Q&A from 9/12 Special Meeting on the Wilson Center / St. Johns Michigan

At the Special Meeting on September 12, 2023 - and post-meeting through noon on September 14th via email - residents were invited to share their questions about the Wilson Center Project. This page is dedicated to answering those questions and providing additional information.

The questions received were divided into two separate groups: first, inquiries regarding the development agreement documents, operational questions or taxation questions. The answers to these questions are indicated below.

The second group of questions required more opinion-based answers. The Commission commented on these inquiries at the regular Commission meeting on September 25, 2023. For those who would like to listen to the comments of the City Commission, please use the link to the meeting recording. The commission commentary on the Wilson center begins at 44:42 and ends at 1:33:38.

September 25, 2023 Meeting Recording

Link: https://us06web.zoom.us/rec/share/qa4o_1OLEW_mxBDROuEIxCDe7xP2lqYZgVJyktwnl_sdT6n022Uu_NZix6WqPtFB.xPugblNVlXO1UOsG?startTime=1695679108000

Passcode: cQq3r=2G

First Set of Questions

What is the plan to finance $2.7 million if we don’t get the grant?

Note: “The grant” refers to the two grant applications submitted by the City to date. See Slide 21 of the City’s special meeting presentation.On October 24, 2022, the St. Johns City Commission passed Resolution #29-2022 Authorizing Publication of Notice of Intent to Issue Limited Tax General Obligation Bonds in an amount not to exceed $3.5 million. If the City is unable to obtain adequate grant funding, the City has the ability to finance the project by issuing General Obligation Bonds.

Did the City have any say in how the parking lot with weeds, etc. was being managed?

The Wilson Center parking lot, similar to others across the City, is subject to City ordinances and general requirements. The lot is not included in the development agreement between the City and Dymaxion, and it will continue to be privately owned. If this project is approved, Dymaxion has indicated that parcel will receive major updates, and that the area will be stripped and cleaned up.

[What are] the unknown costs for the future?

The City has performed extensive work and due diligence to obtain reasonable project estimates. Still, any project of this nature is likely to encounter unexpected expenses. To account for this, the project budget has a line item for contingency funds set aside specifically for unexpected expenses.

Planning for unknown costs is an ongoing process that requires flexibility, awareness and a commitment to careful financial management. Each year, the City assesses its buildings to estimate needed capital improvements and other unknown costs. As a part of the condominium association, the City similarly works to identify needed capital improvements, critical services and areas where unexpected costs could have the most significant impact. By revising the Capital Improvement Plan annually, the City is able to plan for adequate funding.

Who is going to manage the auditorium and gym?

When this project is complete, the City of St. Johns will own the auditorium and gymnasium—and be responsible for the management of both. Previously (as a tenant) the City provided cleaning supplies, performed cleaning and maintained the gymnasium.

The City will also be responsible for the rental and use of the gymnasium and auditorium. The City will work hand-in-hand with local organizations to plan a wide range of programs and events that maximize their use. Evaluating hiring and staffing needs will be the City’s responsibility as well.

How are you going to make your money [off the auditorium and gym]?

Municipal parks and recreation programs do not typically focus on profitability. The primary goal of these programs is to enhance the quality of life for community members. These programs provide opportunities for physical activity, social interaction, cultural enrichment and relaxation. Similar to our City parks and splash pad, the goal of the gymnasium and auditorium is not to achieve a complete offset of costs but to recoup some of the operating costs of the facility.

While the City will generate revenue through user fees, rentals, and other sources, our primary mission is to serve the community. We intend to keep program and rental fees reasonable so as many organizations and residents as possible can benefit. We also hope that this facility will stimulate economic development by bringing others into our community.

Balancing revenue generation with affordability and accessibility is essential to ensure that these programs remain accessible to all members of the community and continue to provide the many benefits they offer.

Can you provide clarity about the construction documents’ cost of $52,000 with Studio Intrigue? It appears to be over $100,000. Can you also clarify another line item for over $100,000 around engineering documents?

We believe the $52,000 being questioned references the City’s $54,000 signed contract with Studio Intrigue. To date, the City has paid $41,434 to Studio Intrigue to date for the following services:

Development of preliminary design including:
- Incorporation of proposed improvements to the gym and auditorium
- Efforts related to the contemplated move of City offices into the Wilson Center
Space utilization studies
The City’s portion of condominium documents
Additional efforts to confirm the accuracy of the preliminary design

This expense is part of the $107,000 line item listed on Slide #11 of the City’s presentation. We currently have preliminary design plans with 30-50% of the design detail required for final construction. The City will incur additional costs (also listed on Slide 11) if the project moves forward to include:

Completing final construction documents and specifications: $110,000
Bidding services (required bidding support, conducting pre-bid meetings): $10,000
Construction engineering, shop drawing review, and inspection services: $113,000

Cities are not developers, and there isn’t any evidence of the City becoming a developer in a project like this successfully. Can you provide any research or business plans that would help?

