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Does City Want Affordable Downtown Housing?

Officials' resistance to Whiting proposal sends wrong message to funders, agencies, developers

July 31, 2009 | By Glenn Puit
Great Lakes Bulletin News Service

  City officials are considering a plan to develop affordable downtown housing at the historic Whiting Hotel.
City officials have an opportunity to approve the development of a major affordable housing project in downtown Traverse City, something city leaders have been saying they are committed to for more than a decade. Yet a few city commissioners are hesitant to support the project, which some say calls into question their commitment to affordable housing.

The project would redevelop the historic Whiting Hotel into an affordable housing centerpiece on Front Street. The developer is requesting no city funds, and requires only a vote of support from the city commission—all the necessary public funds are from state or federal sources.

Supporters of the Whiting renovation—including a broad range of housing and downtown associations as well as Rotary Charities, which has committed some of its own funds to the project—say it is truly a great opportunity for the city.

The Whiting project, they emphasieze, requires no local tax money; it will establish 38 new housing units in the city’s downtown, including 11 dedicated to low-income housing; it will bring new money and jobs into the downtown; and it will attract young professionals to live downtown.

“It would be a wonderful development,” said Cherry Republic owner Bob Sutherland, who is a member of the Michigan Land Use Institute Board of Directors and whose business occupies the first floor of the building.

“This building is in desperate need of upgrading, and this project would preserve its historic integrity and bring new energy to our downtown. We need several hundred housing units downtown, right in the core. This project could jumpstart the whole thing.”

Project is in Danger of Failing
But despite the strong support from community leaders, it appears the Whiting restoration project is in danger of failing. The proposal needs approval from the Traverse City City Commission, which is expected to act on the matter at its next meeting, on Monday at 7:00 p.m. City Mayor Michael Estes continues to express support for more affordable housing, yet has said he plans to vote against the Whiting project.

“I don’t think it’s a good investment of taxpayer dollars,” said Mr. Estes, who added that although no city money would be involved, he still doesn’t like the idea of spending other tax monies to finance this particular project.

For decades the Whiting was a “flophouse” that temporarily housed homeless and transients seeking temporary shelter in tiny windowless rooms that have shared bathrooms and kitchens. Alcohol and drug abuse was common and proper building maintenance was rare, driving down the condition and value of the building.

Two years ago, Cherry Republic owner Sutherland began renting the Whiting’s high-profile ground floor for his business and proposed a multi-million dollar renovation of the building's upper floors that would have significantly upgraded the structure's appearance, attractiveness, and functionalitity. He wanted to invest in giving the building a new, appealing front and creating at least 37 affordable, walk-to-work apartments. But as the project became more fiscally and politically complicated Mr. Sutherland stepped aside, and experienced Traverse City developer Gene LaFave took over.

But funding what is now Mr. Lafave’s $7.4 million project requires a complex series of financing mechanisms. The plan calls for $2.6 million in public funding, including a $800,000 land bank loan that requires city commission approval, $40,000 from the Michigan State Housing Development Authority, a $436,000 Michigan Business Tax credit, and $300,000 from the U.S. Department of Housing and Urban Development. The land bank loan, which would be managed by Grand Traverse County, can only be used in downtowns.

Supporters say they are dismayed that opposition to the project focuses so heavily on the use of public funds. Most recently, project opponent Ross Richardson, a Grand Traverse County Commissioner, wrote an op-ed piece in the Traverse City Record-Eagle saying “it’s starting to look a lot like Christmas” for the developers, and that Mr. LaFave and building owner Michael Anton would receive financial windfalls once the public funding occurs.

“Say the magic words, affordable housing, and public money comes showering down,” Mr. Richardson wrote.

But supporters say some Whiting opponents are omitting several crucial facts about the project and presenting misleading information regarding its financing and final form. Mr. LaFave said the profit margin for the project is in fact very thin, and he expects to take at least a $70,000 a year loss for the first five years, before he recoups any of his investment.

“We’ve heard (people say affordable housing units) can be built at the Commons cheaper,” Mr. LaFave said, referring to the huge historic restoration now occuring at the old Traverse City State Hospital, about a mile northwest of downtown. “Well, we investigated. It’s much more expensive. Or they can be done on the east end of town so much cheaper. That’s not true either... (we are dealing with) misinformation and constant negativism.”

Some Favor Other, Unspecified Projects
Opponents, including Mr. Richardson, claim that taxpayer money could be better spent on other projects in other locations, and that the city would “get more bang for its buck” by spending the money on other, unspecified, future affordable housing projects.

Tino Breithaupt, senior vice president of economic development at the Traverse City Area Chamber of Commerce, said that opinion is misinformed.

