Uncertainty Persists around Center City District Plans

What’s going on with the Center City District project? Confusing signals are coming out of City Hall, and at least one long-time downtown business owner is seriously frustrated with all the uncertainty.

This week, City staff and a representative from the Christman Company have been going around to downtown businesses telling them that Parking Lot #1 would be closed starting tomorrow and continuing for at least a year—because construction on the $132 million project was supposedly going to start.

A map provided by Christman to downtown business owners shows just that—the main parking lot downtown being closed starting tomorrow, marking the start of construction.

But asked to confirm this, today East Lansing Director of Planning Tim Dempsey told ELi, “The lot closure was initially planned for tomorrow but is being delayed, likely until early next week. There will be no closure until an acceptable performance bond and insurance are in place” from the developers.

The situation is causing a high degree of stress for some downtown business owners, including Linda Dufelmeier of Mackerel Sky. She tells ELi, “The lack of communication this past year from the City and developer has been unprofessional, inconsiderate, irresponsible, clueless, arrogant, unacceptable. Despite this recent ‘outreach effort’ we are all left in a state of confusion and anxiety as the very builders of the project have no idea about a timeline and apparently no idea how this impacts the downtown.”

The City has said they’ve hired a public relations firm to manage all this for downtown businesses, but there has been no sign of that firm so far. Asked about this, and whether the firm is now being paid with public dollars, City staff have not responded.

Dufelmeier correctly notes that, back in the spring, business owners were originally told the project would start in July. Says Dufelmeier, she made major business decisions based on that information. That start didn’t happen, even after City Council approved the project against the recommendation of the Planning Commission. Then, just yesterday Dufelmeier was told the project was starting Thursday. Now that’s not the case.

“Not knowing if we will have ‘business as usual’ has thrown a monkey wrench into our business and personal lives. Planning is key to a workable business.”

New actions by Council:

While technically the deal is set, in fact, East Lansing’s City Council is still voting through key decisions on the project.

Last night, City Council voted on a change to the multi-million dollar ground lease between the City and the developers. The developers are a corporation called HB BM, LLC, representing a partnership between Harbor Bay Real Estate from Illinois and Ballein Management, an East Lansing business.

According to a staff memo, the lease amendment voted through last night was being sought by First National Bank of Omaha, which is set to be the senior lender to HB BM for the private development in the Center City District project. The bank wants the changes “to protect their interests should the developer default on the ground lease.” Council voted through these amendments on its consent agenda with no discussion last night.

Recognizing how significantly downtown businesses are likely to be affected by the construction of the project, and the loss of the largest and most visible surface parking lot downtown, Council also voted last night to create a temporary parking voucher program for downtown businesses in the immediate area.

According to a staff memo, “The program would provide $100 worth of free vouchers per month to businesses on the block where the project is occurring” as well as for businesses on Albert Avenue “that rely on public parking. The program would last until the new garage is open, estimated to be about 12 months from construction commencement.”

This was news to Dufelmeier when I spoke to her today. Asked for an estimate of what this program will cost the City, Mayor Mark Meadows and City staff did not respond.

Performance bonds not yet in place:

As noted above, Dempsey says that the construction will not start until performance bonds are in place. These are bonds designed to protect the City if the developer starts the project and fails to finish building the public infrastructure. It’s essentially insurance for the City to get the public infrastructure either restored to what it is now, or finished according to the project plans.

The Development Agreement between the City and the developer requires the developer to provide the City with performance bonds from a company with an AM Best Rated score of A-VII or higher, or else “an irrevocable letter of credit in a form reasonably acceptable to the City.” According to Dempsey, the developer is seeking to obtain such bonds through a high-rated insurance company.

Last week we reported that the investment company set to provide funding for the public infrastructure construction turns out to be owned solely by Peter Bell, the father of Mark Bell of Harbor Bay Real Estate. That’s a company called Scottsdale Capital, LLC. That company does not have a score of the type required by the Development Agreement, so it can’t provide the performance bonds.

But could the substitute option, the “irrevocable letter of credit” come from a Bell family company, effectively putting a lot of the City’s eggs in Bell-company baskets in terms of risk to the City? I have not yet gotten an answer to that question from City staff or the Mayor.

A lot of companies at one address:

A search of the Illinois corporate records done by former East Lansing citizen Eliot Singer showed yesterday that Scottsdale Capital is registered to 3412 Commercial Avenue in Northbrook, Illinois. That turns out to be the same address as the legal address for Harbor Bay Real Estate and HB BM LLC.

In other words, the investment company set to provide funding for the public infrastructure exists at the same address as the developer. But nothing in the Scottsdale Capital letter presented to the City from the developers made clear that this is the case. The letter provides no address for Scottsdale Capital, even while being addressed to the same address it was coming from.

The letter also keeps Peter Bell’s name off the letter, even though he appears to be the sole owner of the company.

Earlier today, I asked City Manager George Lahanas and Mayor Meadows, “Are you comfortable working with developers and investors who don’t disclose relationships in letters like this one?” Neither has responded.

Some uncertainty remains:

Summing up the situation from her point of view, Dufelmeier concludes, “This is insane. Beyond insane. How can the planning on a multi-multi-million dollar project be so deficient?”

“There is also a fear,” she says, “that the developer will tear down the vacant buildings, destroy Lot One and never complete the project after causing havoc in the surrounding businesses. This needs to stop. Who is responsible for allowing this fiasco to continue?”

Right now, plans with the City appear to indicate the intention remains to close Lot #1 sometime soon, to give the business owners parking vouchers, and to have construction start. But we may not really know when that is, until it actually starts.

Read our complete coverage of the Center City District project here, and read the plans and find a timeline of actions here.

Disclosure: Linda and Tom Dufelmeier are financial supporters of ELi.