Ypsilanti's Water Street debt coverage: City needs $2 million invested per acre
The City of Ypsilanti needs to see development worth nearly $2 million per acre on Water Street to pay its debt for the undeveloped 38 acres it owns just east of downtown.
That figure climbs to $2.7 million per acre if council approves proposed plans for a county rec center on one-third of the site.
The City is considering giving 12 acres of the Water Street property to the Washtenaw County Parks and Recreation Commission so the county can build the proposed rec center there. Its planners and supporters say the at least $10 million center would attract the kind of mixed-use development the city envisioned sprouting up when it purchased the land.
Additionally, they say, developers who previously wanted to build student housing on Water Street have recently expressed a renewed interest in the property.
However, city officials also are weighing costs and development scenarios as they look at a $5.9 million budget shortfall by 2017. The city has scheduled the last of three budget meetings for tonight to decide on several options for closing the gap.
The property’s debt payments will eventually grow to $1.37 million annually and the city already made its first $476,000 payment in May on the $31 million bond, according to an analysis of the numbers.
Ypsilanti would need to see an average of $36,000 in annual tax revenue from each acre of the 38-acre site just to cover its highest annual payments. With a TIFA millage set to just under 39 mills, the city needs to see around $925,000 in taxable value, or development valued at $1.85 million per acre to cover the debt payments.
If the city were generating $36,000 in taxes from each parcel, then it would lose $432,000 in tax revenue annually by giving 12 acres of land to the county for the proposed rec center. That totals over $8 million during the life of the bond.
Giving the land for development would leave the city with just 26 taxable acres on Water Street and increase the average annual tax revenue needed to make its highest annual payments to $52,000 per acre.
That would mean the city would need to see an average of $1.35 million in taxable value, or $2.7 million in real investment, on each of the remaining 26 acres to cover the debt payments.
None of those figures take any land sale price into account.
In comparison, local developers Erik and Karen Maurer recently invested $2.2 million to renovate downtown’s Mellencamp Building. The Peninsular Place student housing development, which is on 3.79 acres north of Eastern Michigan University's campus on Railroad Street, has a taxable value of approximately $755,000 per acre, and the city collects around $30,000 per acre annually from it.
Council Member Pete Murdock said during council’s recent discussion on the rec center proposal that he was concerned about losing more than $400,000 in revenue the city could otherwise generate from the property.
He said it was especially bad timing because council is considering putting a Water Street debt retirement millage on the ballot in February as it contends with a looming $5.9 million budget shortfall by 2017 due in part to Water Street’s failure.
Council Member Brian Robb said the city would be “subsidizing” the rec center to the tune of $432,000 annually until the debt is retired.
“I’ve heard positive feedback and that people want to make this happen; however, we have to decide how we’re going to pay for it,” Robb said. “We’re either going to subsidize this recreation facility with a (Water Street debt retirement) millage or subsidize it with the salaries of fire and police.
“I’m not sure residents totally understand that trade off. It’s not something where we can just say ‘Well, we’re doing nothing with this property so come and build.”
Mayor Paul Schreiber said he supports having the rec center on Water Street, though he would also like to see a denser development. He said he has heard a lot of support for the idea as well as some financial concerns. But he said he believes the project would be good for Ypsilanti 20 or 30 years in the future, which council must consider.
“It would be a long-term investment,” he said. “It may not give a quick, short-term payback, but it may be a worthwhile investment. But, again, we need to make the plan a little more dense than proposed.”
Comments
sig.melvin
Wed, Oct 12, 2011 : 8:29 p.m.
For home owners it is Called A Short Sale So WHO owns the waterstreet property ...?is the owner still alive? Give it back ..
Candace Pinaud
Wed, Oct 12, 2011 : 12:47 a.m.
I think the rec center is the absolute 'best' thing that has come Ypsi's way in a Long, Long time and they should jump on this opportunity. Waiting for 'something better to come' is a short-sighted, foolish decision - not unlike the one that got us into this problem in the first place. Surely we don't need to provide 'proof' of how a building such as this would generate and bring future business and success to Ypsi and, most importantly, 'more people'. One of the biggest issues Ypsi has with overall continued success is we just don't have enough people in the city. 23,000 population is just not enough to sustain all of the businesses trying to make it in this town. We 'need' more people. How do we get people 'here'? A festival here and there and cool art projects and so on work, for a short minute; they don't sustain though. We've lost manufacturing industry and that isn't likely to come back. So, 'what' would generate people coming here, be a stable community influence and promote other businesses to come to this area? A Rec Center is 100% the BEST idea. Councilman Murdock use of 'potential lost tax revenue' means nothing compared to 'no' revenue. Not approving this project would only sink my Ypsi heart further away from this town and my business mind as far away as you can get. Ypsi Council - you (or collectively - we) are NOT real estate developers. We are here to 'get that property used' and to stop taxing our residents so much that we cannot afford to live here. We are losing good folks like me because we simply cannot afford the taxes here anymore and we are not attracting new ones as much as we need to. Please, I implore you, to approve this project and tweak out the details. Or hand the job off to business people who can make this decision for us.
Depot Town
Wed, Oct 12, 2011 : 12:18 p.m.
It's my understanding a big special property tax would be needed to pay for this. If you can't afford the taxes now...
Andrew Jason Clock
Tue, Oct 11, 2011 : 11:47 p.m.
