Comments to DDA on 7.19.12 by Jane Creswell click 2 Xs to read

Open Letter to DDA, City Council, Residents of Chelsea 7.19.12

 Preservation Chelsea

J

PO Box 63, Chelsea, MI 48118

uly 19, 2012

Open letter to the Downtown Development Authority, City Council and residents of Chelsea:
All five resolutions presented during the meeting of the Downtown Development Authority on January 19, 2012 were to study situations related to the Longworth Property and Jackson Street corridor. Included among those five resolutions to be studied is the option of demolition of the Daniels addition showroom and the livery.

Since resolution number two is on the agenda today (demolish Daniels addition showroom), what is the evidence of that study? Although resolution three is not on the agenda today (demolish the livery), it should be noted that during the meeting on June 21, 2012, Mark Heydlauff said “The Livery building is old and used up and should not be saved.”

Questions that flow from the study of the situation are:

• Is there an appropriate engineering study completed that documents that the Mack Building is structurally stable enough so that it won’t collapse when its neighbors are removed?
• Although there will be hazardous waste remediation, what are the effects on ground water when buildings are demolished?
• Under Section 29 (2) of the Downtown Development Authority Act (MCL 125 1679, PA of 1975), a DDA is required to refer proposed changes to the exterior of sites listed on the National Register of Historic Places to the State Historic Preservation Office for comment. Has the SHPO been asked for its comments? What were they?
• The adjoining land is owned by the depot, but being proximate to a railroad line, what federal licensing may be required to do major work at the site such as demolition? If such licensing is required, doesn’t that trigger a Section 106 proceeding under the National Historic Preservation Act of 1966 for federally licensed or assisted projects?
• Doesn’t the use of federal funds from the EPA trigger a Section 106 proceeding?

The DDA has a responsibility to produce the results of the study before there is a vote for demolition of any part of the Longworth Property.

Very Truly Yours,

John L. Frank

President,

The Sun Times 7.18.12, front page, click 2 Xs

Sun Times 7.18.12, p 9 click 2 Xs to read

Sun Times 7.18.12, p 9

The question everyone should be asking: What Went Wrong?

John Frank repeated his request of DDA to City Council 7.10.12: initiate a committee to meet with Kadushin Associates

I’m John Frank; I live at 138 East Middle Street.

I am requesting that you please appoint a committee to meet with the developer, Kadushin Associates, who submitted a proposal to rehabilitate the Longworth properties. I made this request to the DDA at their last meeting and I was ignored.

The purpose of this proposed committee would be to resolve several misunderstandings that were created by a resolution the DDA passed on June 7^th.

When they presented their proposal to the DDA at a special meeting on May 31^st, Kadushin Associates made clear how they expected to finance the project, and the required timeline. At the following meeting on June 7^th the DDA passed a resolution that Kadushin perceived as having erected two insurmountable barriers. Some members of the DDA now say that the resolution did not say what they meant, and that led to a misunderstanding.

Upon receipt of the resolution Abe Kadushin asked our City Manager to meet with him to clarify these issues. Abe told me that he was stunned that the City Manager refused to meet with him. This was “the straw that broke the camel’s back.” ----- Abe then took the advice of his attorney and withdrew their offer, and told me that trying to work with Chelsea was, quote, “too much hassle” – “too much hassle”.

I believe Chelsea will suffer if we are silent about what we know from experience is wrong. And what is my experience? Although I do not own a business in Chelsea, I did devote eleven years, prior to my retirement, as a Senior Partner in a 250-person consultancy that worked with large organizations, helping them to improve their business processes. I do know something about business.

My experience in business taught me that criterion number one in doing business is:

Love Your Customer. A developer is – or should be thought of as – an esteemed potential customer. This customer wants to spend 3.7 million dollars in our community to create new tax-paying business. We ought to reach out to him. Make it easy for him to do business with us. Instead of saying, as one us did, “I for one am not ready to move forward by inviting them back,” we should have said “I will meet with you at your convenience to resolve misunderstandings and I will work with you to find a mutually beneficial way for us to move forward together.”

Since the name on the deed for the Longworth property has the City as the owner, it is time that the City Council exercise leadership on this matter, in accordance with the ethical principles for the government of the City of Chelsea. A non-voting sub-committee could be appointed to meet with Kadushin for the purposes of exchanging information and resolving misunderstandings, without violating the Open Meetings Act. Surely this ought to be done.

