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One hotel development deal ended in Warren

Mayor recommends denial of proposal over issues developer says were ‘easy to work through’

By: Brian Louwers | Warren Weekly | Published May 13, 2016

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WARREN  —  If they build it, will they come? 

That remains to be seen, but they won’t be coming to a new “first-class hotel,” sought by Warren Mayor Jim Fouts and built in the city’s Civic Center by the Lansing-based Boji Group, because the two sides have parted ways.

Fouts, who said Warren will now explore other options for a new hotel in the shadow of City Hall and across the street from the General Motors Technical Center on Van Dyke, listed several concerns about the Boji proposal in a press release that addressed his recommendation to deny the plan when it went before the city’s Downtown Development Authority Board on May 4. 

The board later voted 6-0 to deny, and Fouts said he “could not in good conscience as mayor recommend any action except rejection of the plan because of the financial demands of the Boji Group on the city.”

“I cannot put our city millions of dollars in debt for a hotel project that would, in effect, put the city in the hotel business,” Fouts said. 

With a list of high-profile developments in its portfolio and others — including pending developments in Kalamazoo and downtown Royal Oak — in the works, Fouts said he was “very excited” when Boji first presented an initial plan for the space that included a parking structure, specialty shops and a “first-class, multi-story hotel.”

However, the mayor said the Boji Group later proposed that the city borrow $7 million to cover an $11 million “financial gap” that he said they claimed existed in the proposed plans for the $38.6 million development.

Fouts said the Boji Group also sought a $500,000 waiver on building inspection fees and a $2.5 million appropriation by the DDA for infrastructure development.

“Since that initial presentation,  however, much has changed,” Fouts said. “The parking structure was eliminated unless the city built it. The first-class hotel was downgraded, and the city was asked to borrow $7 million from the sale of city bonds to help in the financing of the project. The number of hotel rooms and the size of the rooms were also lowered to reduce costs.”

The mayor said the DDA had agreed to a 12-year tax break that would have saved the Boji Group $5.6 million, but he said they also requested a 100-year lease on the land at the proposed site for $10,000 a year.

“The land is valued at $1.8 million,” Fouts said. “This was never requested at any previous meeting and was never approved by the DDA Board.”

Fouts also said the Boji Group suggested offsetting construction costs with an additional “room tax.”

He said too much was being asked of the city to consider moving forward with the proposal.  

“The burden has to be on the developer, not on the taxpayers of Warren,” Fouts said. “My heart says, logically, it’s not a good gamble. We would be gambling with the taxpayers’ money. Neither I, nor they, have the right to do that.”

John Truscott, spokesman for the Boji Group, said several ideas were presented as options for addressing potential costs, as is common with developments of this size and scope. 

“We knew that there was a gap that had to be addressed at some point,” Truscott said. “A lot of cities choose to work with the developer to find adequate solutions. The mayor just wasn’t willing to do that.”

Truscott said a “room tax” was simply mentioned as something other municipalities have done to defray costs associated with high-value developments. As for the parking structure, he said the Boji Group had suggested doing a feasibility study to determine parking demand. 

“The feasibility study would also help with financing,” Truscott said. “These are all just very  normal things that happen in the course of putting together a development deal. I guess the mayor just didn’t understand how development deals come together.

“This is the sort of thing that you talk through and come up with solutions. We’ve done that in half a dozen cities throughout the state, and we’re always successful in bringing it to a conclusion in an advantageous way.”

Truscott said the Boji Group’s proposal for Warren was still in the early stages but that the mayor’s recommended denial “completely blindsided” them. 

“The cities are usually more willing to work through some of the gaps in financing and help find solutions,” Truscott said. “After this kind of misinformation put out by the mayor, we really don’t have any interest in going back and trying to rework it with them. That’s just not the way we do it.”

The site being eyed for potential development is part of 18 acres of city-owned land on Van Dyke to the west of Warren’s City Hall and City Square. The city’s old municipal offices with Van Dyke frontage were demolished in 2007, and the land has been undeveloped since.

Directly north on Van Dyke, work remains ongoing at a 4.6-acre site set to become the new home of Prestige Cadillac. Construction at the new dealership broke ground last summer, and Prestige Cadillac is expected to be open for business by late 2016.

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