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HomeMy WebLinkAboutPUBLIC HEARING - 2019-05-22 - CRD - SCHOOCRAFT LODGE CITY OF LIVONIA PUBLIC HEARING Minutes of Meeting Held on Wednesday, May 22, 2019 ______________________________________________________________________ A Public Hearing of the Council of the City of Livonia was held at the City Hall Auditorium on Wednesday, May 22, 2019. MEMBERS PRESENT: Laura Toy, President Jim Jolly, Vice President Scott Bahr Kathleen McIntyre Brian Meakin Cathy K. White MEMBERS ABSENT: Brandon Kritzman OTHERS PRESENT: Mark Taormina, Director of Economic Development Paul Bernier, City Attorney Bonnie J. Murphy, Certified Electronic Recorder, CER-2300 The Public Hearing was called to order at 7:00 p.m. with President Laura Toy presiding. This is a public hearing regarding a request from Paul F. Bohn, Fausone Bohn, LLP, on behalf of Schoolcraft Lodge, Inc. for the properties located at 31501 Schoolcraft Road, Livonia, Michigan 48150, for approximately 2.37 acres lying in the Northeast ¼ of Section 27, as more particularly described in the attachment to the application which is herby incorporated by reference and which is hereinafter referred to as “Proposed City of Livonia Commercial Rehabilitation District No. 4.” The City Clerk has mailed a notice to the Petitioner and/or his agent, Wayne County, and to all other parties having interest in the Proposed City of Livonia Commercial Rehabilitation District No. 4. The Public Hearing is now open for comments. There was no audience in attendance. Toy: Mr. Taormina? Taormina: Thank you. Schoolcraft Lodge, Inc., the Petitioner in the case, is seeking th to establish the City’s 4 Commercial Rehabilitation District at the Southwest corner of Schoolcraft and Merriman Road. The City’s first Commercial Rehabilitation District was established in 2013, and that encompassed the 4-acre parcel which is at the Northwest corner of Levan 2 and Five Mile Roads, which at the time was the site of the shuttered Frank’s Nursey and is now home to Mendelson Professional Building. CR #2 was established in 2015 and that included two parcels under common ownership located on Haggerty Road between Seven and Eight Mile Road. That district was about 10.86 acres in size and included what was originally the Haggerty Tech Center and as we all know that project is currently under construction and includes Haggerty Center, the retail center as well as Haggerty Courtyard Apartments is what they are now called. And the third Commercial Rehabilitation District was also established in 2015 and that was to facilitate the redevelopment of the Southwest corner of Schoolcraft and Inkster Roads into what is now a Holiday Inn Express. The Petitioner in that case was Livonia Lodge, Inc., which includes the same principles involved in the current request by Schoolcraft Lodge, Robert and William Nofar. The proposed CRD #4 includes the property at 31501 Schoolcraft Road. The subject 2.37-acre site was originally approved and developed in the early 1980s as a Mountain Jack’s restaurant and was later sold and converted school called L’Esprit Academy. The new owners plan is to redevelop the site with a hotel. Unique to this property and only one other site in the City is the fact that it is zoned C-3, Highway Services. Hotels are treated as a permitted use, but the height is limited to two stories and this is something that will need to be addressed as part of the zoning and site plan review process. Creating the District is the first step in the process of seeking a tax abatement under PA 210 to help facilitate and incentivize the redevelopment of the site. Once the District is established, Council then considers the request for a Commercial Rehabilitation Exemption Certificate. The process is much like filing an Industrial Facilities Tax Exemption Certificate then after the IDD is established. A Commercial Rehabilitation District can include one or more properties, totaling not less than 3 acres, unless the district is part of a downtown or business area as determined by the Local Legislative Body. Because the subject parcel is less than three acres, Council must as part of its deliberations, determine that the District is part of a Business Area. In 2015, Council made this determination in the case of CRD #3 at the Southwest corner of Schoolcraft and Inkster Roads in connection with the 3 development of the Holiday Inn Express. Council agreed that that area, which is located within a well established commercial and industrial corridor, qualified as a Business Area as provided for in the statute. As noted, the establishment of the District occurs before granting the Exemption Certificate. In no way does the creation of the District obligate the City in granting a property tax abatement. For a facility to qualify, the new investment in rehabilitating the property must result in improvements exceeding 10% of the True Cash Value of the property. In addition, some major structural improvements, rehabilitation can include and often does new construction on vacant property from which a previous structure was demolished. The request for an Exemption Certificate does require a separate public hearing and a review of the and upon recommendation