Above: The last rendering of the proposed redevelopment looking southeast towards Albert Avenue.
The East Lansing Brownfield Redevelopment Authority (BRA) has approved a revised tax increment financing (TIF) plan of $56 million for the proposed Center City District redevelopment. The project includes plans for market-rate rental apartments above an urban Target story in the 100-200 block of Grand River Avenue. It also includes apartments for people aged 55 and over above one floor of retail space and a five-level parking ramp on Albert Avenue, where the City surface Parking Lot #1 is currently located.
The new TIF plan would allow $56 million in local property tax payments to be used to reimburse the developers over a period of 30 years. The biggest component of the eligible expenses is $16.3 million for construction of the parking ramp, which will have 613 spaces, at a cost of about $26,600 per new parking spot, not counting the interest costs of borrowing money to pay for that construction. (About half of the spots would be leased to the developers for their tenants.) The other significant cost is the interest reimbursement for financing the project, which accounts for about $28.8 million of the total.
This TIF plan, approved yesterday by the BRA, now heads to the City Council, where public hearings are scheduled on June 13 for the TIF plan as well as a revised site plan and special use permit. Mayor Mark Meadows has requested that the full development agreement about this project also be available well before this meeting, so the Council can consider all of them together and so that the public has the opportunity to review and comment on them. At the BRA meeting yesterday, the new site plan was not yet available. BRA members were given verbal updates on expected changes.
According to City staff, the new site plan, development agreement draft, and other project-related documents will be available on the City’s dedicated Center City District project webpage, probably next week. Meadows previously said he wants all of the paperwork related to the project available to the public two weeks before the public hearings on Tuesday, June 13.
Despite many changes to this TIF plan compared to the one the BRA voted on at its March 23 meeting, the total amount of the expected reimbursement to the developers has changed very little – from about $52.4 million in March to about $56 million today. (Added to this amount would be another $2.4 million in fees payable to East Lansing’s BRA and the State Revolving Fund for management of the TIF.)
Changes to the underlying structure of the TIF plan include the following:
- 100% of the incremental property tax revenue due each year will be reimbursed to the developers, rather than the previous plan’s call for 90% of the tax revenue going to the developers and 10% passing through to local taxing jurisdictions. Councilmember Erik Altmann explained at the BRA meeting yesterday that giving up the 10% pass-through would allow more of the public infrastructure costs included in the TIF plan to be paid for by capturing taxes of surrounding local jurisdictions, including CATA, LCC, and Ingham County as well as East Lansing.
- This project also includes a land lease and master lease for parking spaces in the new parking ramp that are unusual alternative sources of revenues from the developers to the City. The figures for these sources of revenues have been said to be in flux during ongoing negotiations. Councilmembers who are involved in negotiating with the developer on this project have not indicated whether they think the City will get sufficient revenue from this project to move forward with it.
- Total eligible expenses in the TIF plan have been decreased since the last version, but this is more than made up for in the total by an increase in the reimbursed interest rate from 3% to 5%.
- The plan is now based on the City assessor’s latest estimate of the taxable value of the project (on which the property tax estimate is based) rather than the developer’s higher assessment. Basing TIF plans on the City assessor's estimate of the taxable value of the new property is the norm in East Lansing, but it has so far not been used for this project’s TIF proposals. Since the last estimate of a few weeks ago, the City’s tax assessor is now estimating the project to be worth about $2 million more. This is not because the project has increased in scope, but because the tax assessor has raised his estimates on the project’s value.
Another new element in the TIF plan presenting to the BRA yesterday is a potential plan for this project to apply for a second tax incentive from the State of Michigan under legislation (Senate Bills 111-115) that became law just this week.
This new State law is designed to support “transformational” brownfield projects. It is widely seen as having been designed to provide additional incentives to Dan Gilbert, owner of Quicken Loans, for large projects in Detroit. The law was revised to be made available not only in the largest cities in the State, but also in cities the size of East Lansing.
This new “MIthrive” or “super-TIF” program allows three kinds of income tax revenues collected by the State to be used for additional reimbursements to large developers, separate and potentially in addition to the property-tax based incentives that local governments can choose to grant. Each city can propose only one project per year to this State program. Each year, there will be only five projects funded throughout the State, and projects from a city the size of East Lansing must have an investment of at least $25 million.
Were the Center City District project to obtain this second TIF from the State in addition to the East Lansing Brownfield TIF, City staff told the BRA that the development agreement would be written so that the City’s TIF would be paid off in less than 30 years. That would mean that East Lansing and other local jurisdictions would receive property taxes from this project sooner.
However, receiving this second “super” TIF is far from certain, since there is likely to be considerable competition for the five available incentive packages. Furthermore, the developers of the Center City District—including Harbor Bay Real Estate Advisors based in Chicago and the local Ballein family business—have not decided whether they wish to apply for this very new program.
Doing so could complicate and delay the developers’ plans for the Center City District project. Including data in the TIF plan that can be used to apply for this tax incentive, as was done in the revised plan just reviewed by the BRA, does not guarantee that an application will be made to the State.
Few other development projects being considered in East Lansing this year meet the $25 million investment amount to be eligible for this program. DRW/Convexity Properties, which is developing the Park District project between Abbot Road and Peoples Church along Grand River Avenue, is pursuing a different $10 million State tax credit. That developer has not publicly expressed interest in the new super-TIF program.