City defends development's integrity
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Phil Bellfy
Loomis
An East Lansing resident and ardent opponent of the City Center II project said during Tuesday’s City Council meeting that he plans to ask Michigan Gov. Jennifer Granholm to remove East Lansing City Council members from their positions for violating the state constitution in regard to property acquisition and funding for the development.
East Lansing Mayor Vic Loomis said the resident will be hard-pressed to find anyone willing to listen.
Phil Bellfy, an MSU associate professor of writing, rhetoric and American cultures who also unsuccessfully ran for city council in November 2009, said the city borrowed money from taxpayers to allow the Downtown Development Authority, or DDA, to purchase $5.5 million in bond anticipation notes to acquire land — including Evergreen Arms Apartments, 341 Evergreen Ave. — for part of the 5.25 acre, $116 million project.
That land would house a parking garage and performance arts theater.
Bellfy also accused the city of planning to use $30 million in bonds to perform construction on that site, which he said would cost taxpayers money.
He also said the city is using a process called tax increment financing, which uses future revenue from increases in property taxes gained through new development, to pay for the City Center II development.
“It’s not against the law,” Bellfy said.
“But it is against the law to lie to the public. The city of East Lansing is faced with this huge budget problem, and it is a crisis.”
Loomis, however, said Bellfy is misinformed about the bond usage.
Loomis said the $30 million bond notice was informing citizens that the city was exploring the market, but no money has been spent.
Even if bond money were necessary, Loomis said it would be paid long term by new property taxes generated from the development, the theater lease from MSU and parking revenue.
The $5.5 million used to acquire property for City Center II will not impact taxpayers because the bond anticipation note also will be paid for by parking and property revenue.
If no parking garage is built, the city could regain money by reselling the properties, Loomis said.
“There is plenty of protection to the taxpayer, all of which Mr. Bellfy chooses to ignore,” Loomis said.
But Eliot Singer, a 26-year East Lansing resident, said citizens haven’t been given enough information about the project’s cost structure.
Singer said East Lansing has used “propaganda” to promote the positives of the city, but rarely has provided concrete facts about its spending.
Singer said Bellfy’s information regarding city conduct and spending related to City Center II “looks solid.” He said the onus is on the city to prove doubters wrong.
“I’m much more willing to rely on someone who does not have a vested interest in the project,” he said.
The financing plan still could change, and nothing will progress until Scott Chappelle, president of Strathmore Development Co., which is leading the project, provides the City Council with an assessment of his financial plan.
Chappelle said his financing package will look different than the one approved by the City Council in 2008, but he still doesn’t have the pieces in place.
Another issue Bellfy raised is that the city sold the Evergreen Arms properties to CADA Investment Group for development — which Loomis says is misguided.
CADA Investment Group is affiliated with Chappelle in that they’re working together on the project, but it has not purchased the properties, Loomis said.
In 2007, the city bought the Evergreen Arms properties from DTN Management for $2.4 million under the parameters of Michigan’s Uniform Condemnation Procedures Act, but it has not sold the properties.
The law allows the city to begin the condemnation process 30 days following the initial offer if no response is made or no agreement can be reached, only if the intent is for public use.
Loomis said the city never used eminent domain, which is substantiated. He said the city went through the proper legal steps included in the Uniform Condemnation Procedures Act, but did not use eminent domain.
Bellfy said, however, the fact eminent domain was a possible outcome if DTN Management refused an offer scared the company into selling the property.
Tom Yeadon, East Lansing assistant city attorney, said the city had to outline all procedures in the act to avoid legal conflicts. He added that property owners, such as DTN Management, achieve tax benefits through involuntary sales, as the company can transfer capital gains taxes to another property.
“The fact is, Mr. Bellfy’s assertions are taken out of context,” Yeadon said.
“The property owners aren’t saying their property was condemned; it was Mr. Bellfy who said it was condemned.”
Commentary
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Philip
(04/08/10 10:25am)Report
The State of Michigan has a website that explains how Tax Increment Financing Works.
http://www.michigan.gov/taxes/0,1607,7-238-43876—-F,00.html
I suggest people read that site to understand what the city is doing, and not rely on the uninformed assertions of Mr. Bellfy. He has no special expertise in municipal financing, tax law or accounting.
In a nutshell, what TIF does is use future property tax revenues from the specific development itself as a way to finance the bonds. What people need to keep in mind, here, is that most (not all) of the property that currently exists where City Center II is going to be located is largely unproductive or abandoned — and is a drain on the city’s resources and our local economy.
