Commissioners OK contentious school building conversions

April 15, 2012
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Grand Rapids city commissioners quietly approved two brownfield development and reimbursement agreements last week with a controversial out-of-town developer who plans to invest nearly $9 million into converting two former elementary school buildings into apartment houses.

But commission support for the agreements wasn’t unanimous. Mayor George Heartwell cast the lone dissenting votes without comment. The six other board members also refrained from commenting on the contracts.

GR School Lofts LLC, a Berkley, Mich., firm, has pledged to invest $5.3 million into Eastern Elementary at 758 Eastern Ave. NE and almost $3.5 million into Lexington Elementary at 45 Lexington Ave. NW. The firm reportedly was backed by Ojibway Development when it closed with Grand Rapids Public Schools on the sales. But GR School Lofts principal Bruce Michael recently told the city that Detroit Affordable Homes of Southfield, a nonprofit housing developer, is now financing the projects.

Michael drew the ire of City Commissioner Walt Gutowski when he explained why GR School Lofts sold Eastern, Lexington and Oakdale, a third building it bought from GRPS, to National Heritage Academies right after the sales closed.

Michael said the firm had a binding nondisclosure agreement in place with the charter school development company before the closings took place. But Gutowski, who also serves on the Brownfield Redevelopment Authority, said he didn’t believe that explanation and told him he lied when he approached the city in January claiming his firm was going to convert all three buildings into rental units. Michael didn’t respond to Gutowski’s comment.

NHA is developing the former Oakdale Elementary, and GR School Lofts has said it will repurchase the Eastern and Lexington buildings from NHA. NHA is investing $7 million into Oakdale and filed its charter-school application last September, months before Michael approached the city.

Once GR School Lofts completes the renovations, the firm will receive tax-increment financing totaling about $2.1 million from local taxes, school operating taxes and the state education millage for completing certain activities such as demolition work, site preparation and making improvements to the public infrastructure to both sites.

The agreements also allow the city to capture funding for parks on both properties. City Economic Development Director Kara Wood said the tax-increment reimbursement will be divided on a 50-50 basis until either the city or GR School Lofts is paid off. Then the remaining party will capture all the funding. The brownfield authority approved the agreements late last month.

Commissioners also agreed last week to pledge the city’s full faith and credit to a $2.35 million bond package the brownfield authority will sell to help develop the Urban Market, which the Grand Action Committee and the Downtown Development Authority are building on 3.5 acres along Ionia Avenue SW near Wealthy Street.

“There are five backstops to this deal to protect the general fund,” said Jana Wallace, a bond officer with the city, of the 20-year security.

The brownfield authority and the DDA have a payment agreement in place, and the project’s developer, Urban Market Holdings LLC, is also responsible for the debt.

“It sounds like a really risk-free action for us to take,” said Heartwell, who once worked in the mortgage industry.

“Projects like this only work if you have multiple players involved. We have to take some risk to get this deal done,” said Commissioner Dave Schaffer, also a banker.

The market is projected to open July 1 of next year.

In addition, commissioners will hold two public hearings this week for Precision Poly LLC, which makes plastic bags, can liners and industrial packing materials for a variety of industries at 2500 Oak Industrial Drive NE.

The first hearing is to consider transferring a tax exemption that Precision Poly Inc. received in 2006 to Precision Poly LLC, a reorganized version of the first company with different equity investors. The firm has made the $768,000 investment in personal and real property that it promised to make six years ago. The 50 percent property-tax payment reductions continue until 2018 from the 12-year exemption.

The second hearing will focus on the $1.6 million investment Precision Poly plans to make to buy new machinery and equipment to increase its production capacity. The firm is expected to add from 12 to 15 new jobs as a result of the investment. Currently, the company has 15 full-time workers. An exemption would save Precision Poly $10,800 in property-tax payments annually.

Not to be outdone, Leedy Manufacturing also has two hearings on the agenda this week. The first is to establish an industrial development district for its three properties: 206 Hall St. SW and 1225 and 1237 Buchanan Ave. SW. Leedy, which specializes in machining power transmission components, will be required to combine the three parcels into a single address and has already begun that process.

The second hearing will center on the tax abatement itself. Leedy has proposed making a $4.8 million investment to expand its production capabilities into welding, stamping and precision grinding with an eye toward drawing more worldwide business from the auto industry. Leedy employs 54 and plans to add four new jobs from the investment. An abatement would save Leedy $36,190 annually in taxes.

Commissioners also threw their unanimous support behind the $98.6 million millage request that Grand Rapids Community College will have on the May 8 ballot. The term is for 20 years; the school will use the proceeds for building renovations, if voters support the measure.

“They have trained a lot of corporate presidents. It’s a tremendous resource for our city,” said Commissioner Elias Lumpkins, who once served as an executive at the school.

“We so appreciate that GRCC has moved into the (former) Davenport (University) building, so now we don’t have an empty facility,” said Commissioner Ruth Kelly of the Fulton Street building.

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