The City is not acting as a “developer” in this proposed agreement. Unlike a developer, the City will be responsible for making improvements to the existing gym and auditorium and paying for 50% of the improvements to the Common Space as defined in the Master Deed. The City will be responsible for updating the building’s utilities; building out a community room, concessions/kitchen and storage space, if approved; and ensuring it meets modern building standards, codes and ADA compliance. The business plan on Slide #11 of the City’s presentation is to complete the construction and improvements necessary in order to open and use the facility.

I have concerns around theater costs. Who will run it and who will fund it?

If the project is approved, the auditorium will be managed and run by the City of St. Johns, and operational funding will become a line item in the City budget. It will include an associated fee schedule that balances the promotion of the arts with operating costs.

What does that City mean by $140,000 for last bit and $350,000 to develop it?

This question refers to the option to acquire additional space in addition to the gym and auditorium, presented on Slide 15 of the City’s presentation. The actual amount is $130,000, which would be an additional payment to the developer in the event that the City proceeds with developing 1,728 square feet to house the community room, concessions/kitchen area and storage areas. This offsets revenues that would have been received by the Dymaxion utilizing this space as apartments over the life of the facility.

The $350,000 is the estimate for the cost to build out this space.

Before, they [Dymaxion] said it would take more than 69 parking spaces to house that many people. Where are people going to park their cars?

The developer has determined not develop the property at 101 W. McConnell St. at this point. The developer will be making improvements to this lot and creating 83 parking spaces to replace the previously planned 69 on-street parking spaces. If approved, the City will also install additional parking spaces on Cass Street that will mainly serve the Wilson Center gym, auditorium and community space.

You said the City would be able to use gym and auditorium as of January 2025. If they haven’t developed apartments yet, who is going to pay for heat? If the roof starts leaking, is it still a 50/50 split still? 50/50 does not seem like a fair share.

The target date for completion of the gym and auditorium is January of 2025. This would include any needed roof repairs over these spaces. The gym and auditorium will be served by separate HVAC and heating systems. Thus, the City will only pay for the costs for heating and cooling this space. The shared commons space is also served by separate HVAC and heating system and thus can be better controlled and turned off if not in use or construction is still ongoing in the developer’s condominium area. This issue was anticipated as part of the collaborative condominium development and servicing of the structure, thus ensuring the City only pays for the costs of conditioning the spaces being used by the City.

If Dymaxion decides they no longer want this building and sell it off, is the City is stuck with their share of the building? They can then sell it for low-income housing and the neighbors are stuck with that.

The rules and regulations as they pertain to the ability of condominium users to sell off and or transact parts or all their units is contained in the Master Deed. There are several articles that will work to protect the City in this regard.

Article IX – Right of Refusal (Master Deed)
Article V – Restrictions (Master Deed – Exhibit A – Bylaws)

Is it truly beneficial to the City to get stuck with a 50/50 payment deal and repairs and bills and everything else when the City will own such a small share of that building?

The negotiations regarding the proportionate share of the maintenance costs of the common space of the building involved several factors.

The City’s portion of the building (Condominium Unit #1) is smaller than the balance of what will be dedicated to apartments (Unit #2). It is projected that there will be 49 apartments in the development. This was compared to the use of the common space from a loading perspective (for a basketball game, a theatrical performance, a lecture etc. that will involve hundreds of people).

With a 50/50 split of the voting rights (as outlined in the Master Deed and Condominium Bylaws), the City will have greater control over maintenance and improvements, ensuring well-maintained facility and grounds. As a point of clarification, the City will only be paying 50% of the commons space costs, NOT 50% of the costs for improvements and conditioning of Unit #2 (the developer-owned portion of the condominium).

Are there not recreational or arts grants available?

Yes, there are grants available. The City recently applied for a Michigan Department of Labor and Economic Opportunity - Community Center Grant in the amount of $1,910,000.00. This grant application includes $160,000 in programming funds for after-school programming at the Wilson Center and $1,750,000 in capital project funds for the renovations at the Wilson Center. A response is expected by November 1.

We will continue to apply for grants for this project, as we have done in the past with many of our recreation projects.

Any idea what this will actually going to cost the taxpayer per year?

If the project costs approximately $3 million in total, it is estimated the annual bond payment for 15 years will be $300,000. The City will also have annual overhead and condominium costs, and will also continue to monitor staffing to determine if additional help is needed for programming.

He [City Manager Chad Gamble] said an option would have been to continue to rent space. We had an agreement to rent for a couple of years for a very attractive price. We have gone two years without being able to rent those spaces. Any compensation come our way for that from Dymaxion?

