City Not Buying Split Rock Proposal
GRAND RAPIDS — For Split Rock Development V LLC to get the city to sign on for an underground parking ramp at a key corner in the Monroe North Business District, it appears the firm will have to overcome three hurdles.
- Split Rock will have to address the cost of building the 430-space facility that would go beneath the surface near the intersection of Monroe Avenue and Newberry Street.
- Split Rock will have to convince the city that the ramp is an eligible cost under the state’s Brownfield Redevelopment Act. City Counsel Dick Wendt said it didn’t qualify because it wouldn’t be a public facility. Though the title would belong to the city, Split Rock would manage the ramp, set the prices and get the revenue, and the city argues that arrangement makes it a privately owned garage.
- Split Rock will have to prove that it won’t miss a bond payment. If Split Rock did, the city claims it would be in default and that would do harm to the city’s AA bond rating.
“Its rating would be in jeopardy,” said Wendt, even if a default was seen as “technical.”
Split Rock Development wants to build a 300,000-square-foot project over the ramp that would cost $85 million and feature office space, retail and a 62-unit condominium tower on a site that is, for all practical purposes, vacant. But to make the development work, the firm said it needs help from the city with parking.
“There is no way to support more development (in Monroe North) without more parking,” said Jack Buchanan, CEO of Blue Bridge Ventures LLC and lead investor in Split Rock.
Buchanan said Split Rock would build the ramp and finance that cost by buying bonds issued through the city’s Brownfield Authority. The firm would operate the ramp and keep the operating revenue generated. It would also collect the tax-increment financing (TIF) that the development produces, up to $14 million worth.
Tax-increment is the difference between a current property tax before a development goes in and the higher tax a project creates when it’s completed. An assessment decides that figure.
“There is no assurance that we will hit $14 million; we may only hit $8 million,” he said.
In return, Buchanan said, the city would get the title to the ramp, and its only obligation would be to apply to the state for the property’s brownfield status. He added that he wants the city to own the ramp for two reasons: It would be off the tax roll and it would qualify for TIF.
“The TIF helps offset the cost of the garage,” said Buchanan.
As for the city’s objections, Buchanan said he couldn’t provide a hard cost for the ramp yet because Split Rock would have to spend millions to determine that amount, and the firm couldn’t afford to do that without the city confirming that it will go along with the deal.
He said an estimate from Owens-Ames-Kimball, a general contractor that has built at least one ramp for the city, placed the cost at $24 million. But Buchanan added that there were 7.5 feet of bedrock under the surface that had to be drilled through and the soil was polluted, so further engineering work on that site was necessary.
“Nobody knows how much it’s going to cost yet,” he said. “There is no way to know the exact cost until we get into it.”
Buchanan argued that the project does qualify for brownfield status because the act says a facility “can be owned or used” by a municipality, and not necessarily operated by one — and the city would own this one.
Then Buchanan said the city wouldn’t be in default if Split Rock missed a bond payment because the firm would be both the holder of the non-rated bonds and the developer of the project on the property.
“These will be tough bonds to sell, so Split Rock will have to buy them,” said Buchanan.
Talks between the city and Split Rock on the latest proposal are expected to continue into March. A progress report on the discussions is expected to be made at the next meeting of the city’s Economic Development Project Team.
“Instead of scrambling for parking, we want to put it in up front,” said Buchanan of the garage. “(The city) has a tax base being built above it.”