Action-Packed City Council This Week

Should East Lansing homeowners be allowed to construct accessory dwelling units on their lots and, if so, in which neighborhoods? What type of demands should be made of a developer who wants $5 million in tax incentives to build housing on 27 acres owned by the city? How should the East Lansing City Council pick an appointee to replace Lisa Babcock?

City Council tackled these questions and more during its Tuesday night meeting. With Lisa Babcock absent due to a case of COVID, Council also split 2-2 on forgiving a group of late fees imposed on restaurants and voted unanimously to support the spending of $35,000 in public funds on the next phase of the Artspace talks.

Council must appoint a replacement for Babcock by January 30.

Elected to the bench of the 54B District Court, Councilmember Lisa Babcock is expected to resign her seat on Council at the end of this year, just before she is sworn in as judge. The City Charter gives Council only 30 days after her departure to appoint her replacement. That appointee will serve up until the election in November 2023, when that seat will be on the ballot along with Jessy Gregg’s seat.

City Attorney Anthony Chubb told Council the Charter doesn’t say how the council must go about the process. But the discussion this week indicated Council is going to opt to use something like the process it did when it selected Ron Bacon and Dana Watson to replace Ruth Beier and Mark Meadows: seeking applications, holding interviews and choosing the winner. 

Council will not, it appears, use the process it did when it appointed Shanna Draheim to fill in for the vacancy left by Aaron Stephens’ resignation. In that case, Council simply voted to pick an associate who had previously served.

Having now been through this process several times – and as the only one of five Council members from the period November 2019-July 2020 to not resign her seat – Gregg said, “All I wanted this term was to not have to do this again, but I do not begrudge Ms. Babcock her judgeship.”

Council is planning to use the same application form, which asks basic resume-type questions about education and experience (including governmental) and why applicants are interested in serving. The City Clerk will be asked to verify applicants’ eligibility because the person appointed must live in the City’s borders and be registered to vote, according to the Charter.

The plan is for the application to start being circulated and for Council to decide at its next meeting on Dec. 6 what the deadline will be and whether interviews will be required. Any interviews and a vote will be at a public meeting in January.

City staff favor one of three applications to build “missing middle” housing in the northern tier.

Planning Director Tom Fehrenbach told Council city staff received three responses to its call for developers interested in addressing the “significant housing attainability problem” by building relatively affordable housing on 27 acres the city owns at the corner of Coleman and West Roads in the city’s northern tier. 

The goal is to attract a developer who will build to the “missing middle” between low-income housing and what is currently available in terms of higher-cost rentals and houses. Fehrenbach said the goal is “increasing equity and diversity through attainably-priced housing.”

The term “missing middle,” Fehrenbach explained, “refers to a typology of units (duplex, fourplex, townhomes, etc) and also the pricing of units which are attainable by people with certain levels of income.” The Michigan State Housing Development Authority (MSHDA) “defines missing middle housing as that priced appropriately for those with incomes at 185%-300% of the Federal Poverty guidelines,” according to Fehrenbach.

Of the three developer applicants, Fehrenbach said staff strongly favor the all-rental-unit application from Krimson, an East Lansing company with offices in Watertower Place, near the land in question. (See all the proposals here.) The Krimson proposal calls for 34 buildings including nine apartment buildings, 14 townhomes, and 11 “stacked townhouse buildings” that would provide 316 rental units, including one- to three-bedroom units.

Fehrenbach told Council in his cover memo that Krimson provided “a detailed financial analysis” demonstrating “intimate working knowledge of real estate development with a specific focus on housing and local on-the-ground experience.”

Krimson would pay the city for the land, although the company wants another appraisal to see if it is worth the $2.8 million the city is asking. Krimson would also seek about $5 million in local tax incentives through a Tax Increment Financing (TIF) scheme that would divert local taxes from the project back to the developer for about 13 years.

Krimson’s application calls for rents to fall in the range of 55-120% of Area Median Income (AMI), with rents starting at $1,162/month for a one-bedroom, one-bath apartment, and going up from there.

A “strong” application also came in from PK Companies of Okemos, Fehrenbach said, but that proposal has a “significant gap of $15 million” in the financing. Fehrenbach said this creates too great an uncertainty about the project.

The third application, from Watson & Watson of Texas, had “some interesting elements,” according to Fehrenbach. The proposal includes 200 tiny detached homes and a “waste to energy” facility that would burn trash to convert it to electricity. But it was still “highly conceptual” and Fehrenbach said it would require a “great deal of analysis” to see if it would be feasible given the lack of details in the proposal.

Councilmember Dana Watson (no relation to the developer) said she wants to avoid a situation like what happened with “Building C” in the DRW/Convexity project downtown. Developers of that project have built the market-rate Abbot apartments and Graduate Hotel, but so far have failed to build the income-restricted rental building agreed to in the development agreement with the city.

Fehrenbach responded that Krimson would build all the units at the same time. He added there is movement forward on getting an income-restricted apartment building constructed where DRW/Convexity’s Building C is supposed to go at 341 Evergreen Ave.

Fehrenbach explained that, unlike at Building C, the project by Krimson would not have income-limit requirements to rent – so the units would be open to all comers. 