City Confidential, the 12 acre parcel does include the aprox. 4 acres that are river setback. That figure wouldn't include the additional river setback on the rest of the property, and I assume the numbers above don't take that into account either. Washtenaw Parks & Rec envisions building a stretch of the Border to Border Trail on that setback, and connecting it with a pedestrian bridge to Riverside Park, creating a linear park system that stretches all the way from Spring St, where it would connect to Ford Lake Park, to Forest Ave, where it would connect to the B2B on EMU's campus, back out to the river, and on to Ann Arbor. We get more than just the recreation center, we become the eastern hub for a county wide recreation network and gain a spectacular center piece for the entire city. Despite the massive debt involved, and the looming fiscal crisis, the recreation center is the best option we have to attempt to spur development on Water Street and throughout the city. Water Street may be our biggest problem because we own(owe one) it, but it is far from the only parcel of Ypsilanti not living up to its tax potential. Vacant businesses, houses, they all play into that picture. If we only focus on filling this one gap, then we have already failed, we're out of time. To reverse our revenue trend, we need to think big, and yes, think to the future. Ypsilanti currently has no recreation department at all. Anything beyond the parks themselves (and those too, to an extent) are cared for and run by volunteers, and are (valiantly) struggling. Having access to a facility like this can be the tipping point that moves families to locate here. It could be the spark that brings a new business to downtown. Is any of that guaranteed if we move forward with a rec center? Certainly not. But isn't it worth the risk? Green space & recreation rank high in relocation decisions for companies and individuals. Its sure worked in Ann Arbor.
xmo
Tue, Oct 11, 2011 : 8:05 p.m.
Why doesn't the City Government get out of the Real Estate Business? Let developers submit plans for development and the City Council deny or approve the plans.
Paula Gardner
Tue, Oct 11, 2011 : 6:31 p.m.
We just added a line to the story clarifying that none of these numbers involve land sale revenue.
City Confidential
Tue, Oct 11, 2011 : 6:18 p.m.
The proposed land for the rec center includes a substantial amount of square footage that is unusable due to the setback from the river. Is that area included in the 12 acre / 38 acre figures? As was discussed in the city council meeting, this proposed land use is a LONG TERM commitment to a project that is beneficial to the city in qualitative if not simply quantitative measures. This rec center project would NOT become yet another failed vision which blights the land with undesirable buildings. We would not look back in 15 years and find an array of ugly, useless buildings that were some investor's idea of a good plan, but now prevent future investors from buying because they would have to demolish first. Remember the old chinese restaurant and the old furniture store? Who paid to have those removed from the site? Notice the old style Taco Bell and burger joint drive through on Washtenaw that sit empty? Who is going to want to make a go at using those properties? Same goes for the storefronts alongside Abe's Coney Island. What about the trash-strewn mobile home park along Michigan Ave? How much wrangling was needed to get that "investor" to take responsibility for the mess he created there? Washtenaw County can't and won't simply walk away from the buildings when they decide to get out of the recreation business, or when one key board member dies or when someone wants to retire. The land will be far more attractive to realistic investors with an attractive neighbor, Washtenaw County, on the site. The stability that the county can provide is far more valuable to reasonable, risk-averse investors - the kinds we want on the site - than any other proposal that is even remotely likely to come to the table. I appreciate that the city is being a little more careful about looking before they leap, but this really does seem like the best possible course of action for a quagmire such as Water Street.
oldblueypsi
Tue, Oct 11, 2011 : 5:32 p.m.
Give it all away! Spend like drunken sailors on leave for the first time in a year! Maybe Ann Arbor can refer an "artist" to create something expensive, ugly and useless in place of the flood plain condos with living room rowboats on the Huron River. Why not just dissolve the city charter and allow an orderly merger of the township and city? Elimination of duplicity in bureaucratic positions would benefit both. Fire and police services would benefit. And the average homeowner would not be taxed out of his/her home.
no flamers!
Tue, Oct 11, 2011 : 8:40 p.m.
I've been wondering about this for some time. If anyone reading this understands the process and feasibility, please share. I'm sure it is incredibly challenging. And that the Township couldn't/wouldn't "bite" unless/until Water Street was resolved by the City so that Township residents wouldn't face the financial penalty. But still.
average joe
Tue, Oct 11, 2011 : 5:13 p.m.
Didn't know you could give real property away that you still owed money on. How does that work? Instead of the water street project, it should have been named waterworks because the city acts like it's only "play money" like monopoly.
Joe_Citizen
Tue, Oct 11, 2011 : 5:06 p.m.
That's a bit ridiculous for that parcel of land, per acre, and has to be wrong, but for the whole thing is much closer to the actual amounts. The amounts your talking would maybe be more in NY City, but sorry to bust your bubble Tom. Ypsilanti is not even close to these amounts.
Pete Murdock
Tue, Oct 11, 2011 : 4:48 p.m.
Tom - The numbers you are using are not the per acre sale price. They are the average Assessed Value needed to produce the tax revenue through the Tax Increment Finance Plan in order to pay the annual debt payments through 2031. An average of $1.8M per acre of development is needed for the entire site and if 12 acres are removed from the tax roles then an average of $2.7M per acre is needed.
dading dont delete me bro
Tue, Oct 11, 2011 : 4:01 p.m.
ouch...
cinnabar7071
Tue, Oct 11, 2011 : 3:52 p.m.
See what happens when gov't get involved.
treetowncartel
Tue, Oct 11, 2011 : 3:51 p.m.
I think they should consider Feiger's idea for Detroit and turn into the Amsterdam of the west.
oldblueypsi
Tue, Oct 11, 2011 : 7:15 p.m.
Just stop enforcing the "vice" and drug laws and we're already there!