Letter to City Council member James Tate from IRVIN CORLEY, DETROIT FISCAL ANALYST
DDOT New State Fair Transit Center Amendment No. 1
Detroit Building Authority
1301 Third Street • Suite 328 • Detroit, MI 48226 • 313-224-0174 phone • 313-224-4998 fax
November 18, 2021
The Honorable James E. Tate, Jr. Detroit City Council
1340 Coleman A. Young Municipal Center
Detroit, MI 48226
Re: DDOT New State Fair Transit Center Amendment No. 1
Dear Council Member Tate:
Talking points for why City Council needs answers before it can vote on proposed SF Transit Center
The administration:
hasn’t presented a convincing case for why it’s necessary to demolish the Coliseum as part of repurposing the Dairy Cattle Building as the new State Fair Transit Center, which we applaud. The Coliseum, like the Dairy Cattle Building, is listed on the Federal Registry of Historic Places. Preservationists insist repurposing both buildings would enhance the use of the Transit Center as a destination for the region.
Answer: A feasibility study was completed on both the Dairy Cattle Barn Building and the Coliseum. Both structures were considered for adaptive reuse however the Dairy Cattle Barn Building meets the program needs of the proposed new State Fair Transit Center given its site location, circulation, safety, and access. Also, we engaged preservationists on the project and have received an endorsement of the plan from Preservation Detroit (letter sent on November 12, 2021).
2. Hasn’t presented a plan for mitigating the inevitable pollution generated by thousands of 18-wheel diesel trucks entering and exiting the fairgrounds site 24/7 363 days a year. This represents a health and safety danger to transit riders, surrounding communities and the region.
Answer: The City is currently committed to complete air quality monitoring through 2024. The results are being posted actively on the City’s website here (https://detroitmi.gov/government/mayors-office/michigan-state-fairgroundsdevelopment). Six monitoring reports have been posted to date. The purpose of the data is to inform future mitigation efforts with the developer, if necessary. We have taken the initial step of data collection and plan to push mitigation efforts for the development site (if necessary). The Amazon distribution center development is projected to generate just over 200 truck round trips daily. Of those, only 65% are projected to come from 8 Mile Road and use the interior roadway adjacent to the Transit Center, while the remaining 35% will enter/exit from Woodward Avenue. During the morning peak commuting hour, only 8 truck round trips are projected. During the early evening peak commuting hour, only 9 truck round trips are projected.
3. Is proposing to replace the Coliseum with an open-air park and plaza adjacent on two sides to the four-lane roadway to be used by the diesel trucks going to and from the warehouse. These conditions will serve to dissuade potential businesses and non-profits from operating there, and residents from using and gathering at the proposed plaza/park, entirely defeating its purpose.
Answer: The location of the open-air park was made with transit riders in mind. This is to promote a positive bus rider experience and to increase ridership. This Park will enhance user experience (particularly in the spring/summer) and provide a comfortable place to rest and wait for their next bus. Entertainment and food trucks have the potential to enhance user experience as well.
4. Is ignoring its own “Sustainability Action Agenda” by failing to require the transit center be built “green” and operated sustainably, relying on renewable energy. The urgency for converting to a renewable energy economy is demonstrated by the new international agreements reached in the last two weeks at the COP26 in Glasgow, Scotland.
Answer: The Transit Center is being built with certain green elements incorporated. By the nature of this being an adaptive reuse project we are following the “Sustainability Action Agenda”. Activating an existing facility is the best sustainable approach. This facility will be built “green” using the most current industry standards for example the current mechanical and electrical ASHREA standards also meet LEED sustainable principles.
5. Is proposing that the city make a double payment for demolition of the Coliseum, with the additional payment of $1,347,449 for demolition. Though the original Purchase Agreement stipulated that the developer would pay for demolition, the city turned around and subsidized that payment by subtracting the costs of demolition ($2,640,000) from the appraised value of the site to arrive at the sale price of $9 million. Now, in addition, the Administration is proposing another payment for demolition - the $1,347,449 that's part of the $18,957,623 proposed for the revised transit center. Why is the city agreeing to make this redundant payment?
