A brownfield plan is a developer’s request for reimbursement for expenses that are considered public improvements. This is usually accomplished through tax increment financing, or TIF, plans. TIFs require a portion of the city’s revenue from property taxes on a new development be “captured” and paid to the developer during a period of time to reimburse public improvement costs.

The plan also calls for issuing bonds in order to gather enough money up front to build the project. The bonds will be paid back using the TIF. This is a structure dissimilar to recent brownfield plans discussed for Park District, which simply involve the TIF reimbursing the developer. As before, the city will incur no debt from this.

City Manager George Lahanas said the Michigan Strategic Fund, or MSF, would appear to be issuing the bonds at this time, though the brownfield plan calls for the BRA to do so.

The levels of security for the bonds is threefold, Lahanas said; if the TIF is not enough to pay back the bonds, parking revenues will pay for them. If that is not enough, the developer will be responsible for paying back the bonds.

“We’re backing up all the bonds,” said Greg Ballein, whose family owns the Grand River properties included in the project as Ballein Management. “The city is reimbursing this, but they’re not backing it. If the city should default on these bonds, I pay them.”

Discussion

Councilmember Shanna Draheim said the council has been individually firing questions at Lahanas for discussion.

“I have some questions for staff that I’ve posed about the size of that proposed parking garage, and whether we should be considering something slightly smaller,” Draheim said. “I don’t know that I think we should, but it’s just something I want to look at in terms of parking and what that does in terms of the proposed brownfield cost.”

Draheim said she thinks the costs are in line on the plan as is. Always interested in funding environmental cleanups, Draheim said she’s in favor of the pedestrian-friendly Albert Avenue redesign.

“I think it’s a well done plan, it just has a lot of information in there, (there’s a) breakdown of what they’re proposing and I think it’s certainly in line with what I expected and what I have heard,” Draheim said.

Mayor Pro Tem Ruth Beier has several questions about the plan and was concerned about the loss of parking revenue from the Albert Avenue lot while the parking structure is being built.

“That’s not a small number, it's $500,000 a year or more,” Beier said. “Somehow we need to figure that out, we can’t just give up a half a million dollars (a year for) two years, we don’t have that kind of money.”

Money has been a common concern for the city. Draheim and Councilmember Erik Altmann both said they’d prefer to support a TIF at an 80/20 rate during a longer period.

“(We’re) trying to do a wider spread whenever we can, I would much prefer this to be an 80/20 split because we do have revenue issues in the city … but I know given the numbers that we’re talking about … it’s not feasible under those numbers,” Draheim said. “I’m comfortable with the 90/10 split … I think we are all shooting for where we can make 80/20 work, but I think ultimately the overall cost of the project has dried that.”

A hindrance to more flexible agreements, Altmann said, is that state law doesn’t allow a TIF to extend beyond a 30 year period. This limits the ability of the city to negotiate for what it wants most: more revenue.

“We had similar concerns with the TIF for the Park District project,” Altmann said. “I wasn’t willing to go above an 80 percent capture rate, but the problem is that over 30 years that did not generate enough revenue for the developer for them to be able to go with project as it was designed then, so that’s why they had to scrap it and go back to the drawing board.”

Altmann said he thinks the city needs more revenue from the project and less parking.

“This brownfield plan involves the city paying for the parking garage, and the parking garage is big, it’s 715 spaces, and when I think about that in context we would be building a third parking garage in three consecutive blocks of Albert Street,” Altmann said. “I think we have all the parking we need already, and ... I want to find better ways to use the parking we already have.”

In order to address these concerns, Altmann said he has proposed to the developer they cut two of the six stories of parking from the planned building.

“If we can cut the cost of parking for this new project then that will help with my other concern, which is that we’re not seeing enough new revenue from it,” Altmann said.

If the $27 million garage is cut back slightly, Altmann said he thinks the brownfield plan can be feasible.

“If we can cut the cost of the garage to $20 million say, and that’s going to allow for a decrease in the capture rate (that) with any luck would get us to 80 percent or lower, and that would help a lot,” Altmann said.