Developers to halt Red Cedar project after state again rejects plan

Kass: Ongoing construction to be ‘shut down’ as local workers face possible layoffs 

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THURSDAY, March 19 — Plans to redevelop the former Red Cedar Golf Course have been rejected by the Michigan Strategic Fund Board after officials said the project wouldn’t do enough to bolster the local economy. 

Revised plans to prop up the $274-million superdevelopment with tax incentives did not include enough information or comport with Michigan Strategic Fund guidelines and would not result in “overall increased economic opportunity for the region,” officials found before the plan was rejected 8-2 with one abstention. 

Developers will still have yet another opportunity to submit a revised plan, according to a Michigan Economic Development Corp. spokesman. The board has another meeting scheduled later this month and in April. But in the meantime, the development team behind the project is already considering pulling the plug altogether. 

“We’ve been funding this internally and frankly, I’m out of money. We’re going to have to close the site down. It’s as simple as that,” said Ohio developer Frank Kass, a partner alongside Joel Ferguson, of Lansing, at Continental-Ferguson LLC.  “Nothing could be more important for this region than what we’re doing.” 

Kass said that in 45 years of development, he’s never seen such an “unwelcoming process” than at MEDC. 

“I don’t know what more we can do, and frankly, I’ve never seen anything quite like this,” Kass said. “We’re going to have to lay our workers off. They have been working on this site. We thought this was a formality.” 

The MEDC turned down funding for the project last month, noting the project, in its initial form, did not meet “core strategic priorities” — like greater access to affordable or low-income housing, revitalizing or stimulating development in downtown areas or the creation of a long-term, net economic benefit for limited resources. 

Using that feedback, developers — in tandem with the Lansing Economic Area Partnership — submitted a revised plan for tax incentives that was reviewed by the Strategic Fund Board at a remote meeting this morning. The result: A major strike two for the developers as they head back to the drawing board for more adjustments. 

“It is difficult to evaluate the ability of this project to attract talent, provide greater access to necessary housing, or create long-term, net economic benefits that are key elements of the state’s economic development priorities,” according to an MEDC recommendation that was sent to the Strategic Fund Board before the plan was rejected. 

Continental-Ferguson LLC broke ground on the project last October after the Lansing City Council approved a development plan and tax incentives to get the redevelopment started last April. Construction is ongoing. 

Kass said the project will generate $100 million in new property taxes and bring in more than $10 million in hotel room revenue annually — a boon that he contends will spread across the rest of the region. Additionally, the project is slated to provide local construction companies up $120 million by the time the construction ends. 

Plans call for the vacant parcel to be transformed into market-rate and student housing, a hotel, a senior care facility, an amphitheater and various retail and restaurant space. Developers said the project would create about 400 full-time jobs by the time it opened in 2023. But state officials clearly haven’t been supportive of the idea. 

And without support from the MEDC, millions of dollars that could have been captured as part of a tax-increment financing plan to construct the project will no longer be available for developers to spend. Calls to Ferguson and Project Manager Christopher Stralkowski for more comment were not returned this afternoon. 

Among the MEDC’s assessment from this morning’s meeting:  

  • The work plan does not include enough information to define its final scope, does not comport with state guidelines on tax incentives and is inconsistent with “state economic development priorities.” And it doesn’t result in an increased economic opportunity for the region, MEDC officials found.   
  • Developers planned to build a variety of “pads” to sell off to other entities after the project was completed. That left some “ambiguity” as to what future development could actually occur on the site, making it difficult for officials to determine whether the project would create jobs and housing. 
  • With 1,100 student housing beds in 325 apartments and a 120-unit senior care facility consuming more than 60% of the project, officials said it was “impossible to determine developers' return on investment and the project’s financial need” and said those amenities didn’t warrant incentives. 

While technically a Brownfield redevelopment site, environmental activities, demolition and abatement accounted for less than $2 million on a $274 million project, officials found. And eligible costs for an integrated parking structure were significantly increased specifically due to the project’s location in a designated flood zone. 

“The work plan does not allow for the level of evaluation and continued assurance of compliance with board-approved parameters necessary to ensure transparency and accountability for the use of local state capture funds,” officials said of the plans. “A compelling case has not been made to demonstrate a regional benefit.” 

Furthermore, a study from the Anderson Economic Group that focused on the benefit to Lansing did not adequately consider the impact on both the city and the rest of the Greater Lansing region, officials said. 

The project calls for about $177 million in private investment alongside a 30-year Brownfield plan that would cover about $97 million in infrastructure and soil cleanup from years of chemical treatment at the former golf course. Bonds backed by the developers were set to be repaid through eventual property taxes on the site. 

Local support for the project’s latest proposal included $64.9 million in local property tax captures and $278,965 from the Lansing Board of Water & Light to remove an electrical substation on the property. Officials ultimately found a lack of clarity on the financial need and various inconsistencies with state priorities. 

If the MEDC doesn’t eventually approve that funding plan, developers will likely either be forced to float the bill themselves, downsize or alter the scope of the project or kill construction on the development altogether. While Kass suggested the recent denial could be fatal, Ferguson previously refused to recognize a problem. 

“I think we solved it. I think we’re good to go. We’re finding common ground. We’re all on the same page,” Ferguson said in February, declining to elaborate. “Downsize? Hell no. We’re still going to be a gamechanger. We’re good to go. Everyone will be happy. The mayor will be happy. Lansing will be happy.” 

Contrary to Ferguson’s assertion, at least the MEDC still isn’t happy with the “gamechanger” of a project. 

Bob Trezise, CEO of LEAP, said he was in “severe disagreement” with the recent rejection. 

“It’s more than shovel-ready. Shovels are in the ground,” Trezise said, pleading with the board. “Ironically, and especially during these tragic times, not rejecting and approving this is helping hundreds of workers keep their jobs over the next 18 months. Our community really needs this project. We’ve been counting on it.” 

Sen. Curtis Hertel Jr. said the denial is a “huge issue” for Lansing and will invariably lead to additional drainage assessments on local businesses and homeowners. He requested the decision be tabled until next month. 

Lansing Mayor Andy Schor said developers have done “everything” possible to move the project forward to “greatly help the economy as we go into a recession.” He labeled the delayed approval as  “mind-boggling” 

“It is inconceivable to me that the MEDC staff would recommend rejection when this could cost the state nothing due to being a capture of future taxes, and no upfront dollars have been requested from the state,” Schor said in a statement. “The MEDC staff recommendation is resulting in layoffs in our local building trades.” 

As the now-settled development agreement shifted in 2018, at least half of the Lansing City Council had also leaned against the project, criticizing the spread of student housing and the layout of its apartment units. Others fumed over what they claimed to be an unnecessary use of eventual tax dollars to support construction. 

Developers, at the time, quelled concerns by promising that some units would not be marketed to students. Council President Peter Spadafore objected to the proposal, but the Council approved the project 7-1 last April. 

“I have a philosophical objection to using a brownfield tax capture on green space,” Spadafore said after the vote, noting the project was generally underwhelming. “There are real examples of brownfields throughout our city that need this type of incentive to encourage growth in the core of Lansing. This is not one of them.”  

Visit lansingcitypulse.com for previous and continued coverage at the former Red Cedar Golf Course.   

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