of the City Council, the issuance of the CREC by the Tax Commission freezes the taxable value of the building, the land improvements and exempts the new investment from local taxes for a period of up ten years as determined by Council. Upon expiration of the Certificate, then the value of the real property uncaps. For Tax Year 2019, the taxable value of this property was $425,000.00. Representing the Petitioner this evening and to provide further details is Paul Bohn of Fausone Bohn, LLP and also William Mofar. Toy: Will the Petitioner give his name and address for the record. Bohn: Name and address is Paul F. Bohn, business address is 41700 West Six Mile Road Suite 101, Northville, Michigan. Toy: Thank you very much. McIntyre: I have a question for Mark. Toy: Go right ahead. McIntyre: Mark, under the PA 201, the owner pays the Commercial Rehabilitation Tax instead of property taxes, correct? Taormina: Correct. McIntyre: Does any of that money come to the City? Taormina: Yes. So, what happens is – 4 McIntyre: And I’m sorry, I don’t remember the specifics, we haven’t done one for a few years. Taormina: Yes. It operates similar to other statutes, parallel statutes for industrial properties. In this case it would freeze the taxable value on the real property, excluding land. So, it would be the building and any land improvements. Land still can continue to increase and be taxed, and State school taxes are still applied to the industrial, the increased taxable of the property. So, the freeze only applies to the building and land improvements. McIntyre: So, the City would continue to recognize whatever revenue we commonly recognize. Taormina: The other thing I have to say, there will be an increase over time on the value of the land that increases and the maximum period for which the Certificate can be granted is ten years. McIntyre; And we ran it ten years for the other districts, is that correct? Taormina: I think all, I think two of the three were but the third one I can’t recall the actual time. McIntyre: Thank you. Thank you, Madam President. Toy: Certainly. Councilman Bahr. Bahr: I have a question for Mark as well. You said the minimum size is three acres? Taormina: Minimum size, yes. But it does have the provision that the local legislative body can waive that requirement when it’s located in a downtown or a qualified business area and that is a discretionary determination. Bahr: We need to decide what a qualified business area means? Taormina: Yes. Bahr: Wow, that’s a loose wall. My next question what is it about this site that brings them up for an incentive like this? I mean a lot of the properties in the City are developed that don’t come for this. What is unique about this that brings this discussion up? Taormina: You know, I don’t want to speak directly to the economics, try to justify that based on numbers, that’s something the Petitioner can respond to. This is similar to many other redevelopment projects where demolition is 5 required, full scale demolition of all of the site improvements and then the redevelopment including the installation of new underground utilities, and storm water and the expenses involved in that. And rather than try to go into justification, I think that’s something that the Petitioner should do. They evaluated this in terms of what I believe they feel is needed to help facilitate this project without taking it as far as submitting it for a Brownfield Redevelopment proposal. That was discussed early in the negotiations with the Petitioner in terms of what the options would be, but I think they felt that this was probably something that’s more palatable to the community, because it was done in a similar case at Inkster and Schoolcraft. Bahr: I appreciate that. If you take something like Chi Chi’s property for example, we didn’t do something like this for that, and that required demolition of the building and I imagine it required a lot of the same kind of underground work, or am I wrong? Taormina: No, that’s right. Bahr: So, what is it --- is it just the fact that the Petitioner has asked for this and they did not, or is this something --- I’m trying to understand why does it apply to a site like this versus others? Taormina: The fact of the matter is in that case they did not ask for any type of incentive. Whether or not the economics are comparable here, I know that this is a recent acquisition on the part of this entity, unlike the former Chi Chi’s site was held by the owner for a very long period of time so that may be part of the difference there. Bahr: All right. I know you said this was a Mountain Jack’s, you said it was a salon or something like, and remind me again, currently is it sitting vacant? Taormina: It has been empty, I’m going to say it’s been around a year and a half now, maybe closer to two years. Bahr: All right, thank you. Bohn: Council, I can answer the question. Toy: Hold on a second. Bohn: Sure. Toy: Mark, what I need to know on this site, as we look at hotels that we’re putting in in our community, where do we, as we referred to many times 6 the Inkster and Schoolcraft hotel, Holiday Inn Express. As we come down the corridor and we get into – I know that Burton Manor was thinking about petitioning on a