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DDA Says More Time Needed to Decide How Much to Kick into Hotel Project

“We all want this project to happen, we all know we are going to contribute,” Royal Oak Downtown Development Authority member Mike Sophiea said. “We just need to sort through this.”

A rendering of a mixed-use project by Krieger Klatt shows plans for 400 N. Main.
A rendering of a mixed-use project by Krieger Klatt shows plans for 400 N. Main.

Royal Oak’s Downtown Development Authority says it wants to hear from a four-member ad hoc committee before deciding how much money to kick into a $60 million hotel and mixed-use development at 400 N. Main St.

A recommendation is expected in two weeks, the Observer & Eccentric reports.

“We all want this project to happen, we all know we are going to contribute,” DDA member Mike Sophiea said at a meeting Wednesday. “We just need to sort through this.”

The proposal for the hotel complex at the former Fresard auto dealership site includes the 8-story Hyatt Place hotel, an 8-story apartment building, a five-story building with restaurant and office space, a three-story building with retail sales, a pair of office buildings and a 4-level off-street parking deck.

The development team – which includes Royal Oak-based CG Emerson Real Estate Group, Southfield-based Versa Development, Hotel Investment Services, Inc. (HIS) of Plymouth,  T.H. Marsh Construction and Krieger | Klatt Architects, both of Royal Oak – and the city have been working together in "a strong spirit of collaboration" to re-develop the obsolete site and create "something special," Erne said.

The developers have been working with the Michigan Economic Development Corporation (MEDC) to secure funding assistance for the project through the Community Revitalization Program (CRP), which requires strong local participation in order to commit its funding.

"This is really an important part of the project right now," Erne said.

The proposal presented to the Downtown Development Authority is:

The developer is allowed to capture the incremental ad valorem real estate taxes for up to 10 years

The amount of the capture will be capped at $4 million plus interest and carrying costs

The method for the capture will be a Reimbursement Agreement between the Downtown Development Authority and the Developer

The proposal is structured to be no-risk to the DDA.

At Wednesday’s meeting, Royal Oak resident Rick Karlowski said he supports the project, but thinks the DDA is being asked to kick in too much money.

“I don’t know why we have to spend this kind of money to bring businesses to our downtown when you have landlords marketing their storefronts at $42 a square foot,” he said. “We are not in the middle of a battle zone where things are torn down and decrepit.”

DDA member Matt Riley said the amount of assistance being requested is “exorbitant.”

“We have the potential here to get a great new customer,” he said. “But to give away the majority of our profits from that customer for the next 12 years would really stifle us from doing what we need to do.”

The DDA has time to sort out various issues related to its contribution without jeopardizing the project Versa Development’s Greg Erne said, adding he wants to make sure a “true partnership” is developed between the parties.

“We know we are going to figure this out,” he said. “Let’s get it done, let’s get it right and let’s commit to working together to get it done and not push it off.”
Debbie Campbell March 25, 2014 at 10:24 AM
Hey Bill thanks—In your previous comment you mention a HUD directive for a resident oversight committee to keep city government focused on federal guidelines—Does this committee vote on how the funds are allocated?—Does the oversight committee have access to all the info/numbers that you had to file a FOIA to obtain??-I ask this because in discussions with friends who serve on city committees –If they ask financial specifics they are frequently told that it isn’t their concern—And let me make sure I’m following you on this –So a city employee’s salary draws from these different “cost centers”-the report lists the various cost centers the employee’s salary is drawn from –but not the breakdown of the actual time and dollar amount ie: 20K from DDA—40K from Block Grant? If this is the case then an employee who spends most of their time working on DDA stuff could be getting paid for their time with Block Grant funds instead of DDA funds??
RON Ostrodamus March 25, 2014 at 11:30 AM
Why not Debbie, who is gong to know and more, who is going to care? This is not an inner city where finding corruption is like shooting fish in a barrel, this is the great Royal Oak, now home of come to the party Arts Beer and Eats and a mayor so popular there is none who can oppose him (ahem).
Chris March 25, 2014 at 12:17 PM
I see of the 5 to 6 different contributors that everyone brings a valid opinion. Why is there so little concern to the actions affecting a population of almost 50,000+? To get to the crux of this blogs' concerns is it about money/taxes/property appreciation/value for our contribution. One observation I am taking away from these posts is what is going on with the finances in this great city? One thing I hear no denying is that contributions (taxes/fees) keep rising and the benefits are still in question. So why do our residents continue to pay the bill without understanding why? I have read posts from both Debbie and Bill stating that a FOIA is required and then when the documents are provided questions are asked and the n a comprehensive answer is not obtained. My question or outside the box thought is why do we pay an Assessor, James Guyerman to continue to support the County's inflated Equalization of our properties that causes us to continue to pay taxes that we do not get benefits from except to support City Hall's Administration? As the 2015 Board of review completes this year's Equalized Values, what is the percentage gained to the City Residents vs. Contributions made to the County and State? Is there a benefit to the tax payers of Royal Oak? Is it proportional to the contribution? Since the Cities are no longer obtaining revenue sharing, why continue to push higher revenues? Is it wrong to have Guyerman think like a CPA and find ways that our equalization decreases or plateaus? Allowing our decreased taxes to become attractive on there own. That way as this discussion has evolved, the DDA is not a part of the Developers Equation? One question for our Assessor is; If every property in the City came up for sale at the same time, would our SEV's be correct? If not why should we be paying the taxes based upon the County's Assessment and our Assessor's review?
RON Ostrodamus March 25, 2014 at 07:27 PM
Foolishly RO does not consider the drying up of available parking, the duplication of services by E-Magine right next to a hotel all at a bar/movie saturated intersection that will turn into an AB&E style gridlock on weekends all year round. They are playing russian roulette in their rush to approve development without understanding that available for development space at its major intersections is disappearing while vacancies fleeing higher rents are increasing. A twenty percent vacancy is usually the tipping point before a decline in both residential and commercial.
Bill Shaw March 26, 2014 at 11:00 AM
Debbie, please forgive my omission of material you might want to research. If you go to the city site and go to the Planning Dept. you can look at the "CAPER REPORTS" these are the reports that the city must send to HUD on the CBDG program. The reports start in 2005 to the present. You might try looking and comparing the numbers. Please keep in mind that social programs are capped at 15% and admin. costs at 20% of funding. For your information the planning department did hire a full time planner under the following provision than 50% would come from CDBG and 50% from DDA. Yes, you would assume that individual would spend 100% of their time on these two programs. Again, the reason this flew through the CC was the Planning Department pointing out that this new hire "would not cost the city a dime!" Yes, his lips were moving!!! Please let me know if I can assist you further.

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