Developing it will, hopefully, create jobs and increase the value of the property itself and will pay back the city. There are also specific forms that are required to be filed with the state by local tax increment financing authorities, whcih are presumably public records and could and should be available for anyone who wants to look at them. See this link:
http://www.michigan.gov/taxes/0,1607,7-238-43876-154674—F,00.html
The City also has a website specifically dedictated to explaining how this financing plan works.
http://www.cityofeastlansing.com/Home/Departments/PlanningDevelopment/MajorInitiatives/CityCenterII/TaxIncrementFinancing/
There is no excuse for not going there are reading their explanation — and then making uninformed statements about what the city is doing. Most of the complaining about this project comes from people who are anti-devlopment generally; or those who are not opposed to development as a rule — but just do not like the City Center II project specifically; or people who are just ignorant about what is going on.
Benjamin Campbell
(04/08/10 10:25am)Report
Maybe I’ll run for office. I can screw up the city and not listen to its inhabitants, and I’ll do it for less money!
Benjamin Campbell
(04/08/10 10:30am)Report
we dont Need it, we don’t Want it. And we all know it’s just to make someone money at our expense.
me
(04/08/10 10:40am)Report
So, E.L. bought Evergreen apartment building 2007 for $2.4M. I wonder what the market value of that is today LOL. Nice job buying at the peak of the market!
TIF: Diverting Money AWAY from General Revenue Fund
(04/08/10 11:14am)Report
TIF is a form of PUBLIC DEBT. Although, Bellfy DOES have a PhD, you do NOT need a PhD to understand Tax Increment Financing. These are $30 Million Dollars in property tax backed GENERAL OBLIGATION BONDS. Yes, the money comes from somewhere; there IS a PUBLIC COST. We have to pay interest on these too. City Hall HOPES that Chappelle will suddenly start paying his property taxes, so they can use that money to repay the bonds. In the real world, that money would be benefiting everyone in the community, lowering OUR tax burden, because that money SHOULD be going into the General Revenue Fund—but it is not. In fact, it actually WORSENS our tax burden, because they are property tax levying General Obligation Bonds. And Chappelle has a LONG history of FAILING TO PAY HIS PROPERTY TAXES. So, why are Loomis and Staton partnering with Chappelle? Kickbacks, bribes, and favors?
http://www.box.net/shared/jyfx6tamn5
(04/08/10 12:02pm)Report
QUOTE: The property owners arent saying their property was condemned; it was Mr. Bellfy who said it was condemned.
This link proves City Hall wrong:
http://www.box.net/shared/jyfx6tamn5
Phil Bellfy
(04/08/10 3:29pm)Report
Richard Nixon: “If you cover up, you’re going to get caught. And if you lie you’re going to be guilty of perjury….It is not the issue that will harm you; it is the cover-up that is damaging.”
[July 19, 1972]
Learn to Read
(04/08/10 3:33pm)Report
People should read the documents they are posting. The link proves the city correct. All it shows is that the city was willing to work with DTN to secure the most favorable tax treatment possible after the sale. Does it strike anyone else as odd that if DTN was really threatened that not once has anyone from DTN stepped forward to say so? It’s just Mr. Bellfy and his merry band making assertions on other people’s behalf to benefit their own misguided agenda.
TIF Basics
(04/08/10 3:35pm)Report
“that money would be benefiting everyone in the community, lowering OUR tax burden”
False. If there is no project there is not increase in taxable value, which means no new tax collections. This is not a trade off. This whole arguement is a red herring (or maybe a lie) by Bellfy, Larsen, and others who want to stop downtown redevelopment.
Truth Hurts
(04/08/10 4:45pm)Report
Someone needs to ask the Governor to remove Bellfy from the state — or, at least, make him move to Lansing.
WHAT A NUT-JOB!
Reality Check
(04/08/10 5:21pm)Report
TIF absolutely DIVERTS property tax revenue AWAY from the general revenue fund, to pay off the debt that was used to build the project in the first place. TIF is a drain on the citizens, while bailing out the annointed, chronically tax delinquent developer, Scott Chappelle. If a privately funded venture were to be build, using private funding, then 100 percent of the new property tax revenues would normally go to the general revenue fund, lowering our overall tax burden. City Center II only worsens our debt obligations.
re: Reality Check
(04/08/10 8:10pm)Report
Like it or not Chappelle owns the property. You can’t just wish him away because you don’t like the man.
Without City Center II what would be on those lots? Dilapidated buildings bringing in new new revenue. You can divert something that does not exist.
Chappelle: TIF and Tax Delinquency formula for disaster!
