Ann Arbor City Council rejects downtown conference center proposal in 8-2 vote
Ann Arbor City Council Member Sandi Smith, a real estate professional, expressed concerns the city might give up one of its most valuable pieces of real estate and not ever see a dime for it if a proposed hotel and conference center project wasn't viable.
Ryan J. Stanton | AnnArbor.com
(This story has been updated.)
The Ann Arbor City Council voted 8-2 tonight to reject a New York-based developer's proposal to build a hotel and conference center on city-owned property downtown.
The vote came after more than an hour of debate during which council members in favor of rejecting the Valiant Partners proposal expressed concerns about the project's viability and potential financial risks to the city.
The Valiant Partners proposal for a hotel and conference center on the city-owned Library Lot, located on Fifth Avenue between Liberty and William.
Only two council members — Margie Teall and Tony Derezinski — were in favor of giving further consideration to Valiant's proposal. They expressed concerns that the city's formal request-for-proposals process was being cut short.
"I don't understand why we are taking a vote this early before the process has been given a chance to get to where we were supposed to take a vote," Teall said, noting that Valiant wasn't given a chance to respond to issues raised.
"These petitioners are more than willing to work with us," she said. "This process cannot be an all-or-nothing deal. There has to be room for negotiations, but we aren't giving them the chance."
Valiant was not at tonight's meeting and has been unreachable since last week.
The approved resolution rejects a letter of intent that was supposed to come back before council on April 19. The letter of intent would have laid the framework for negotiations toward a complete development agreement with Valiant, which was asking to build on a piece of city-owned property known as the Library Lot.
The site is located along South Fifth Avenue between Liberty and William, where the Downtown Development Authority is building a $50 million underground parking garage. The city in 2009 sought proposals from developers interested in building atop the garage once it's finished, and Valiant's proposal rose to the top last year in committee discussions.
In recent weeks, it has appeared increasingly unlikely that Valiant's proposal for a 150-room hotel and 26,000-square-foot conference center would have gotten the eight votes needed from the 11-member council when it came time to decide on a final deal.
Council Member Stephen Kunselman added his name to the list of co-sponsors of tonight's resolution, along with Mayor John Hieftje and Council Members Stephen Rapundalo, Christopher Taylor, Sandi Smith and Sabra Briere.
Rapundalo was absent.
"What I think this comes down to is whether or not you have confidence that this concept will ever work," Hieftje said, adding he didn't think the project was feasible.
The council added a clause to the resolution before tonight's meeting to stipulate that future planning and proposals for the site will include a robust public process.
However, as passed by council, it still states whatever future project is contemplated must compensate the city with fair market value and a positive financial return, contribute to the tax base, add vitality and density to downtown and provide open space.
Valiant had estimated its project could turn a profit and potentially kick back more than $270,000 a year to the city's general fund, but some had doubts the city would ever see that money.
Council members expressed concerns that, legally and financially speaking, the city would be in a subordinate position, meaning Valiant's first obligation would be to make its primary debt payments, and the city would risk the potential of never seeing a dime for the property if cash flow from hotel operations wasn't what was projected — which has happened in other cities that have bought into conference center proposals.
For instance, the city of Bay City loaned $4 million to help finance a hotel and conference center that opened in its downtown in 2004. Seven years later, the city hasn't been paid because cash flow hasn't been in excess of primary debt payment amounts.
Ann Arbor resident Alan Haber appeared before the City Council admittedly disgruntled tonight.
Ryan J. Stanton | AnnArbor.com
"The way I understood the last proposal, as it was presented to us, was it was almost like a land lease where there would be annual payments to the city," Smith said, adding the city also would have gotten a percentage of condo sales. "However, the first lien holder was in the primary position, so should there not be enough money left over, the secondary party paid would be the city. So that, to me, represents a risk that I think is totally unacceptable to the taxpayers."
Smith, a real estate professional, said she thinks the Library Lot is the city's most valuable piece of land, possibly worth as much as $8 million or $10 million. She and other council members said they've never seen an appraisal of the property, though.
Ann Arbor resident Alan Haber, one of the leaders of a push to see the site developed as an urban park, chastised city leaders tonight for overlooking his "community commons" idea.
"Your advisory committee did not give it fair hearing," he said. "They did not allow questions to be asked and answered. It was not a fair process."
