Due diligence for City Center II complete; city council votes
Tuesday night will be a busy one for East Lansing City Council as members prepare to discuss the completed due-diligence report for the $105 million City Center II project during a special 5 p.m. meeting in City Hall, 410 Abbot Road.
The city entered into a predevelopment agreement with Strathmore Development Co. President Scott Chappelle on April 3, during which he was required to complete a due-diligence report outlining the financial ramifications of the project. During the 90-day due-diligence period — which ended Tuesday — Chappelle was given authorization to begin demolition on the building located at 303 N. Abbot Road.
Now that the due-diligence period has ended, council has until July 31 to decide whether to enter into a development agreement with Chappelle or opt out of doing business with the developer.
“There’s no doubt in my mind City Center II represents a type of project good for East Lansing, but what we need to decide now is whether or not we can finance the project responsibly,” Mayor Pro Tem Nathan Triplett said. “Even the best project for East Lansing cannot be completed if it’s not responsibly financed.”
He added Tuesday’s discussion likely will focus on two main issues — the city’s debt and Tax Increment Financing, of TIF plan repayment.
The TIF plan would allow the city to use the increased tax revenue from the completed project to help fund the public elements of the project.
“What’s important when embarking on a TIF plan (is that) the estimates of TIF revenue are sufficient to cover the costs of public infrastructure improvements,” Triplett said. “If that’s not the case, it would be ill-advised to enter into that plan.”
Director of Planning and Community Development Tim Dempsey said the due-diligence report will not be fully complete by the time of the meeting, but the five main areas of concern will be, which allows council to have a comprehensive discussion. Those areas include the city debt, TIF allocation, the developer’s equity, risk profile and parking for the project.
Dempsey added he did not see any foreseeable consequences due to the incompleteness of the due diligence.
“Because of the complexity of these items, even if the other materials were ready, it would be logistically difficult to cover it all in the meeting,” he said. “We have to take the due diligence as a one step at a time approach.”
Chappelle could not be reached for comment.
Following the discussion on City Center II, council will hold its regularly scheduled work session at 7 p.m., where it will discuss the unapproved construction on a fifth floor for the St. Anne Lofts and vote on some minor amendments for the 2012-13 fiscal year budgets.
Councilmember Don Power said he expects the focus to be on how the fifth floor was built without authorization, and whether the additional floor was approved by an engineer to ensure its safety.
“We have to look at what we’re going to do with the contractor for not complying and at the structure of the building making sure it’s sound,” he said. “If there’s a drawing for the fourth but not the fifth, how do we know it’s sound?”