In addition to approving its $436,375 balanced budget for FY 2018-19, the Chelsea Downtown Development Authority (DDA) discussed the funding challenges involved in developer Joe Ziolkowski’s Mack Building redevelopment project.
Ziolkowski told the DDA on Thursday, April 19 that despite competitive bidding and a scaled-down project, there’s still a funding gap not covered by grant funding, his investment and the DDA’s commitment.
He’s seeking an additional $60,000 from the DDA, has increased his personal investment in the project and is seeking an additional $180,000 in CBDG (Community Block Development Grant) funding.
Ziolkowski provided a history of the project on Jackson Street, which began with community interest in preserving this historic property.
In 2015, he submitted a redevelopment plan to the DDA that preserved the exterior of the building, and included apartments on the second floor and commercial space on the ground floor. This was followed by the developer seeking $500,000 in federal grant funding with the help of the city/DDA, which owns the property.
In January, 2017, the developer received three different bids for the project “all with varying degrees of disappointment,” Ziolkowski said, because all were in excess of the projected budget.
He told the DDA that since 2016, the project had changed completely, and it was “stripped down as much as possible” but continues to include the original components.
City Manager John Hanifan said that grants are “draw-down funds” that are paid over the life of a project once certain aspects are completed and verified by a third-party administrator. This grant is jointly held by the developer and the city/DDA and the project must comply with numerous standards including Federal employment wages.
As a review, here’s a little history involved in this project.
The DDA/city and the developer have a development agreement for the property, but the city still owns the property until there’s a closing and it’s turned over to the developer.
The DDA previously committed $40,000 over five years and Thursday’s request would mean an extra $12,000 to $15,000 per year over multiple years. Any changes in the DDA/ city’s funding commitment would need to be reflected in an amended agreement.
Hanifan said there is also a “reverter clause” in the agreement that stipulates “if the developer doesn’t do what he says he’ll do, the building reverts back to the city.”
Requesting more time to think about the request, by a unanimous vote, the board has called a special meeting for Thursday, April 26 at 7:30 a.m. to discuss an amended development agreement with the additional $60,000 included with a timetable for payments included in future DDA budgets.
Here are some of the additional factors involved in this decision.
Adapting and redeveloping historical buildings is something a large number of residents told the DDA and the city they would like to see done for this property.
Although the city has spent about $800,000 on this property, it hasn’t collected any taxes on, which when developed, are estimated to be about $20,000 a year.
Developing the property would provide additional housing, something that the community has also requested, as well as additional commercial space on the ground floor for new business.
As another historical reminder, Ziolkowski took the dilapidated former police station on Middle Street and redeveloped it into a viable, mixed-use building.
“This project has been difficult,” Ziolkowski said, adding that with the additional funding needed, he’s still paying the largest percentage on the project.
This is a $1.7 million redevelopment project for a 7,700-square-foot building.
A five-year analysis, through 2022, shows that private investment in the building stands at 46 percent while the city/DDA would be 15 percent.
In other discussions, the DDA was updated on the Federal Screw property, which is privately owned and is currently for sale.
Although there’s been interest in the property, Hanifan and Mayor Melissa Johnson meet with Ann Arbor Spark for assistance in providing ways to spur the development of this property. With a deed restriction that prohibits residential development, there’s still hope that perhaps a business incubator can be located there — providing a space for new businesses.