Haber and other members of the audience carried signs that read "Keep A2 Lot Public." They also wore buttons in opposition to the conference center proposal.
Hieftje said Haber's idea doesn't have to go away.
"It can certainly be kept alive, and we can start a conversation about where in our city it would fit best," he said. "But does it need to be in what is probably the most valuable site in downtown real estate perhaps right now in the entire state of Michigan?"
As for what goes on the Library Lot, Hieftje said the city has to honor the $5.4 million invested into infrastructure to make sure it's suitable for development, and so it can't just be a park. He said there are other areas near downtown where a park could work, though.
"You heard about the one at 415 W. Washington tonight," he said. "That's the first phase of the greenway. There's another one on North Main, a very large parcel. There's another one on First and William, which is right now a surface parking lot that needs a pollution cleanup. All of those have been designated to be part of the greenway."
Despite rejecting Valiant's proposal and concluding the RFP process, council members expressed hope that developing the Library Lot site would remain a priority.
"For me," Briere said, "this is hitting the reset button."
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's e-mail newsletters.
Comments
Ryan J. Stanton
Wed, Apr 6, 2011 : 12:44 a.m.
To expand on the Bay City situation mentioned in the story, the Doubletree Hotel and Conference Center is not technically in "default" to its subordinate debt holders. The trust indenture and related bond documents indicate that subordinate debt holders will be paid when cash flow is in excess of primary debt payment amounts. Currently, the subordinate debt holders are not being paid. The subordinate debt includes a $4 million loan from the city, $640,000 from the Great Lakes Center Foundation Loan; a $2.5 million Section 108 loan ($500,000 was repaid); and a $255,000 MEDC Urban Land Assembly loan.
15crown00
Tue, Apr 5, 2011 : 7:21 p.m.
Good i'm GLAD they Rejected it.
katie
Tue, Apr 5, 2011 : 6:07 p.m.
So far, so good, but . . . Please, no more projects that might end up with taxpayer liability. No more "privatize profits and socialize risks."
TravisT
Tue, Apr 5, 2011 : 5:24 p.m.
I'm really disappointed that this project was rejected so early in the process. I was a co-chair of a national conference that was hosted by a student organization at the University of Michigan. The conference had approximately 650 attendees. Therefore, I feel I have more experience in this matter than most, and I can honestly say that Ann Arbor does not have adequate conference facilities, either at U-M or in the city. We had to take our conference, which was supposedly hosted by the University of Michigan, and move it to Ypsilanti. Although the facilities in Ypsilanti are fantastic, I still consider this a huge disappointment and the biggest failure of our conference because despite our constant bus service to the University, we found it almost impossible to get people to go and see all of our wonderful research facilities (showing off our facilities and our department was supposed to be one of the benefits of hosting the conference). The facilities in Ann Arbor are not nice enough and they are certainly not large enough. Furthermore, there is high competition for the small conference facilities that U-M does have. We tried to book university facilities a year in advance before we realized just how big our conference would be. ALL of the university facilities suitable for even a modest sized conference were already booked - the demand is there. There is always a market for conference facilities in a small/mid-size town with a large university. You can't compare Ann Arbor to Bay City, which doesn't have a comparable population, proximity to a major airport, or a major univerisity. We could have really used this conference center. The only change I would have made is to make it bigger.
Roadman
Tue, Apr 5, 2011 : 10:44 p.m.
You're mistaken Travis T. The public does not want congestion in their neighborhood.
Wolf's Bane
Tue, Apr 5, 2011 : 5:49 p.m.
Two words: University Michigan!
truthspeak
Tue, Apr 5, 2011 : 3:16 p.m.
Margie Teall said it best when she said ( and this is paraphrased from my memory of the meeting) " we are stopping the process too early when the public hearings have not been held. The public has not been given the facts on the project. There have been some residents who have shown up at the committee meetings who typically show up at meetings, but the public in general has not been given any accurate information about this project. The council has not even been given a finalized version of the project or had their questions answered. How can we quit when we don't have the facts?" As I have said many times in previous posts, the public's right to know has been pushed aside by a few residents with their own political agenda. They hijacked the conversation. They cry corruption and unfair process when they are the exact ones actually producing the corruption. This disgusts me to no end. I am extremely disappointed that these few people can corrupt the process so easily. Although I am not completely in favor of a conference center and do not like the current design, I do believe that the final version would have been much different and do want something to be developed on this location.
