Old Jail site development hits snags, delays

ESCANABA — Light was shed on a few of the snags that have delayed the development of the former Delta County Jail and Chamber of Commerce properties during a special meeting of the Escanaba City Council Monday morning, but how those issues will be resolved to allow development to move forward remains to be seen.

“I believe we’ve all been taught the telephone game as children and we’re trying to avoid that,” said Mayor Mark Ammel during the meeting.

Of primary concern to the council and to the three developers present at the meeting were the purchase agreements, which are still in the negotiation phase. Despite all of the contracts being stalled, the reasons for the delays were as varied as the projects themselves.

North Shore Marine Terminal & Logistic’s development project, which is primarily composed of extending the seawall along the roughly 260 feet of shoreline near the old jail site, was the first to be discussed Monday, as the council felt it was likely to impact neighboring development.

Aaron Kadish, project manager for North Shore Marine, raised concerns over the city’s appraisal of the property, claiming the comparative properties used in the appraisal were unsuitable because they had completed seawall.

“Once it’s done it may approach that value, but there’s a huge expense to get it there,” said Kadish.

Assuming North Shore Marine and the city can come to an agreement on the price, Kadish said work on the seawall would begin as soon as the permits were approved. All of the necessary paperwork has already been filed with the state, but the application fee has not been paid, as the city indicated it would not reimburse the developer for the fee if the sale failed.

Council Member Ron Beauchamp, who requested Monday’s special meeting be called, raised concerns about the seawall construction and the impact driving pilings could have on the hotel development being proposed by Terrace Bay Hotel on the site of the former jail. He said past seawall construction had shaken buildings and had damaged foundations near the shipyard.

“There was only damage to buildings that were not foundationally, structurally sound, correct? Was there any damage to buildings?” Nick Kobasic, general manager for North Shore Marine Terminal & Logistics, asked Beauchamp.

When Beauchamp replied he believed there was damage to nearby buildings from seawall construction last year, Kobasic said he was not aware of any and that vibratory installation of pilings is common practice around the world, often near skyscrapers and other structures.

The pilings, however, were not a concern for Terrace Bay Hotel, which aims to put a Hilton hotel on the site of the former jail.

From an engineering perspective, Terrace Bay expected the two largest hurdles for their project would be the reengineering of the city’s storm sewer system, which will have to cross the property being acquired by North Shore Marine, and the removal and replacement of utilities that are currently installed in the old jail.

But Terrace Bay’s biggest concern is finalizing a purchase agreement.

From the perspective of acquiring property, Terrace Bay has undoubtedly the most complicated series of tasks to complete. To bring the hotel to fruition, the developers must acquire the site of the former jail, a small strip of additional land owned by the city, and a portion of land that would technically be part of North Shore Marine’s land purchase from the city. North Shore Marine has already indicated it would sell the land to Terrace Bay for the project once its own purchase agreement is completed.

The biggest concern for the council Monday was who owned the former jail and why. In 2010, the county passed a resolution giving the city and the Escanaba Downtown Development Authority right of first refusal to purchase the property if the county left the property. While there was some debate about whether or not the council intended for the acquisition of the property to be refused — with Beauchamp adamant that was never the intent — City Manager Patrick Jordan ceded the city’s claim to the property earlier this year.

“I didn’t want to be the one to hold up the projects the county was ready for so I notified the council, wrote the letter, wrote the letter for the DDA as well, … got it signed, and got it delivered to Emily (DeSalvo, county administrator),” said Jordan.

Terrace Bay is already in the final stages of talks with the county to purchase the jail site.

Most of the council members expressed they were under the impression the county was responsible for the jail property from the beginning, stating any combining of the properties was really a marketing strategy used to seek proposals from developers after the failed development of the property by Proxima, a developer that expressed intent to build a hotel at the site but unexpectedly ceased contact with the city after being awarded the project.

The request for proposal plan was successful in that it attracted attention from four developers, all vying for the jail and chamber sites. The three developers currently seeking to buy the properties each submitted larger proposals, as did the Red Deer Lodge Development Team, which presented a hotel project of its own. Initially, it was recommended the city offer the project to Red Deer, but at the last minute, the three local developers presented a collaborative plan for the land.

The majority of the council wanted to award the land to the local developers, causing some legal hiccups, as the projects had not been vetted through the request for proposal process. That prompted the city to begin the process of selling the land outright, which required purchase agreements as well as appraisals to be in compliance with the city’s land sale policy.

Red Deer largely faded into the background in the months following the council’s May decision to direct Jordan to negotiate sales with the local developers, but at Monday’s meeting, the developer made their presence known once again.

“We understand that the old Chamber of Commerce building property located at 230 Ludington Street is being offered for sale by the city and we would appreciate an opportunity to make a competitive bid to purchase it,” read Council Member Karen Moore from a letter addressed to the council and sent by Jason Konrad, president of Konrad Construction and a part of the Red Deer Lodge Development Team. “We only learned late in the day Friday, Sept. (23) that a special council meeting was to be held on Monday, Sept. 26 to discuss the sale, and we are, unfortunately, unable to attend the meeting on such short notice. We requested the opportunity to appear virtually, but we were informed that we would not be permitted either.”

It was not stated who, if anyone, had received the letter besides Moore and Jordan.

Matt Sviland — who with his wife, Beth, makes up Swanee, Inc. — expressed his displeasure over the letter, which takes aim at the property he and his wife intend to buy and redevelop into condominiums.

“We have felt that they’ve been in the wings this whole time, and we have felt that’s why this has been delayed so long, hoping that we would drop out, but, you know, I’m so happy you felt it your civic duty to read that to everybody at this meeting. Thank you,” Sviland told Moore.

Sviland had other concerns about the purchase agreement that is being drafted for the property. Drafts of the agreement required the property to be reverted to the city if construction wasn’t progressing on schedule — something Jeffrey Slagstad, vice president of Baybank, told the council would interfere with his ability to lend to the Svilands, as there would be no collateral for the loan. Later drafts included timelines that still hindered financing, didn’t recognize the multiphase-nature of the project and ignored the changing economic conditions caused by interest rate hikes.

The three developers and their attorneys were invited to attend a meeting this morning with the city’s legal counsel and subcommittee members Moore and Council Member Tyler DuBord to further hash out the developers’ respective agreements. Though today’s meeting, which is not an open meeting, was scheduled prior to Monday’s special meeting, not all of the developers were notified until Monday morning. It is unclear how many will attend or will have attorneys present.


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