Development problems

By Sam Inglot

A city contractor and tax abatement beneficiary has been late on paying taxes, but says the redevelopment of the Holmes Street School will be completed this summer

The redevelopment of the former Holmes Street School into a high-tech workplace is scheduled to wrap up this summer. But the project’s completion comes after years of late tax payments and delays due to the economy from a developer who has received tax abatements and money as a city contractor.

Ryan Vartoogian, the 36-year-old president and CEO of Spartan Internet, a Lansing-based online marketing and strategy company, purchased the three-story building at 1030 S. Holmes St. from the Lansing School District in 2007 for $115,000. Vartoogian said he plans on investing $2.5 million into the 35,000-square-foot project.

Spartan Internet is a contractor for the city and has been paid $1.5 million since 2009 for various technology services, according to figures from the city’s internal auditor.

And according to documents from City Assessor’s Office, Spartan Internet Properties LLC, the holding company that owns the Holmes Street School, recently owed the city just over $15,000 in taxes. Vartoogian and Bob Trezise, president and CEO of the Lansing Economic Area Partnership, said the taxes have recently been paid. Karen Conroy with the Ingham County Treasurer’s Office confirmed that there were delinquent taxes, but that they had been paid back.

“He’s paid his taxes now, and we’ll follow up on that again,” Trezise said. “We were adamant that we would rescind his incentives if he did not pay his taxes, and he understood that.”

In 2008, Spartan Internet Properties received an Obsolete Property Rehabilitation Act tax exemption as well as a personal property tax exemption — worth a combined $449,000, according to the Lansing Economic Development Corp. — from the City Council for the Holmes Street School property. They each last 12 years.

Trezise said the city has revoked “numerous” tax abatements in the past and that they’ve “always involved taxes being owed.”

To Lansing City Council President Carol Wood, it doesn’t matter if the taxes have been paid back. She believes the tax abatements should be pulled.

“I find it troubling on two avenues. The fact he was given property tax abatements and the other is the fact that the city has also been contracting with them for services,” she said. “The fact we´re paying them for a service and they’re not paying their taxes I find very troubling.”

According to city documents, from January 2009 to February 2013, the city had paid Spartan Internet Consulting just over $1.5 million for its services.

Wood said she was “equally as troubled” by the fact that the Council only found out about the tax issue at a recent committee meeting because it requested an update on the project from LEAP.

She said the delinquent taxes made her question the “validity” of the project.

Vartoogian says he found out about the delinquent taxes at the same time the Council was notified and took care of the situation immediately. He said the taxes were about two weeks late. However, records show the payment would have been over a year late.

“(The meeting) was the first that we became aware,” Vartoogian said. “We didn’t know anything prior to that point because we hadn’t received any other notices. We received no communication other than we were on the agenda for that meeting. I don´t think there’s any conspiracy around it. If we had known sooner, we would have taken care of it sooner.”

The late tax payments are the latest setback for the project. The redevelopment kicked off in 2009, but was delayed when the economy tanked.

“It was built at the cusp of the financial market falling — the Great Recession — which was the No. 1 problem,” Trezise said. “It was struggling through that, but now we´re under way.”

With the project moving again, Vartoogian said he plans on having it finished by the end of July.

One of the biggest parts of the project is the addition of a three-story entrance with a glass atrium on the west side of the building, which faces the parking lot and playground.

“Our goal was to make it look very different from what you would expect going into other school buildings,” Vartoogian said. “So, we’re adding a modern addition to the back of the building.”

He said workers will be “setting the steel” for the structure within the next month or so.

Much like the outside, the goal is to transform the interior to make the building more of a “cool loft-style space” rather than an old school building.

Inside the building, only a few things give away the fact it was once a school, like the lockers on the first floor that Vartoogian plans on keeping. The rest of the lockers and old classroom chalkboards have been stripped out.

To give the building the loft-like atmosphere that Vartoogian is trying to cultivate, the ceilings were raised about 10 feet. Each room has large, energy-efficient windows, which bring in a lot of natural light.

Initially, Spartan Internet will occupy half of the 35,000-square foot space, but Vartoogian said it’d scale back as other groups move in, like the Lansing Public Media Center, which is now at the South Washington Office Complex.