Public Purpose Must Be Commensurate with Cost // Eliot Singer

I am trying to push state legislators on development authority reforms, using East Lansing as the poster-child for how to do public-private development wrong.

One of the key reforms needs to be requiring all brownfield projects or DDA expenditures provide a detailed breakdown, including financials, of what the public purposes are in relation to tax diversion and other costs, and also requiring a strong procedure for objective assessment. Currently, all government has to do is wave a magic wand and say, there’s a public purpose, without explaining what it is, let alone why it is worth the money. Public purpose, according to Michigan Supreme Court definition, is supposed to mean usable by the public at large, which means any private building given tax breaks serves no public purpose. The lack of objective assessment is pervasive: under Engler, assessment of impact of tax diversion on community colleges was deliberately removed.

1) The Lotto 1 project has a $55 million 30-year tax diversion (brownfield) plan. If Lot 1 had been sold on the open market for its $18 million value, and the money spent on legacy costs, over 30 years that would be worth about $36 million. Instead the city is leasing it for $200,000, about $6 million over 30 years. So real public cost is about $85 million. (If Meadows or anyone else in city hall wants to come up with their own numbers, they can feel free to do so.)

The only public purpose for the project, looking at its talking points, is ~100 apartment units for well-to-do seniors. (I’ll ignore that the developer has clearly shown he is only going through the motions on the senior apartments.) The cost per apartment over 30 years is about $850,000.

Is this cost commensurate with the public purpose? You make the call.

2) Avondale Square public costs are about $200,000 per house. Instead, the ~$100,000 per year in CDBG funding for infrastructure could have been spent on neighborhood infrastructure repairs (in eligible neighborhoods). The bond money could have been done (for slightly more) as a $3 million voter-approved bond for neighborhood repairs, costing the average homeowner about $20 per year debt millage for 30 years. The resulting increase in taxable value for single family homes, not just in neighborhoods where the repair money was most needed to be spent (there really is a ripple effect on how all homes in city are assessed) would have brought in far more new revenue (even with existing homes tax increases capped) than the small amount of TIF on Avondale Square.

3) DDA TIF #2 (which does not include University Place, TIF #1) has diverted ~$15 million in taxes since 2000. I also hold the DDA responsible for the City Center II debt, ~$10 million. The only accomplishment, because the theory of jump starting private redevelopment has turned into brownfield entitlement, was the 38 condos, about half of which are occupied by students whose parents bought them, at Grand River/ M.A.C., with the CVS on the first floor. The other parts of that c. 2000 project, such as the Barnes & Noble in the former Jacobson’s, failed (conveniently forgotten but those in city hall who eschew objective assessment).

4) The two high luxury student apartments/bars projects on Albert/Ann from c. 2012 had $8-$9 million in tax diversion, MBT credits, and city sewer bond money. (Cleaning up chemicals from a former dry cleaner, which was not causing problems, was paid for by a $1 million state grant.) About $750,000 of this went for repairs to the Grove St. parking structure and for Ann St. Plaza. (I’ll ignore the bait and switch over a restaurant incubator morphing into a bar, the illegal extra floor, etc.) A $900,000 voter approved bond would have allowed for a much better plaza (the developer was allowed to build something much inferior to the original design) and the repairs at the cost of about $1,800,000 over 30 years debt millage. That would be about $6 per year for the average home. The developments could then have contributed to the tax base. Most of the eligible expenses for the brownfield plans have no public purpose, and the city’s planning director was quoted in The State News at the time as justifying the MBT credit as “maximizing the developer’s return.”

All the vague public purposes—jobs, density, reducing sprawl, “cranes in the air”—are magically thinking.

Eliot Singer

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