Proposal to Redevelop Vacant Properties Approaches the Finish Line

Friday, September 7, 2018, 7:48 am
By: 
Dan Totzkay

Above: The fenced-in, vacant properties downtown, shown with an arrow added by ELi.

The proposed “Park District” redevelopment plan by Chicago-based developer DRW/Convexity for the northwest corner of Abbot Road and Grand River Avenue is approaching its final approvals in the City of East Lansing. Signs are indicating that, this time, it might make it all the way through state-level approval and actually happen.

Yesterday afternoon, at special meetings of the Brownfield Redevelopment Authority (BRA) and the Downtown Development Authority (DDA), which have identical membership, those present unanimously approved recommendations to City Council to accept a revised development agreement and amended Brownfield Tax Increment Financing (TIF) plan.

The development agreement and Brownfield TIF plan will now go to City Council for a public hearing and subsequent vote on September 18. If passed, the deal will continue on to the State for final approvals.

State-level approval, however, is contingent on the developers reaching an agreement with Scott Chappelle, the former developer of these properties who lost them to foreclosure years ago. DRW/Convexity made it all the way through local approval last year, but Chappelle prevented redevelopment on these properties by convincing the Michigan Economic Development Corporation (MEDC) that his permission was necessary for tax incentives to be granted.

DRW/Convexity has said the project can’t happen without the tax incentives, including $10 million in Michigan Business Tax credits that date back to when Chappelle was looking to redevelop the same properties. The State has said it won’t proceed unless DRW/Convexity can show it has Chappelle’s consent, because it doesn’t want him to sue the State.

David Pierson, attorney for DRW/Convexity, said at yesterday’s meeting that the developers are looking to reach an agreement with Chappelle within the coming days. Such an agreement with Chappelle would be designed to prevent him from suing either DRW/Convexity or the City over these properties.

If the deal goes through, the City and DDA will still have to figure out what to do with almost $7 million in debt on nearby properties that the DDA was asked to purchase to support Chappelle’s failed project. But those properties, along Evergreen Avenue, are not part of DRW/Convexity’s proposal.

The Development Plan

This project area has historically been called “The Park District” (previously City Center II), although, on this round, DRW/Convexity has not been referring to it by that name. Whatever the project is ultimately called, the development agreement covers construction of three major new buildings:

  • “Building A,” a 12-story mixed commercial and residential building that would be located at the northwest corner of Grand River Avenue and Abbot Road. This is set to include about 14,000 square feet of retail space, 218 apartments housing about 370 people, 89 indoor parking spaces on two levels, and a rooftop terrace for residents.
  • “Building C,” a 5-story residential building located at the southwest corner of Evergreen Avenue and Valley Court Drive. This would include 72 income-restricted rental apartments with one level of on-site parking for 26 cars.
  • “Building D,” a 10-story hotel from The Graduate chain located directly to the west of Building A, between Evergreen Avenue and The Peoples Church. This would include 194 guest rooms, a ballroom, about 3,300-square-feet of retail space, hotel meeting rooms, and a rooftop restaurant and bar.

The project would also involve reconstruction of area infrastructure, including sewers, water mains, and road surfaces.

Latest Agreements

A sticking point in negotiations has been over construction labor. The developers wanted to bid out to contractors who could get them the best price. Members of City Council have wanted guarantees of the use of unionized labor and/or workers hired under prevailing wage policies. The agreement now calls for 100% adherence to the City’s prevailing wage policy for Buildings A, C, and public infrastructure, and 67% adherence for Building D.

Another sticking point had been what happens if the developers don’t construct Building C. The City’s Ordinance 1384 requires that big downtown developments restrict at least 25% of their housing units to senior housing, owner-occupied housing (condos), or low/moderate-income housing. As previously reported, Building C is designed as moderate-income housing but is not entirely planned as of yet, with the developers waiting on Council and the DDA to decide the future of Evergreen Avenue and the DDA-owned properties along it.

Under the new agreement, if Building C isn’t constructed by January 1, 2025, ownership is transferred to the City and deed-restricted as “Public Open Space,” to be dedicated for “parks, recreational areas, and scenic areas.” Pierson noted the idea was in service of benefiting downtown living and adding to the existing Valley Court Park. At today’s meeting, Pierson stressed that the developer “doesn’t want to give up $2 million worth of property to avoid meeting the [housing requirement].”

The Brownfield Tax Increment Financing Plan

Under a TIF plan, additional property tax revenues resulting from redevelopment are “captured” for a specific number of years and used to pay for certain expenses involved in the redevelopment process. Under a plan like this, taxing authorities continue to receive property taxes according to the taxable value of the property prior to redevelopment, while the increased “increment” of property taxes that the redevelopment generates is used to reimburse specifically designated expenses, up to a dollar-amount cap and time-limited cap.

The now-amended proposed TIF plan that now goes to City Council is for a total of $7.9 million, rather than the previously-proposed $7.6 million. That includes about $3.4 million for public infrastructure improvements that the City is asking the developer to build for it, including water and sewer system upgrades, realigning Albert Avenue on both sides of Abbot Road, and building new street surfaces and sidewalks.

The remainder of the funds mainly reimburse for environmental clean-up, demolition of the vacant buildings, purchase of about one-third of vacant property at 303 Abbot Road from the DDA, and interest for the developer laying out funds upfront. The TIF plan is set to run for nine years, during which time 100% of taxes that can be captured for TIF will be.

Pierson has estimated that over the next 30 years, East Lansing will see about $19 million in net new revenue from this project, including from real estate taxes and the East Lansing income tax.

What’s next?

DRW/Convexity hopes to break ground for Building A and the hotel in January. But groundbreaking can’t happen until the development agreement and any TIF deal are signed and sealed by City Council, a deal is reached with Chappelle, and the State approves the tax deals.

Local approvals may wrap up when Council considers the materials at a public hearing on September 18. As ELi has reported, Council is currently down two members, so the remaining three members would have to show up and vote in the affirmative for the project to proceed.

Citizens who want to weigh in on this project at the local level can show up and speak at the public hearing in the courtroom of City Hall on September 18, and can also write to City Council via email.

[Editor's Note: The original version of this article stated that "Under the new agreement, if Building C isn’t constructed by January 1, 2015, ownership is transferred to the City and deed-restricted as “Public Open Space,” to be dedicated for “parks, recreational areas, and scenic areas.” The date in this sentence has been corrected to reflect the actual deadline, January 1 2025.]

 

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