Developer of White Oak Place Lowers TIF Ask, Changes Site Plan
East Lansing’s Downtown Development Authority (DDA) Project and Infrastructure subcommittee met this Tuesday to hear revised plans for White Oak Place, a project planned for the northeast corner of Grand River Avenue and Spartan Avenue. The developer presented a new Brownfield plan lowering the tax increment financing (TIF) ask from $9.5 million to about $6 million. The developer also provided a revised site plan.
City Planning staff member Darcy Schmitt presented the site plan changes to the DDA subcommittee. The portion of the planned project along Spartan Avenue has been increased from two to four stories, increasing the size of the building and allowing for a different configuration of the apartments. The plan now calls for more one-bedroom and four-bedroom apartments and fewer two-bedroom and three-bedroom apartments. The retail square footage in the project remains the same.
The City assessor and the developer have now agreed on an estimated taxable value for the planned finished project of $5.8 million. The future taxable value estimate is important because tax capture under TIF is drawn from the incremental change between the original value and the increased value created by the redevelopment. So, estimates at how much a property will be worth help determine how much TIF can be captured.
During a phone conversation with me last Friday, Eric Helzer, representing the firm that wrote the Brownfield Plan, indicated that he and the developer, Joe Goodsir of CRMC, had worked hard to revise the plan in an effort to lower TIF expenditures for the City.
This week, Eric Helzer presented the DDA subcommittee the revised Brownfield plan, which as noted above now asks for substantially less TIF reimbursement. There are a number of changes that lowered the total dollar amount. About half of East Lansing’s approved TIF plans allow the developer to be reimbursed for interest expenses. The interest rate is typically around 5% and that is the amount Helzer and Goodsir wrote into the original plan. But the revised plan calls for no interest reimbursement.
The revised TIF plan also calls for a reduction in “contingencies” from 15% to 5%. “Contingencies” are included in Brownfield plans as a protection for the developer in case of unforeseen cost overruns. Goodsir and Helzer say they feel confident enough in their understanding of the nature and scope of the environmental clean-up required that they “are comfortable reducing the contingency” by about $500,000.
The revised TIF plan is now expected to be about $6 million over 17 years with a 90% capture, meaning that the City and other local taxing entities will get 10% of the new taxes from the property during the life of the TIF plan, and the developer will get 90% until the reimbursements reach either the cap of about $6 million or 17 years (whichever comes first). The formula of 90% tax capture over 17 years was the same as the initial plan.
As Eli previously reported, the Grand River Avenue portion of the White Oak Place project, home to a former gas station and the former Tasty Twist, have been tested via a Basic Environmental Assessment (BEA) and found to contain high levels of carcinogenic compounds in the soil and the ground water. The site is what Helper calls “a true environmental Brownfield.” He says that problems like this are why Brownfield TIF plans came into existence.
The site was first discovered to be contaminated in 1996 when contaminated water leaked through a storm sewer, ultimately draining into the Red Cedar River. The Michigan Department of Environmental Quality (MDEQ) traced the source of contamination back to the Grand River Avenue site. Measures were taken to clean the site, but they were rudimentary. Helper and Goodsir plan to rid the site of all contamination so that future leaks into the Red Cedar River do not occur.
The measures that need to be taken for full remediation are extensive, as I have previously reported. Contaminated soil will need to be removed and replaced, millions of gallons of ground water will have to be pumped out and purified, barriers constructed, and vents installed if the site is to have underground parking as planned. Remediation measures would be simpler and less expensive if the underground parking were eliminated. But doing so would mean elimination of a key feature in the development, the green space surrounding the 265-year-old white oak tree along Spartan Avenue.
Not all in attendance at this week’s DDA meeting were happy with the revised plan. Mayor Pro Tem Ruth Beier and Councilmember the Erik Altman (who had to leave the meeting early but asked Beier to speak for him) expressed concerns with the Brownfield Plan.
One concern was the City’s lack of control in determining the cost of eligible expenses. Beier would like a second opinion or some other way of checking the estimated costs claimed in the developer’s plan. She was assured by Helper that the MDEQ must review the plan, as does the Michigan Economic Development Corporation (MEDC), and Helzer said that the jobs are triple-bid.
Furthermore, the City, by way of reviewing receipts for work done, checks expenses as the project proceeds. Helzer added that “this [estimate of eligible expenses] is a worst case scenario,” noting that as the remediation work is done the expenses may actually go down.
Another concern was that this project includes what is likely to be more undergraduate student housing. Goodsir says he will market the apartments as being for “graduate students and young professionals,” but the development has 40 four-bedroom apartments which are unlikely to be desired by graduate students or young professionals.
Beier stated that, as far as she was concerned, the City should not subsidize more student housing and should only grant the TIF for cleaning up the Brownfield environmental clean-up. Beier expressed frustration that the City is facing “infrastructure problems that we can’t afford to correct,” but again stated that the “environmental cleanup is worthwhile.” She is opposed to reimbursing a developer for “underground parking” when the City needs more money.
The question that may be facing Council when this Brownfield TIF comes up for approval is one that was raised several times during Tuesday’s meeting: “Can the city afford not to remediate the site?” If the environmental problems are not addressed, there remains the possibility that another leak from the site could contaminate the Red Cedar River or the City’s sewer system.
The revised Brownfield plan will be discussed at the next Brownfield Redevelopment Authority (BRA) meeting on December 17 from 12:30 to 2:00 p.m. in City Hall’s Conference Room A. The public is welcome to attend the meeting.
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