The Berkley City Council delayed a vote on a commercial rehabilitation exemption certificate for a project at the former Our Lady of La Salette School. It is scheduled to come back before council on Oct. 18.

The Berkley City Council delayed a vote on a commercial rehabilitation exemption certificate for a project at the former Our Lady of La Salette School. It is scheduled to come back before council on Oct. 18.

Photo by Deb Jacques

Berkley tables decision on exemption for La Salette project

By: Mike Koury | Woodward Talk | Published October 13, 2021


BERKLEY — A decision on a commercial rehabilitation exemption certificate for a project at the former Our Lady of La Salette School was delayed.

At its Oct. 4 meeting, the Berkley City Council tabled a vote on a resolution that would grant an exemption certificate to 2219 Coolidge LLC, the developer of a project that would revitalize the former school building, as well as construct a new building on the site’s parking lot.

City Manager Matt Baumgarten stated that the resolution falls under Public Act 210, which allows local governments to create a tax abatement district and certify individual projects that occur within that district.

“It would allow the developers to qualify for a tax abatement in order to make commercial development of properties more feasible, more economically viable,” he said.

The last time La Salette came before the City Council for a vote was in November 2020 to establish a commercial rehabilitation district at the site of the school that would allow for an abatement of property taxes for the development within this district, and to approve a brownfield plan for the project. The council approved both resolutions.

The project at 2219 Coolidge Highway consists of two phases. Phase one would be the renovation of the old three-story school building to create 54 apartment units, the construction of an underground stormwater detention system, and 109 parking spaces. Phase two would be the construction of two three-story buildings, each 10,600 square feet. The two buildings would provide 12 apartment units, bringing the total to 24.

The conversation during the meeting focused on phase two and the new buildings.

The CFO for the developer of the project, Tom Herbst, stated that there are challenges in rehabilitating a 70-year-old building because of the additional costs in retrofitting the structure so the school and its architectural character would remain, as well as expanding it.

“Taking those costs and spreading them over now 78 units allows us to get close to making this project economically viable, but still, again, given all the extraordinary costs associated with this unique project, we still were not able to meet the minimum thresholds that are raised by our lending partners,” he said. “To go out and bank financing for this, we need to achieve specific minimums to make the bank happy so they’ll underwrite our loan. And not to get too into the weeds, but they’re looking at things like debt service coverage ratios and they have minimums for those, and even with adding the 24 units on the back and taking into account all the additional costs, we were falling short of their minimum thresholds.”

The developer was able to identify two incentive programs that, together, would make the project economically viable. The first was the brownfield reimbursement for cleaning up environmental contamination, and the second was the program under discussion at the meeting. Herbst described the program as a “short capping of certain components of the taxes generated by the new and improved building for a specific period of time before they’re fully taxable.”

Herbst also clarified that the project was in two phases because they didn’t want to hold back the renovation and clean up of the school while plans were being drawn up for the new buildings.

“For our purposes, we’ve always looked at this as one project and, quite frankly, in order to get it, to meet our leverage requirements, we need all 78 units and both incentives on all 78 of those units,” he said.

The discussion then turned to the City Council. According to Councilman Jack Blanchard, the approval of the certificate would not result in fewer taxes to the city in the short- or long-term, and on a long-term basis following expiration of the abatement, the building would deliver a significant increase in tax revenue.

“Last year, the city made zero dollars off this in property taxes,” he said. “This year, we took in approximately $55,000 dollars in property taxes for that piece of property and as I look at it … that will continue through the abatement period. We will continue to get approximately $55,000 a year through the abatement period until it’s finalized and then …  it’ll be over $200,000 dollars. So we’re going to get a big jump in taxes. So we’re not losing any money, the schools are still getting their money, we’re still getting more money than we were before, so I just want everybody to know that we’re not giving away the store here if we do this.

“It’s a plus for the city,” Blanchard continued. “If it sits there much longer, it’s not developed (and) we’re going to have a real eyesore on our hands. So I’m looking forward to supporting this, getting some additional taxes for the city, even though we are giving an abatement, which is not my favorite thing to do.”

Councilman Steve Baker, who supported last year’s resolutions for the project, said they weren’t at the meeting to address minimum thresholds and debt service ratios; that’s something developers should take into consideration before they pursue a project

“We’ve approved the brownfield to help remediate that particular property,” he said. “We’re talking about not a brownfield thing here. This is a parking lot that’s going to get converted into some additional residential units. I applaud the concept of having additional residential units to bring additional folks to Berkley ... but we’re not talking about that building and although I appreciate the additional context, that’s not particularly relevant in my mind.”

Baker added that he wasn’t opposed to the project but he wasn’t comfortable moving forward with an approval.

The rest of council also was hesitant moving forward with an approval at the meeting, with some expressing they needed more information on aspects of the project, such as with the stormwater management and the financial plan of the development.

“I absolutely supported the brownfield, and phase one made complete sense to me why you are taking on that building and would need help from the city to preserve the historical aspect of it and have it be viable,” Councilwoman Natalie Price said. “Phase two, I feel, is a different beast, and we just have not been presented with the evidence of the hardship or the evidence of the benefits to the community, beyond providing market rate units.”

One of the developers, Steve Friedman, said he was “tremendously perplexed” as to why the city is having issues with the project, as they got the feeling everything was approved for them last November to move forward. He stated this project would not have advanced without the abatement and brownfield and he felt what they’re asking for are the right tools to make the project happen.

“If the city wants to go back on the decisions that were made previously and not approve the concept of the abatement, we got a problem. A big problem on this particular site,” he said. “I loved working with the mayor (Dan Terbrack) to try to swing this project from what it originally started to be. I stepped in specifically to try to right the ship and eliminate all the confusion and problems that were being developed, and I bought into the mayor’s vision of rehabbing this building, which this is a very expensive proposition. We’re excited about doing it, but if the abatement goes away, we’ve got big problems on this process.

“I really don’t understand why we’re having this discussion about not being able to utilize what was approved a year ago, conceptually, because we just moved forward doing everything we said we’re going to do. Now we’re asking the city to just do the same thing,” he continued.

Following Friedman’s comments, Baker stated he does support the brownfield that was approved, but reiterated that wasn’t what the discussion at the meeting was about, and that it was more so about the development of a new building on the parking lot.

Baker said he struggled to imagine why every single parking lot that might get developed would need an abatement. He also said the notion of stormwater management is a necessity for Berkley, given its past with rain and storm issues, specifically in 2014 and 2017.

“This current proposal to get additional benefits, I certainly appreciate, you know, the desire to maximize your bottom line and make this as economically feasible for you guys as possible,” he said. “I just don’t think that that is the right way to allocate the city’s taxpayers’ dollars to give you guys a break there. … I absolutely do hope we can find a way to move this forward.”

The council has until Oct. 31 to approve the resolutions because that will be 60 days prior to the end of 2021, which is the deadline for the taxable year, Baumgarten said.

The council voted to table the decision until it gathers the information requested, and the resolutions are scheduled to come back before the council at its next meeting on Monday, Oct. 18.