Is It Fair

January 26, 2008
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GRAND RAPIDS — City commissioners will decide Tuesday whether to extend a closing date to sell the former City Centre ramp property to Two West Fulton LLC, and they will also vote on a new development agreement for the project, one that is likely to include incentives that weren’t part of the original sales contract. 

Two West Fulton is a partnership between Second Story Properties of Grand Rapids and RSC Associates of Chicago. The city chose the firm as the winning bidder to buy the 37,000-square-foot parcel owned by Parking Services on the southwest corner of Division Avenue and Fulton Street in May 2005. Two West and four other developers responded to the request for proposals, which was issued in late 2004.

The development agreement that is coming to commissioners, though, bears little resemblance to the one they approved for the RFP.

One major change is that the Downtown Development Authority will buy about half the property on behalf of Two West for $854,000 and then begin to sell the land back to the firm after the project is finished. Another change has Parking Services keeping the other half of the parcel to build a 262-space ramp there at a cost of $9.4 million.

A brownfield tax credit worth a total of $3.3 million is also part of the incentive package. But these credits would likely have been pursued if another firm had won the RFP.

The city issued its Request for Proposals in December 2004 with a minimum asking price of $1.95 million for the property, a price tag that reflected the appraised value.

The RFP also asked for design guidelines, the amount of investment that would be made in the project, proof that the bidder had the financial capacity to do the project, the number of jobs the project would create, an estimated economic impact the project would have for the city, a start and a completion date for the project, a summary of the project, and a pledge to make 100 parking spaces in the project available to the public.

What the original RFP didn’t contain was the DDA’s financing of the property’s purchase for the winning bidder. Nor did it mention that Parking Services would build parking spaces that the winning bidder would be allowed to use.

But, is that fair? Shouldn’t the four other firms that responded to the RFP in 2004 be given the same kick at the incentives can that Two West looks like it will get in 2008?

First Ward Commissioner James Jendrasiak said the process has unfairly favored Two West over the other bidders, and has gotten away from its original intention.

“I just hope my colleagues can see and understand just what is going on with this project,” he told the Business Journal in an e-mail.

Second Ward Commissioner Rosalyn Bliss pointed out that the RFP also suggested that whatever was built on the site should be able to make a positive contribution to the nearby arts and entertainment district, and that is something The Gallery would accomplish.

“As I think about this project, I take that (RFP) into consideration with what is currently being proposed. With the DDA piece of it, I feel that was made pretty much in isolation and independent from the City Commission. So for me, what comes down to us is the parking issue. Knowing that the Parking Commission vetted this out, as well as (Parking Services Director) Pam (Ritsema) supporting the parking — weighing that in the decision — at this point, I’m supportive of the project,” said Bliss.

“Looking back on the fairness of it, I think that is hard. It’s a good question. I can tell you that no developer has contacted me and said, ‘Wait a minute, you should put out another RFP, and I’m interested in making another proposal now that these two incentives are on the table,’” she added.

Bliss also said if a developer had contacted her and requested that a new RFP be issued with the financing package and parking spaces, she would have considered doing that.

Rockford Construction and Design Plus responded to the RFP with a project that finished second in the selection process. Fulton & Division LLC, Robert Tol and James Azar also answered the request.

The winning project Two West submitted in the RFP competition is not the one the firm is offering now. Two West originally planned to fill the site with a bookstore, a jazz club, a café, 74 condominiums and 194 parking spaces at a cost of nearly $25 million, and it agreed to buy the property for $2 million.

But the firm’s inability to find a retail anchor, along with a declining housing market, caused Two West to pay the city $25,000 for two extensions on the closing date while it looked for tenants, and then to finally change the project from its original plan.

Now The Gallery on Fulton proposes to be the new home of the Urban Institute for Contemporary Arts, which will contribute to the arts and entertainment district as the RFP requested. UICA will own its space.

The Gallery will also offer about 2,500 square feet for retail and 55 apartments ranging in size from 700 square feet to 1,100 square feet. The project has been estimated to cost from $32 million to $35 million.

Before city commissioners granted Two West its second six-month extension on the closing date last July, Jendrasiak suggested that the city put the property up for bid again because the site had been cleared and vacant for 18 months at that point.

The extension commissioners will vote on is likely to move the closing deadline from Jan. 31 to March 31.

The Downtown Development Authority is set to vote Feb. 13 on the property purchase and on an offer to reimburse Two West for infrastructure improvements the firm plans to make to the site.

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