Closing The Gap

December 2, 2005
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GRAND RAPIDS — City commissioners are expected to get their second look Tuesday at what may be a less controversial proposal for an $85 million project in the Monroe North Business District, after meetings last week between city staff and Blue Bridge Ventures LLC reportedly produced some progress on a spending gap.

Another meeting was set for today, less than 24 hours before the commission meets.

The proposal from Blue Bridge is for a mixed-use development at the corner of Monroe Avenue and Newberry Street. The project includes condominiums, retail and office space, and an underground parking garage.

And the parking garage was the contentious feature of the development.

Third Ward Commissioner Robert Dean introduced a motion two weeks ago that asked the city to pre-purchase the garage, an action supported by fellow 3rd Ward Commissioner James White. But discussion of the proposal created confusion for some commissioners and generated a few heated exchanges between those seated at the commission table.

Prior to last week’s meetings, the 480-space garage would have cost the city $20.6 million.

According to the proposal, the city would recoup its investment through taxes from the project’s eventual tenants and parking revenue the city would get by operating the garage. But the cost worked out to be $43,000 per space, a price tag the city’s legal staff said would be illegal for the city to pay, as it would be above a “guaranteed maximum price” for similar parking the city recently got from another downtown development.

“There is a difference between a fixed price and a guaranteed maximum price,” said Eric DeLong, deputy city manager.

“The developer proposed a fixed price, which is illegal if you think that the price is too high,” he added. “A fixed price is not necessarily illegal, if the parties can agree that it is a fair and reasonable price. At $20.6 million, we don’t agree that it’s a fair and reasonable price.”

The city thinks the price for the garage is too high because it recently agreed to sell One Division Avenue, the site of the former City Centre parking ramp, to Two West Fulton LLC. A portion of that deal has the city buying 149 parking spaces for just over $4 million from Two West Fulton after construction is completed.

It isn’t clear whether all of those spaces would be built underground, as the preliminary design work for the $24 million project hasn’t been done yet. But that agreement has locked-in a per-space cost to the city of $27,000, which DeLong said was a benchmark for a guaranteed maximum price as far as the city is concerned.

Using that cost as a basis, the city feels the North Monroe parking garage is worth closer to $13 million and not the $20.6 million that was proposed.

“So what we are hoping for is a more reasonable price; particularly we’re hopeful for a guaranteed maximum price,” said DeLong.

“We think that is a better way of doing it. That is how we’re doing developments all around the city and it’s a standard business practice that protects the parties,” he said.

After roughly two hours of discussing the proposal two weeks ago, Dean moved to table any further talk of it until Dec. 6 to give Blue Bridge Ventures CEO Jack Buchanan and city staff time to try to close the cost gap for the garage.

“We have to address the concerns that were expressed at the meeting,” said Delong. “One way of doing that is through a guaranteed maximum price.”    

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