Traverse City Record-Eagle

October 29, 2013

Grand Traverse County officials consider brownfield funds to redevelop 8th Street

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

---- — TRAVERSE CITY — City and county officials will consider redeveloping Eighth Street by picking up the tab for private developers to raze old houses that line the corridor.

The county Brownfield Redevelopment Authority will consider granting almost $825,000 in tax reimbursements for two houses built in the 1890s that contain asbestos, lead paint, and coal dust. The brownfield authority meets Wednesday at 8 a.m. in the Governmental Center.

Some officials aren’t sure the potential payoff justifies the public support, but others believe the two at-hand projects could spur similar work on dozens of older residential homes that line city corridors if owners opt for commercial redevelopment.

“It could set the precedent for how we redevelop the corridors with brownfield (financing),” said Jean Derenzy, deputy county planner and brownfield redevelopment director.

Costs to abate contaminants at the two houses is set at $147,000, but state brownfield laws allow the developers to receive reimbursement for other costs such as site preparation, building demolition, and site improvements, including sidewalks and utility connections.

Dr. Debra Graetz wants to bulldoze a home on the corner of E. Eighth Street and Railroad Ave. to construct a physicians office. Graetz spent $207,000 to acquire the house, but had to halt the project because of unexpected costs and financing issues.

Graetz told brownfield authority board members she didn’t realize the extent of the asbestos in the drywall mud, linoleum, pipe insulation, window glazing, roofing and siding. Graetz declined to be interviewed for this story.

Graetz estimates it will cost her almost $1.3 million to demolish the existing house and replace it with a new one-story office building. But her bank estimates the value of the completed building at $500,000, and Graetz told officials she can’t afford to cover the difference.

A brownfield designation would allow the authority to capture all additional property taxes paid by the doctor’s company, Graetz Properties LLC, for the next 30 years and use that money to reimburse Graetz up to $493,000, including interest. The reimbursable costs include: $83,000 for asbestos removal; $148,000 in interest, and $262,000 in other costs.

Graetz is unlikely to receive the full reimbursement because over the next 30 years the project is expected to generate just $325,000 in additional taxes subject to capture. But it still might be too much money for authority board members and city officials.

“That’s a lot of money going to create little value,” said city Commissioner Mike Gillman, who sits on the brownfield authority board.

Other authority board members shared similar concerns, noting brownfield money makes up about 40 percent of the total project cost.

“I’m not sure the numbers work for me,” said authority member Mark Crane. “If every home is turned into an office, and we are spending $300,000 for every one ... we are spending a tremendous amount of money.”

City and county officials don’t have the same financial concerns for the second project on their agenda.

J. Socks Construction proposes to spend $2.8 million to construct a three-story, 20,264-square-foot building on the northwest corner of Eighth and Cass streets with retail and private parking on the ground floor and seven apartments above. The developers want reimbursement of $395,000 for brownfield costs and it’s expected the project will generate enough new tax revenue to cover the costs in just eight years.

The costs include $64,000 for asbestos, lead paint, and coal contaminated soil removal.

Socks appears to have more support among city officials.

“We have very limited land in the city and I think that’s the kind of development we should be promoting,” said city planner Russ Soyring. “We want to make sure when we are doing development we are doing the type of projects that will develop tax revenue.”

Should either or both projects gain brownfield authority approval they would then go before the city commission followed by the county board of commissioners.