What could you buy with City Center II?
By: Kate Jacobson
Illustration by Andrea Zagata / The State News
After a Dec. 17 expiration date for City Center II’s site plan, there are many directions in which the project could go. Strathmore Development Company, the project’s developer, is behind on paying both East Lansing and Ingham County taxes. It has paid about a third of what it owes to the city, about $129,000, for summer 2009 taxes. It owes more than $200,000 combined to the city and the county.
The project might sit in limbo in front of the East Lansing City
Council or face foreclosure by the county if these taxes are not paid.
Regardless of whether Strathmore pays before the expiration date, the future for the project is uncertain, but not lost. It has many paths, but few that end the financial struggles that have plagued the $116.4 million mixed-use development.
Foggy future
East Lansing Mayor Vic Loomis said there are many different scenarios and components playing into what potentially could happen to the project, which contains seven properties and is bordered by Grand River and Evergreen avenues and Abbot Road.
“You’re trying to predict the future, and that’s hard to do because we don’t know for a fact what the developer may or may not do,” he said.
If the site plan expires in December, Strathmore must go back through the process of getting it approved. Loomis said the council can vote on the issue with the delinquent taxes pending; however, it could affect the outcome of the council’s vote and would mean the project couldn’t physically move forward.
“We can vote on it at any time,” he said. “The question is what the outcome of the vote would be.”
Director of Planning and Community Development Tim Dempsey said the process for City Center II took almost 50 meetings to review the project.
After the developer submits a special-use permit, the project is circulated throughout various boards and commissions, which could take months, East Lansing Planning and Zoning Administrator Darcy Schmitt wrote in an e-mail.
Once it’s reviewed by each board and commission and has a public hearing through the East Lansing Planning Commission, commissioners would advise Strathmore of any issues that need further study.
Eventually, the request will fall in the hands of City Council, where a public hearing will be held and the council then can take action on the application.
“The process … is required by (the) city code and is used as the minimum standard of review,” Schmitt wrote.
“Each proposed project regardless of size has been unique as far as length of review process.”
As for the still nonrenewed development agreement, Loomis said the City Council would not vote on the issue until all summer taxes were paid.
Come to collect
Strathmore currently owes about $129,000 for summer 2009 taxes in East Lansing. The taxes the developer owes were levied July 1 and were not paid before Aug. 31. Because they were not paid by then, there is a one-time, 3 percent late fee added to the balance, East Lansing Treasurer Jill Martinez said. If the taxes aren’t paid by the end of February, they will roll over to the county for collection, Martinez added.
The outstanding balance owed to the city is paid by the county. Personal property taxes, which include things such as equipment and furniture being used by a business, still are pursued by the city.
The county is no stranger to Strathmore’s struggles. The company owes about $130,000 in back taxes for 2008 to the county. These are separate from the city’s taxes and must be paid within 25 months before the county files for a tax foreclosure on City Center II’s properties, Ingham County Treasurer Eric Schertzing said.
Additionally, Dec. 1, winter taxes will be levied on City Center II and are payable through Feb. 14. The same 3 percent late fee would apply to those taxes if they are not paid by Feb. 14. If the December taxes go unpaid, just like the others, they also will be taken up by the county.
The options
Chappelle said the company is working through the financing process and remains optimistic the project will move forward.
Dempsey said he also is confident the financing will come through, citing almost daily conversations with Huntington Bank, which is financing Strathmore.
With the development agreement stalled, Dempsey said the developer can choose how to proceed with the site plan. The developer can continue with the current plan or make any changes to the plan by going through the process all over again.
Chappelle said a business has expressed interest in occupying potential office space, which would replace some of the residential space.
But, if the funding does not come through, Dempsey said Strathmore ultimately owns the properties.
“From that respect, we would not see another developer step forward because they wouldn’t have control of the property,” Dempsey said.
Regardless of what happens, Dempsey said the city is committed to redeveloping that area of town. If Strathmore were to lose the properties, the city would be interested in finding other options to develop.
“If we got to the point where the current developer couldn’t proceed, we would certainly look to somebody else to move a project forward there, under a worst case scenario.”
11/20/09 @ 8:05am
is this a newspaper for kids? I think everyone here knows how much $129,000 is.
11/20/09 @ 8:54am
Hopefully this falls through and the City has no choice except to relinquish the sale of the property back to individual businesses, and the City can go on. East Lansing’s grand schemes have been ill-advised and very poorly handled since the beginning.