Answer: The authorizing resolution anticipates expected reimbursement from the developer. Council is authorizing the full contract amount, expecting reimbursement of a portion from the developer ($280,000). This functions just like a giant reimbursement. Demolition costs have changed because of the selective demolition required for the adaptive re-use. The $280,000 figure is based on the initial bids from 2020 (for the Coliseum). However, the City will be able to recover the difference between that amount and actual costs. Demolition costs are up as a result of labor and equipment costs. The proposed project budget identifies the demolition cost. The Developer is contributing to the demolition cost.
Cc:
City Council members
Gail Fulton, Mayor’s Office
Jay Rising, Chief Financial Officer
Irvin Corley, Fiscal Analysis
Janice Winfrey, City Clerk
Community Benefit Ordinance the law
Oct 28, 2020
TEMPORARY RESTRAINING ORDER ISSUED HALTING SALE OF STATE FAIRGROUNDS PROPERTY
October 28, 2020 p. 1
October 28, 2020 p. 2
oct. 19
STATE FAIRGROUNDS development COALITION COMPLAINT
STATE OF MICHIGAN
THIRD CIRCUIT COURT FOR THE COUNTY OF WAYNE
STATE FAIRGROUNDS DEVELOPMENT COALITION,
FRANK HAMMER, AND KAREN HAMMER, Plaintiffs,
vs. .
THE CITY OF DETROIT; MIKE DUGGAN, Mayor; KATHY TRUDEAU; and MARC SIWAK.
Defendants.
SUGAR LAW CENTER FOR ECONOMIC & SOCIAL JUSTICE
Co-Counsel - Attorneys for Plaintiffs
COMPLAINT FOR DECLARATORY, INJUNCTIVE & MANDAMUS RELIEF
NOW COME Plaintiffs, State Fairgrounds Development Coalition, Frank Hammer, and Karen Hammer by and through their attorneys and for their Complaint, do hereby allege as follows.
INTRODUCTION
1. This lawsuit arises out of Defendants’ failure to follow state and city law during the proposed sale of the 142 acres of public land located in the City of Detroit. Pursuant to a voters’ initiative in 2016, the citizens of the City of Detroit adopted a community benefits ordinance requiring that the city proceed through a specified community benefits process before large parcels of city land may be sold at a price below the land’s market value and without a public bid. In 2020, the Detroit City Council adopted a Community Outreach Ordinance requiring a specified outreach process before amending the city’s master plan. In the present case, the Defendants have failed to follow the requirements of both the city’s Community Benefits Ordinance and the Community Outreach Ordinance.
NATURE OF PLAINTIFFS’ CLAIMS
2. Defendants have entered into a proposed purchase agreement and taken affirmative action to execute the sale of 142 acres of public land (“State Fairgrounds site”), which is currently designated as a regional park.
3. The 142 acres of public land that is the subject of the proposed sale is the former home of the Michigan State Fair.
4. The public land in controversy is bordered by Woodward Avenue and Eight Mile Road in the City of Detroit.
5. Defendants have requested and taken affirmative action to amend the City of Detroit Master Plan to change the designation of the State Fairgrounds site from “Regional Park” to “Light Industrial”.
6. Defendants are seeking to evade the statutory requirements that are applicable to the sale State Fairgrounds site by utilizing an appraisal that is invalid under Michigan law.
7. Defendants are seeking to evade the statutory requirements for the sale of State Fairgrounds site by also utilizing statements and methodologies of valuation that deliberately understate the fair market value of the land in violation of the Community Benefits Ordinance.
8. Defendants are proposing to amend the City of Detroit Master Plan and effectuate the sale of the State Fairgrounds site without adherence to statutory requirements, namely the City of Detroit’s Community Outreach Ordinance.
9. Defendants have deprived residents of the City of Detroit of the rights and privileges they are entitled to under Detroit’s Community Benefits Ordinance and Community Outreach Ordinance, and such rights and privileges are not de minimus.
JURISDICTION AND VENUE
10. Jurisdiction and venue are conferred by MCL §§ 600.601, 600.711, 600.4401; and MCR 3.305 (2).
PARTIES
11. STATE FAIRGROUNDS DEVELOPMENT COALITION (SFDC) is an unincorporated association with its principal offices located in Wayne County, Michigan.
12. The SFDC is a membership association with over 200 members and is predominately composed of persons who reside in neighborhoods adjacent to the state fairgrounds and are taxpayers of the State of Michigan and City of Detroit.