He said the city would have to figure out how to prevent the Krimson project from turning into a market-rate project where rents rise to the same levels as the rest of the area. He suggested this might be achieved through legal agreements between the city and developer.

Fehrenbach also said staff and the city attorney would seek to work out agreements that would make it less likely the project would be taken over by MSU student renters, as the goal is to attract families, retirees and single people.

Although Fehrenbach was pushing to get Council’s permission to enter into detailed talks with Krimson, Mayor Ron Bacon said he did not want to make any decisions without everyone at Council present. Bacon was also concerned that the proposals were not released to the public in advance of the meeting. 

The proposal will come back to Council at the Dec. 6 meeting.

City planners like the idea of “granny flats” but don’t want to accidentally create a big Airbnb market.

Planning and Zoning Administrator Peter Menser brought to Council ideas for changing East Lansing’s zoning laws to allow for homeowners to create Accessory Dwelling Units (ADUs). The idea is to create greater urban density, make wealthier neighborhoods more affordable to some renters and enable homeowners to house family members in nearby dwellings. 

With the help of other staff and Planning Commissioners, Menser has been reviewing model ordinances to see what might work best for East Lansing. He had high praise in particular for the ideas put forth by AARP. 

He highly recommends having a law that requires one of the two units on any property with an ADU be owner-occupied. This would prevent landlords from building ADUs on properties with single-family houses. He also recommends that rental to a family member not require a rental license from the city.

Menser suggests the city could allow homeowners to rent out ADUs, but not in existing rental-restriction overlay districts. He noted that legislation open at the state creates a “complicating factor” because, if passed, it could change the city’s overlay districts, throwing open the possibility for Airbnb-style rentals. The current legislation being considered at the state capitol allows East Lansing to retain existing overlay districts and create new ones to prevent short-term rentals.

If the East Lansing law changes to what is being considered, ADUs of 800-1200 square feet could be created through additions to houses, renovation inside houses or garages (like adding a “granny flat” above a garage), or construction of new dwelling units on a property holding a single-family house.

While Brookover wants to see more of the laws Menser has been reviewing, Gregg called herself “wildly in favor” of ADUs because they could protect open greenspace that would otherwise be used for building more housing. She also noted this could allow adult children with disabilities to live independently of their families but on the same property.

Watson also called the idea “exciting.” She asked whether it would be possible to buy a tiny house on Amazon, get a building permit and construct it on an owner-occupied lot. Menser’s response suggested the devil is in the details with regard to building permits (complications could include things like sewer-hookups). He said planners are looking at ways to have easy-build plans available to homeowners if the law is changed to allow for ADUs.

Bacon said he “just wanted to put out there” one thing: “parking.” He did not elaborate.

Menser will be returning to Council with more information.

Council splits 2-2 on relieving restaurants of late fees.

Local restaurants have been objecting to a move on the part of the city to assess late fees for licensing paperwork submitted after a summer deadline. Council had previously waived a number of fees for pandemic relief. But in June, Council voted to reinstate the fees for various licensure issues, including those involved with selling alcohol and hosting live entertainment. 

While Council allowed that restaurants could pay late fees by December, it required paperwork submission by the summer deadline. If the paperwork wasn’t submitted on time, the fees accrued.

After disclosing that some affected business owners contributed to his campaign (he did not say which), Brookover made motions at Council this week to waive the late fees or at least credit the restaurants. Brookover called the city’s policy on the matter very confusing because of how the requirements had been “miscommunicated” to businesses about June versus December deadlines.

But City Manager George Lahanas insisted the city had made the decisions about deadlines “exceedingly clear.” He also said reversing the fees would cost at least 10 hours of staff time. 

Bacon backed Lahanas, saying if a restaurant failed to meet the requirements, “This was lazy.”

Agreeing with Lahanas and Bacon, Gregg voted against Brookover’s motion, while Watson voted with Brookover. Because it was a 2-2 vote, the motion failed. That means the restaurants will not get the relief they sought.

Artspace will move onto the next phase.

Council voted unanimously (4-0) to take at least $20,000 from the city’s general fund to pay for the next phase of Artspace analysis. Council is hoping the Downtown Development Authority and Arts Commission will take tax money out of their funds to pay for the rest of the $35,000 bill for the next phase analysis.

Artspace is a nonprofit developer of affordable-housing live-work space for artists and the company has expressed interest in doing a project for East Lansing. East Lansing paid $30,000 for the last round of analysis, which found local interest in the project. The next phase will look at local need for this housing and possible funding sources.

Council also voted 4-0 to formally accept Artspace’s phase one analysis from early this year. Before the votes, local arts advocate Elinor Holbrook reminded Council she has presented letters in the past from local leaders in the arts and economic development who support the concept.

Noting that normally developers pay for their own feasibility studies, Gregg said it makes sense for East Lansing to use public money for this purpose because Artspace is a nonprofit developer.

Bacon said he believes the project would be a “multiplier” of positive development. Watson said she just wants to make sure everyone attends to the question of where “the huger amounts of money” are going to come from to get this project done.

And on the consent agenda…

Council voted to adopt their evaluation of Lahanas’ job performance. We’ll be bringing a separate report on the evaluation. 

Council also approved a resolution supporting the State High Water Infrastructure Grant Project and changed the requirements for membership on the Historic District Commission, no longer requiring that half of the members live in historic districts.

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