Roadman
Tue, Apr 5, 2011 : 10:43 p.m.
"They cry corruption and unfair process when they are the exact ones actually producing the corruption." Sounds like the Council Party to me, or the "Gang of Seven" as some have labelled it.
grye
Tue, Apr 5, 2011 : 2:54 p.m.
This may not have been a great plan, but utilizing the space to generate jobs and revenue would be in the best interest of Ann Arbor. Putting another uneeded park on top of the garage would be a waste. The city is flush with parks that cannot be kept up with mowing, weeding, and tree trimming. Even some of the existing park ammenities are in poor shape and need of replacement. I hope the city council will have enough vision to profit from this space and not kneel before the tree huggers nor put the city into massive debt on a whim.
Roadman
Tue, Apr 5, 2011 : 10:46 p.m.
I disagree., Grye. The "Tree Huggers" are a powerful force in this town and their views are highly respected.
Wolf's Bane
Tue, Apr 5, 2011 : 2:10 p.m.
Recall City Council members Margie Teall and Tony Derezinski! Let's get a petition going. These folks clearly don't have Ann Arbor's best interest at heart. Boooooooo-hisss
Roadman
Tue, Apr 5, 2011 : 10:47 p.m.
I support a recall effort.
Mike Martin
Tue, Apr 5, 2011 : 2:09 p.m.
Quoting Hieftje- "But does it need to be in what is probably the most valuable site in downtown real estate perhaps right now in the entire state of Michigan?" Classic out of touch comment by the mayor. Out little postage stamp of a lot is not even close to the "most valuable site in the entire state of Michigan" Mr. Hieftje. That's laughable. When are we going to get over ourselves in Ann Arbor and come down to earth? Hiefje's lightweight leadership gets depressing.
Goofus
Tue, Apr 5, 2011 : 1:44 p.m.
I'm going to go get a lunch from Jerusalem Garden and a dinner from Earthen Jar to celebrate this victory for the citizens of Ann Arbor. I'm also gonna pray for a quick completion of that travesty called the Underground Parking Garage so we can get back to normal on that block.
Bob Martel
Tue, Apr 5, 2011 : 1:34 p.m.
A wise move by Council indeed!
AA
Tue, Apr 5, 2011 : 1:30 p.m.
. . . "Valiant was not at tonight's meeting and has been unreachable since last week." ENOUGH SAID ABOUT THIS 'INVESTMENT' IN OUR COMMUNITY.
xmo
Tue, Apr 5, 2011 : 1:14 p.m.
Why doesn't Alan Haber and his supporters exercise their rights and buy the land, pay taxes on it so, we all can enjoy it!
Terminal
Tue, Apr 5, 2011 : 1:39 p.m.
Why doesn't Valiant just buy the property and pay taxes on it with their own money? And build the project without any publicly funded financial help from the public. And they can pay full price for parking in the underground structure.
BornNRaised
Tue, Apr 5, 2011 : 12:52 p.m.
The two holdouts didn't understand why they were taking a vote so early? Maybe they never took their hands off their ears to listen to what the residents have been telling their elected officials. ANN ARBOR DOESN'T NEED THIS! AND CAN'T AFFORD THE RISK! So they wanted to ignore the city residents and just keep going? Great leadership.
jimi1984
Tue, Apr 5, 2011 : 12:36 p.m.
TG there is some sanity by voting down (at least) this conference center concept. What a larf to think such a monstrosity would be consistently filled, what with the competition far and near, and at a sustainable rate. Boondoggle indeed. Another take on public commons: Make it the AATA bus depot. Perhaps for Greyhound too.
Wolf's Bane
Tue, Apr 5, 2011 : 2:07 p.m.
Greyhound already has a beautiful depot.
Veracity
Tue, Apr 5, 2011 : 12:28 p.m.
