.
“I have to believe that this is all incredibly frustrating for Convexity [the would-be developer] because it is equally frustrating for the City,” Meadows tells ELi.
Convexity has promised to demolish the vacated buildings after the MEDC makes the decision, but says it would jeopardize the tax credits (and thus the project) to demolish them before the decision. DRW/Convexity is seeking a $10 million Michigan Business Tax credit for the project.
Says Meadows, “The attaining of the 10 million [dollar] credit is critical for the project to move forward. It took us awhile to get to the sweet spot on this project (understating here!) and I think everyone thought all was taken care of.”
The problem is that the former owner of the private properties, Scott Chappelle, is insisting he is owed something on this project in terms of tax money, even though he lost the properties to foreclosure years ago. Chappelle’s lawyer and the MEDC have declined to answer questions from ELi about why they think he has a right to future tax incentives for properties he does not own.
Meadows, an attorney, tells ELi, “It was my expectation that the ‘right’ to having the 10 million [dollars] in State funds was transferred with the land because it has no value otherwise. Chappelle has argued that it is independent and it constitutes a property right that cannot be transferred without his consent.”
Chappelle’s attorney, Arthur Siegal, has declined to answer questions about what his client is seeking to get out of this legal maneuvering, other than saying his client is owed $6 million in expenses related to the project that never happened. We have asked Siegal to give us a break-down of that $6 million, and he has not.
Chappelle is known for being litigious. Indeed, he has tried and failed in court to wrangle back from DRW/Convexity some right to the Park District/"City Center Two" properties he lost to foreclosure. Now he seems to be causing the MEDC enough legal worries that MEDC keeps issuing new orders to East Lansing and DRW/Convexity about how it wants paperwork redone.
As we’ve previously reported, the $10 million tax credit requires that DRW/Convexity’s project be completed by May 2021, so time is running out on the project.
The City of East Lansing might be willing to live with the project not getting done—as noted above, DRW/Convexity has promised to demolish the blighted buildings no matter what happens with the State. But the DRW/Convexity redevelopment would help the City financially in multiple ways:
· The associated TIF scheme provides a way to use newly-generated taxes to pay off about $7 million in debt on the publicly-owned Evergreen Avenue properties, a debt which otherwise is going to come due and create another financial challenge for the City.
· The TIF plan would also give the City a way to obtain millions of dollars in new public infrastructure (roads, sidewalks, sewers, etc.) in the area with money paid by the developer in taxes.
· The redevelopment, once built, would immediately start paying hundreds of thousands of dollars in new taxes to the City, and the City is desperate for new sources of revenue.
The project, if built as planned, would also bring a new downtown hotel, additional retail space, and hundreds of new residents, including owner-occupied condominium apartments. (Read more.) All this would mean substantial economic development in East Lansing's downtown.
As a consequence, members of City Council are keen to see this project happen. But it remains to be seen whether the MEDC’s latest instructions will ultimately result in the necessary tax incentives from the State.