13. The SFDC was founded in 2012 to provide community input and vision concerning the future development of the State Fairgrounds site. Since its founding, the SFDC has actively engaged residents, participated in past proposal processes, kept the community of informed, provided input to city officials, and engaged in a range of activities to assist in the development of the site in a manner consistent with the community’s concerns and goals.
14. FRANK HAMMER is a Detroit resident residing in the vicinity of the land formerly known as the Michigan State Fairgrounds.
15. KAREN HAMMER is a Detroit resident residing in the vicinity of the land formerly known as the Michigan State Fairgrounds.
16. The Defendant City of Detroit is a municipal corporation located in Wayne County, Michigan.
17. The Defendant MIKE DUGGAN is the duly elected Mayor of the City of Detroit.
18. The Defendant KATHY TRUDEAU is the Deputy Director of the City of Detroit’s Planning and Development Department.
19. The Defendant MARC SIWAK is the Chief of Staff and Director of Operations of the City of Detroit’s Planning and Development Department.
COMMON FACTS
20. A press conference was held by Defendants on August 11, 2020 to announce the sale of the public land in controversy.
21. Defendants stated in a media release and in multiple representations that the public land in controversy would be sold for $9 million.
22. Defendants executed a proposed purchase agreement that describes the Seller as the City of Detroit and the Purchaser as State Fair Partners LLC.
23. The purchase agreement states that the purchase price of the land is $9 million.
24. The purchase agreement states the property is being sold “as-is”.
25. The purchase agreement contains a provision whereby approximately 78 acres of the land would be reserved for a “tenant” of the purchaser that is not named in the purchase agreement.
26. Additionally, the purchase agreement contractually binds the City of Detroit to replace an existing transit center located along Woodward Ave. and move it closer to the entrance of the new proposed facility of the purchaser and tenant.
27. The purchase agreement states $7 million will be provided as consideration for the Defendant City of Detroit to build the new transit center.
28. Defendant City of Detroit is contractually bound to assist the “tenant” with interim transit capacity (i.e. supplemental public transportation services) if the City of Detroit fails to construct and operationalize a replacement transit center within 18 months of the closing.
A. Appraised Value of the 142 Acres
29. The City of Detroit commissioned an appraisal of the State Fairgrounds site.
30. The effective date of the appraisal is March 1, 2020.
31. The appraisal is unsigned and labeled as a draft document.
32. The draft appraisal lists three approaches when developing a market value opinion for real property: cost approach, sales comparison approach, and income capitalization approach.
33. The draft appraisal states that only the sales comparison approach was used in developing the draft opinion of value for the land.
34. The draft appraisal states the sales approach is applicable to the subject because there is an active market for similar properties, and sufficient sales data is available for analysis.
35. The appraisal states the cost approach was not applicable because there are no improvements that contribute value to the property
36. The appraisal states the income approach was not applicable because the subject is not likely to generate rental income in its current state.
37. The draft appraisal opined a fair market value of the public land in controversy as $11,100,000.00 using the sales approach.
Count I- Violation of the Community Benefits Ordinance
38. Plaintiffs incorporate by reference paragraphs 1-37 as though fully stated herein.
39. The Detroit Community Benefits Ordinance, §12-8-1 et seq of the City of Detroit Code of Ordinances, was enacted by voter initiative pursuant to §12-101 and §12-110 of the City of Detroit Charter.
40. Detroit’s Community Benefits Ordinance, mandates that the Defendants proceed through a specified community benefits process before the transfer of City-owned land parcels that have a cumulative market value of $1,000,000.00 or more, as determined by the City Assessor or independent appraisal, without open bidding and priced below market rates. Detroit Code, §12-8-2 and §12-8-3.
41. The Defendants determined the market value of the State Fairgrounds site by retaining an independent appraiser to do an appraisal.
42. Before the sale of such properties, the Community Benefits Ordinance requires the appointment of a Neighborhood Advisory Council composed of nine members, two of whom are required to be neighborhood residents who are nominated by other neighborhood residents. Id. at §12-8-3.
