Council Votes 3-2 To Let Developers Walk Away From Promised Affordable Housing Near Valley Court

When presented with the reality that DRW/Convexity was not going to construct the third and final building of its “Park District” developmentBuilding C, which was to be low-to-moderate income housing at 341 Evergreen Ave — the pair of options were not exactly enticing to the East Lansing City Council. 

Building C was the portion of the overall “Park District” project designed to satisfy the City’s requirement that large housing developments downtown have 25% of the units dedicated to diversified housing — low-to-moderate income, senior age-restricted, or condominiums.

Per the terms of the development deal, if Council did nothing and waited out DRW/Convexity (presumably in the hope they’d reverse course and construct Building C), and there wasn’t a certificate of occupancy issued by a date in March 2025, the property would be deeded over to the City on the condition that it remain open public green space. Additionally, despite having not built any diversified housing, the developers would be considered in compliance with the City’s housing diversity ordinance; the other two buildings considered to be part of this project are The Abbot and The Graduate Hotel.

Dylan Lees for ELi

The Graduate Hotel (left) and The Abbot (center) now rise on land Chappelle had aimed to redevelop.

The other option was to agree to a non-binding Letter of Intent (LOI) from DRW/Convexity that outlines a proposed exchange of the property back to the City, along with building plans and designs. In return, DRW/Convexity would get $1.56 million more in Brownfield Tax Increment Financing (TIF) — a system of financing often used to pay for large developments where developers get paid back over a number of years with captured taxes. 

According to Director of Planning, Building and Development Tom Fehrenbach, the net effect of that $1.56 million payment is there will be one more year of TIF payments to DRW/Convexity — but the payments were already several years ahead of schedule. Instead of finishing in 2024, they will now finish in 2025, at which point the TIF money that was going to the developers will begin going back to the Downtown Development Authority. Of the taxes captured for the $1.56 million, about one-third of the money comes from East Lansing taxpayers.

East Lansing Director of Planning, Building and Development Tom Fehrenbach.

Ultimately, the ability to retain flexibility for future development at 341 Evergreen — and throughout the Valley Court Park area — was enough to push Council member Dana Watson, Mayor Ron Bacon, and Mayor Pro Tem Jessy Gregg to vote in favor of signing off to the LOI on Tuesday evening. Council members Lisa Babcock and George Brookover voted against.

With the LOI approved, a months-long process of the property transfer will get underway. And with the City set to retake 341 Evergreen Ave. while assessing options about redeveloping the area, City staff suggested that the City itself could drive a project with low-to-moderate income housing — an option that would not be available to the City were it to let the deal run out in March 2025.

DRW/Convexity’s decision to not build the final third of their proposed project — approved in late 2018 — first came before Council at the discussion-only meeting on April 12. 

The seeds of Brookover’s opposition were evident in that discussion when he learned that the property had not been recently appraised. 

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Council member George Brookover at the Nov. 9, 2021, meeting of City Council.

“The reality is at some point we have to justify to the taxpayers what we’re doing,” Brookover said on April 12. “And if I go out and buy a car, I’d like to know what the price is going to be, what the appraised value is going to be. That’s all. We have to explain it to somebody sometime.”

Fehrenbach noted then that the $1.56 million was the best offer from the developer and this Tuesday, Fehrenbach said the developers had wanted around $3 million for the property.

But with no appraisal done, Brookover voted no on Tuesday. 

Babcock was opposed along similar lines and also concerned about the fast pace the developers seemed to be wanting to move at. The developers wanted a response to their Letter of Intent within five business days, which Babcock was concerned with. It was explained that the non-binding letter is more a jumping off point for the process and something to indicate both parties were on the same page.

Dylan Lees for ELi

Council member Lisa Babcock at the Aug. 19, 2021, meeting of City Council

Babcock also questioned whether it was prudent to be doing anything that was taking money out of the DDA coffers when the DDA is sitting on around $5.1 million in debt related to a set of properties it owns on Evergreen Avenue. 

But Babcock and Brookover were outnumbered. Watson, Bacon, and Gregg were willing to pay the money to get the property back, with the flexibility to still develop it. The opportunity cost of standing pat and perhaps letting the lot become a quasi-park was not tenable, to them. 

In general, they seemed to agree with Fehrenbach about the City having a lot more flexibility to redevelop the Valley Court Park area with the parcel at 341 Evergreen in play. The additional acquisition of building designs and plans also potentially give the City a head start in getting another project done, City Manager George Lahanas noted.

“So in a way, you can pencil this out — and appraisal is good — but I can pencil it out to either have nothing with raw land, or no opportunity to ever build again on this site,” Bacon said on April 12, indicating he’d rather have the raw land with a chance to build.

“I think there’s what it’s worth, but there’s also what it’s worth to us,” Gregg added.

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