East Lansing Announces $1M Grant for Downtown Park. Is Big Redevelopment Coming Nearby?

The City of East Lansing has announced that it has been awarded a $1 million grant from the Michigan Economic Development Corporation (MEDC) to revitalize Valley Court Park. This will likely mean an outdoor pavilion for the farmers’ market along with many other improvements to East Lansing’s largest downtown park.

But what’s going on with plans for big redevelopment in the area around the park? Today, ELi brings you up to speed on that question.

First up, what will the grant for Valley Court Park bring?

The funds from MEDC arrive in the form of a matching grant which means the City will need to put up or otherwise obtain another million dollars. But that total will give City staff a significant sum to deploy as they reinvigorate Valley Court Park.

The centerpiece of the plan is an open pavilion for the farmers’ market space, similar to what Meridian Township now has. That space could be used for much more than the weekly farmers’ market, as City Manager George Lahanas remarked at Council this week. 

Lahanas said he envisioned the pavilion could be used also for “the festivals we talked about, with fiber and fashion, where it’s creators who are actually making stuff, so instead of [just] homegrown Michigan produce, it’s homemade crafts, it’s homemade clothing, it’s homemade art.” He said he imagined this happening many days of the week, not just on Sundays.

The City also plans to do some sort of rehabilitation of the old brick BWL substation building that was relocated to the park years ago as part of nearby redevelopment, although detailed plans for that have not yet been shared. There will also be fresh landscape architecture work.

What about the fenced-up empty lot across from Valley Court Park’s tennis courts?

This is the triangular plot of land with the address of 341-345 Evergreen Ave. DRW Convexity, the developers who built The Graduate Hotel and The Abbot apartments, had promised as part of their deal with the City to construct “Building C” as an affordable-housing apartment complex at this location.

As ELi readers may recall, “Building C” was supposed to be the way the developers would satisfy the City’s law that big downtown redevelopment projects with housing have some “diversified” component for 25 percent or more of the units. 

The idea behind the law, Ordinance 1384, was to provide more than student housing downtown. The allowable “diverse housing” options include owner-occupied condos, low-to-moderate income housing, or housing for people aged 55+. 

The original plan for Building C called for five stories of income-restricted apartments. In 2019, Council approved the idea of adding one more floor and mixing in some market-rate apartments at Building C along with the income-restricted apartments. And, just a year ago, we reported it looked like that building would soon get built.  

But then, in April of this year, Council voted 3-2 to allow the developers to walk away from that plan and obligation and to instead sell the land to the City. On Council, Ron Bacon, Jessy, Gregg, and Dana Watson voted in favor of this change, with Lisa Babcock and George Brookover voting against.

The idea was for the City to pay $1.56 million to the developers for the land and the architectural plans for the building. The money for the purchase was supposed to come from an extension of the Brownfield Tax Increment Financing (TIF) plan capturing taxes from The Abbot and The Graduate. 

But this tax-capture plan would have to be approved by the MEDC.  Months later, there are no signs MEDC is giving approval.

It would be somewhat surprising if MEDC did approve it. That’s because Brownfield TIF plans are supposed to be created to incentivize future redevelopment, and the TIF running on the land of The Abbot and The Graduate has already achieved redevelopment: those two big buildings are already built. 

Under Michigan law, Brownfield TIF plans aren’t supposed to be created on recently-built projects to pay for other projects on separate parcels of land.

Asked about what’s going on with the deal approved by that 3-2 vote in April, Planning Director Tom Fehrenbach told ELi on Aug. 26 his staff is now working with the developers to do an affordable housing project at 341-345 Evergreen Ave., writing, “We are working towards bringing an affordable housing project to fruition on the Parcel C property.”

According to Fehrenbach, “Staff continues to work with the developer’s representatives as well as with representatives from the Michigan Economic Development Corporation to seek a mutually agreeable path forward towards the development of an affordable housing project on Parcel C. Any potential outcomes requiring discussion or consideration by boards, commissions and/or City Council will be brought to them in public session.”

If the developers DRW/Convexity don’t build Building C by a particular date, according to the existing agreements, the City will be given the land by the developers at no cost and the parcel will become open space (park land) in perpetuity. What that deadline for construction is is not entirely clear because of pandemic-related delays on both the developers’ and city’s sides. 

The agreement further specifies that if the City obtains the land this way (for free), it can allow building on it, but only if the City creates new park land that is the same size as the Building C parcel and that new park land is contiguous with that development. It’s not clear how the City would pull that off, given the land that exists there.

Fehrenbach told ELi he understands that, if the developers hand over the land because they haven’t built Building C in time, then it will have to remain a park. He wrote, “It would essentially be deed restricted as public open space.”

So, the fate of 341-345 Evergreen Ave., the “Building C” parcel, remains uncertain.

What about the DDA’s properties, right across the way on Evergreen Avenue?

There, plans to turn a north-south strip of land into major new office space is stalled, while one developer continues to hold an exclusive agreement on redevelopment rights for the land.

Here’s the quick background: 

The DDA owns four contiguous parcels of land from 314-344 Evergreen Ave. When the DDA bought these properties in 2009, the idea was to see them quickly redeveloped as part of a very large redevelopment project. But that project ultimately fell apart in 2015, leaving the DDA with a debt of over $5 million and properties that were worth much less.

One by one, the rent-producing structures on these properties have been ordered emptied and demolished by the DDA, either because of structural problems or the DDA’s desire to lease empty land to MSUFCU for construction of its project. 

The last two buildings remaining are two small old houses that are no longer rented following a bat infestation. At its Aug. 25 meeting, the DDA voted on actions aimed at having those last two buildings demolished by the end of this year.

