ASK ELi: Have TIFs Been Rejected?

Friday, October 30, 2015, 8:29 am
By: 
Coleen Moyerbrailean

Above: Photo of Albert Place Condos when they were being built on the site of a planned project whose TIF plan was earlier rejected by the State.

Some residents are wondering if all requests from developers for tax increment financing (TIF) in East Lansing are ultimately approved. There has been at least one plan rejected in the recent past, as explained below.

To date, East Lansing has 20 Brownfield TIF plans (16 plans are active, 3 plans are inactive, and one, the Park District plan, was never approved) and 2 Downtown Development Authority (DDA) TIF plans in East Lansing. The Brownfield TIF plans help developers finance the cost of redeveloping contaminated, blighted or obsolete sites anywhere in the city, not just in the downtown district. A TIF also may allow the City to finance the cost of infrastructure improvements by having the developer pay the cost of the improvements and then be reimbursed over a period of time with interest. The DDA TIF plans allow for a variety of improvements, acquisitions, loans, grants, and rent subsidies to be financed by and paid back to the DDA over a period of time.

According to Katharine Czarnecki of the Michigan Economic Development Corporation (MEDC), with whom I spoke, approximately 95% of the TIF plans submitted to the State by municipal governments are approved. The State will look at plans during their development to ensure that the project is acceptable to the MEDC and that the financing and recapture plan is sound. It then reviews the plan again upon completion. In East Lansing, this typically occurs after City Council has approved the TIF Plan.

East Lansing’s first TIF, for the underground parking structure below the Marriott Hotel, was granted in 1997, and was recently renewed for another 30 years. None of East Lansing’s TIFs has yet been completed. Only after a TIF is completed do the full taxes due on the increased value of the development flow into the City’s general fund.  

Only one TIF plan in East Lansing has been rejected, and that rejection came from the State of Michigan via the MEDC. The rejected plan was for developers David Krause and Douglas Cron for their Stonehouse Village II and III project.

In 2007, after completing Stonehouse Village I (the building that houses the new Taco Bell and Insomnia Cookies), Cron Management (developers Krause and Cron) proposed Stonehouse Village II and III to the city. Stonehouse Village II was to be constructed along East Grand River Avenue next to Stonehouse Village I with nine two-bedroom apartments. The first floor was to have space for businesses and 12 parking spaces in the back.

The Stonehouse Village III development was to contain three one-bedroom and 33 two-bedroom condo units with two levels of parking underneath the building. Unlike Stonehouse Village I and II on Grand River Avenue, Stonehouse Village III was to face Albert Street, and the condos were to be marketed for sale to older professional and empty nesters.

The City was willing to approve the developers’ DDA and Brownfield TIF plans. The State was not. MEDC wanted $2.3 million cut from the TIF plan.

Tim Dempsey, East Lansing’s community and economic development administrator at the time, was quoted as saying, “[The State] felt it was more of a small-scale downtown project. They didn’t view it as something that would impact the region….A project of this scale is going to have a major impact; it’s deserving of support.”

Dempsey added that the State also felt the City was “juggling too many projects at once.” At the time, East Lansing was developing the East Village, West Village, Virginia Avenue (Avondale Square) and City Center II projects, all with proposed TIF plans.

With the loss of the potential of $2.3 million in reimbursements, the developers scrapped the Stonehouse Village II portion of the project because of its “high cost per square foot” (according to Lori Mullins, City Planning staff). The city was still happy with the end result of Stonehouse Village III (now known as the “Albert Place Condominiums”) and, upon completion of that project in 2008, the City purchased the two-level parking garage for the building from the developers for $2.7 million.

 

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