Commissioners Weigh West End Options

Traverse City commissioners are pumping the brakes on a process to redevelop six city-owned parcels on State and Pine streets in downtown Traverse City. A recent request-for-proposals (RFP) generated two significant development proposals, but commissioners Monday agreed the RFP was flawed and raised more questions than answers. The board plans to discuss the city’s policy for payment-in-lieu-of-taxes (PILOT) agreements – a tax incentive tool planned to be used by both developers to include workforce housing in the project – before proceeding further.

Consultant Rob Bacigalupi of Mission North, who is assisting commissioners with the RFP process, provided the board with an overview of the proposals. The city had outlined several desired components it wished to see in a scoring rubric, including public parking, income-targeted housing, public restrooms, a TCPD substation, a prohibition on short-term rentals, and alignment with the city’s strategic action plan and building electrification policy.

John Socks submitted a proposal under his company ShoreNorth Development in partnership with Great Lakes Capital, another player in downtown development. It offered a developer-owned and controlled parking deck with 534 parking spaces and 90 housing units, including 68 workforce apartments and 22 market-rate apartments. ShoreNorth also offered to convert 60 units in its neighboring Loop development for workforce housing. The group is not offering to compensate the city for the land itself because of the public benefits included, such as “permanent public infrastructure, restricted housing, and long-term tax base.”

The second proposal comes from Endeavour Traverse City Partners and includes partnerships with HomeStretch, Spence Brothers, and Kuhn Rogers. It offers a deck that could be either developer or city-owned with 365 parking spaces and 56 units of mixed-income housing. The team is offering $1 million for the land if the parking deck were to be owned by the developers. Both projects plan to use city PILOT agreements to make the numbers work for attainable housing.

While Endeavour scored slightly higher than ShoreNorth under the scoring rubric, multiple commissioners said they preferred ShoreNorth’s plan. However, ShoreNorth also said its proposal would require using brownfield tax increment financing (TIF), which under the city charter would require a public vote for approval. The team could potentially avoid using TIF by reworking the design to have automated parking, which requires a smaller footprint, Bacigalupi said. However, that then raised questions about how the parking would function during high-traffic events like fireworks and concerts. Bacigalupi flagged challenges both development teams had with fitting all of the city’s desired components on the site while still meeting the zoning ordinance and making the financial numbers pencil out.

Multiple commissioners agreed the city had “painted ourselves into a corner,” in the words of Mayor Amy Shamroe, by not considering the full design implications of what they sought on the site. “We want the parking, we want the affordable housing, and (then) we don’t like how it looks,” said Shamroe. “I don’t think this is the path we meant to go down.” She said she sensed “buyers’ remorse” from commissioners on the parameters set around the RFP. Commissioner Mitch Treadwell agreed, stating: “We tried to throw everything at this without thinking about how all of the pieces would actually fit together.”

Though it wasn’t specified as one of the criteria in the RFP, Mayor Pro Tem Laura Ness said she didn’t see a “strong ROI coming out of any of these proposals” to justify the city’s investment in acquiring the multiple parcels over many years. “I would need to have a much better understanding of how do we quantify those public benefits to see a $7.6 million investment,” she said. Ness later added: “If it’s not a good deal for the city, then we have to walk away.”

Commissioner Ken Funk said he was not as worried about the city recouping its exact investment upfront, as any new development would generate long-term tax revenues for the city that could offset those costs over time. However, he said he was not “interested in owning another parking deck,” so he wanted to see a deal where those spaces would be privately operated. Funk reiterated that any housing that isn’t market rate will require a PILOT to work on the site.

That’s significant because commissioners have already expressed interest in revisiting the city’s PILOT policy to determine how many such projects they want to allow in the city and under what parameters. After Ness asked how commissioners could keep the West End RFP process moving forward while still taking the time to vet all outstanding questions – “slow doesn’t mean stop,” she said – commissioners agreed a good next step would be having the PILOT discussion. They will do so within the next month, after which they’ll take another look at the proposals to determine how to proceed.

Bacigalupi described several options available at that point, including accepting one of the offers and negotiating terms, pursuing a city-financed and built parking deck (scrapping any development partners), focusing just on developing housing without a parking component, or putting the RFP process on hold and maintaining surface parking on the site for the foreseeable future. Ness added another option is the city could simply sell the land outright.

Shamroe thanked developers for the extensive work they put into their proposals and emphasized the process isn’t dead, just slowing down to give commissioners more time to “digest” the competing offers and have the PILOT discussion. “We’re not saying no to anything,” she said.