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HomeMy WebLinkAboutPublic Hearing 1-08-2020 - Victor Parkway- CRD CITY OF LIVONIA PUBLIC HEARING Minutes of Meeting Held on Wednesday, January 8, 2020 ______________________________________________________________________ A Public Hearing of the Council of the City of Livonia was held at the City Hall Auditorium on Wednesday, January 8, 2020. MEMBERS PRESENT: Kathleen McIntyre, President Jim Jolly Brandon McCullough Rob Donovic Laura M. Toy MEMBERS ABSENT: Scott Bahr Cathy K. White OTHERS PRESENT: Mark Taormina, Director of Economic Development Paul Bernier, City Attorney Sara Kasprowicz, Recording Secretary The Public Hearing was called to order at 7:00 p.m. with President Kathleen McIntyre presiding. This is a Public Hearing relative to Paul F. Bohn, Fausone Bohn, LLP, Attorneys at Law, on behalf of Livonia Hotel Group, LLC, requesting to establish a Commercial Rehabilitation District for the property located at 19265 Victor Parkway, Livonia, MI 48152, to facilitate the redevelopment of this property. (Tax ID No. 024 99 003 009). This will be heard at the Regular Council Meeting of January 27, 2020. The Public Hearing is now open. There were five people in the audience. McIntyre: We do have New Data for tonight’s public hearing. This is a letter from Jonna Construction about an increase in the budget. I think that’s it. All right, Mark, would you like to explain this to us, please? Taormina: Thank you, Madam President. The Livonia Hotel Group, developer of the recently approved Marriott dual-branded ALOFT and ELEMENT hotels on th Victor Parkway, is seeking to establish the City’s 5 Commercial Rehabilitation District. The City’s 4 (four) other Commercial Rehab Districts, in order of when they were established, include the 4-acre parcel at the NW corner of Levan and 5-Mile Roads, which, at the time, was the site of the former Frank’s Nursery and is now home to Mendelson Professional Building. That CRD, or that Commercial Rehabilitation District was established in 2013. Next was the former Haggerty Tech Center, comprising 10.8 acres on Haggerty Road between 7 and 8 Mile Roads. CRD #2, as it was called, was created in 2015, and even though 2 the District remains in place, Council discontinued the tax abatement replacing it with Brownfield financing. The site is currently under construction and includes Haggerty Center retail and Haggerty Courtyard apartments. Also, in 2015, CRD #3 was established to facilitate the redevelopment of the SW corner of Schoolcraft and Inkster Roads into what is now a Holiday Inn Express. The Petitioner in that case was Livonia Lodge, Inc. Most recently, in 2019, Council approved CRD #4 involving the redevelopment of the SW corner of Merriman and Schoolcraft Roads. That project will include demolishing a former Mountain Jacks Restaurant and constructing a new Springhill Suites hotel. Like the last two or two most recent requests, the Petitioner in this case is seeking the establishment of a Commercial Rehabilitation District in order th to develop a new hotel. On June 17, Council approved the site plan for the construction of a 6-story dual-branded hotel on the site of the former st Doc’s Sports Retreat. Creating the District is the 1 step in the process of seeking a tax abatement under Public Act 210. Once the District is established, Council can then consider a request for a Commercial Rehabilitation Exemption Certificate. That’s the abatement. The process is very similar to a tax abatement under Public Act 198. First, the District is created, followed by consideration of the tax abatement, also referred to as the CREC. A Commercial Rehabilitation District can include one or more properties, totaling not less than 3 acres. In this case, the site is 3.21 acres and qualifies based on parcel size. By creating a District, the City is not obligated in granting a property tax abatement. For a facility to qualify for an abatement, the new investment must result in improvements that exceed 10% of the True Cash Value of the property. Rehabilitation can involve major structural improvements, as well as new construction on vacant property from which a previous structure has been demolished. The request for an Exemption Certificate requires a separate public hearing and a review of the cost of the incentive and the impact on property taxes. Upon the recommendation of the local legislative body, the issuance of an Exemption Certificate by the State Tax Commission freezes the taxable value of the building and land improvements and exempts the new investment from local taxes for a period of up to 10 years, as determined by the City Council. School Operating and State Education Taxes are still levied on the new investment, and the value of the land and any personal property, to the extent these assets are taxable, is not abated under PA 210. Upon expiration of the Exemption Certificate, the value of the real property uncaps. According to City Assessor, for Tax Year 2020, the taxable value of the real property, not including the land, totals $534,000. In evaluating this request, Council should consider the following questions: 1. Is the abatement necessary for the establishment or expansion of the business? 2. What evidence has been provided to demonstrate the need for the abatement? 3. Without the incentive, what is the likelihood that the property will be redeveloped? 