InsideTheHall and pbehjatnia: Your continued support for a new downtown hotel/conference center ignores the excellent feasibility study presented by Charles Skelton, a local expert in the hostelry industry. His conclusion was that the Valiant Partners proposal would not generate the revenue that they expected. This prospect would not only deny the city income but the city would likely be at risk of having to pay for Valiant Partners debt servicing as well. What benefit would the city experience when that happens? Furthermore, the many hotels in the Ann Arbor area are averaging only 60% occupancy with an average $99 nightly room rate. The hotels include those of large national corporations such as Marriott and Hilton. Both of these are aware of the hotel market economics in Ann Arbor and would have competed with Valiant Partners if they saw a profitable market. Actually, Valiant Partners model assumed 75% occupancy and $200 per night room rates in order to produce the paltry $270,000 projected payments to the city. Future population and commercial growth projections for Ann Arbor are flat. Corporations are spending less on conferences in this recession and many are adopting virtual Internet conferencing. The "field of dreams" hope that "if a conference center is built then it will be profitable" is only wishful thinking. The Valiant Partners proposal was flawed from the beginning and should have been rejected on initial presentation. However, better late than never.
Snarf Oscar Boondoggle
Tue, May 17, 2011 : 4:29 a.m.
wellllllllll, if the prop is worth ~$8M ... a lease for $270K/yr wolud be a return of ~ 3.4% .... and the developer can have the rest of the profit(s), if any. hmmmm.
Elaine F. Owsley
Tue, Apr 5, 2011 : 12:21 p.m.
The gods of architecture and fiscal responsibility are smiling on the City Council today. Let the people say, Yippee!!
Terminal
Tue, Apr 5, 2011 : 12:20 p.m.
To Council and Mayor; Talk is pretty cheap around here. After the debt we've racked up and the Million Dollar Urinal talk is the only affordable option. Yep, talk is all this council can afford to do.
Wolf's Bane
Tue, Apr 5, 2011 : 12:11 p.m.
I want to voice my support for Alan Haber's position in that I also believe that the Library Lot should remain public or at a bare minimum have the public's input as to what should be built on top of the parking structure. I also strongly agree with Council Member Sandi Smith that the Conference Center or any other building of that size is just not viable at this particular time. In addition, I'm surprised that an appraisal of the new lot has not yet been completed? You would think that would be the most important and perhaps the first step in the process of developing this property. As for the figure of 8-9 million? Not quite sure about that, Fingerele Lumber;'s lot has been valued at 4 million back in 2009, so I would guest-imate the Library lot, which is much smaller, to be at maybe 5-6 million.
pbehjatnia
Tue, Apr 5, 2011 : 11:25 a.m.
i was able to watch the council meeting on t.v. last night. the comment towards the end about hotel owners near briarwood who are currently building their own centers was telling. ann arbor is passing on opportunity to protect chain mktls and hotels at the mall. these hotels could have benefitted from a large center in the city. the centers they are building are small meeting areas. they are not destinations. the reference to average occupancy and rates is willfully low and not very believable. these hotels currently most likely make their bottom line during large university events. a destination hotel/conference center had the viable potential to spread those good days over more months for everyone. the comparison of a major academic and research center like ann arbor to a completely depressed area like bay city or a university town, hard to reach, like madison, wi is just wrong. ann arbor is not a depressed car town or in the northern woods of wisconsin. it is an academic and research town with direct access to an international airport. but i agree with the other commentor here: let cranes and jobs keep rising in grand rapids. let the money go elsewhere. city council: you got my NO vote on any millage from here on out.
pbehjatnia
Tue, Apr 5, 2011 : 11:27 a.m.
motels - typo!
InsideTheHall
Tue, Apr 5, 2011 : 11:03 a.m.
Meanwhile, building cranes line the sky of Grand Rapids employing skilled tradesmen. The German mayor has imposed his will once again.
Roadman
Tue, Apr 5, 2011 : 8:21 p.m.
John Hieftje is actually a Danish-American.
pseudo
Tue, Apr 5, 2011 : 10:30 a.m.
Ann Arbor, I think you have a Waterstreet... "However, as passed by council, it still states whatever future project is contemplated must compensate the city with fair market value and a positive financial return, contribute to the tax base, add vitality and density to downtown and provide open space." add density and open space... good luck with those two things in the same space
Snarf Oscar Boondoggle
Tue, May 17, 2011 : 4:17 a.m.
yeh, but 5 out of 6 will work, eh?
Brad
Tue, Apr 5, 2011 : 11:32 a.m.
