Feb. 3 Agenda: Edwards Brothers Land Buy

Now on the Ann Arbor city council’s Feb. 3, 2014 agenda is a resolution to move ahead with the purchase of the 16.7-acre Edwards Brothers Malloy property on South State Street. The University of Michigan has made an offer to Edwards Brothers to purchase the property for $12.8 million, but the city has a right of first refusal.

The item was added to the agenda on Thursday, Jan. 30 and is grouped with staff-generated items. City administrator Steve Powers is indicated on the council’s agenda as the originator of the item. The resolution approves the exercise of the city’s right of first refusal, appropriates necessary funds, and directs the city administrator to notify Edward Brothers Malloy about the exercise of the city’s right. As of early afternoon on Friday, Jan. 31, the item contained no other background information.

Update: Reached by phone late Friday afternoon, city administrator Steve Powers told The Chronicle that he and other staff would be working over the weekend to finalize the information that the council would be provided before being asked to consider the possible purchase of the land. That includes the financing mechanism, source of funds, types of scenarios for the city eventually to shed ownership of the land, results of an environmental review, and possible zoning revisions to enhance property value. Powers allowed that the council might not be ready to vote at its Feb. 3 meeting, but confirmed that the council’s next regular meeting on Feb. 18 would still fall within the 60-day window of opportunity for action.

At its Jan. 6, 2014 meeting, the council had directed the city administrator and the city attorney to explore options and gather information about the Edwards Brothers land. The due date for that gathering of information was specified in the council’s resolution as Jan. 30 – the same day that the land-purchase item was added to the Feb. 3 agenda.

At its following meeting, on Jan. 21, 2014, the council approved without discussion a $25,550 contract with Atwell LLC for environmental site assessment services on the property. That assessment included a survey of asbestos-containing materials.

By way of background, the pending sale of the property to UM was announced in a Nov. 27, 2013 press release. The business – a fourth-generation Ann Arbor publishing and printing firm – had signaled its intent to put the property on the market in late July.

The city’s right of first refusal on the property was a condition of a tax abatement granted by the city council three years ago, on Jan. 18, 2011. Purchase by the university would remove the property from the tax rolls. Washtenaw County records show the taxable value of the property at just over $3 million. In 2013, Edwards Brothers paid a total of $182,213 in real property taxes, not all of which is the city’s levy. The total city levy of 16.45 mills on $3 million of taxable value works out to about $50,000.

According to the tax abatement agreement, the event triggering the city’s 60-day right-of-first-refusal window is a formal notification to the city by Edwards Brothers, which was made on Nov. 27, 2013. If the council were to delay voting on the item until its Feb. 18 meeting, it would appear to still be within that 60-day window.

The Feb. 3 agenda item requires an eight-vote majority on the 11-member council – because the resolution will change the city budget and involves a purchase of real estate. At least one councilmember will not be present for the Feb. 3 meeting. Stephen Kunselman (Ward 3) will be attending a professional conference of the Association of Physical Plant Administrators (APPA). He works in the University of Michigan’s energy office as Planet Blue energy conservation liaison.

Discussion at the city council’s Sunday night caucus on Jan. 19 indicated that talks are taking place between the city and developers who might have an interest in purchasing the property from the city. One obstacle in those conversations is the fact that the university could still eventually exercise its right of eminent domain to acquire the property from a developer, even after purchasing it from the city. But that would require convincing a court that the expansion of the university’s athletic campus at that location would be in the public interest.


  1. By Fred Zimmerman
    January 31, 2014 at 3:46 pm | permalink

    Let this be a “no.” I don’t want city council in the business of land speculation. What a quagmire of things that could go badly and predictably wrong.

  2. By John Floyd
    January 31, 2014 at 5:12 pm | permalink

    Mr. Zimmerman,

    Many of us are with you in principle, that land speculation is outside the bailiwick of our government. When the immediate alternative is for the U to remove the property from the tax rolls more-or-less forever, it makes sense to me to consider exercising the city’s option as the lesser of two evils. My sense is that this possible city purchase is contemplated not as a flip-for-profit opportunity, but rather as a way to try to keep the property on the tax rolls. It can always be sold to the U later, of nothing pans out.

    To my way of thinking, it would be a win-win if a developer could be found to erect high rises there: advocates of building up could get what they want without having to further degrade the “Core” Ann Arbor experience. If I’m not mistaken, the city planning department wants to encourage greater development/density along the State/ Eisenhower corridor, near this site. This location is near shopping (e.g. Briarwood), major employment sites (Briarwood, UM’s Wolverine Tower, etc.), an I94 on ramp, and is on a city bus line. If there is single family residential near that site, I can’t think of it; certainly, no historic neighborhoods are near it. It would be a surprise if anyone opposed residential towers there.

    Since the U is eager to grad this site, and since the potential benefits to the city from taxable residential towers at this site are enormous, it makes sense to me for the city to hold on to the property for a while, and see what turns up.

  3. By Steve Bean
    January 31, 2014 at 7:42 pm | permalink

    How long, John? A week, a month, a year, indefinitely?

  4. February 1, 2014 at 10:23 am | permalink

    John Floyd -

    The Edwards Brothers Malloy property will come off the tax rolls whether the property is bought by the University of Michigan or the City of Ann Arbor. Furthermore, property taxes generated last year were only $183,000 of which $50,000 goes to the city. Tax payments this small are inconsequential for a city with a total revenue and transfers of $86,614,681 for the last fiscal year.