4. What amount of the costs associated with the project are extraordinary and due to unforeseen 3 conditions? If a Commercial Rehabilitation Exemption Certificate is approved for this project, the estimated annual tax savings would be approximately $290,000. This is based on the estimated True Cash Value of the hotel at $85K per room, totaling roughly $18.5M, and a corresponding taxable value of $9.3M. Representing the petitioner this evening, and to provide further details on the project is Paul Bohn, facilities manager. With that, Madam Chair, I will be happy to answer any questions. McIntyre: Thank you, Mr. Taormina. Does anyone on Council have any questions for Mr. Taormina. Ok, with that, I’ll be happy to go to the petitioner. Bohn: Good Evening, Council and Happy New Year and welcome to all the new Council people and welcome back to the returning Council people. Paul Bohn with the law firm, Fousone Bohn. Most of you know me, Mr. Taormina, as accurately summarized as his request is, I know some of we’ve received some information from Frank Jonna. Frank’s company needs no introduction to Livonia, he’s been doing business here for several decades. He’s operating as the General Contractor. Here today with us though, is Mr. Chris Abbo, he’s with the Livonia Hotel Group. They’re actually the hotel operator or would be the primary business owners, likeness as a hotel operator, and also Mr. Shakir Alkhafaji. Let me explain to you why those two gentlemen are here because they’re here in an unusual way. I often get contacted by people who are developers and they’re looking at acquiring property and do all that normal due diligence and doing that process. What essentially relates to the Ownership Group, they actually hold the note, or the loan on this property, which underperformed and came back to them and they found themselves in the unenviable position of going from being a lender to being a reluctant developer. They brought in, that time, the Hotel Group with Mr. Abbo, who represents them and went through the site plan process. So, when you talk about unforeseen conditions, and about what we should anticipate or shouldn’t anticipate when we go into buying a property, it’s a little bit unusual here is that the entity is here because somebody else couldn’t perform. That said, we are aware that the project has gone through site planning, it has received site plan approval and in the normal course of them developing where your footprint or your goal is going to be, where your utility runs are, there with the normal site planning process, the next step if you will, pushes to the geotechnical borings and determine actual vertical building suitability, once you know where your paths are going to be once you know where your utilities are. You’ll see some correspondence in that package that you may have seen from Mr. Jonna, if not I’d be glad to provide it at a later date. I recognize that tonight’s just the night to consider the district, which is really all that’s before you today. I expect that you’ll have other questions and want more detail, based on appearing here before and having some very good questions which I hope 4 we’ll all be better prepared to ask, I expect several questions, so with that, what we will see are some cost-estimate summaries so we can answer more detailed questions at a later date. There’s a difference between when the project was originally put forward and today, and there’s about a six-million-dollar swing. That is not the nature of unforeseen conditions. The actual unforeseen conditions is a subcategory that approximately two million dollars, and by the way, when I reviewed this, I apologize, I probably should have done a better job editing that. I should have gone to Frank and recognized that building demo was not an unforeseen condition. We knew the building was there, we knew we had to get rid of it, that fell into that category, so please nip that cost out. The primary cost as you’ll see are some really unforeseen conditions. Really unsuitable soil, likely from maybe the corridor next door, old material, hard to say, that it’s unusual to see that type of lithology where you have unconsolidated sandy soil then it stops at a grade below that, so I’m guessing they didn’t fill. Then you have a retaining wall, that, when you walk up to it, looks quite robust. When you actually do some structural analysis, it turns out that it’s not robust, and it can’t be used, and maybe a little more complicating, it has some really substantial sub footers, which all have to be pulled out and then reinstalled in order to facilitate this development. This development is nearly a $30 million development, it’s a sizeable development. With that, again, the request tonight, is to consider a district, that as accurately pointed out the property and project meets those qualifications. I would expect keeping Council’s interest in this type of issues, if it chooses to create the district, once an application is applied for, it will get the scrutiny that this Council gives these issues. So, if there are any questions for me now, I’d be glad to answer them. McIntyre: Thank you, Mr. Bohn. Jolly: Madam President? McIntyre: Yes, Mr. Jolly. Jolly: Thank you. Well, Mr. Bohn, you know, I was all prepared to give you a hard time tonight, but you kind of cut me off at the pass here with some of the information that you provided. Looking at the letter from Jonna, some of these things are clearly not things that we would be interested in, in terms of the swing, but I can understand the parameters of which you are laying out right now, even though I’ve given you a hard time in the past. What you are