“We have (close to) $3 million in public money to spend, and (the opponents argument is) it would be better to find a better deal somewhere else,” Mr. Breithaupt said. “Well, this is a site-specific project. It’s not like there’s a bucket of $3 million bucks just ready to be doled out. It’s site specific, downtown specific, it’s historic-preservation specific. There are a lot of nuances to this deal that allow this type of project to get some of the credits ...and you can’t just go pick another site around downtown and think you are going to have the same type of tax credits and dollars available for another project.”

Mayor Estes also has raised concern that the Whiting currently provides 57 low-priced housing units that are available without public subsidy, and that after the Whiting renovation is complete, there will only be 11 dedicated low-income apartments.

“I don’t want to see a net decrease in affordable housing and see us subsidize it,” Mr. Estes said.

But project supporters suggest that Estes’ position is unfairly describing the current units at the Whiting as full housing units when in fact they are rental rooms without full baths or kitchens--and incapable of housing couples or families. In addition, say supporters, the historic building is in critical need of repair to prevent it from becoming an eyesore on Traverse City’s main commercial corridor.

At a public forum on the Whiting project held Tuesday night at the Michigan Land Use Institute’s offices on Front Street, two city commission members, Jim Carruthers and Ralph Soffredine—who have not committed yet to a yes or no vote on the project—say they are receiving a lot of negative comments from constituents.

“’It’s a bad economy,’” Mr. Carruthers said of some feedback he’s receiving. “[People ask] ’Why spend the money there?’ They’d like to see the money spent elsewhere. I know the pots (of money) are separated, but that’s what people think.”

Mr. Carruthers said he has explained to voters who have contacted him that the city has no financial risk in the project. “The developer is the one taking the biggest risk, and I think some folks don’t understand that.”

Many Other Long-Term Benefits
Just as important, proponents say, are the long-term, economic benefits of the project for Traverse City. It is estimated that the Whiting development will generate $21,900 per year in new taxes to the Downtown Development Authority. The project will create 190 new construction jobs in a down economy, and it also fits in line with the provisions of The Grand Vision—the groundbreaking land use study in which more than 12,000 residents said they want to see public investment go into the region’s downtown corridors.

“It’s been interesting to me how it’s been portrayed,” said Virginia Coulter of the Traverse City Housing Commission, noting that opponents are focused on the public funding components. “Instead it should be looked at as an affordable housing project that is the carrot to bring all of these resources into a dilapidated building into downtown that will make it a beautiful building.”

Others question how the city, which has adopted the recommendations of its own affordable housing task force, can now reject such a promising project like the Whiting.

Project proponents also say there is rising concern that if Traverse City rejects this project, it will earn a reputation among affordable housing funding sources that the city talks a lot about affordable housing but doesn’t really mean it.

“It sends a real message to the community, to the rest of the state, to other developers, that we are not really a town that wants to support affordable housing,” said Jim Lively, program director with the Michigan Land Use Institute.

“The net result of a no vote will be this impression that we can just pick a better project. We’ll just take this money and move it to another, more deserving project," Mr. Lively said. "Frankly, that’s not possible. And by talking like that, it sends the clear message to grant administrators that we are just not serious. It’s a real concern that in fact a no vote on this project will diminish Traverse City’s chances for state and federal funds for future projects.”

UPDATE: August 4, 2009

After a prolonged public debate, four Traverse City Commissioners rejected the proposed redevelopment of the Whiting hotel on Monday night.

Voting no on the affordable housing project were Mayor Michael Estes, Deni Scrudato, Barbara Budros, and Jim Carruthers. Voting in favor were Commissioners Ralph Sofredine and Jody Bergman.

The vote followed an impassioned plea by affordable housing supporters, community leaders and city residents, who told city officials the Whiting project would diversify the downtown sector, giving working families a place where they can live in the downtown corridor and walk to work. Adding to the appeal of the proposal, supporters said, was the fact that the renovation would have offered 190 new jobs to city residents at zero cost or risk to the city.

“I support the Whiting project,” said Marsha Smith, city resident and executive director of Rotary Charities of Traverse City, which offered a $50,000 grant to help fund the project. “I support it as a taxpayer of Traverse City and Grand Traverse County. I think it’s a wise use of public funds to leverage with private investment for redevelopment within city limits. It’s the only way we are going to get affordable housing in our city core.”

Mayor Estes said he was voting against the project because he didn’t believe it would be wise expenditure of public monies, even though no city taxpayer money was involved. He also expressed concerns about the displacement of the 50-plus residents currently living at the Whiting.

Developer Gene LaFave told the Record-Eagle newspaper in its coverage of the controversial vote that the defeat by the City Commission was a fatal blow to the project.

“It’s dead in the water,” LaFave said. “I will not be pursuing it at all.”

Glenn Puit, a veteran investigative reporter, is a policy specialist at the Michigan Land Use Institute. Reach him at glenn@mlui.org.

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