The DDA’s Evergreen Avenue Debt: It’s Time to Think Creatively // Alice Dreger

Tomorrow night, Sept. 10, City Council will take up the question of whether to permanently rezone the DDA’s Evergreen Avenue properties (314-344 Evergreen on the east side) to B3. In a report published today at ELi, I explain what that would mean and list what are seen as the pros and cons of this rezoning:

As a lot of Public Response readers know, these properties carry about $5.6 million in debt, a debt for with City taxpayers are ultimately responsible. 

That debt has been seen as the reason we “have to” have a very big building at that location. And what do very big buildings in East Lansing consist of? Mostly student rental housing, because that’s what the market will bear.

But there are other ways to think about solving this debt, and I would like to encourage the DDA and City Council to consider them as the DDA moves to release an RFP on the properties.

First, a disclosure: I own a house in the Oakwood Historic Neighborhood, and it is my primary residence. According to Google Maps, that puts me a quarter-mile from the properties we are talking about. Some of my neighbors who also own their homes (and who are good friends of mine) live even closer than that to these properties – hundreds of feet.

The houses on the DDA’s properties are, in fact, still part of the Oakwood Historic District – the properties have been part of our neighborhood for a long time. 

But I’m not here to NIMBY. I’m here to point out these properties offer a fabulous opportunity for the city as a whole, and we should be thinking creatively about how to make a lemonade project out of the lemon debt.

Debt on properties can be dealt with in ways other than constructing really big student housing on those properties.

A reminder: Avondale Square was not supposed to end up costing the City taxpayers $5 million, or about $200,000 in subsidies per house. But it did. We published that story, based on a ton of research by Eliot Singer, at ELi:

The way the City has been dealing with the debt on Avondale is to work creatively to pay it off. The Avondale Square house properties are TIF’ed and the City has been using CDBG funds as well as other funds to try to pay off the debt. 

The CoEL 2020 Budget and Program of Services notes, for example, “Finally, the Capital Improvement Fund transfer is increasing slightly, with funding $170,500 of crucial facility repairs and a $91,260 subsidy to assist in paying debt related to the Avondale Square development.”

For some reason, the Evergreen properties debt has long been seen as something that must be solved with the Evergreen properties land. We all know the only way to do that is a giant, mostly-student-housing project, particularly if you restrict TIF there to the use that City Council has indicated it favors – environmental clean-up and public infrastructure.

But is that the only approach? Certainly not, just as Avondale doesn’t have to be solved only with money flowing from the taxes being paid by the property owners of Avondale.

One approach could be to use the TIF from the Evergreen properties to pay a developer for private development expenses (like excavation and foundation work), essentially offsetting the purchase price. 

This is not something we generally want to see happen in East Lansing, but in this case, the real purpose is solving old debt, and it might be palatable if it gets us a better project for the area and for the community as a whole. (Like real senior housing, and a new space for a public senior center?)

The City has been trying to figure out how to use TIF from the DDA properties to fix and build public infrastructure in that area. There’s a need for new sewers, watermains, streets, etc. So the TIF from the DDA properties is seen as “needed” for that work.

But we should remember that DRW/Convexity’s 341 Evergreen (now a constructions staging area; the land where Building C will go) has no TIF on it. That DRW/Convexity project at 341 Evergreen could be TIF’ed to pay for public infrastructure in the area, freeing up the TIF on the other side of the street (the DDA’s properties).

I’m not thrilled with the idea of TIF’ing everything. Every time we do, we divert potential new taxes away from East Lansing’s general fund, away from CATA, away from LCC, away from Ingham County, etc. The rest of us end up paying for the services these projects use.

But I’m also not thrilled with the idea of another giant majority-student housing project in this location, and I feel like maybe my neighborhood (like Avondale) deserves help with a TIF on this one, given what we’ve put into buying, upkeeping, and improving the old houses over here. The community as a whole also deserves something great on these publicly-owned properties.

There are other ways to manage the Evergreen Avenue debt. I’ve named just one potential way. 

It’s worth noting that at City Council last week, Council members Erik Altmann and Ruth Beier were talking seriously about creatively using TIF at new “Hub” buildings to deal with the issue of problem rental houses in neighborhoods like Bailey and Oakwood. 

Basically, as I understood it, the notion is letting Core Spaces get TIF for their building expenses in exchange for them buying out rental licenses in the mostly-owner-occupied neighborhoods. They were thinking creatively about how to leverage money available in a property in one area to deal with issues in another area of the City. 

We don’t have to hyper-localize the DDA’s unfortunate debt and accept a less-than-ideal project. We don’t have to solve the debt by creating problems with big student housing where it doesn’t belong, adding a lack of parking where parking is seriously needed, increasing traffic in an area that could suffer serious negative economic consequences as a result, etc. 

The Evergreen Avenue properties are at a unique (kind of wonderful) location and something truly beneficial could be built there – and it could be built at 6 stories instead of at 110 or 140 feet. Condos, for example, might truly work here now, based on what’s happening nearby, if we can help offset the debt. High-quality senior housing might work. More moderate-income restricted rental housing, like DRW Convexity is building at 341 Evergreen, might work.

As the DDA rightly moves to release the RFP on the properties, it’s time to think creatively about the Evergreen Avenue debt.

Alice Dreger

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