asking for tonight is just the district to be determined and I don’t see a problem with it at this point. I’ll offer an approving resolution. McIntyre: Anyone else? I do have one question, Mr. Bohn. Maybe Mark, I misinterpreted something you had said. I thought you gave the value of 5 the development as about $18.5 million of the taxable of $9.3. Mr. Bohn referred to a value of $30 million. Bohn: That’s the investment. The taxable value of the fair market value had been lowered. We had a lot of self-cost in that too. McIntyre: Got it, okay. Thank you for that clarification. Bohn: There’s a huge component that’s personal property. The FF&E in a hotel is substantial. That’s trade for furniture, fixtures and equipment for anybody that’s in the audience here. McIntyre: Yep, all right, Mr. Jolly has offered a…Councilwoman Toy? Toy: To Mark Taormina, if I may. Mark, is there other property on Victor as we, I’m trying to recall, vacancies, redevelopment, as we go through there? We’ve had a lot of activity there, because it’s such a desirable property to develop over there, a nice little corridor. So, we have no problem getting tenants for those areas, per say, from my knowledge, as we move forward with this great economy we’re in. Taormina: Per say, I think, here, that’s accurate. That’s not to say there aren’t some properties that have struggled a little more than others along Victor Parkway, as evidenced by the vacant property at the corner of 7 mile, but most of the office buildings have an occupancy rate that I think is higher than average throughout the community. There are some vacancies but nothing substantial. We had some issues trying to, when the Davenport property came up for sale, it has since been sold, it looks like that site will be repurposed, but I think it’s accurate, what you said. Toy: Thank you. Thank you, Madam Chair. McIntyre: Yes, Mr. Donovic? Donovic: Thank you, thanks for being here tonight, I appreciate it. Thank you to the petitioners as well, for choosing Livonia. Can you bring me up to speed a little bit? I’ve been reading about this and looking at different documents that Mr. Taormina has given us and just some other information, I’ve looked into. Can you give me a little more information about the actual hotel itself? Bohn: Maybe I’ll turn to the expert who is in the audience. It’s a very unique property. We can save that for another day, that in fact, obviously, if this proceeds, we will bring in drawings and all the things that you will want to see. 6 Dominic: It’s ok, but I will be supporting Councilman Jolly in that position. McIntyre Anyone else? McCullough: Madam President? McIntyre: Yes, Mr. McCullough. McCullough: So obviously, you will, upon the next step, assuming, like you said, we will have more in depth information on the soil. I would recommend, if possible, just be as detailed as possible. As I was looking at the notes, I’d like to see something more than maybe just one boring soil, maybe something that shows the footprint. Bohn: Councilperson McCullough, I think we can arrange to have Frank Jonna here or a member to answer those questions specifically, beyond just the geotechnical so you can get a better understanding to study. McCullough: I’d appreciate that. Bohn: Absolutely. McIntyre: I’d just like to emphasize what Councilman Jolly said. Many of the costs in the Jonna document would not be considered to not be anticipated right, cost rise. We know that there’s been strong inflation area trend in construction materials and labor, but, what was not anticipated, were the soil conditions and some of the remediation that needs to occur. Bohn: The soil conditions and the retaining wall were, yes. McIntyre: Yep, not foreseen at the time of the site plan. I just wanted to call that out because in the past we’ve had public scrutiny and commentary about commercial rehabilitation projects and it’s kind of an extraordinary incentive. It’s not dissimilar to a 198 but it’s broader, and so we are very judicious in approving them. Bohn: Understood, and to the councilperson’s question. We do intend, when we come back, to have the ability to answer those questions, not just by a lawyer, but to have people in the construction trades that generate this information so you’re not getting it third party. McIntyre: Great. The only thing I need to note for you is that tonight’s item will be on th the January 27 meeting agenda of the Regular Meeting that begins at 7. Bohn: That would be the approval to create the district? 7 McIntyre: Yep. We have an approving, the only resolution we have is the approving resolution at this time. Bohn: And not to presume that the district would be created, but assuming it would be created, then the application will be subsequent to that. McIntyre: Yes, and then we have a public hearing, as you know, on the application. That too, will then go to a Regular Meeting. Bohn: So, Councilperson Jolly will have more than one opportunity for me. I want to give you as many opportunities as you wish. Measure twice, cut once. McIntyre: If the site plan has not changed considerably, and I don’t think it has, we can get that to the new Council members that don’t have the benefit of getting all the information we got last year during the site plan approval process. So, we’ll make sure, Rob and Brandon, that you get that. All right? Bohn: Thank you. McIntyre: Thank you. Anything else? All right, the public hearing is adjourned. As there were no further questions or comments, the Public Hearing was declared closed at 7:19 p.m.