City Commission approves new office building for existing City Hall parking lot

By: Victoria Mitchell | Royal Oak Review | Published September 1, 2017

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ROYAL OAK — Members of the Royal Oak City Commission unanimously approved an agreement with the Central Park Development Group Aug. 29 for the construction of a nearly $40 million, six-story, 142,523-square-foot office building with a first-floor restaurant and retail.

The unanimous vote came early Tuesday morning, as the Monday night meeting went past midnight after more than 40 people spoke in favor or against the development during public comment.

The development group — backed by Ron Boji and Sam Surnow — received the go-ahead to construct the building in the existing Royal Oak City Hall parking lot at 211 S. Williams St. The front of the office building will face east toward what is the current City Hall, and the rear of the structure will face the Main Street storefront alleyways.

As part of the agreement, the city will raze the existing City Hall and Royal Oak Police Department headquarters and build a central park in its place. The city will also build a parking structure in the existing city-owned surface parking lot between the Main Street storefront alleyways and the Royal Oak Public Library.

Plans to construct a new stand-alone City Hall on Troy Street and a new Police Department headquarters to the north of the 44th District Courthouse are also in the works.

Some of those speaking out during the public comment portion of the meeting voiced their opinions against the money outlined in the Central Park Development Group agreement and the size of the project.

“I don’t see it as human scale; I see it as developer scale,” said resident Dave Ayers.

As part of the agreement, the city will pay the development team $5.5 million and will sell the existing surface parking lot, valued at $900,000, for $1.

The money would not be paid directly to the developer, but rather into an escrow account and accessed by contractors once the Central Park Development Group spends $8.5 million of its own money on the project.

City Manager Don Johnson said the $5.5 million would come from the general fund, and city officials said the terms of the agreement were necessary to remain competitive.

Royal Oak Economic Development Manager Todd Fenton said subsidies are a normal part of business in Michigan, because the gap between construction prices and the rental market is large.

“The construction costs in Detroit are the same as they are in New York,” Fenton said. “The difference is, the rents are not the same as they are in New York, and so the scales are tipped.”

Independent consultant and Plante Moran CRESA partner Greg VanKirk said his firm analyzed the construction budget presented by the development group and deemed it reasonable by industry standards.

Fenton said another aspect of the project to be taken into consideration is that it is a speculative office building, meaning there is greater risk by the developer because the building has not been leased out prior to construction. 

According to the term sheet, Central Park Development Group must pay the city back its initial investment in eight years, and if the taxes are not recaptured in that time frame, the group would have to pay the difference to the city. The total amount of all tax revenue generated by the office building must be at least $12.8 million over the first 20 years.

Fenton said the office building will help the city reach a goal recommended by the downtown task force in 2014 to bring 180,000 square feet of Class A office space into the downtown by 2020, as well as create 1,000 jobs to establish daytime foot traffic.

“This would position Royal Oak for the future,” he said.

Fenton said the Central Park Development Group office building would bring about 700 jobs to the building and produce an annual economic impact of $234 million. Fenton said the 18-month construction phase alone is anticipated to create more than 500 jobs with an economic impact of $74 million.

Those speaking in favor of the development thought it would be a crown jewel for the city and welcomed the idea of a central park.

“I personally like dynamic urban areas,” said resident Matt Gerwolls.

During the meeting, commissioners also designated the public right of way for the area surrounding the office building and parking structure, and approved the issuance of limited tax general obligation bonds to finance the building of the police station, City Hall and public park, and the issuance of revenue bonds to finance the building of the parking structure.

“I think it goes without saying that this project alone stands in high regard and certainly has a tremendous amount of positives that certainly outweigh the negatives,” Mayor Michael Fournier said. “The world is changing around us; we can choose to resist it, we can drift, or we can adapt and take control of our own fate.”

The mayor said the deal was a culmination of a lot of hard work by the commission, experts, staff, and members of the community who have expressed their opinions throughout the years of discussions about the new municipal complex.

Fournier said a vibrant, successful downtown is ultimately for the residents, because it not only makes Royal Oak a premier place to live and visit, but it also helps maintain and raise property and home values.

Complete details of the project may be found by visiting romi.gov/civiccenter.

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