43. Detroit’s Community Benefits Ordinance mandates further requirements, including but not limited to, the following:
a. Notice of a public meeting prior to submitting the purchase agreement to city council. Id. at §12-8-3.
b. Appointment of a city council liaison to monitor the community benefits process. Id. at §12-8-3.
c. Selection and appointment of the Neighborhood Advisory Council.
d. One or more meetings between the Neighborhood Advisory Council and the developer, facilitated by the city Planning Director. Id. at §12-8-3.
e. Development and publication of a community benefits report, including details of the concerns raised by the Neighborhood Advisory Council and how the methods for addressing concerns raised. Id. at §12-8-3.
f. Provisions within the development agreements concerning enforcement for any failure of the developer to meet promises made; a process for citizens to make complaints regarding noncompliance; annual compliance reports; and continued engagement and/or meetings with the community and/or meetings. Id. at §12-8-3.
g. Establishment of a committee to oversee enforcement of the community benefits provisions. Id. at §12-8-3.
44. The requirements of the city’s Community Benefits Ordinance, including but not limited to each of the aforesaid requirements, impose a clear legal duty on the Defendants and the Plaintiffs have a clear right to the discharge of these duties.
45. The requirements of the city’s Community Benefits Ordinance, including but not limited to each of the aforesaid requirements, are of a ministerial nature that are clearly and specifically prescribed and defined by law and are not discretionary.
46. The officers and employees of the Defendant City of Detroit, Defendant MIKE DUGGAN as Mayor of the City of Detroit; KATHY TRUDEAU as Deputy Director of the City of Detroit’s Planning and Development Department; and MARC SIWAK as Chief of Staff and Director Of Operations of the City of Detroit’s Planning and Development Department; each have responsibility for complying with and ensuring compliance with the city’s Community Benefits Ordinance.
47. The Defendants have failed to comply with requirements of the city’s Community Benefits Ordinance.
48. It is a clear violation of Michigan law for Defendants to rely on an unsigned draft appraisal to establish the fair market value of the public land in controversy.
49. The Defendants have not properly determined the market value of the State Fairgrounds site, as evidenced by actions, including but not limited, to the following:
a. Defendants appraisal lacks a valid certification under Michigan law;
b. Michigan law requires that an appraisal be signed by the appraiser to be valid, and the only appraisal done for the site is clearly labeled as a draft and is unsigned.
50. The proposed sale of the public land in controversy is priced below market rates as evidenced by actions and conduct, including but not limited to, the following:
a. On its face, the Defendants’ draft appraisal values the State Fairgrounds site at $11,000,000 and the proposed purchase agreement states that the developer will pay $9,000,000 for the site;
b. The Defendants’ appraisal does not reasonably estimate the value of the State Fairgrounds site and the land is properly appraised at a value higher than $11,000,000 and higher than the consideration received by the City of Detroit under the proposed development agreement; and/or
c. As consideration for the sale of the land, the Defendants improperly include the developer’s reimbursement of additional unrelated new costs to the city that the agreement imposes on the city (e.g. relocating a transit center, environmental remediation, demolition of buildings, etc.).
51. The Defendants are proposing to sell public land in controversy without a valid appraisal in violation of Michigan law and the Detroit Community Benefits Ordinance
52. The Defendants are proposing to sell public land and by utilizing statements and methodologies of valuation that deliberately fail to recognize that the land is being sold below market value and in violation of the Community Benefits Ordinance.
WHEREFORE, Plaintiffs request that this Honorable Court enter an order: a) granting declaratory relief finding that Defendants are in violation of, and ordering compliance with the, requirements of the City of Detroit’s Community Benefits Ordinance; b) granting preliminary and permanent injunctive relief restraining the Defendants from executing and/or finalizing a sale of the public land in controversy until such time as the Defendants comply with the city’s Community Benefits Ordinance; and c) mandamus relief ordering that the Defendants comply with the city’s Community Benefits Ordinance.
Count II- Violation of the Community Outreach Ordinance
53. Plaintiffs incorporate by reference paragraphs 1-52 as though fully stated herein.
54. The public land in controversy is currently designated as a regional park.
55. The City of Detroit Master Plan prohibits the sale of public parks for private development.
56. On October 1, 2020, Defendants obtained a recommendation from the Detroit City Planning Commission to amend the City of Detroit Master Plan to effectuate the sale of the public land in controversy.
57. The proposed amendment to the City of Detroit Master Plan changes the designation of the public land in controversy from designation as a Regional Park to Light Industrial.
58. Under the city’s Community Outreach Ordinance, §12-10-1 et seq of the City of Detroit Code of Ordinances, Defendants must comply with a specific community outreach protocol for City-Wide Proposals where there is a park improvement plan, and/or for Class A Neighborhood Proposals where there is an amendment to the City’s master plan.
