The Ypsilanti Courier
A Heritage Newspaper
Weekly Publication
Freed backs out of Water Street
City to evaluate what steps to take without a preferred developer
By Dan DuChene, Staff Writer
PUBLISHED: December 14, 2006
Negotiations for a Water Street developer have fallen through for a second time since 2001.
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Joseph Freed and Associates, the city's second selected developer, decided to cease negotiations for a development agreement, citing the state's poor economy and slow housing market as the primary reasons. Ed Koryzno, Ypsilanti's city manager, made the announcement in a memo on Friday.
In a recent press release, Mayor Paul Schreiber said, "City Manager Ed Koryzno will be forming an advisory committee of experienced local developers to examine all of the options available to the city."
"Also, I will be forming the Mayor's Ypsilanti 20/20 Task Force at the beginning of the new year," Schreiber said. "The task force will be charged with proposing at least five long-term strategies and ideas to make Ypsilanti a thriving city in the year 2020. The task force is a natural setting for public input and ideas on Water Street."
Before Freed, the city had been working Biltmore Properties. The city selected Biltmore in 2001, and ended negotiations with the company in December 2004.
City council approved Freed, a Chicago-based developer, as the preferred developer earlier this spring, and went into negotiations following that decision.
This summer, Freed presented a concept plan for the 38-acre Water Street Project. The plan included 51 residential lots, 94 town-homes, 312 apartments, 90 condominiums and 96,620 square-feet of retail space along Michigan Avenue.
Water Street was not the only project Freed abandoned in Michigan.
The same day Freed's decision to scratch Water Street was announced, the Detroit Free Press reported the developer had canceled a $100 million plan to build two high-rise apartments in Troy. The project would have created 165 condominiums and 11,620 sqare-feet of retail space near Big Beaver Road. Freed cited the same reasons for backing out in Troy as they did in backing out of Ypsilanti.
"What we need to do is assess the amount of cleanup we can perform on our own," Koryzno said.
In his memo, Koryzno said the city still has more than $1.25 million remaining in grants and loans for building demolition and environmental cleanup.
"It is important to begin this work as soon as we receive approval from the Michigan Department of Environmental Quality," Koryzno said in his memo.
In October, council approved a $100,000 budget in the city's general fund to pay for any legal and environmental consulting fees associated with Water Street. The measure was used to allow time until the city's Brownfield Plan and Act 381 Work Plan are approved by the state. Those applications must be passed in order to secure funding from an MDEQ grant, which the city currently possesses.
The Brownfield Plan has been submitted for approval. However, the Act 381 Work Plan is still being developed. The two plans layout a cost structure to get Water Street cleaned up and ready to sell.
The plan gives an estimated cost for bringing the land up to the standards of the Michigan Department of Environmental Quality at $3,716,120 The plan also predicts a $3,758,890 cost to demolish buildings, update infrastructure and land balancing on the property.
Karen Hart, Ypsilanti's planning and development director, said the cost of infrastructure and road work may not be necessary depending on how city council plans to move forward from this point. Infrastructure costs were estimated at $1,866,800.
Hart said the city has also applied for a $800,000 loan from Washtenaw County's Brownfield Authority's revolving loan fund.
Hart said the city has taken out $18.5 million in bonds and loans, and acquired $5.5 million in grants.
In his memo, Koryzno said the first bond payment will be $378,000 and will be due in November 2009.
"There are two debt payments the following year totaling approximately $1,000,000," Koryzno said. "The payments continue to escalate until 2015 when they reach a maximum of approximately $1,600,000 and then decline until retired in 2031."
In order to offset the projected $23 million dollar cost, the city applied for tax increment financing with the state. The city estimates $23,033,557 will be generated by three separate taxing jurisdictions. The city hopes to capture those tax dollars and apply them to the brownfield costs.
The entities impacted by proposed tax increment financing (TIF) would be the State Education Tax, the School Operating Tax and the Washtenaw Intermediate School District.
The plan predicts capturing $8,612,742 from the State Education Tax, $8,683,293 from the School Operating Tax and $5,737,521 from the Washtenaw Intermediate School District.
In addition to the TIF, Brownfield and Act 381 applications, the city also applied for a Single Business Tax Credit to benefit Freed, because the city cannot collect credits, as it does not pay taxes to the state.
The credit is called the Brownfield Redevelopment Single Business Tax Credit. The city would have applied for the credit with Freed as an incentive during negotiations. The city estimated raising $9.9 million for Freed from the SBT credit.
Hart said she is not sure what will become of the various applications the city had been working on.
"We're going to evaluate what we can do without a developer," Hart said. "I have to evaluate them all to know."
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