(04/08/10 9:25pm)Report
Nothing personal against a chronic liar, who fails to pay his property taxes, who claims to have private financing and tenants lined up, but who also admits to being financially insolvent, with a long history of failed projects. Why are we partnering with him? Smells like favors, bribes, and kickbacks… If Loomis and Staton can only get away with it…
Lyle
(04/09/10 1:41am)Report
East Lansing City Government sounds a sleazy as Detroit City Government. Lining their pockets while passing the risks on to the taxpayers.
Must have gone to school with Kwamie.
Zach Coleman asserts that Loomis, Staton, and Chappelle have Integrity? Aww, how touching.
(04/09/10 10:07am)Report
The title of this article should be:
Despite Evidence to the Contrary, City Hall Asserts That They Have Integrity, And Zach Coleman Gives City Hall the Last Word, While Ignoring Documents Proving Dirty Deals. Printing their propaganda is the easy path; glory and honor result from hard work.
TIF expert
(04/09/10 11:32pm)Report
“If there is no project there is not increase in taxable value, which means no new tax collections.”
Really? How do you explain the taxable value increases in towns without TIF districts? Look at property values within and without the EL DDA. When the market is good, values rise both within and without. When the market is poor, values fall both within and without.
Parking is going to contribute to the bond payments? Look at the track record of the city’s lease with the DDA on the existing ramp, where the same claim was made—and that during economic boom times.
TIF bonds are always GO bonds backed by the full faith and credit of the municipality for a reason: otherwise, no investors would buy them because they recognize TIF for the riverboat gamble it is.
Phil Bellfy
(04/12/10 10:25pm)Report
OK —let’s take this step by step. First. The “lies” quote attributed to me is correct, but I was saying that I hate being lied to about the bonding issue —not the bonds, per se. When the city first rammed the CCII proposal through the community, they said that the bonds would be TIF Bonds and Parking Revenue Bonds, That proved to be a lie —they are proposing to float General Obligation Bonds.
Second, Ted Staton told the Council (and the public) that the DDA was going to buy the properties on the east side of Evergreen “with their own money” and that the city was not in a position to stop them as the DDA was “legally obligated” to buy them. Loomis —as a member of the DDA Board voted in favor of the purchase and did not recuse himself, for the same reason —the city was not involved in this purchase and would not vote on it. Again, this proved to be lies from both —the CITY borrowed $5.5 million to buy the buildings on Evergreen. If the DDA gives the city the money to pay the interest on these Bond Anticipation Notes, all is well and good —if not, then the taxpayers will pay that $500,000 interest. Again, I hate being lied to.
On the the question of eminent domain. Dennis McGinty, the City Attorney, has stated publicly (and correctly) that the city cannot threaten to use eminent domain to force a sale of property to a private developer. So, consider this: CADA bought the “Evergreen Arms” apartments (4341-45 Evergreen) from DTN on 5-30-08 (for $2.4m), then transferred that title to City Center II LLC on 6-2-08 (for $1). The city DID NOT buy this property.
The documents linked below show that DTN was threatened with eminent domain (documents can be found at this link: http://publicresponse.com/?page=article&cid=534&aid=612) —this is clearly a violation of the state’s constitution (as Mr. McGinty, and others, have stated publicly). I’m sorry if you can’t read these documents for what they truly are —I’m not making this stuff up —the letters in that linked PDF are signed by the City Manager on city stationary. Why would the city get involved in the sale of private property to a private developer? Ask Ted, but don’t call me an idiot for providing the public with these documents. If there’s something wrong with that link, email me and I’ll send you the PDF (you can send your hate mail somewhere else, thank you): phil.bellfy@gmail.com
Here’s the bottom-line: the city cannot force an involuntary sale of private property to another private party for any purpose. It’s simply unconstitutional in Michigan. If the city did not force an involuntary sale, then the seller IS NOT eligible for a 1033 Exchange; Federal tax law simply doesn’t allow it.
To see what happens when you try to claim a voluntary sale is involuntary so you can claim a 1033 Exchange tax break, look at the case US v. T. Wickersham: http://openjurist.org/29/f3d/191
Hesiod
(04/13/10 1:53pm)Report
The eminent domain threat was for the parking structure, which is perfectly legal under the Michigan and federal Constitutions. That would qualify as a public infrastructure investment. The City has, all along, said it was going to be financing the public parking garage piece of this project. And, it should also be pointed out, that the DDA is funded to a great extent through TIF already. (All of this information is available on the city’s website for anyone who isn’t too lazy to look it up).
As was correctly pointed out by another commenter — this property is OWNED by Chappelle’s company. He has every right to develop it. And the truth of the matter is that it will not get developed — or will not be developed in an economically viable or advantageous way — without some help from the City. It is an investment.