I request that you please appoint a committee to meet with the developer, Kadushin Associates, to resolve several misunderstandings that were created by the resolution the DDA passed on June 7^th.

Thank You.

Two points communicated to City Council on 7.10.12 regarding timing of funding and process required of DDA

July 9, 2012

Chelsea City Council

Meeting July 10, 2012

Good evening, Members of the Chelsea City Council. My name is Ellen Thackery and I am the Southeast Michigan Field Representative for two nonprofit organizations, the Michigan Historic Preservation Network and the National Trust for Historic Preservation. I am here tonight to communicate two points of interest about the Longworth Complex—a complex both of my organizations believe is a valuable historic asset to your community and to our shared heritage. I am directing these comments to you because you are the elected, legislative body and I know that all things that affect your city and its residents are relevant here and because I believe that the Longworth Complex issue has become urgent and the discussion of this issue should not wait until the next DDA meeting on July 19.

The first point of interest that I’d like to convey is a matter of timing as it pertains to the Longworth Complex. On June 7, the Chelsea DDA passed a resolution that requested that the development team chosen to rehabilitate the Longworth Complex submit an irrevocable bank letter of credit of $1 million along with their modified proposal by June 21. It’s important for you to know how difficult or even impossible that request is to fulfill. We speak from our own current experience. The Michigan Historic Preservation Network (MHPN) is developing a historic property ourselves in Old Town Lansing as our offices. The property agreement was finalized in November 2011, asbestos abatement has occurred, our architectural designs have been developed, and many other due diligence activities and engineering and environmental studies have taken place on the property since November 2011. And we are, just now, in July of 2012, waiting for the permanent loan commitment from our bank, which will indeed come.  It has taken us about 8 months of environmental and financial investments before we could obtain that commitment. I don’t know how it would be possible to obtain that kind of commitment from a bank within two weeks or even 90 days of a project’s start.

The second point of interest that I’d like to convey is to note for you that the state law that enables DDAs requires that any city-owned properties listed on the National Register of Historic Places receive a State Historic Preservation Office review before the city changes the exterior of the building. As you know, the National Register is an honorary designation that affords access to the Federal Rehab Tax Credit program, and in the vast majority of cases, there is no oversight of any of these properties listed on the National Register. In this case, because the Longworth Complex is City-owned and listed on the National Register, the complex requires a State Historic Preservation Office review before the City and/or the DDA make final decisions about the buildings. The DDA is determining now and over the coming weeks what its intentions for the Longworth Complex are, but if the intentions could involve demolition or even simply changing the exterior, I did want to bring that necessary review to your attention.

In conclusion, because of both of these points, I am urging you to act on behalf of the historic buildings in your care and to intercede if the DDA does decide to do anything than have these buildings rehabilitated by a seasoned development team committed to their revitalization. These buildings were purchased by the City and these buildings are City assets. We urge you to encourage more time for gathering approvals, due diligence, and securing bank support. Several MONTHS are needed for this project, not just a couple weeks. And please ensure that the buildings’ State Historic Preservation Office review occurs in accordance with the state law.

Thank you for your time and consideration.

Sincerely,

Ellen Thackery

Michigan Historic Preservation Network and the National Trust for Historic Preservation

107 E Grand River Ave.

Lansing, MI 48906

(517) 371-8080

Two other developers explain financials commonly used to redevelop historic properties to City Council 7.10.12

To Members of the Chelsea City Council,

As Chelsea leadership deliberated about the Longworth property and the proposals that were submitted to rehabilitate the property and revitalize the corner of Jackson and Main, it was suggested by some members of the DDA that the development group is not putting enough “skin in the game” relative to the financial package they’ve developed. To some, the group appears to be taking advantage of too many financial benefits—benefits that put them at an unfair advantage to others in town.

Not so. The financial tools specifically made available for historic preservation are designed to level the profoundly lopsided playing field that disadvantages the rehabilitation of historic buildings relative to other kinds of construction, especially new construction. Here’s what we mean by “lopsided.” Seeking financing at the bank, the historic property developer finds a banker who, almost always, is skeptical that an old building can be saved. The resulting loan-to-value ratio is low, forcing the developer to become extraordinarily creative in attracting any kind of loan, grant, or incentive available. The more complicated the package, the riskier. And the greater the risk, the less likely there is a return commensurate with what it takes to work on a property that has surprises at every turn – a weaker foundation than expected, asbestos in the plaster, rotted floor joists or ceiling beams, and the like. If returns were assured, generous, and easy, don’t you think everyone would be doing preservation projects?

