No CityDevelopers Meeting Set

October 4, 2002
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GRAND RAPIDS — City Manager Kurt Kimball doesn’t doubt for a minute that the developers of a proposed convention center hotel for Calder Plaza were disappointed with the outcome of a luncheon meeting they had with city commissioners two weeks ago.

“I don’t doubt that,” said Kimball.

Blue Bridge Ventures and Hines Interests LP, who have formed Gallium Group LLC for the project, want to build a 24-story hotel on the plaza across Monroe Avenue from the new DeVos Place convention facility that is being built. But to do that, the developers have to relocate the city and the county to new downtown sites.

Gallium Group had hoped that commissioners would give them an exclusive option on City Hall, the plaza and its parking ramp at the Sept. 24 meeting. But the city saw the get-together in a totally different light.

“Frankly, we were getting information that the developers were hell bent on getting the commission to act on an option agreement that same day,” said Kimball.

“My understanding was that we would be giving a status report and that the lunch agenda format is an opportunity, not for action, but for enlightenment. So the idea of expecting the City Commission to act on anything that same day was not something that the staff could support.”

As for getting together with the developers again …

“That is the piece where I’m not certain where my bosses would have the city staff go. I don’t think we learned that at the lunch discussion,” said Kimball.

But Mayor John Logie did remark at the meeting that he thought it would be a good idea if city staff met with commissioners to present details of the option, staff assumptions of the deal and any reservations they might have about entering into an exclusive agreement with the developers.

“But I don’t know when that meeting is to be scheduled. And I don’t know whether other commissioners are inclined to concur with the mayor’s suggestion as to what to do next about this opportunity,” said Kimball.

As of early last week, a meeting hadn’t been scheduled between the developers and city staff to go over their differences on the option before possibly meeting with commissioners later this month.

“It’s not because we’re necessarily trying to avoid one. It’s because we just haven’t had a chance for my staff and (special counsel) Dick Wendt to debrief from the last discussion,” said Kimball.

“We’re working on arranging for that (debriefing) meeting, and after that meeting I’ll know more about what the staff will want to suggest in terms of further process, if any.”

One reason why staff recommended that commissioners not vote on the option was they felt the deal was too costly for the city.

According to City Fiscal Services Director Robert White, to relocate City Hall the city would have had to pay the developers $79 million over 30 years — a figure the Business Journal inaccurately reported was what the developers would have paid the city over that period — for a 120,000-square-foot building. White added that the developers declined to reveal how much of that $79 million was principal and how much was interest.

After doing the math, White determined that the city could issue a $36 million bond package to relocate to the building the developers suggested. The bond package and the square footage gave White a price tag of $300 a square foot for a new City Hall built by the developers.

In comparison, White said it cost the city $156 a square foot to convert the former City Centre mall into the new police station. He added another $14 a square foot to that figure for inflation and contingencies, and felt the city could build its own City Hall for $170 a square foot — or $130 less per square foot than if the Gallium Group built it.

“Three hundred dollars a square foot from bond proceeds; $170 to build and move in. What’s the other $130? Well, that must be the fee that the developer is earning. That is a pretty hefty fee. I said to myself, ‘Why would we want to do that? Why wouldn’t we want to just build our own?’” White said last week of his thought process on the deal.

An uncertainty that the Government Center parking ramp would remain open to the public, and a fear that the option could tie up the city for longer than the 10 months the developers wanted were two more of about 10 issues that staff felt were wrong with the agreement.

So the question now is, is the deal salvageable in the city’s eyes?

“The differences are considerable and today it feels like a futile effort,” Kimball said a week ago. “But I have also learned to never say ‘never.’”           

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