Authority OKs brownfield request

Despite self-blighting building, former Super One site gets tax designation

ESCANABA — After months of discussion over whether or not a property owner could legally blight its own property to receive brownfield designation and related tax benefits, the Escanaba Brownfield Redevelopment Authority narrowly approved the designation for the former Super One Foods building Wednesday afternoon.

The designation comes after the property’s sewer was capped by the city at the request of its owners in March in an effort to make the building fit the legal definition of “blighted” under the Brownfield Redevelopment Financing Act, also known as Public Act 381. One of the definitions of blighted given in the act states a property is blighted if it “has had the utilities, plumbing, heating, or sewerage permanently disconnected, destroyed, removed, or rendered ineffective so that the property is unfit for its intended use.”

The brownfield designation opens the property up to tax incremental financing (TIF) reimbursements. In the case of brownfield sites, this means 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.

“We heard from a couple of our lawyers and our adjusters and some local people, and if it’s something that we can put our stamp on and possibly bring some more (to the) economy — buildings into our town — I think we should go ahead and say, ‘let’s go for it,'” said authority member Monte Morrison.

Dial Companies, which owns the Super One building, had a prior attempt at having the property designated as a brownfield site based on “functional obsolescence” denied last year. The move by the board was primarily made to avoid suggesting empty buildings are less valuable than occupied buildings in light of the ongoing legal battles between the city and big box store Menards over dark store tax theory.

In December, Myron Berry of Mountain Engineering, which is assisting Dial Companies with planned redevelopments, approached the board to see if it would be receptive to giving the property brownfield status if Dial disconnected one of the utilities. The plan was met with resistance, and ultimately a motion to allow “created” blight on properties failed.

However, after discussions with City Manager Patrick Jordan, Dial went through with the plan on the recommendation of the attorney representing the city in the dark store dispute.

On April 3, the authority held a work session and regular meeting to discuss how the board should move forward. Concerns were raised allowing self-created blight would set an unwanted precedent for the city and could be illegal — or at least against the spirit of Public Act 381. For clarification, the board voted to seek a qualified opinion from an attorney or state attorney general to define whether or not self-blighted properties qualify under Act 381 or if capping of a sewer qualifies under the blighted definition given in the act.

Prior to Wednesday’s meeting, City Attorney Ralph BK Peterson wrote a letter to Jordan weighing in on the issue. In the letter, Peterson stated the language of the law was clear, that there was no prohibition against the property disconnecting the utility, and that a prior requirement that utilities be disconnected for at least a year was removed from the law in 2006 without the legislature making changes at that time to prohibit self-created blight.

“As stated, it is my opinion that the language of the law is clear and that members of the Brownfield Authority have the obligation to follow the law,” said Peterson.

Peterson also wrote in his letter that “permanently disconnected” doesn’t mean the disconnection must be permanent.

“Permanent cannot mean forever. The purpose of the Brownfield Redevelopment Financing Act is to facilitate the reuse of blighted property. In order to reuse the property, the sewer utility has to be reconnected,” he wrote.

Some members of the authority were satisfied with the opinion from the city’s attorney.

“I just wanted to get a legal opinion on it and I think we have that,” said board member Matthew Sviland.

Others on the board were not fully convinced. Board member Joseph Kaplan — who noted he spoke with representatives from both the Michigan Department of Environment, Great Lakes, and Energy and the Michigan Economic Development Corporation — was quick to raise the question of whether or not Berry had found any other examples of self-blighted properties in the state.

Berry, who attended the meeting, said he had not yet found any examples.

Resident and semi-retired attorney Paul Caswell interjected during the meeting, giving his opinion on granting the designation.

“There is no clear law on this situation. You are walking into a pig in a poke and lots of problems, doing something where there is no case law. You’re going to end up with a lot of lawsuits here. You need to get an (attorney general’s) opinion or a court opinion before you make a decision, because, in a case of first impression, most people say, ‘we have no law to support this,'” said Caswell.

Authority Vice Chair Elizabeth Keller, who had indicated her intent to resign at the last Brownfield Redevelopment Authority Board meeting, made the motion to designate the property as Brownfield eligible.

“I had several people request that I change my mind. The council had not accepted my resignation,” said Keller.

The motion, which was seconded by Morrison, passed three to two, with Kaplan and Authority Chair Randy Godlewski voting against the measure.

Now that the property has been designated as brownfield eligible, Dial Companies will need to find a developer and submit a plan to the board including redevelopment expenses it feels are eligible for reimbursement under Public Act 381. The authority and the city council will have the final say as to which expenses are approved for reimbursement.

“We are not obligated as a Brownfield Authority to accept a 381 Plan,” said Kaplan.

Dial Companies is currently seeking a developer to construct a hotel at the site of the building, but only minor details of the working plan are known. The project would probably cost upwards of $10 million and include an 83 room, 55-foot-tall hotel, without any attached restaurants or conference centers. Early plans for a portion of the Super One building to remain intact as commercial space at the site have been scrapped.