"add density and open space... good luck with those two things in the same space" That's an excellent point!
a2grateful
Tue, Apr 5, 2011 : 9:54 a.m.
Good to see the current project and process ended. Interesting quotes in story give insight to project and process demise: ". . . concerns that the city's formal request-for-proposals process was being cut short. . ." Citizens have been concerned, too. The DDA proposal-culling process undercut fair and reasonable selection. The DDA recommendation appeared to be predetermined, devoid of wisdom and fiduciary responsibility. ". . . I don't understand why we are taking a vote this early before the process has been given a chance to get to where we were supposed to take a vote," Teall said, noting that Valiant wasn't given a chance to respond to issues raised. . ." The bottom line: No "viable proposal" equals no building. The definition of viable is still an issue. Viability, in civic terms, includes high civic benefit and protection. ". . . Smith, a real estate professional, said she thinks the Library Lot is the city's most valuable piece of land, possibly worth as much as $8 million. . ." At best, this is wishful and nonsensical thinking. The value of the library lot will likely be the investment value of the parking garage, once it is finished. The test for Smith's notion of value is the listing test. List the property for $8 million and see what happens. . . Or, if council belief in value is strong, auction the property to the high bidder. Maybe what's needed here is a name change for the DDA. Let's rename it the DPA: Downtown Parking Administration. The delusions of grandeur and self-importance could then be brought into check.
RTFM
Tue, Apr 5, 2011 : 2:52 a.m.
Congratulations! A 'No' vote. Now can the Ann Arbor City Council get that bridge fixed?
capersdaddy
Tue, Apr 5, 2011 : 2:49 a.m.
thank goodness. aside from criticisms of architecture and obstructed views - this was just the wrong idea at the wrong time. i DO support big buildings AND obstructed views - but not for this. we need to support big development - keep in mind the twin trade towers were vilified in their time, an offense to nyc as those who knew it. let go of the past and accept that we need to march forward, but not with a conference center. for anyone who's attended a "conference" - they're bs. go ahead and build a monstrosity - just give it a higher cause and push through the haters.
TravisT
Tue, Apr 5, 2011 : 5:05 p.m.
I'm curious what you have against conferences. What conferences have you been going to that are such "bs"? I go to 3-4 technical and scientific conferences every year. I present my research, I learn what other cutting edge research people are doing around the world, and I get to meet and discuss new ideas with experts from around the world. They're a great forum and a great place to learn. A lot of positive work gets done at the conferences I go to. They're nothing like the conferences I see on T.V. where people only seem to do team building excercises.
capersdaddy
Tue, Apr 5, 2011 : 3:12 a.m.
eiffel (hated), london eye (hated), space needle (hated), guggenheim (hated), getty (sorta hated)...a2 is not a world city - but go for iconic over supposedly economic, otherwise, a community garden will suffice.
Blackbird
Tue, Apr 5, 2011 : 2:19 a.m.
Congratulations to the citizens uprising that led to this victory! So happy not to have any giant ugly building obstructing our views! I can still walk from the West Side to downtown with the Burton Tower in full view.
Roadman
Tue, Apr 5, 2011 : 10:51 p.m.
A "Valiant" effort went down the tubes for the developer, LOL.
Roadman
Tue, Apr 5, 2011 : 10:49 p.m.
The anti-development activists carried the day, Blackbird. The only two nay votes came from City Council members not up for re-election.
Tom Joad
Tue, Apr 5, 2011 : 2:17 a.m.
Boondoggle project REJECTED Not enough palms greased, better luck next time. That building looks like nightmare relic from East Germany
Snarf Oscar Boondoggle
Tue, May 17, 2011 : 4:16 a.m.
i resemble taht remark! thank you city council! /P H E W! (now i can braethe agian)
ferdcom
Tue, Apr 5, 2011 : 3:38 a.m.
Are you implying that the council members who were for the project were bribed and the developer just needs to come back with more graft money?
Roadman
Tue, Apr 5, 2011 : 1:55 a.m.
This is absolutely great news. I thank all of the City Council members who voted for this and all of the activitsts who opposed it, including John Floyd, Mark Koroi,Lou Glorie, Alan Haber, David Cahill, Sabra Briere and many more. This was a victory for the citizens of Ann Arbor.