    No developer will want to pay twice market value for land upon which it must finance building a, hopefully, profitable enterprise such as luxury residential housing. The city will likely have to sell the property for a discounted price resulting in Ann Arbor tax payers absorbing the loss.

    The marketability of high priced residential housing along South State Street is uncertain. The development will be considerably distant from downtown dining, entertainment and shops. Briarwood will not be a daily draw for residents.

    Spending $12.8 million out of $14 million dollars of unrestricted city funds in order to overpay for the Edwards Brothers Malloy property is not responsible financial behavior. I hope that City Council recognizes the folly of chasing after the Edwards Brothers Malloy property and, thus, preserves the city’s unrestricted funds for use in emergencies and for more worthwhile purposes.

  5. By John Floyd
    February 1, 2014 at 10:08 pm | permalink

    @3 Good question, Steve. My guess and $1.50 will get you a small coffee at Starbucks; given that, I would think that 12 months would tell us something about what market interest there is.

    @4 Mr. Salberg

    I understand that the city doesn’t pay itself taxes; my point was to give a window of time to see what else could go on there. I don’t claim intimacy with the details of Malloy’s tax abatements, but I seem to recall that they are not paying the full freight on their property. This 12 acres within the city may not be of any interest to anyone other than the U, but rather than have the U eat up more and more of the city’s tax base, I think it is worth finding out.

    As to the location, there actually is a restaurant base already out there; Macaroni Grill might not be to your taste, but Mediterano (sp?) looks like it does OK. The downtown high rise bunch holds that the hipper-than-you crowd they seek does not want to live/work/play in/ or near anything historic. It might not be a draw for undergraduates, but that’s not whom the tear-it-down bunch claims it is trying to woo.

    On Briarwood, we see things exactly opposite: to me, Briarwood is not much of a draw for restaurant tourists, but try finding socks, underwear and a pair of jeans downtown, let alone shoes, an oxford shirt, or kitchen ware. Eisenhower is prominent shopping area, and the big box stores are closer to Briarwood than downtown. We may disagree, but to my mind – and in my experience – day-to-day shopping is out there, not on Main Street. As I mentioned, the bus line, nearby freeway access, and major employment locations nearby look to me like additional pluses for that site. It’s location on a bit of a hill also seems favorable.

    Acknowledging that the YMCA site experience has not been an inspiration to many of us, and acknowledging that real estate development is not my single greatest area of expertise, it seems to me that an expansion of the U’s athletic campus is not the best long-term use of that site. At this moment, I don’t see an immediate viable alternative to the U’s offer. It could turn out that there is no residential/commercial use for those 12 acres, but I think we should find out. That’s all.

  6. By Chuck Warpehoski
    February 1, 2014 at 11:00 pm | permalink

    John, you can get socks, underwear, and jeans at Sams on Liberty. That said, most of the downtown places that sell Oxford shirts are out of my price range.

  7. February 2, 2014 at 9:38 am | permalink

    I am encouraged that the Council has had the vision to consider buying and redirecting this property. While the loss to the tax rolls is a big consideration, even more is the overall development and fate of the area. It is a key location on South State and will influence the course of the surrounding properties profoundly.

    The South State Street Corridor plan [link] suggests that this property should be mixed-use office and residential. That would help to anchor the area as a part of the community (allowing for some density in housing, and also some pedestrian access to other areas). Council has a chance to implement this via zoning and pre-planning (but not too much micromanagement of the type often seen in RFPs).

    If it merely becomes part of the UM’s athletic campus, it will essentially be a dead zone that blocks usage for many public and private purposes. I heard in one transit meeting that UM has built out to the street beyond our permitted setbacks and thus impeded some uses of the corridor for transit.

    I see elsewhere that Peter Allen has proposed that the city retain the property and lease it to developers and the UM. That sounds like a lose-lose to me. Let the property go to a good home (with homes).

  8. By John Floyd
    February 2, 2014 at 10:33 pm | permalink

    @7 Vivienne, to me Mr Allen’s suggestion still beats letting the U buy it outright. If it were leased to the U, at least the city could get revenue from it. If the U just buys it, we lose even that.

  9. February 3, 2014 at 10:28 am | permalink

    John, the City would surrender the ability to obtain tax revenue, which is variable and subject to adjustment (including new millages, etc.) in exchange for a long-term lease payment (I think the report mentioned a 99-year lease). It would assume much of the risk associated with the property, while losing the ability to manage its use (physical plant would be installed and landlord-lease relationship would impose limits). I might add that the city usually seems to negotiate from a weak position when dealing with the UM – I doubt it would be a favorable arrangement.

    Allen is hoping to broker several smaller developments while leasing the back portion of the property to the UM. (I am merely repeating what the report in the other publication said.) This would eliminate the hope that the city could effect the recommendations of the South State Corridor plan, since most provisions of the lease would presumably be baked in.

    I’m looking forward to some good Council action tonight.

  10. February 3, 2014 at 1:25 pm | permalink

    Here it is, less than 6 hours before the meeting, and we don’t have the text of the resolution that would easily be the Council’s single biggest decision of 2014 (and perhaps of all of 2013).