I wanted to know what can cities do to protect themselves from development duds, and that's the subject of this Fact Finder Report:
Petoskey Pointe and the West Front Street Project have had their critics from the start, still both got the go-ahead to build, but because of financing, building has barely begun when both should be nearing completion. The Traverse City Planner Russ Soyring says, "you expect a clean well kept community and to have a hole in the ground with weeds growing up it's a deterrent and it looks unfinished and it looks un kept and it makes the community less attractive."
Especially in cities that pride themselves on being tourist destinations, how could something like this be allowed to happen in the first place? And, not for the first time, a new developer has released new plans for Front and Park Streets, but only after the original project was stalled for almost a decade. Russ says, "what the city was doing was issuing foundation only permits just to keep the project moving along while the architectural plans were being finished and steel was being cut for the building. We were basically saying we give you permission to build an unfinished building and if you stop there's nothing the city can do."
That's right, with a foundation only permit, as long as the site is not a public danger, and the developer pays property taxes, he never has to finish what he started.
There is a catch with Petoskey Pointe, because the city basically traded some property for public parking within the completed project, if the developer does not finish, the city could force the developer to refund the city the appraised value of that land, $970,000. November 3rd the city did declared the developer in default. But the negotiations aren't over, the developer may have new financing, and the city may grant an extension of the development agreement. The Mayor tells me they hope to have the discussions wrapped up by the end of the year.
In Traverse City the Deputy Director of the Downtown Development Authority tells me the developer of the West Front Street Project does want to build the smaller project on the north side of the street and may have new financing, but there's nothing definite. And as for the larger project, that will remain surface parking for the foreseeable future.
Meanwhile, the city has changed the way it does business to prevent stalled developments like this in the future. October 16th Traverse City commissioners banned foundation only permits. Russ says, "we made it real clear in our code of ordinances that unfinished buildings are not permitted and they are illegal."
So does this ordinance have any teeth?
If the developer hasn't finished the building by the time the building permit expires, that would be considered a civil infraction and the developer could be ticketed. The cost of that ticket? However much it costs the city to fix the problem, including attorney's fees and demolition if needed. If that ticket goes unpaid, the city could take the developer to court to finish the building or clear the site. "It's important that we have standards and that if you start a project you keep it neat and orderly and finish on time," says Russ.
He goes on to say that Traverse City was actually considering a more aggressive approach that would have required a financial bond from a developer. If the project was not finished, the city could cash in on that bond, but city leaders feared that would lead to other problems. "What we don't want to do is deter development from happening in the city and have developers say that's just going to add a lot more cost to my development so I'm just going to move out to the orchards or the hillsides on the perimeter of Traverse City instead of building in TC and that would just perpetuate urban sprawl and we don't want that to happen."
So while cities continue to walk a fine line Traverse City has a new tool to protect itself. And remember talk about loose lending practices and how that may have contributed to the home mortgage meltdown? Well Soyring says the same thing may have led to these kinds of stalled developments. A few years ago, big projects like this were getting easy financing, but when it came time to actually build the projects. They didn't have the money to follow through. Because of the tightening credit situation, in some ways, stalled developments like this are less likely to happen today than they were when these particular projects were first planned.