59. The Community Outreach Ordinance requires that there be a minimum of ten days’ notice of community outreach meetings.
60. The Community Outreach Ordinance requires the following actions including, but not limited to:
a. Providing a minimum of ten days’ notice of community outreach meetings;
b. Providing the date, time, and location of the meeting;
c. Providing an Administrative Summary of the City-wide or Neighborhood Proposal;
d. Providing procedures by which persons may request translation or interpretation services through the City’s Human Rights Department;
e. Providing procedures by which persons with disabilities may participate in the outreach process; and
f. Sending digital notification to all residents and entities registered in the Department of Neighborhoods’ electronic database.
61. As a regional park, the proposed sale of public land is subject to the outreach process for City-Wide Proposals.
62. The outreach process for City-Wide Proposals includes but is not limited to:
a. Holding one outreach meeting in each of the seven city council districts;
b. Providing an administrative summary of the proposed purchase agreement and accompanying resolutions that addresses the anticipated ways the neighborhood will be impacted; and
c. Providing a community outreach report that provides a detailed account of notice provided, an itemized list of concerns raised by the impacted neighborhood during the outreach process, and the proposed method to address concerns raised or why a concern will not be addressed, and any submitted letters, comments, or reports from a resident, business, neighborhood organization or community group within the City of Detroit.
63. The Defendants have failed to comply with each of the aforesaid outreach process for City-Wide Proposals,
64. Alternatively, the proposed sale of public land is subject to the outreach process for Class A Neighborhood Proposals.
65. The outreach process for Class A Neighborhood Proposals, includes but is not limited to the following:
a. Holding at least two outreach meetings in the impacted neighborhoods;
b. Providing an administrative summary of the proposed purchase agreement and accompanying resolutions that addresses the anticipated ways the neighborhood will be impacted; and
c. Providing a community outreach report that provides a detailed account of notice provided, an itemized list of concerns raised by the impacted neighborhood during the outreach process, and the proposed method to address concerns raised or why a concern will not be addressed, and any submitted letters, comments, or reports from a resident, business, neighborhood organization or community group within the impacted neighborhood.
66. The Defendants have failed to comply with each of the aforesaid outreach process for Class A Neighborhood Proposals.
67. The requirements of the Community Outreach Ordinance must be completed prior to consideration of the proposal by the Detroit City Council.
68. Defendants have failed to comply with the Community Outreach Ordinance as it has not complied with the outreach and notification requirements of the ordinance.
69. The requirements of the city’s Community Outreach Ordinance, including but not limited to each of the aforesaid requirements, impose a clear legal duty on the Defendants and the Plaintiff have a clear right to the discharge of these duties.
70. The requirements of the city’s Community Outreach Ordinance, including but not limited to each of the aforesaid requirements, are of a ministerial nature which are clearly and specifically prescribed and defined by law and are not discretionary.
71. The officers and employers of the Defendant City of Detroit, Defendant MIKE DUGGAN as Mayor of the City of Detroit; KATHY TRUDEAU as Deputy Director of the City of Detroit’s Planning and Development Department; and MARC SIWAK as Chief of Staff and Director Of Operations of the City of Detroit’s Planning and Development Department; each have responsibility for complying with and ensuring compliance with the city’s Community Outreach Ordinance.
72. To the contrary, the proposed land sale of the public land in controversy has been expedited, in clear violation of the law, and consideration of altering the city’s master plan to facilitate the sale is scheduled to go before the Detroit City Council to be considered for a vote on October 20, 2020.
