EL Council to Revisit City Center II Plan Tuesday Night

Apr 3, 2012

East Lansing officials will decide Tuesday night whether the latest City Center II plans are worth further study. The East Lansing City Council is expected to vote on a ‘pre-development’ agreement with Strathmore Development involving the proposed $105 million mixed-use project.

The agreement calls for an outside accounting study of the plan to be paid for by developer Scott Chappelle. It would also give the City Council until July to decide whether to finally go forward with the often-delayed project.

WKAR’s Mark Bashore spoke with East Lansing City Council member Don Power about the agreement. Power says he's looking for transparency.

DON POWER:   One of the things that I’ve heard people complain about before I came on the council is that people didn’t know for sure what was going on.  And from my standpoint, I will not allow that to happen ever again.  I want total transparency with the exception maybe of those confidential areas that would be protected, (that) we would normally expect with a developer and his banker—things like that. 

The second thing that I want is--and I urged council to do it and only myself and councilman Loomis and I have done it so far--is to make an exhaustive list of the things we want studied during this time period, in addition to what our staff wants.  The reason being is it’s real easy to ask for a study to be done. But if you don’t, in effect, think about what’s going to be in that study, then how are you going to use it in the end because you won’t even know what those items are and how they apply?

And then the pre-development agreement itself. I wanted a very clear statement: all it is is a period of study to do our work correctly, to see whether this project is of benefit and value to the city. Because this current proposal has asked us to commit an additional $18.3 million at a time when we have a $95 million debt in terms of buildings--and some of that is to be expected--and $100 million debt in terms of unfunded liabilities for pensions and retiree health insurance.  So it’s important that we make certain that when we spend one dollar, we’re getting a dollar’s worth of value out of this.

BASHORE: And committing to the City Center II project would specifically increase the city’s existing development debts.  That’s a particular concern then?

POWER:  Yes it is.  When I look at the overall debt of $95 million, most of it is for infrastructure such as water, sewage and utilities, which is normal in any city. And that represents about 40% of that $95 million.  But when I look at development-type debt, it’s about $12 million.  That represents now 13% of our total debt.  And by adding in the proposed $18.3 million that Mr. Chappelle has proposed, that would increase it up to almost 26%.  When I look at similar organizations in terms of ratios and everything, that concerns me greatly.

The other piece that I’m concerned about--and it’s a technical thing--tax-incentive financing is a part of this. And I’m adamantly opposed to a 30-year TIF.  It’ll be 30 years before you see a return on taxes to us.  And if you do too many of those, all of a sudden you have a lot of beautiful buildings and you’re adding city services to support them, but there’s no taxes there coming in from those projects to, in effect, do them.

BASHORE:  Is there anything in Strathmore Development’s track record or history that concerns you?

POWER:  Yes there is.  One of the due diligence questions I ask is a very exhaustive historic study of Strathmore and all of its subsets.  Because when I do business with somebody, I want to be able to look at them and know who they are and what they’re all about.  I understand the ups and downs in development and the economy and some things that Mr. Chappelle probably ran into.  That was everybody.  What I want to know is ‘what actually is that track record? Who am I about to do business with?’  And so that’s going to be a serious part of the due diligence study we’re going to do.

BASHORE:  Do you intend to vote for the pre-development agreement tonight?

POWER:  Absolutely.  I believe that in all sense of fairness to the city and to the developer—whoever the developer is--and despite all the track record, in all fairness to both, we need to take a constructive period of time to study it in view of 2012 and take that data and make an adequate decision at the end.  That’s the only way we should be doing business.