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 The developer behind the Madison Center shopping center at the corner of 12 Mile and John R roads has been granted tax relief to cover remediation-related costs as the plaza is upgraded to attract new tenants.

The developer behind the Madison Center shopping center at the corner of 12 Mile and John R roads has been granted tax relief to cover remediation-related costs as the plaza is upgraded to attract new tenants.

Photo by Deb Jacques

Madison Heights provides $2.3 million in tax relief for shopping center developer

By: Andy Kozlowski | Madison - Park News | Published December 19, 2019


MADISON HEIGHTS — The Madison Heights City Council recently approved a brownfield redevelopment plan for the Madison Center shopping center, home of the new BJ’s Wholesale Club at the corner of 12 Mile and John R roads.

The plan will provide millions of dollars in tax relief to developer Landmark after the company miscalculated the cost of developing the center’s north end. City officials say that Landmark underestimated the level of interest it would receive from national companies looking to move into the new shopping center. As such, the scope of the project has expanded, and with it the cost.

The move is not without its critics.

Madison Heights City Councilman Robert Corbett was the only council member who voted against the plan during the meeting Dec. 9. Councilman David Soltis was not present.

“I wasn’t 100% against the project, and I do agree the corner is an important one as far as the city’s image is concerned. But I think $2.3 million of tax money being forgiven is just wildly excessive, especially since the money is needed to correct an error in planning by the developer and their advisers in not anticipating costs,” Corbett said.

“Plus, the optics here are just terrible,” he added. “This happened not six weeks after the residents of Madison Heights voted to invest in the community by raising the established permanent tax levy of 6 mills (with Proposal MH). Then first thing out of the chute, the city hands back $2.3 million of property taxes, of which $400,000 will not be recovered, to private business concerns.”

The councilman said he would have liked to see the city negotiate a more favorable tax split.

“I believe anything closer to a 60/40 split, in the city’s favor, would have made more sense, while sufficiently backstopping the developer and his project,” Corbett said.

Soltis said that had he been present that night, he also would have voted against it.

“The math just doesn’t add up,” Soltis said. He also pointed to data from the U.S. census and the Michigan Department of Health and Human Services that illustrates more pressing needs. “We should have used that ($2.3 million) to help those in need in Madison Heights, like the almost 600 seniors and 1,500 kids under 18 living below poverty (in fiscal year 2017), and the 300 cases of child neglect and abuse (in fiscal years 2014-17).”

Landmark’s total investment in the project, including property acquisition, is nearly $50 million, of which $17 million is investment beyond its original plan, funding the completion of two out-lots and the renovation of the existing Madison Center building. This estimate includes site work such as stormwater detention and reconstruction of the remaining parking areas that have not already been reconstructed by BJ’s Wholesale. The developer has already invested around $10-$12 million on the construction of BJ’s Wholesale, the gas station and other site work.  

This marks the first time that Madison Heights has approved a brownfield plan for a developer. City officials say that Madison Heights will continue to collect revenue on the property’s base taxable value of $4.2 million, as well as a 10% increase over the course of the plan’s 20 years. In those same 20 years, the developer will be reimbursed $2.3 million in tax breaks for remediation-related costs.

According to Barry Hicks, the city’s community and economic development director, negotiations for a brownfield plan began over the summer. The new BJ’s Wholesale Club had piqued interest in the shopping center from other companies, leading Landmark to design a “phase 2” that includes building a new McDonald’s at the corner of 12 Mile and John R roads. The McDonald’s currently at 28220 John R Road will relocate there for more visibility. First Watch, a restaurant chain, then showed interest in locating in the lot next to Texas Roadhouse. Other prospective tenants also began showing interest in the plaza if it was upgraded.

“Now it’s looking like there may be a deal signed any day now for space in the soon-to-be-renovated shopping center,” Hicks said. “Landmark knew of the development potential of the property, but did not know the amount of interest they would have so quickly. The development costs increased due to the site needing more preparation work than originally anticipated, but they wanted to get everything done as soon as possible — and to the highest possible standard — to bring desirable businesses to Madison Heights.

“The city will see an increase in tax revenue right away as a result, with more in the future,” Hicks emphasized. “The city will not see a decrease in tax revenues. A common misconception the public tends to have about these (tax abatements) is that the city is giving away money to a developer. The reality is that the proposed development would not happen without some type of reimbursement to offset the cost of redeveloping a site that already has old, functionally obsolete structures on it. No development means no new tax revenue.

“Plus, the reimbursement to the developer comes strictly from their own project, so there is no cost to any other Madison Heights businesses or the residents,” Hicks continued. “By assisting the developer with the brownfield plan, they will be able to complete both phases of the project and attract world-class tenants that will continue to increase property values in the area, which increases tax revenues while creating hundreds of jobs in the process.”

Corbett cautioned against the slippery slope the situation could create.

“I certainly want to support and help businesses, but we have to remember the precedent we set with every action,” Corbett said. “If we give money to this developer to cover their bad preparation, what happens to the next business down the road? It’s $2 million this time, $3 million the next time. When does the city start to realize benefits from these concessions? It’s something to keep in mind.”

Mark Kimble — a lifelong Madison Heights resident and a real estate broker in the business for over 30 years — said he feels this arrangement is unfair. He voiced his concern at the council meeting and elaborated on his thoughts afterward.

“If a homeowner made this mistake, miscalculating the cost of renovations, the city certainly wouldn’t bail them out. Here, we’re talking about multimillionaires who came here to make money — not to run a soup kitchen. The millions they’re being given in tax breaks could’ve gone to the parks and to public safety. And they didn’t ask for this money at the beginning of the project; this was asked for after the fact. Attracting upscale tenants is only going to get them higher rent; it’s a benefit for the developers but not necessarily the city or the residents.

“I think this is a bad decision,” he said, “and it’s one that comes on the heels of the city asking for a large tax increase (in Proposal MH), when the city insisted we’re broke — and yet here we are, just giving away millions a month later. It makes you wonder what they’re thinking.”