Now, people are perfectly free to object to the investment, or disagree with developing downtown. But they are not entitled to lie about what is going on — or misrepresenting it to mislead people. Unless this is done — we are going to continue to have two big old, abandoned eyesores in a key part of the downtown doing nothing to add to our local economy or culture. The taxes those properties would bring in are negligible compared to what they would bring in if developed — even if you account for paying off the TIF.
Also, if you don’t like the developer — then I suggest you find another one — or put together the financing yourself – to buy those dilapidated old eyesore buildings off of him. Then you can do whatever you want with those old buildings. Turn them into a hippy commune or a homeless shelter — or whatever floats your boat.
Phil Bellfy
(04/13/10 6:06pm)Report
OK —let’s go through this again. I am convinced that Michigan’s Constitution does not allow the city to use (threaten) eminent domain to acquire land to build a parking structure —in fact, I believe this is exactly why they have been shouting “no eminent domain was used” for the past two years (when the documents clearly show it was).
But, I didn’t lie about this transaction or any other —look at the documents, again. It is also very clear that the CITY used the threat of eminent domain to force DTN to sell to Strathmore. Again, this is clearly illegal, and one more reason that the mayor lied to the SN when he said that the City bought the Evergreen Arms apartments from DTN —they did not. So, who’s the liar?
Finally, what is being suggested is exactly what I (and others) have been advocating from the outset —let Strathmore develop its property and simply leave the city out of it. In this regard, it’s also very simple —East Lansing should do exactly what the city of Ann Arbor requires of Strathmore in their Lower Town project (the vacant lot just a few blocks north of the UoM hospital): Build your own parking garage, and no publicly funded bonding support (TIF-Yes — Bonding-No).
The major point is this —there is no reason to bait me with taunts of why don’t I buy those buildings, etc. That’s crazy-talk. A much better question is: Why can’t Strathmore put together the funding to carry this project forward? Could it be that no lender (including HUD) is crazy enough to loan money to build a project that will sit just as empty as the buildings they are built on? Finally, all of those buildings (with one exception) were full of tenants and businesses when Strathmore took them over —NOW they sit empty. Whose fault is that? Mine?
RC River
(04/13/10 6:45pm)Report
Hesiod opines, “we are going to continue to have two big old, abandoned eyesores in a key part of the downtown doing nothing to add to our local economy or culture …” Why are these nuisances tolerated? If a frat or a landlord tried the like, their buildings would have been bulldozed long ago. All agree that these structures are toast; preservation is not an option. City code not only allows, but appears to require abatement.
Ted Staton and Mayor Loomis trashed the building!
(04/14/10 12:33am)Report
City Assessor Jane Meddaugh, in her Sworn Affidavit, stated that the City Police And Fire Departments deliberately destroyed then inside of the Citizens Bank building, rendering it functionally obsolete and qualifying it for Brownfield incentives. Prior to that it was a perfectly functioning bank—not an eyesore. Chappelle, also under the table, allowed all of the plumbing to be ripped out of the building, while the building was insured. Do you think that sounds fishy?
Ted Staton and Mayor Loomis trashed the building!
(04/14/10 12:33am)Report
City Assessor Jane Meddaugh, in her Sworn Affidavit, stated that the City Police And Fire Departments deliberately destroyed then inside of the Citizens Bank building, rendering it functionally obsolete and qualifying it for Brownfield incentives. Prior to that it was a perfectly functioning bank—not an eyesore. Chappelle, also under the table, allowed all of the plumbing to be ripped out of the building, while the building was insured. Do you think that sounds fishy?
Mark Freyling
(04/14/10 9:05am)Report
The City can orchestrate a massive fraud in order to qualify for MORE tax payer money for our pet project, while assembling, with threats to Condemn and use Eminent Domain to assemble the properties for this
gigantic project. Sure, the developer is financially insolvent, but we have
his back. Naysayers are simply
hippies and lapdogs. Besides the Downtown Development Authority
and Brownfield Redevelopment Authority both agreed unanimously in favor if this project, but it is NOT because both governing bodies are comprised of exactly the same people. And, the inside of private Citizens Bank building was destroyed by CITY employees, and it is just pure coincidence that now this qualifies for Brownfield incentives. Yeah, you know, Himmler said if you repeat the same lie enough, people will eventually believe it. Loomis, Staton, and Chappeles are the masters of this propaganda technique. Oh, and the $5 million budget crisis has NOTHING to do with the $5 million used by the City to by up private properties for this developer.