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Hotel Development Looks for Financial Support from DDA

Developers for a hotel complex at 400 N. Main are working with the State of Michigan to secure funding assistance through the Community Revitalization Program, which requires local participation.

Krieger | Klatt rendering
Krieger | Klatt rendering
Members of Royal Oak's Downtown Development Authority (DDA) received an update and a request for support Wednesday from the developers of a $60 million hotel complex at the former Fresard auto dealership site.

The complicated project for the site at 400 N. Main Street  which includes an 8-story hotel, an 8-story apartment building, a pair of office buildings and a 4-level off-street parking deck – is moving forward at a "rapid pace," according to Greg Erne, principal at Versa Development.

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, Erne said.

"We are not here to ask the DDA for a check," he said, adding "We're all in this together but we are not asking you to take on risk."

Erne said he expects the project to break ground in the fall.

Directors will discuss the request at a special work session on March 1 and come back at the March DDA meeting for formal action.

The proposal for the Fresard property, which has been vacant since the auto dealership moved to Ferndale in 2008, first came before directors in May 2012 to measure the DDA's interest in the project and move the discussion along.

"You did come to us over a year ago and present it and ask us if there would be interest and at that time I believe we told you yes," said Director Jay Dunstan.

"We're taking you up on that," Erne said.
DianeKH March 02, 2014 at 08:25 PM
CDE - There's an important word - relative. What does that mean? Government, at every level is sinking further into debt on a daily basis. Certainly Royal Oak, at the current time, fairs better than many. So relatively speaking, I guess we shouldn't be concerned But, I am concerned. I'm concerned because we are not taking any actions to improve our situation. Without some type of plan, it will continue to get worse, not better. I have looked at the latest financial statements. As near as I can tell, our unfunded liabilities (Pensions and OPED's) are somewhere around 190,000,000. My condemnation is based on the premise that present and past elected officials have and continue to refuse to address the issue. And, I don't have to look farther than 8 mile road to see what is going on around the country. CDE, do you think we should ignore this? Do you believe this to be a non existent problem?
Geof Vasquez March 03, 2014 at 08:54 AM
City officials always made a point (each year) of stating that they contributed to the retirement system what the auditor told them to. However, the auditor is really only making a recommendation as to the MINIMUM amount the city should contribute. Now, over the last 4 or 5 years, the city has contributed about $25,000,000 LESS than the auditor's stated MINIMUM contribution. So the city can't contribute the minimum to the retirement system, it doesn't have money for road repair and many other basic needs, but people want us to believe the city is in great shape?
Bill Shaw March 04, 2014 at 08:43 AM
CDE, I find it very interesting that you really question Debbie, Diane, and Geof, but you never question the City of Royal Oak. For years the unfunded liability has been the pension and the health care costs. Even if you try to separate the two, which I believe, a liability is a liability, your argument really fails. However, your comments seem to indicate that you do "question" which puts you in the very small minority of Royal Oak taxpayers. The majority says "hey, we have an unfunded liability of $170 million, but when can we get a splash park?" I feel that this more than points out the Johnson philosophy "Show them where you want them to go and they will go!" The administration and some of our elected officials need people to buy into this "Game." If you read the financial transmittal letters to the commission, Mr. Johnson is just as worried about the liabilities as Deb, Diane, and Geof. Your assertion that our debt is an "exaggeration" makes me question your research and accounting acumen. To be fair, I've been in this accounting world and have witnessed more "Voodoo" accounting than you can imagine. I need only point to our last financial crisis and the governments "Too big to fail" philosophy. Or, the bail outs. Theirs only one looser...us. Unfortunately, at the end of this fiscal year the City of Royal Oak and the Royal Oak school District will be putting on the books what for decades, they have been able to "play" with for years, mainly, the unfunded liabilities. You will see our state put a $24 (B)illion dollar unfunded liability on the table for state teachers and school workers. The Federal government with $17(T)rillion debt will have to start dealing with a federal unfunded liabilities in social security and Medicare that will put the federal debt to over $100 (T)rillon dollars. CDE, your comparison of Moodys, the Federal Government, and Royal Oak left me breathless. Just let me state that only the Fed. can print money, only the fed. can issue T-Bills, and the Royal Oak pension fund is invested in the stock market, which your accounting guru will tell that is not riskless. I would invite you to attend the monthly Retirement Committee meetings as Geof and Diane have. I think you will find them enlightening and informative!
Geof Vasquez March 04, 2014 at 08:53 AM
To add to Bill's point: if you follow the discussion of unfunded liabilities on a national scale, the experts are saying governmental units are UNDERSTATING unfunded liabilities by using unrealistic rates of returns, favorable life expectancies and other forms of wishful thinking to calculate the unfunded liabilities. There is a move to change these calculation methodologies so that more realistic (meaning HIGHER) unfunded liabilities can be calculated and reported to the public.
Bill Shaw March 04, 2014 at 09:39 AM
Presently, Royal Oaks pension plan, and contributions are based on a guaranteed rate of return of 7 3/4%. Recently the retirement committee had a motion to reduce the ROI to 7 1/2%. While still not even close to the actual ROI it would have been better and more realistic. However, this would have placed a bigger burden on the city's obligation to make a larger contribution. Sooooo, with Mr. Johnson's crack leadership, the motion to lower the ROI was defeated and moved to maintain it at 7 3/4 which is financially ridiculous. With more of a contribution the city would not be in a position for all the new hires coming on board. I always said he was a financial wizard.

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