WHEREFORE, Plaintiffs request that this Honorable Court enter an order: a) finding that Defendants are in violation of, and ordering compliance with the, requirements of the City of Detroit’s Community Outreach Ordinance; b) granting preliminary and permanent injunctive relief restraining the Defendants from amending the master plan and from executing a sale of the public land in controversy until such time as the Defendants comply with the city’s Community Outreach Ordinance; and c) mandamus relief ordering that the Defendants to comply with the city’s Community Outreach Ordinance prior to any amendment to the city’s master plan and prior to executing a sale of the public land in controversy.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs STATE FAIRGROUNDS DEVELOPMENT COALITION, FRANK HAMMER, and KAREN HAMMER prays this Honorable Court enter Judgment against Defendants granting:
a) Declaratory relief finding that, because the Defendants have not conducted a proper valuation of the land in controversy, Defendants are in violation of the requirements of the City of Detroit’s Community Benefits Ordinance ;
b) Declaratory relief finding that, because the land in controversy is being transferred at below market value and without public bid and is valued at more than $1,000,000, the Defendants are in violation of the requirements of the City of Detroit’s Community Benefits Ordinance;
c) Declaratory relief finding that Defendants are in violation of the requirements of the City of Detroit’s Community Outreach Ordinance;
d) Declaratory relief finding that, because no public outreach report has been prepared or made public, the Defendants are in violation of the requirements of the City of Detroit’s Community Outreach Ordinance;
e) Preliminary and Permanent Injunctive relief restraining the Defendants from executing a sale of the public land in controversy until such time as the Community Benefits Ordinance and the Community Outreach Ordinance have been fully complied with;
f) Preliminary and Injunctive relief restraining the Defendants from amending the master plan until such time as the Community Outreach Ordinance has been fully complied with;
g) Mandamus relief directing Defendants to fully comply with the City of Detroit Community Benefits Ordinance and the City of Detroit Community Outreach Ordinance.
h) Awarding Plaintiffs’ attorneys’ fees and costs; and
i) For such further relief as is just and equitable.
Respectfully Submitted,
SUGAR LAW CENTER FOR ECONOMIC & SOCIAL JUSTICE
Attorneys for Plaintiffs
Date: October 19, 2020
___________________________________________________________________________
sEPT 7, 2020
Are the developers paying Fair Market Value for our treasured Fairgrounds land? We don’t think so!
The SFDC strongly believes that the City of Detroit is selling the property for less than fair market value. The JET memorandum attempting to justify this transaction is flawed.
The $9 Million sale price is $2.8 Million lower than the appraised value. No after the fact memo from JET can justify the sale price. The JET memo is junk.
SFDC strongly believes that the below-value sale price triggers the Community Benefits Ordinance. Failure to negotiate a Community Benefits Agreement is a violation of the law.
Here are the details:
MEMORANDUM
TO STATE FAIRGROUNDS DEVELOPMENT COALITION (SFDC) &
MEMBERS OF DETROIT CITY COUNCIL
FROM Peter Rhoades and Frank Hammer, SFDC Steering Committee
RE Evaluation of the State Fairgrounds sale price
DATE September 7, 2020
On August 11, 2020, Mayor Duggan of the City of Detroit announced the proposed sale of 142 acres of the former Michigan State Fairgrounds to a new corporation formed by two real estate developers. The sale price was $9 Million. Mayor Duggan stated that: (1) the developers were not requesting tax abatements, and (2) would not request that the City of Detroit (or the Detroit Brownfield Redevelopment Authority or any other government entity) cover the costs of demolition or environmental remediation.
The SFDC obtained copies of the April 2020 real estate appraisal and a memorandum addressed to Mr. Nick Khouri, Director, Jobs and Economy Team (JET) dated August 24, 2020 (two weeks after the Mayor’s announcement).
This memorandum evaluates the August 24, 2020 JET memorandum. After careful review, we determined it suffers from discrepancies, and several serious errors in valuation. On page 3, for example, it states that the appraised value of the State Fairgrounds property up for sale to the developers is “$8 million.” However, on page 1, the appraised value – per the company that performed the appraisal – is $11,070,000.
This value is mysteriously ¾ of a million dollars less than the appraisal performed for the State of Michigan in 2018, even though the price per acre increased in the intervening two years from $75,000/acre to $85,000/acre.
It must be noted that the 2020 valuation of $11,070,000 is arrived at after a subtraction of remediation costs pegged at $1,510,000. The valuation of the land – as is - is, therefore, $12,570,000.
There is a deduction of $595,000 for 7 acres that will be retained by the city for roads in the Fairgrounds site, bringing down the appraised value of the total acreage to be sold to the developers to $11,975,000.
Remediation: The August 24, 2020 memorandum incorrectly allows the $1.51 million cost of remediation to be subtracted from the appraised value. This contradicts Mayor Duggan’s statement during the sale announcement that the developers were not requesting government assistance in covering the costs of environmental remediation. This $1.51 Million off set is exactly what Mayor Duggan stated would not be done.
