Answers to Questions on ELi’s Nov. 28 Report on the DDA’s Finances

This article provides supporting material, including answers to readers’ questions, about our special report on the East Lansing Downtown Development Authority’s finances published Nov. 27, 2022, at East Lansing Insider and Nov. 28, 2022, at eastlansinginfo.news. We have organized the questions according to the flow of that report. 

Don’t see your question answered? Contact us and we’ll add it and the answer here.

Where does the figure of $1.9 million in diverted taxes come from?

City staff presented this matter to the DDA at the Nov. 17, 2022, meeting. You can find the staff memo on this issue here. The top of the third page shows current tax capture from DDA TIF #2 (a TIF plan that is explained in our report) is currently about $853,192. The DDA is currently in FY23 (Fiscal Year 2023). By FY26, that amount will be up to $1,866,063. 

Staff explained this is chiefly due to taxes that will be captured from the MSUFCU building, The Abbot and The Graduate Hotel.

What are the Evergreen Properties and why is more than $5 million owed on them?

You can find ELi’s most recent reporting on the DDA’s Evergreen Properties here. This article provides a useful history. City Council is set to vote on a refinancing of the debt on those properties on Dec. 13, 2022.

How much has the DDA spent on the Evergreen Properties bonds?

Through the Freedom of Information Act (FOIA), we have so far determined that the DDA has spent $515,000 on principal payments on the bonds (since 2009) and $1,830,382 on interest payments. 

So far, over $2 million has been spent on interest payments and the fees paid for the original bonds (in 2009) and the two refunding bonds (In 2012 and 2015). 

We submitted a series of new FOIA requests to the city clerk to get the exact numbers on the fees paid so far. The city clerk’s office has indicated they need three business weeks to find the bond closing letters and the DDA’s annual financial reports.

How fast is the DDA special millage going up?

Material provided by city staff for the Nov. 17, 2022, meeting of the DDA shows that the DDA special millage (a City Council-approved property tax on the properties in the DDA district) is currently bringing in $269,100. In five years, that is projected to rise to $499,621.

What do we mean when we say the rental income from the DDA properties is mostly gone?

A financial report from the DDA for June 2019 (the end of the DDA’s Fiscal Year 2019) shows that, at that time, the DDA was bringing in $335,106 per year in rental income from the five buildings on the DDA’s Evergreen Avenue properties. After that, the DDA decided to stop upkeeping the four old rental houses on the property and voted to knock them all down. 

In March 2021, the DDA voted 9-2 to knock down the lucrative modern brick rental building at 314 Evergreen Ave. in order to give MSUFCU a place to park construction vehicles.  (When MSUFCU proposed its building, the credit union said it would not need anything more than one lane of Abbot Road and one lane of Albert Avenue for its construction staging. That turned out not to be true. It needed much more land, and asked for the DDA’s nearby land.)

The demolition of the three-story apartment building at 314 Evergreen Ave. destroyed most of the DDA’s rental income from its Evergreen Avenue properties. Now, MSUFCU is paying $6,000/month while it rents some of the land for final construction staging. That rental income will end soon, when the MSUFCU project finishes.

City Manager George Lahanas, who is a member of the DDA by virtue of his office, said clearing the land made sense because he wanted to see the MSUFCU building constructed and he expected redevelopment of the DDA’s land to happen soon.

Why is the Brownfield TIF on The Graduate and The Abbot paying off so much sooner than expected?

The TIF plan on the land under The Graduate and The Abbot was expected to require nine years of tax diversion to pay off all the “eligible expenses” identified in that TIF plan. But that Brownfield TIF is finishing about five years early due to a change in how East Lansing’s assessor calculates taxes on big apartment buildings.

Basically, the tax assessor decided to start setting the taxable values of big downtown rental apartment buildings in a new way, using an income-based approach. The result has been that the taxes paid by those properties’ owners is far higher than when the TIF plans for those buildings were set. With more taxes coming in, reimbursements for the approved TIF expenses are being paid off faster.

By the way, the tax assessor’s methodology change means that a number of downtown TIF plans are likely to pay off sooner than expected. When that happens, if they are in DDA TIF #2’s district, the local taxes due to be captured under DDA TIF #2 will flow to the DDA, not to the taxing authorities that would otherwise get those funds.

The City of East Lansing, CATA and LCC will be losing a total of over $1 million per year through the tax diversion from the land of the MSUFCU building, The Abbot and The Graduate. What will they do to make up that loss?

The city, CATA and LCC will simply have to make due without this money. This is one objection often raised to TIF – that it creates more need for services while “robbing” taxing authorities expected to provide those additional services. 

For example, hundreds of people live in The Abbot and might reasonably be expected to sometimes use CATA. But while the property taxes paid by the owners of The Abbot includes a payment “to CATA,” in reality, the DDA gets that money to do with it what it wants under DDA TIF #2.

Some people who support TIFs argue there can’t be a “loss” of new tax income to the city because the development that generates those taxes would not have been built in the first place if the developer hadn’t received a TIF. It’s very difficult to prove whether a particular development would happen were there no TIF.

A good example of where a dispute over TIF was really needed to attract redevelopment happened with the East Lansing Costco store. The East Lansing City Council decided to give Costco a $1.5 million TIF, while Meridian Township’s board balked, indicating they believed it unnecessary to give away so much in tax capture to land Costco. Read more about that here.

Don’t see your question about this reporting answered? Contact us and we’ll add it and the answer here.