11/20/09 @ 10:09am
The biggest problem the city faces is that it borrowed $5.5m so the DDA could buy those properties on Evergreen, supposedly so the city could build a parking garage for CCII.
No project — no parking ramp.
Then what do you do to get that $5.5m back out of those properties that are not worth anything close to what the city paid for them? Five-and-a-half million dollars is serious money, especially when the city is being “forced” to lay off librarians and police and fire personnel. I beleive these are General Obligation bonds, so the taxpayers are on the hook.
And I know that I’m repeating myself, here, but the taxpayers warned the city that this project was doomed from the start almost two years ago. They didn’t listen then, and they won’t listen now.
11/20/09 @ 10:41am
The City Council and all of the conspiring Commissions knowingly approved this project, while IGNORING the FACT that the developer stated way back in 2007 that he was FINANCIALLY INSOLVENT. He made the statement under oath! The developer clearly is drowning in lawsuits, liens, foreclosures, and delinquent property taxes, involving failed projects in Florida, Ann Arbor, Mason, and Petoskey. We cannot ignore that there is more than $60 Million Dollars of TAXPAYER MONEY at RISK in this project. With this Developer, the taxpayers will be stuck footing the bill for such reckless financial decisions in City Hall. Now Mayor Looms suggests that he can do whatever he wants, even violate the City Charter and approve this project, a publicly funded BAILOUT, for the developer with delinquent City taxes. Where is all of this private funding that they promised?
11/20/09 @ 11:41am
Obviously, East Lansing government went out of its way to enable this project, despite being warned about the reasons for not approving it. Now, officials deny they could have known, just like Bush and Iraq.
But it isn’t just this project. It’s the Bush-era “conservative” mentality that weighing pros and cons gets in the way of risk taking, risk taking where, of course, those promoting the risks share none of the responsibility for the consequences.
If the executives of development companies had to put up substantial amounts of their own money, and if banks could not launder loans, and if taxpayers got to vote on what to subsidize, only projects that had viable business plans and/or (for subsidies) that had tangible benefits for the majority of taxpayers would make it past the first review.
City government can look for all the developers it wants, but unless someone has a business plan that can explain who is going to occupy buildings for such and such a price (in the real world), it isn’t risk taking, it’s recklessness.
11/20/09 @ 11:47am
Let’s be honest with ourselves, this project needs to just end. The commercial and residential real estate markets are awful nationwide, especially in Michigan. When you throw in the impossibility of refinancing existing debt in the commercial mortgage market this project looks even worse. This is just one of many development stories nationwide which have turned into huge busts. The go-go years of real estate development are officially over, like a long time ago.
11/20/09 @ 12:07pm
Really another City Center II story? how original state news…it never gets old.
11/20/09 @ 2:38pm
It won’t get old as long as the idiots in charge of EL are still planning on going through with such a dumb idea.
Crappy article though.
11/20/09 @ 3:52pm
They should do a similar experiment, like the one in this graph, with the expenses of ASMSU.
11/20/09 @ 4:37pm
This project needs to END!!! Quit taking property from small businesses and students!
11/20/09 @ 7:06pm
Kate Jacobson and the State News should be commended for their INVESTIGATIVE JOURNALISM, for exposing precisely the same level of improprieties involving massive, publicly funded bailouts for private entities, essentially rewarding bad decisions. The FEDERAL bailouts of the financial, mortgage, and lending sectors mirror what is happening NOW in EAST LANSING with City Center II and next with the East Village Project. The eyesores at the corner of Abbot and Grand River reflect many years of risky and reckless decisions by our City Council and City Manager. Do not forget that the City Council already granted the Developer a blank check bailout, offering to purchase all of his damaged properties at whatever prices he wants!
SB
11/20/09 @ 7:09pm
It needs to end. Take any money you would have spend and put it into our public schools. They can make much better use of it.
11/21/09 @ 1:14pm
Condos are such a BS way to “grow” the city. It isn’t going to translate into a better downtown. If the city were to use these properties as a way to attract businesses to the downtown district it could have a snow ball effect.They can keep recent grads and attract young professionals, recent grads/YP will want housing near their job, thus a demand for this kind of housing. Also if there are more people working in and around downtown it will help the various struggling businesses attract a new customer base on top of the students. Businesses don’t leave in the summer either so it can help foster year round business. This stuff isn’t rocket science.
11/21/09 @ 4:06pm
“Dempsey said he also is confident the financing will come through…”
Who is Dempsey working for? Can we get a little reality out of our city staff?