Traverse City Record-Eagle

November 21, 2013

Board hopes brownfields jump-start 8th St. development

By BRIAN McGILLIVARY bmcgillivary@record-eagle.com
Traverse City Record-Eagle

---- — TRAVERSE CITY — City commissioners approved about $660,000 in brownfield tax incentives for two Eighth Street developments and another $240,000 that will go into a county agency’s coffers.

Commissioners unanimously supported a request to rebate $395,000 in property taxes over eight years for brownfield costs incurred by J. Socks Construction. The developers propose to spend $2.8 million to construct a three-story building with both retail and residential space on the northwest corner of Eighth and Cass streets.

But commissioners split over allowing the Grand Traverse County Brownfield Authority to continue capturing all local property taxes for 13 years, which includes five years of property tax revenue for the brownfield agency. About half the estimated $207,000 generated by the project over the five-year span typically would go to the city.

“It almost doubles the subsidy for the whole project,” said city Commissioner Ross Richardson. “The brownfield authority has already assessed its fees; I want that tax money to go back where it’s intended to go.”

Richardson’s amendment to limit the county’s capture to two years failed when Mayor Michael Estes and Commissioners Tim Werner, Gary Howe, and Jeanine Easterday opposed him. Commissioners Jim Carruthers and Barbara Budros supported the two-year limit.

Estes and Werner said the decision on how long the brownfield authority captures city tax money should be made by the county board-appointed brownfield authority.

Richardson said waiting for the brownfield authority to voluntarily relinquish the capture of hundreds of thousands of dollars “will never happen.”

Estes also noted the money captured by the authority goes into its local site remediation fund and generally returns to the city. The authority uses the fund to help clean contaminated sites for redevelopment. To date, all such projects have been in the city.

“There are other needs for city tax dollars to pay for besides further development downtown,” Richardson countered.

Richardson, whom fellow commissioners nominated to represent them on the brownfield authority board, stood alone in opposition to a second brownfield project that commissioners approved.

Dr. Debra Graetz received $232,686 in property tax rebates over 21 years to replace an 1890s home on Eighth Street with a physicians office. The brownfield authority also will capture an additional five years of taxes there that would be worth about $33,000.

Graetz estimates it will cost her almost $1.3 million to bulldoze the house on the corner of Eighth Street and Railroad Avenue to construct an office with a finished value of $500,000.

“The costs involved with this project are sort of unbelievable, quite frankly,” Richardson said. “I don’t know how we get to the point where tearing down an old house and building a 2,500-square-foot office building costs $1.3 million.”

Richardson questioned how Graetz needed $84,000 for asbestos removal when Socks Construction projected $27,000 for a building of similar age and size.

“This house was found to be exceptional,” Graetz responded. “It was remodeled at a time in which it was all (done) at once in asbestos.”

The $236,000 public cost for a $500,000 building makes it a bad deal for the city, Richardson said. By the time tax capture ends in 26 years the city will be rewarded with a functionally obsolete office building.

The majority of commissioners looked past financial concerns and said they supported the project because it’s the type of redevelopment they want to encourage along the Eighth Street corridor.

“I think what you see is a certain willingness to jump-start certain undeveloped areas,” Estes said. “This seems to be the direction the city wants to go along Eighth Street. So when we get the first two projects, do we turn them down? I think not.”