piece of property over there that was – again, that’s rumored but I heard it several times, and then we come down, is that a Fairfield or a Hampton? Taormina: Hampton. Toy: and then we have Costco, and we come down and have some more commercial, UPS, and we come down into this area and there’s a restaurant and along the road there’s some commercial; then you come across Merriman Road. That on the corner is a gas station, if I recall correctly? Taormina: Correct. Toy: I’m trying to look at the site again, I drove past it but I’m trying to remember, the building just to the other side of south of the gas station, if you will, in the little box, what is that building? Taormina: Storage. Toy: And then the bigger, the larger building right here, do we know what that is? I’m trying to get a feel for the area. Taormina: Those are just Industrial. Toy: Industrial? Okay. Taormina: Yes. Everything that is identified as blue on the plans is Industrial zoned property. The darker red is C-3 zoning. The gas station is zoned C-2 to give you a better understanding. Toy: And then across the expressway, there’s some older homes over there, if I’m not mistaken, they’re scattered in a little bit here and there, some old Livonia homes if you will, and then there’s several office areas. There’s a root canal specialist, I know that, in that area but I’m just trying to envision again, that would be blue most of it just behind the Mobil there on the flip side? Taormina: No. There’s very little Industrial on the north side of Schoolcraft, in fact, I’m not aware of any. Toy: Okay. It’s mostly office? 7 Taormina: Yes. There’s a Speedway gas station on the northeast corner and then you have another gas station across the way, with some offices, residential to the north. Toy: And then there’s residential that starts across the expressway, I know my sister lives over there in that direction as well. So, as we move down the expressway, we don’t really have any hotels this side of Merriman; would that be an accurate statement? Taormina: That is. The Comfort Inn is located back at Middlebelt Road, behind – as part of the Buckingham site, America’s Best is also located adjacent to the new storage facility where the old bowling alley was located, but I’m not aware of any other hotels as you continue west from that point all the way to --- Toy: Merriman Road. Taormina: Well, to Merriman Road and even more down the way. Toy: Okay, that’s what I wondered. So, as we proceed, this is something new to this area as far as a hotel? Taormina: Yes. Toy: And that’s what they’re asking for, okay. I’m just trying to get the vision of the area. Okay, Mr. Bohn, thank you for waiting. Bohn: You’re welcome. I wanted to address Council’s question regarding the economics. I can’t tell you why somebody doesn’t come in and pursue financing and why people didn’t. But I can tell you the incentives that we’re looking at for this, I would think would qualify for would be Brownfield to demolish the building as an up-front cost. The building is vacant, it’s unlikely, given its current configuration, to get re-leased, I believe that’s probably what the current owner recognized. The use that is being proposed is a greater investment than most two-story buildings, reflects a change in that area. That zoning in that area is actually quite old, so ultimately if this is approved, you’d get an investment that would be substantially greater than the standard investment that limits you to a two- story building. You’re also on highway frontage, you’ll see along a highway, a five-story building is not an unusual size building. And the specific economic risk is what’s been going on in the State of Michigan, what’s been going on in Southeastern Michigan and what you’ve probably read about in Crain’s and others are there are numerous projects that have been planned, site plan approved, that are on hold. We are now at the convergence of a dire shortage of skilled trades, the average skilled trade worker is my age which should scare you. With the shrinkage of 8 available labor has put projects on hold in Detroit that are otherwise financed. What we’re seeing just in the hotel market, is you have a relatively very competitive room rate, so you’re willing to charge more per room and keep your vacancy rate low, you want to have lower vacancy, that’s what you can charge. Labor rates on a daily basis are what they are, but your skilled trades, the ability to make this building go vertical has gone up at a greater rate than the ability to charge greater rent from your property. At the same time because of the real or perceived costs of tariffs, the things that you build with, predominantly concrete and steel, and then secondarily wood, have gone up. So you’re having an unusual circumstance where you have a market demand but the cost to actually construct new has increased greater than you can get rent back. So, this abatement request which to Councilmember McIntyre’s question, does not deprive the City of any current revenue, that revenue stays in place, that remains unchanged. It increases because the land, the dirt component of the real estate, can and does get reassessed. In fact, the CRD #3 land has been subsequent to redevelopment assessed at an