Dec. 7 2016 09:48 AM

County door cracks open again on infrastructure bonds

A controversial proposal for Ingham County to issue millions of dollars in bonds to fund the public infrastructure for the $380 million Red Cedar Renaissance project may get new life.

That’s despite an October letter to Lansing Economic Area Partnership leaders from Ingham County Controller Tim Dolehanty that effectively declared the deal dead. But Lansing developer Joel Ferguson has released a legal opinion that contradicts the findings of Ingham County’s attorney regarding whether new property taxes could be appealed — thus impacting bond repayments — after the development was completed. Ferguson also held out a carrot, offering to sign an agreement that his company would pay off any bond revenue shortfalls on the project.

“I was not aware of the developer’s position regarding bond repayment shortfalls,” Dolehanty wrote in an email to City Pulse Monday. “Mindful that no formal proposal has been presented, I remain willing to consider any viable plan brought before the County.”

Under the proposal, originally floated in May by LEAP officials, the county would issue up to $45 million in publicly backed bonds to fund the building of infrastructure to raise any development at the former Red Cedar Golf Course on Michigan Avenue out of the floodplain. The bonds would be repaid by the developers as part of a tax capture involved in development-related incentives and agreements.

Economic development officials floated the bond idea with county officials in May because the county had a better credit rating than the city. A lower credit rating would save millions in interest payments, Robert Trezise Jr., president and CEO of LEAP, said in May.

In October, Dolehanty, who is also the county administrator, sent a letter to development officials announcing that he could “not propose a favorable recommendation for county participation in infrastructure funding.” The reason? The county’s attorney had determined it would be impossible to hold developers to an agreement that would prevent them from appealing any new tax assessments. He said a legal review found such restrictions would “run afoul” of the state and federal constitutions.

Five business days later, however, Ferguson obtained a legal opinion from Honigman law firm attorney John Pirich that argued that was inaccurate.

Any agreement restricting property value appeals “would run with the land and be binding upon each and every subsequent fee owner of the TIF (Tax Increment Finance) Property,” Pirich wrote.

Dolehanty said he was unaware of the memo.

“I would need to review the content of the memorandum to determine its impact on positions taken in my Aug. 12 communication to the Board of Commissioners,” he said in email responses to questions Monday. “Positions expressed at that time were founded in part on research conducted by our corporation counsel.”

The development would bring two hotels, retail space, housing and a Sparrow Health System facility to a key location along the Michigan Avenue corridor. But in order to build on the property, Ferguson said it was necessary for three-story-high plinths to be built. A plinth essentially is a solid surface that lifts any development out of the floodplain. Those could cost as much as $45 million.

Without them, Ferguson said, the property is worth “zero” because it can’t be developed.

County officials had sought, among other things, evidence that businesses had committed to locating to the development and that financing was available. They also asked for an independent study on the economic impact the development would have on the region.

Ferguson said last week the economic impact study is in the final phases and could be released in weeks. He declined to provide a specific deadline, noting that “things can change.”

“Upon the county’s decline of interest in the project, LEAP has not been involved in the developer’s possible interaction with the county as far as bonding goes,” Trezise said in an email statement Tuesday. “We will cross that bridge if and when we get there.”

Trezise said they continue to do their “due diligence” in vetting the proposal and funding.

Thomas Morgan, a member of the Ingham County Brownfield Redevelopment Authority, which would have to approve tax incentives for the development, said he didn’t think the proposal was completely dead, even after Dolehanty’s letter.

But he said before he would vote to approve bonds issued with the county’s backing, he’d like to see four specific things. He wants to see the Honigman memo reviewed by the county attorney, a solid legal agreement requiring the developers to guarantee payment in the event of bond repayment shortfalls, an independent economic impact study and assurances that jobs on the development’s construction will go to local laborers.

He was clear that Ferguson has a proven track record of providing union jobs, but he still wants “the assurance.”

“It’s not dead,” Morgan said of the proposal, “but the priest is at the door.”