In 3-2 Vote, Council Grants Developer TIF Boost

Tuesday, October 7, 2014, 9:25 pm
By: 
Alice Dreger

Following a highly contentious discussion between Mayor Nathan Triplett and City Council member Ruth Beier, the City Council voted 3-2 to grant the Trowbridge Plaza developer his wish for as much as $1.2 million more in reimbursement from tax revenues over 16 years, funds that would otherwise have gone to public services. Triplett was joined by Mayor Pro Tem Diane Goddeeris and Council member Susan Woods in voting for changing the TIF plan from a 50/50 division to a 65/35 split in favor of the developer. Beier and Council member Kathy Boyle voted against.

The project is being built by River Caddis, and Kevin McGraw, a principal of the company, had put forth the request to change the TIF calculation to be in his company’s favor.

Boyle, who lives in the Red Cedar neighborhood where the project is located, strenuously objected to the additional give-away of tax revenue, stating that there is a need to increase city revenue to be able to provide public services and pay city employees competitive wages. She said that the project is adding student housing “at a time when many believe the market for student housing is saturated.”

Boyle also said that McGraw’s claim that the problem was caused by a tax miscalculation – one that would ultimately cost the project an additional $55,000/year in taxes – was not the fault of the city, but his own. She also suggested that if McGraw was facing more taxes because the project was actually going to take in more rental income than he had expected, he would and should obtain his boost in projected profits that way, i.e., through the higher income than he had originally calculated.

Beier said that “there are cities all over, including ours, where you can make a profit without [public] subsidies on student housing.” She named the giving away of more TIF funds as “taking my tax dollars and giving it to someone else’s profit, which I find odious.” She added that “we need every dollar we can get for sidewalks and sinkholes.”

Triplett suggested that because the tax mistake – a mistake made by the developer by underestimating the number of tenants – was not caught by City staff, the City should grant the developer his request. To this, Beier responded that if she were a developer and estimated her taxes on a project wrong, she would not come back to the City and ask for a TIF plan to repair her profit margin. She said it was the developer’s job to get the numbers right in the plan and added, seconding Boyle’s remark, “I haven’t seen any proof that the error did not also increase the revenue” the developer will obtain from the property.

Triplett responded that the situation was “troubling” and opined that if the mistake had been made the other way – i.e., to the city’s detriment – Council would have gone back to the developer to change the TIF plan to restore the City’s expected revenue. But to this Beier strongly objected saying she would not renege on an agreement after negotiations were settled. (She noted that she is a professional negotiator.)

Triplett said it was not as if, by increasing the TIF funds that would accrue to the developer, the Council were giving away existing tax revenue, because the project is not yet built. To this Beier again strongly objected, saying the previous TIF plan was already approved and therefore counted as an existing tax revenue stream that Council would now be diverting away from the City's treasury if they voted “yes.”

Beier called Lori Mullins, City Planning staff, to the podium and asked Mullins to acknowledge that 35% is less than 50%. Beier noted she was doing this rhetorically, i.e., to make the point that the City revenue would be sharply decreased if the TIF change passed. Mullins agreed that 35% is less than 50%. As the debate over whether this reduced city tax revenues continued, Beier told Triplett, “If you’re going to be purposely obtuse, I can’t argue with you.”

In the earlier part of the discussion, Goddeeris said she thought flexibility in TIF plans, i.e., the ability to come back and change them, was a necessary part of the process. She expressed concern that if the TIF change was not approved as the developer McGraw requested, he would walk away from the project as he had said he would do at the September 23 work session of Council.

Woods was present but did not participate other than to vote “yes.”

I had advised Council in advance of today's meeting that I would be reporting on the votes taken today, and as a result, Beier wrote to me after the meeting to ask to have this statement put on the record: "I think voters should vote 'no' on the land sale on the ballot because this Council, as constituted, has shown that the interests of developers are more important that the interests of city residents."

No other Council statements have been received as of publication time.

 

Image of City Council courtesy City of East Lansing.

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