increase. You’ll likely see an increase. And when the abatement ends, the property as you know uncaps and you’ll assess it at its current value. What I really encourage you to do, if anything to describe, to your point is it a business area, I guess it sort of Justice Potter Stewart, it’s a pornography showcase, if you get a map -- not --- I don’t want to say pornography showcase, but I could show you some aerial maps and say tell me why this isn’t a business area, I think it’s pretty well described as a business area. It’s probably a little more, a little older than some of your other areas, it hasn’t gotten the demand, some of the more centered empired demand crossings have. Your industrial properties went first, as the whole State lost industrial properties, no one built that. The Amazon project was phenomenal because look at how long that property sat in an underutilized fashion. You could ask your assessors or others whether CRD #3, the Holiday Inn Express, has been a success. I think if you measure the actual dollar abatement in the freeze that’s measured in tens of thousands of dollars, where the actual economic outcome because of employment, re-employment and greater activities to the surrounding areas. I would tell you go around the hotel and look at some of the small businesses and the activity that’s gone on there, ask them whether they’ve seen an uptake in business since the hotel has stayed about 85% occupied. Ask the restaurants in that area if they’ve seen more people eating meals and I can tell you some of the vacant spaces aren’t vacant any more. I can’t --- it’s probably harder for me to measure it, but I think the operator of that entity is standing next to me, his brother is not here, but the two operate that successfully, they’ve hired locally. 9 If you have questions of me or the project, but in closing why we are asking for this and what differentiates it from maybe some other types of businesses, this hotel market is driven by the costs in the immediate area or the costs of construction, particularly in Southeastern Michigan right now, I think are going to remain greater than originally anticipated. If you saw the Crain’s article from three weeks ago, front page, the number of projects that have been approved but put on hold, I don’t wish that to happen and I am submitting this request so that we can make this project go forward this year. Toy: Councilmember Bahr. Bahr: Thank you for that. It was interesting to hear. I was going to ask you about the Hampton and Holiday Inn Express. Do you perceive that there’s a demand that those hotels can’t keep up with that this hotel is going to relieve? Nofar: They’re not struggling to keep up with demand. I can’t speak to Hampton Inn because that’s not my property. I can only speak for my Holiday Inn Express and we’re keeping up and we have a lot of sell out nights, but we also know that Staybridge is an acceptable brand and corporate driven, and there’s a need for that. Bahr: What do you mean by corporate driven? Nofar: A lot of corporate stays. Bahr: Got it, got it, okay. Nofar: And when we spoke to the parent company for Holiday Inn Express, Staybridge, all these brands, they told us there is a need for an extended stay in that location, in that area. And with us having six properties with them, we felt a need to take the next step and pursue this location and to move forward with it. Bahr: When you say in that area, do you know what constitutes that area, is it that square mile, is it the City of Livonia, is it Western Wayne County? Nofar: No, it’s Livonia on I-96 and Livonia on 275, they’re not looking on 275. They’re looking on the 96 corridor, which has the Holiday Inn Express and the Hampton Inn. So, they’re looking for another one which would be an extended stay in that corridor. Bahr: Through the Chair to Mark, just to be clear, so you’re talking about the business area, that’s as opposed to what, an industrial area, a residential area? I agree this is a business area, I’m just trying to figure it out. 10 Taormina: I think business area could mean a combination of both industrial and retail, commercial properties. It doesn’t differentiate between that as a business category and wouldn’t necessarily include the residential properties. And I don’t think the statute is designed to necessarily include the residential properties in the formation of the District, unless the development is a particular type of residential project. Bahr: I’ll just make a comment here, I think this project is fantastic. What is happening between Inkster and Middlebelt along the expressway, I think from a community standpoint makes that corridor more attractive. I think the concept of the project is awesome. Toy: Councilmember Meakin. Meakin: Thank you, Madam President. This is the Public Hearing portion of this process and since there’s no public here to be heard, I will offer two resolutions, an approving and a denial. Toy: We have two resolutions, an approving and a denying. Any other comments from the Council? Hearing none, this matter will be heard on th the Monday, June 17 Regular Meeting of Council. As there were no further questions or comments, the Public Hearing was declared closed at 7:26 p.m. SUSAN M. NASH, CITY CLERK