Demolition: The cost of demolition is estimated at $2,640,000 and it too is subtracted from the appraised value. Again, this contradicts Mayor Duggan’s statement during the sale announcement that the developers were not requesting that the City of Detroit or any other governmental entity cover the cost of demolition. This off set does exactly what Mayor Duggan said would not be part of the real estate deal.
Also troubling is the fact that the off set for demolition costs takes $2.6 Million from the city taxpayers to cover the costs of demolition of the historic buildings. The JET position not only rejects Mayor Duggan’s public statements but may also violate federal and state law - since the taxpayers are covering the costs of demolishing three buildings listed on the Federal Registry of Historic Places. The $2.6 Million off set is contradictory, insulting and may be illegal under federal law, depending on the details. The JET memorandum is a complete rejection of the stated position of the Mayor of the City of Detroit.
Contrary to the Mayor’s claims that the $9,000,000 sale price is equal to the appraised value of the property, that dollar amount is nearly $3 million below the appraised value, per the City’s own memorandum. That triggers the City of Detroit Community Benefits Ordinance per Chapter 14. Community Development Article XII.
The JET memorandum cannot justify the sale of a city owned asset valued at $11.975 Million for the discount price of $9 Million and claim it is a remarkable deal. That is a $2,975,000 mistake.
Transit Center: The JET memorandum attempts to justify the sale in other ways, including the developers’ agreement to: (1) build a new $7 Million transit center (which increases the value to the purchase agreement by that amount), and (2) pay an additional amount, up to $1 Million, for the costs of demolition, if necessary, for the agreed transit center location. The JET memorandum adds this amount to the benefits of the agreement. The JET logic is flawed. The City of Detroit currently has a D-DOT turn around located on Woodward Avenue near West State Fair Avenue. The municipality holds the deed to this land and the turnaround land has value since the developers need this land for access to Woodward Avenue to accommodate Amazon employee and truck traffic. As part of the purchase agreement, the City of Detroit will convey this extremely valuable property to the developers. The cost of this conveyance is the new location of a new transit center as described in previous paragraph. This is an allowable trade off but it is only an even deal, not a basis for JET claiming more than what it actually states.
Roadways: The JET memorandum claims that the City of Detroit also benefits because it will retain, as mentioned above, seven acres of land for roads thereby reducing the sale price by $595,000 (7 acres x $85,000 per acre) because this land cannot be used by the developers. The JET logic is flawed.
(a) Normally, a developer will cover the cost of road construction and offer the new road system to the local government at no cost. The government entity in turn accepts the roadway dedication and incorporates the new road into its roadway grid system. This is common with residential subdivisions and some industrial parks. This is not common with shopping centers and other uses. Shopping center developers usually retain ownership of the roadways (actually, driveways) within the development because the roadways are for the benefit of its retail tenants, employees, and retail business invitees. The road system is not incorporated into the larger traffic grid system.
(b) The State Fairgrounds road system is for the benefit of the developer and its corporate tenants, employees, business invitee truck traffic and tenant truck traffic. There is little cause for other traffic on the roadways. The proposed road system is not intended for everyday public use.
(c) The proposed road system is actually for the benefit of the developers and their corporate tenants. The City of Detroit could allow the proposed road system to remain a private road with the cost of construction, normal maintenance and eventual rebuild to be covered by the developer, not the taxpayer. The $2.2 Million benefit claimed by JET does not exist.
In Conclusion, the appraised value of the city’s Fairgrounds property, per the City’s own memorandum, is $11,975,000. The proposed Purchase Agreement with a sale price of $9,000,000 cannot go forward without a major modification of the sale terms - unless the City of Detroit acknowledges that the sale price is clearly less than the appraised value and triggers Detroit’s Community Benefits Ordinance.
MEMORANDUM ADDENDUM
DATE September 11, 2020
It is noteworthy that the responses received from Mr. Ray Diggs of the Jobs and Economy Team - wherein the fair market value and/or the sale price are referenced - contain inconsistencies which undermine the City’s claims regarding the proposed transaction between the City Administration and Hillwood Enterprises, also identified as Newco, LLC. The sale price is variously described as:
“nearly double fair market value,” Question #3
“well above fair market value,” Question #5
“twice the value of the land,” Question #8
“full price for the land.” Question #8
march 29, 2012
CONVEYANCE OF STATE FAIR PROPERTY H.B. 4803 (S-1): FLOOR SUMMARY