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ESCANABA -- A brownfield redevelopment plan for the Delta Plaza Mall will go before the Escanaba City Council tonight following split-vote approval by the city's brownfield redevelopment authority at a special meeting Wednesday, but the future of the former Super One Foods building is far from decided.
The vote to move the brownfield redevelopment plan for the mall on to the city council was met with some resistance, both from residents during a public hearing on the matter and from the authority itself.
"I do not feel, as a citizen of the community, we should be putting money into a facility that is owned by a company that is looking basically for tax breaks and money from us to refurb to their own property, which they should be doing themselves," resident Paul Caswell told the authority board.
The authority designated the mall site a brownfield last month due to contamination discovered during a recent environmental assessment. The assessment revealed tetrachloroethylene in the groundwater in excess of the Department of Environmental Quality's minimum reporting and clean-up levels. A dry cleaning facility was once located in the mall near where the chemical was found, and tetrachloroethylene is widely used for dry-cleaning fabrics. The chemical is known to cause a number of health problems if inhaled and is considered by the Environmental Protection Agency to likely be carcinogenic.
While the tetrachloroethylene was only discovered near the former dry cleaning site, the Delta Plaza Mall brownfield site consists of four separate parcels all owned by Dial Companies. It includes the former Menards building on the mall's southern-most end -- which will soon be home to a Hobby Lobby -- and a portion of parking lot on all sides of the building; the rest of the mall as a whole and some adjacent parking; and the two outlot on both the north and south sides of Sayklly's Confectionery & Gifts.
The brownfield designation opens developers like Dial Companies up to a number of tax incentives and grants, but for the authority the key issue is the property's access to tax incremental financing (TIF) reimbursements. In the case of brownfield sites, this means that the difference between a property's taxable amount at the time it was designated a brownfield and the value of the property once it has been developed is captured by the authority and returned to the developer to pay for specific eligible expenses that are included in a plan approved by the authority and the city council.
The plan approved Wednesday includes $1,564,058 of expenses that are considered eligible activities for reimbursement under either the Michigan Department of Environmental Quality or the Michigan State Fund. The reimbursement would take place over a maximum period of 30 years, leaving roughly $700,000 unreimbursed to the developers at the end of the period.
The plan does not include any actions to address the groundwater contamination, but does include plans for measuring vapor intrusion from the tetrachloroethylene.
While unrelated to the brownfield designation, Dial Companies is also seeking designation of the mall building itself as an Obsolete Property Rehabilitation District under the Obsolete Property Rehabilitation Act (OPRA). The designation only applies to the mall itself and not any of the outlots or the former Menards, but provides Dial with a property tax exemption for up to 12 years while the mall is being rehabilitated. Assuming all the proper paperwork is filed within this calendar year, the designation will limit the brownfield capture to only the outlots and the Menards building for the length of the OPRA terms.
Not all members of the authority agreed with decision to approve the plan and send it to the city commission for final approval. Authority member Joseph Kaplan voted against the measure. Monte Morrison was absent from the meeting.
The Super One Foods building, which Dial Companies says should be designated as a brownfield because it is functionally obsolete, faced a different fate when Vice-Chairperson Elizabeth Keller moved to designate the building and adjacent parking lot as brownfield eligible. The motion died for lack of a a second.
Authority members expressed their discomfort with the "functionally obsolete" designation. Escanaba, and some other select communities that are designated as "Core communities" by the state of Michigan, are the only places that functional obsolescence is an option for brownfield designation, but the definition is more specific than just being out of date.
According to Public Act 381, "'Functionally obsolete' means that the property is unable to be used to adequately perform the function for which it was intended due to a substantial loss in value resulting from factors such as overcapacity, changes in technology, deficiencies or superadequacies in design, or other similar factors that affect the property itself or the property's relationship to other surrounding property."
Dial Companies has argued the former grocery store is functionally obsolete because the company has been unable to find a tenant for the building based on its size. A letter from Juli Kolbe, a level 4 assessor who serves as the equalization director for Delta County, stated: "The building does suffer from functional obsolescence with the lack of ability of the improvements to satisfy market standards of demands."
While Myron Berry, a consultant from Mountain Engineering representing Dial Companies, argued that the letter was sufficient to meet the legal requirements of a brownfield designation in a Core community, multiple authority members expressed the letter was broad, short, and did not provide enough information for a decision.
Keller, however, disagreed.
"I don't think we … can question this level four assessor's determination. Whether I believe I would determine the same thing or not doesn't matter. She has the certification and she has made that determination," she said.
Beyond the designation itself, concerns were raised over the informally-proposed plan for the Super One shared at the Sept. 11 meeting. First, roughly two-thirds of the building would be torn down with the remaining third being converted into retail space. Then, the a hotel would be constructed on the newly cleared area and existing parking lot. The entire project is anticipated to cost between $10 million and $12 million.
Denis Severinson of Dagenais Real Estate, which owns the neighboring building that was the former home of Staples, attended the meeting to raise concerns over how a hotel could impede access to the Staples building. He noted a hotel built in the parking lot could affect an existing easement agreement between Dagenais Real Estate and Dial Companies and block the Staples building from view from Lincoln Road.
"I already know of one potential tenant we had that backed away from leasing that space because they were aware that Dial Properties might be putting a motel there -- hotel -- and perhaps expanding it into the parking lot, blockading that store. So just to make everybody aware, on behalf of Dagenais Real Estate, we're not going to standby and let that happen so easily," said Severinsen.
City Manager Patrick Jordan raised concerns of his own about the brownfield designation and proposed redevelopment.
"The thing that I am concerned about on this letter from Juli Kolbe -- and she wrote this very reluctantly, it took a while to get this out of her, and she wrote it very broadly and generally as you noticed -- is that by declaring this store, Super One, as functionally obsolete, it could undermine the argument that we're making, that we've been making, with the Menards dark store case that we have going on. They could use this argument against us in court. To sacrifice everything we've done, to have a hotel built there just doesn't make any sense to me at all," he said.
The dark store case dates back to 2014 when Menards won a state appeal with the Michigan Tax Tribunal stating the retailer's property taxes should be based on the value of a closed and empty building, also known as a "dark store." The decision forced the city to adjust the retailer's 2012 property taxes, and resulted in a series of legal battles that are currently ongoing.
While the issue of Super One being designated as a brownfield site failed for lack of a second, the fight from Dial Companies for the designation my not be over.
"It doesn't mean it can't be considered at another meeting, and perhaps it would be possible to gather some more information in the meantime," said Keller.