Because the DDA has been paying mostly interest on the debt for years, the debt is about as big now as when it was first incurred – around $5 million. The DDA’s plan has always been to pay off this debt through a redevelopment project. 

But that hasn’t worked out. The land is oddly shaped, narrow, and on a hill, and one proposed project after another has fallen apart for these properties, while The Abbot apartments, The Graduate hotel and the MSUFCU project have gone up on nearby parcels. 

The biggest challenge with the Evergreen Properties isn’t the geography. It has been that no developer wants to pay millions more than the land is worth. And it’s difficult if not impossible for developers and City staff  to design a proposal with a Brownfield TIF plan that can generate enough tax revenue to somehow pay off that big debt. 

About two and a half years ago, the DDA was swayed by a proposal from River Caddis Development to enter into an exclusive redevelopment agreement for these properties. River Caddis promised “The CITADEL,” a big new office building with interior parking, built at their expense. (Interior parking is very expensive to construct.)

Since then, the concept has been extended and has morphed – for example, the developers decided they want the City to provide parking after all. 

Still, the project has been going nowhere. The developers have been clear that it is extremely hard to find office tenants for this site, even though they have been looking nationwide. (The pandemic hasn’t helped.) They’ve even started referring to themselves as something akin to real estate brokers for the project, working with traditional commercial brokers.

Despite no movement, the DDA has stayed the course, allowing now automatic (no-discussion) renewals of the exclusive agreement with River Caddis with no termination date specified.

That agreement hasn’t survived without controversy. In January of this year, Council arrived at a contentious 3-2 vote on the question of whether to have the mayor sign a letter of enthusiastic support for the River Caddis concept. The split went the same way as on the idea of the City buying the land across the street from DRW/Convexity: Bacon, Gregg, and Watson in favor; Babcock and Brookover against.

According to a recently-posted July 18 update from East Lansing Planning Director Tom Fehrenbach, “DDA staff are exploring short-term revenue generating possibilities [for the Evergreen Properties] while also working with River Caddis Development…on attracting a significant office tenant as the anchor for a new building envisioned for the site.”

Asked for an update, River Caddis’s John McGraw told ELi on Aug. 29 that his company has no comment at this time. 

Could an Artspace project be built on the Evergreen Properties?

In theory, yes. In fact, ELi reported a little over a year ago that this idea was being floated. 

As a reminder, Artspace is a nonprofit Minneapolis-based property developer that builds affordable live-work space for “creatives,” broadly defined. Artspace owns and operates the projects it builds. That means if a project were built on the Evergreen Properties, the DDA would sell, give, or long-term lease the land to Artspace.

Artspace was paid $30,000 in public funds to consider the possibility of a project for East Lansing. The group produced a report on the idea, and now, they’re seeking additional payment from East Lansing for further consideration.

The challenge of trying to put an Artspace project on the Evergreen Properties is that $5 million debt. Artspace can’t pay that much for the land and create an affordable housing project. And the tax revenues from an affordable housing project would not be enough to pay off the debt through a tax increment financing (TIF) scheme.

Now, technically, the DDA doesn’t have to pay off the debt when the Evergreen Avenue land is transferred or redeveloped. That’s because the bonds aren’t secured by the land. The bonds are instead secured only by the full faith and credit of the City of East Lansing. 

In other words, the DDA could sell the land for any amount a DDA majority approves. They could also essentially give away or long-term lease the land if a majority of DDA members approve. (DDA members are selected by Council and legally empowered in this way.) But they or the City would have to find some way to pay off that debt.

As it turns out, because the DDA has been steadily demolishing the income-producing structures on its Evergreen Avenue properties, there’s soon going to be little or no income coming off the properties, which makes retaining them less important to the DDA’s finances.

The DDA currently has no plan for how to handle paying off the debt, which is expected to have to be refinanced again by 2025.

Could an Artspace project be built where Building C was supposed to go, on the west side of Evergreen Avenue?

Again, in theory, yes. Notably, when the City moved to buy the parcel from DRW/Convexity, the agreement called for DRW/Convexity to also hand over the architectural plans for Building C. Those plans could then be turned over to Artspace’s designers. The deal approved in April on that 3-2 vote also called for removing the deed restriction requiring that the land remain open space (park land), paving the way for redevelopment there.

That all seems to set the stage for a potential Artspace project at this location. But as noted above, the purchase of the land doesn’t seem to be moving forward at this time. As quoted above, Fehrenbach said they’re in talks with MEDC. But affordable housing is the job of the Michigan State Housing Development Authority (MSHDA), not MEDC. And MSHDA project approval can take many years.

Could an Artspace project be built where the Valley Court Community Center now stands?

The community center building has been in dire disrepair for years, as ELi has reported, and one option is for the City to dedicate that property to a new Artspace project. 

If that City-owned land were sold, the sale would have to be approved by voters. But a majority of Council could vote to long-term lease the land to Artspace as it has done with other projects, including University Place (the Marriott Hotel complex) and the Center City development downtown, without voter approval.

Right now, an adult respite care center uses the community center. According to Fehrenbach’s memo of July 18, “The City recently renewed a lease agreement with the Active Living for All (ALFA) adult day services non-profit operating in the Valley Court Community Center. This is a short-term arrangement as the building is nearing the end of its useful life, and the City intends to include the Valley Court Community Center in future plans for redevelopment of the area.”

So, a lot remains uncertain about the future of the area around Valley Court Park.

According to Fehrenbach, the plan is to engage a wide variety of “stakeholders” as ideas and options emerge. 

What we do know for sure is that, with the just-announced MEDC grant for Valley Court Park, there will now be a significant influx of funds to improve a park that stands as an important community gathering space near where a lot more redevelopment might eventually happen.

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