Hotel developer, DDA agree to deal

By: Robert Guttersohn | Royal Oak Review | Published April 23, 2014

ROYAL OAK — The Downtown Development Authority and the developer of a proposed downtown hotel and office building reached an agreement April 16 that will provide up to $3 million in tax reimbursements from the DDA throughout the next 10 years.

The proposed site for the project is 400 N. Main St., which currently is a vacant car dealership.

The reimbursements will come from the increased taxable value of the site following the development’s completion.

The developer, Trailhead RO LLC, has proposed building an eight-story hotel with 114 rooms, an eight-story apartment building, a five-story building with restaurant and office space, a three-story building with retail and office space, and a four-level parking deck at the vacant site.

Bill Harrison, a DDA board member, said that the only reason the development authority agreed to the reimbursement is because the project will include office space and a hotel.

“If they weren’t building a hotel or office building, we wouldn’t be doing this,” Harrison said before the vote.

The DDA, the city and the Royal Oak Chamber of Commerce have stated that encouraging office development is a goal for the downtown.

At its March 19 meeting, the DDA formed an ad hoc committee to meet with Trailhead RO and the Michigan Economic Development Corporation to negotiate the amount of the reimbursement.

Jay Dunstan, the chairman of the DDA, said that the meeting was very educational and showed that the developer is bringing a lot to the table.

“They’re not coming in with empty pockets,” Dunstan said. “They put a lot of money into this thing already.”

As part of the deal, the DDA will retain 20 percent of the increased taxable value throughout the next decade, which is projected to bring the authority $1.8 million in new revenue throughout that time.

Further, the DDA projects that Royal Oak Schools, the Detroit Institute of Arts and other entities exempt from the DDA tax capture will gain $6.3 million in new revenue from the improvement of 400 N. Main St.

“This site is an eyesore right now,” City Manager Don Johnson said. “It’s been a problem site ever since Fresard closed the dealership. … The office portion of this will generate a lot of economic activity in Royal Oak.”

The decision has the backing of the Royal Oak Chamber of Commerce.

Shelly Kemp, the executive director of the chamber, said before the decision that the chamber was in favor of a “reasonable and fair (tax increment financing) reimbursement for this property.”

Developers and the DDA still are waiting for a decision from the Michigan Economic Development Corporation on whether it also would provide some financial support for the project.

“Without the MEDC coming through, this project isn’t going to happen,” Harrison said.

Kathleen Fagan, a spokeswoman for the MEDC, said she was not able to discuss any pending decision before the state development corporation.

“We can’t discuss projects that may or may not be under consideration for MEDC support until an approval has been made,” Fagan stated in an email.