In spite of these challenges, the Kadushin/Beal group has been skillful in suggesting a financial package that can revitalize the Longworth property, a large, complicated, deteriorated complex of buildings that only a seasoned preservation group would even consider taking on. Let’s take a closer look at the financial components proposed by the group.

A Tax Incentive Program:

For 32 years, the Federal Historic Tax Credit has quietly and effectively created skilled jobs, stimulated local economies, and revitalized historic buildings and communities. Nationally, 37,000 historic properties have been rehabilitated with the help of this credit, generating 2 million jobs and attracting $90 billion in private investment. The amount of tax credits paid by the U.S. Treasury is far less than the amount of federal taxes generated by these projects. Michigan has used the program since its inception. What many people forget is that the credit is not a benefit provided before the work is done. Rather, the investor must cover all rehabilitation costs and conduct all work in keeping with the “Secretary of the Interior’s Standards for Rehabilitation” without any assurance of qualifying for the credit. Only when returned to service and certified by the National Park Service, may the property owner claim the 20% credit that is taken against qualified expenses.

A Grant Program, a Loan Program:

Governor Rick Snyder is keenly interested in the revitalization of urban, suburban, and small town Michigan and last year created the “Community Revitalization Program” to make his vision a reality. He factored in historic preservation by having “creates jobs,” “addresses blighted properties,” and “works with historic resources” included among the selection criteria for program participation--clearly all of which play to the desire to see historic preservation supported. Successful applicants receive an incentive of up to 25% of rehabilitation expenses as a grant or a loan, both with dollar maximums. The pool of dollars currently assigned by the Governor is $100 million with at least $20 million for Brownfield and Preservation projects. The Michigan Economic Development Corporation is charged with getting the program up-and-running, and preservation projects have been among the first to be approved. We understand that Chelsea has been deemed a promising environment for successful use of this program.

A Tax Freeze Program:

Michigan’s Obsolete Property Rehabilitation Act (OPRA) was established in 2000 as another means by which to spur development. While not specifically for historic properties, they have often been the recipient because they reclaim some of the state’s most deteriorated properties. Unlike a tax abatement, OPRA freezes the current tax liability for a property so that improvements can be made without the taxes going up for from 1-to-12 years. A developer can finance a rehabilitation, an existing business can finance an increase in capacity or efficiency, or an entrepreneur can finance a start-up, knowing that they have a period of time to get underway. Rather than creating a competitive advantage for a project, it allows a project to compete when its neighbors may already be going concerns. The payoff? The municipal unit gets a more robust business able to pay its fair share at the end of the tax freeze, rather than one stunted by a tax burden that forever places it behind its neighborly competition. And of course, even as a historic property is being assisted through OPRA, the community benefits--i.e. sales tax is paid on building materials, people are employed to do the rehabilitation, employees in the new business spend their earnings in the community, income taxes are paid, visitors are attracted and spend their dollars around town, etc.

If Chelsea’s community leaders are not using all the tools available to make a historic preservation project successful, they are short-changing their community’s economic success and compromising the architectural history they are responsible for stewarding. Rather than making it impossible for the Kadushin/Beal team to work with the Longworth Property by dismissing their use of one tool or another, the City of Chelsea, its City Council, and especially its DDA should be helping create a great project—a genuine success story that will grab attention and attract others. And best of all, these tools are not just for outsiders who can bring new ideas and vitality to Chelsea. They’re for those who already have invested in Chelsea’s future and deserve a level playing field, too.

Sincerely,

Scott Lowell

Owner

Traffic Jam and Snug Restaurant

Detroit, MI
 &

Gregory Saxton

Director of Development

J. E. Johnson, Inc. 
Midland, MI

Postscript:   

We challenge the belief held by some that the Kadushin/Beal group is taking advantage of too many financial incentives in lieu of their own equity – i.e. at a DDA meeting, it apparently was noted in a critical tone that the group had factored $500,000 into their term sheet for themselves.  It must be noted that Kadushin/Beal are not investors who simply are putting dollars into a project with no sweat equity involved.  Rather, they ARE the project.  They need to pay themselves for the hours they invest as professional architects, planners, builders, and retailers.  They need to pay themselves for the risks they are taking using the Federal Tax Credit which is not paid, or even assured, before the project is undertaken.  And don’t forget they have invested cash equity as well.  This is indeed “skin in the game.”