City Reduces Reimbursement To Boardwalk Developer

June 17, 2002
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GRAND RAPIDS — The City Commission Tuesday approved four adjustments to the to the original contract struck with Pioneer Inc. for development of the former Berkey & Gay building, now known as the Boardwalk.

Pioneer had originally agreed to develop the 420,000-square-foot building at 940 Monroe Ave. NW into an apartment building with a minimum of 300 moderately priced residential units ranging from $500 to $1,000 monthly.

The developer later displaced some units to accommodate commercial space, reducing the total units from 300 to 240. Though a restaurant, drycleaner and Laundromat were part of the original development plan, there had been no earlier discussion of or preplanning for office space in the building.

In addition to changing the building’s development mix, Pioneer proposed an increase in rental rates from $500 to $575 on the low end and from $1,000 to $2,000 on the high end.

In light of the changes, city staff recommended a commensurate 20 percent reduction in development reimbursement through one or more adjustments.

The agreement had called for the city to provide Pioneer with some reimbursement through tax increments from the Monroe North Avenue tax-increment financing district, to be paid annually during construction and for up to 12 years thereafter.

Eighty percent of the tax increments generated from the project were to be used to defray $2.5 million of project costs for building improvements that fell within the definition of public facilities, namely the barrier-free design elements that Pioneer incorporated at an estimated cost to the company of $3.6 million.

The contract adjustments approved by the commission Tuesday limit and reduce the total amount of reimbursement Pioneer will receive in project public facilities cost.

Newly approved provisions of the contract include:

  • Capping reimbursement at $2 million.
  • Reducing the annual reimbursement percentage from 80 to 75 percent.

  • Reducing the number of years of reimbursement from 12 years to 10 years after the construction period.
  • Setting initial monthly rents between $600 and $1,500 per month.

Under the revised contract, Pioneer has committed to developing no less than 240 residential units.

Both First Ward Commissioner James Jendrasiak and Second Ward Commissioner Rick Tormala voiced concern about the increase in rental rates from the original $500 to $1,000 range when the premise behind the project was to create moderately priced apartments.

Mayor John Logie contended that it wasn’t intended to be a low-income housing project and that rental fees of $600 to $1,500 fell into the mid-price range.

Second Ward Commissioner Lynn Rabaut said she hoped the contract revisions would send the message that “if you have a contract with the city, don’t break it.”

Non-residential tenants of the Boardwalk include the non-profit Michigan Educational Resource Consortium, The Waterworks restaurant and lounge, and Mika, Myers, Beckett & Jones law firm, which is to take occupancy next year.

Building renovation included construction of a 350-space parking ramp and a 60-space surface lot to serve building tenants. Neither parking facilities will receive tax subsidies as they are not for public use, Deputy City Manager Eric DeLong told the Business Journal.

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