City Withheld Key Data on Center City District Proposal

Monday, May 22, 2017, 7:00 am
By: 
Alice Dreger

Above: Developer's rendering of the private retail space and rental apartments proposed to be built on public land as part of the Center City District redevelopment.

Results of a new Freedom of Information Act request show that the City of East Lansing withheld key data on the Center City District proposal for over three months.

This data, produced by the City’s own tax assessor in January, showed the City’s assessor giving the redevelopment a 30% lower taxable value than the developer’s estimate, a difference of $7.9 million.

It also showed that, as early as January, the City’s assessor conservatively estimated that the developer would obtain about $2 million in gross rents from private development built on City land—a deal for which the developer offered to pay the City only $75,000 per year.

The holding back of this information occurred even as City staff shepherded the project through the Brownfield Redevelopment Authority for approval of the tax increment financing (TIF) plan, to Planning Commission for review of the site plan, and to City Council for public hearings, where the public was asked to comment on plans and the proposed public-private deal.

ELi reported our previous discovery, through the Freedom of Information Act (FOIA), that the City’s assessor had determined on May 4 that the redevelopment proposal would be worth about 30% less than the developer was estimating. Since then, through additional use of FOIA, ELi has learned that back in January, before the project was even made public, the City had access to the assessor’s estimates of taxable value and gross rents.

Here’s the timeline as it played out:

  • January 24: East Lansing tax assessor David Lee estimates the redevelopment as conceived at that time to be worth about $19.9 million in taxable value. Lee’s estimate also shows that he calculated that gross rents from private development on public land would come to about $2.2 million annually. This conservatively-estimated rental income would be derived from both retail space on the ground level along Albert Avenue and residential units for people aged 55 and older to be built above a parking ramp on the location of the City-owned surface parking lot. (The number of units and rental space has since been reduced in the plan, bringing the gross rental estimate to $1.9 million.)
  • February 22: In an unusual move, the City of East Lansing hosts a press conference announcing the redevelopment proposal, with Mayor Mark Meadows and Brownfield Redevelopment Authority Chair Peter Dewan praising the project. This is the first time the proposal is made public.
  • March 23: East Lansing’s Brownfield Redevelopment Authority (BRA) approves a $55 million TIF plan for the project. That plan is based on the developer’s taxable value estimate. The City assessor’s much lower estimate is not disclosed to the BRA, nor is the City’s assessor’s estimate of the gross rents. The BRA is told the developer has asked to pay $75,000 per year for rights to the public land needed to develop private rental properties.
  • April 26: East Lansing’s Planning Commission completes review of the project’s site plan, voting 4-4 (against) recommending it to City Council. While various Planning Commissioners refer to the TIF plan during the weeks of review, at no point is the City tax assessor’s estimates of taxable value and rents publicly disclosed.
  • May 8: Developer Mark Bell of Harbor Bay Real Estate holds a public event at Lotsa Pizza and announces his group is not ready for the public hearings on the site plan and TIF plan, scheduled for the next day. He says the project’s site plan is undergoing revision in response to public comment.
  • May 9: East Lansing’s City Council holds scheduled public hearings on the site plan and TIF plan. The public is encouraged by Mayor Mark Meadows and other Councilmembers to comment on the project as it had been approved by the BRA and reviewed by Planning Commission, yet at no point are the City tax assessor’s estimates of January 24 or May 4 disclosed to the public.
  • May 11: ELi obtains the City assessor’s May 4 taxable value and rents estimate, via FOIA.
  • May 15: ELi obtains the City assessor’s January 24 taxable value and rents estimate, via FOIA.

The City of East Lansing has yet to disclose Lee’s estimates to the public, and has yet to formally disclose them to the BRA, which reviews and votes on Brownfield TIF plans.

City Manager George Lahanas is a member of the BRA, by virtue of his office. It is reasonable to assume he knew about the estimates on taxable value and rents dating to January, but he did not provide these estimates to the BRA.

Mayor Mark Meadows is also a member of the BRA by virtue of his office. Meadows tells ELi, “As to the January 24 assessor estimate, I still have never seen it and have only heard of it from the more recent discussion.” He says, “I don’t recall when I hear[d] about the May 4 estimate.”

According to Meadows, the figure from the tax assessor “would only be important in developing the TIF spreadsheet” for a Council vote, and, Meadows suggests, since Council wasn’t going to vote at the May 9 meeting, because the developer wasn’t ready, the tax assessor’s estimate didn’t need to come to Council or the public by that point.

Meadows says about the estimate, “If it is FOIAable it is a publicly available document.” He adds, “If you are asking why it wasn’t published or disseminated widely or something like that, we don’t do that with every document prepared by staff otherwise that is all staff would be doing. There is no hidden staff agenda or suppression of information involved here.”

Douglas Jester, member of the BRA and former mayor of East Lansing, tells ELi he thinks the assessor’s findings should have been made available to the BRA before the vote on the TIF, and that it also should have been made available to the public before Council’s public hearing on the TIF.

Mayor Pro Tem Ruth Beier tells ELi, “We should never use incorrect taxable value amounts in BRA plans. If there is a discrepancy between the developer’s estimate and ours, at the very least, we should see both versions of the plans.” She says the same is true for the BRA—that it should also be advised of the assessor’s findings.

Councilmember Shanna Draheim tells ELi, “I am focused on ensuring the City negotiates an agreement that minimizes the City's risk. I am comfortable that the process to date is allowing me to make that determination.”

Councilmember Erik Altmann did not respond to ELi’s questions about the process—including what he knew when—except to say, “I think we should use the assessor’s numbers, unless there’s a compelling reason not to.”

Councilmember Susan Woods has not responded to ELi’s questions, nor has City Manager George Lahanas.

We cannot find another instance of a project for which there was a tax assessor’s estimate available yet a TIF plan instead used a developer’s estimate. We have asked City staff for an example, and have polled other developers to try to find an example. We have found none.

Developers for the Trowbridge hotel and DRW/Convexity Park District projects tell ELi that, in those recent cases, the TIF plans used the City assessor’s estimates of taxable value.

Asked by ELi about what happened with his White Oak Place TIF plan, local landlord/developer Joe Goodsir says, “The City assessor set the value, [and] we actually disputed his evaluation.” City staff denied Goodsir’s appeal, and the TIF plan used the assessor’s findings. “So the answer is NO, we had no say in the taxable value that was used.”

This would therefore appear to be another instance of the Center City District proposal following irregular process.

The BRA is set to take up a new version of the TIF plan this Thursday, May 25. Based on discussions at meetings last week, the TIF plan is expected now to use the City assessor’s estimate.

Meanwhile, City Council members continue to meet with the developers behind closed doors to try to come to an agreement which can garner enough votes to pass. This is not a violation of the Open Meetings Act, so long as not more than two Council members discuss the project at one time. (You can view disclosures by City Council members of meetings with developers at the City website.)

 

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