The City of St. Johns had an intent to lease commercial space for the gymnasium for $1 per year, plus monthly payments for a pro rata share of common area expenses including utilities, property taxes, insurance, and common area maintenance starting 6/10/2021. This continued until a two-year commercial lease agreement was signed on 7/1/21 for $1,000 per month. Pro rate share of common area expenses including utilities, property taxes, insurance, and common area maintenance were to be tracked, with the remaining balance to be reconciled upon year end. The landlord according to this agreement had the right to terminate the lease at any time. When the boiler in the building stopped working, the landlord terminated the lease. There was no prepayment for this lease and therefore no compensation was owed from Dymaxion.

Do we know the breakdown of one bedroom vs. two-bedroom apartments?

The allocation of one-bedroom vs. two-bedroom apartments will need to be in accordance with our zoning ordinance. Section 155.102.c requires that multi-family buildings with more than 10 units shall have no more than 25% of the units be studio units, and no more than 60% of the units be one-bedroom units. On September 21, 2022, a zoning variance was approved by the zoning board of appeals to allow for up to 80% of the units in the building to be one-bedroom units.

The developer is currently anticipating 15 two-bedroom units and 34 one-bedroom units, subject to change with unknowns such as the flexible community space decision.

What part of the contract obliges them to keep the plan of 49 apartments and not reducing size of apartments and making them smaller?

The size of the units will be governed by the City’s zoning ordinances. The zoning variance approved on September 21, 2022 requires up to 80% of units in the building can be one bedroom apartments. Section 155.101.d states the minimum gross floor area of any dwelling unit in the city shall be 500 square feet. If the developer wishes to have units smaller than 500 square feet, they would be required to get a variance.

Do you have any projected numbers for the likely cost of annually maintaining these facilities? I’m asking in terms of things such as annual heating/cooling and general cleaning/maintenance.

It is very difficult to estimate the annual costs for maintaining these facilities. However, it is important to note that the City would be responsible for these yearly maintenance costs or overhead costs regardless of ownership. All lease agreements for the gymnasium and auditorium stated that the lessee would be responsible for a pro rata share of common area expenses including utilities, property taxes, insurance, and common area maintenance. While leasing these spaces, the City was responsible for the cleaning and maintaining of our spaces and bathroom.

What happens if 5-10 years down the road they sell to someone else and they want to put in Section 8 apartments?

There is nothing that prevents a developer from selling their property. However, there are controls the work to establish limitations and guidelines on the operations of the facility. The rules and regulations (as they pertain to the ability of condominium users to sell off and or transact parts or all their units) is contained in the Master Deed document. There are several articles that will work to protect the City in this regard.

Article IX – Right of Refusal (Master Deed)
Article V – Restrictions (Master Deed – Exhibit A – Bylaws)

Why is it better to pay $2.8 million dollars up front and incur the liability of owning and maintaining the Wilson Center in perpetuity instead of granting the developer the brownfield tax abatement? The interest alone on the money is at least $60,000 per year. Add in the cost to maintain the building and a number exceeding $90,000 per year is more than likely. The brownfield tax abatement route is the best and least risk[y] option for the City. After the tax abatement expires, the City will have all the tax revenue and none of the interest and maintenance costs.

The $2.8 million is a project cost associated with offsetting the brownfield ($550,000), along with the improvements necessary to make this a usable facility. The revenue that would be generated to all taxing entities (i.e. St. Johns Downtown Development Authority, St. Johns Public Schools, Clinton County RESA, City of St. Johns, and others) over a 15-year period (assuming a $4 million investment by the developer) is $1,970,000.

The brownfield would capture/divert funds from the respective taxing entities and force additional monies into the brownfield request to pay for fees and costs associated with the brownfield program that the City is avoiding by directly working to partner with the developer.

Owning part of the building with a private business introduces all sorts of risks to the city. One being, what stops the developer from selling their part of the building?

Article IX – Right of Refusal (Master Deed)
Article V – Restrictions (Master Deed – Exhibit A – Bylaws)

Because the City will be 50% owner of the Wilson Center, is it figured into the justification that future tax revenue from the property will be 50% of what would be received compared to granting a brownfield tax abatement? That would be something like $55,000 in lost tax revenue forever.

The City will only receive the 50% tax reduction in the common areas of the building. This would be a reduction in True Cash Value of approximately $214,000 (State Equalized Value of $107,000) or approximately $6,000 in tax revenue annually. All other portions of the building owned by Dymaxion Development would still have an increased SEV based on the true cash value of their improvements. We have estimated this for analysis purposes as $2,000,000 SEV.

I saw it stated that yearly maintenance costs for the City would be $30,000. What is included in that number? It sounds very optimistic. I heard the school system was paying over $100,000 for just utilities per year. Who will clean and maintain the building? Is that figured into the $30,000?

The $30,000 yearly maintenance cost was related to the City office space, which is no longer being discussed.

The amount of space the City will own is approximately 26% of what is being referenced in the $100,000 annual utility cost. It is important to note that the City would be responsible for these yearly maintenance and overhead costs regardless of ownership. All lease agreements for the gymnasium and auditorium stated that the lessee would be responsible for a pro rata share of common area expenses including utilities, property taxes, insurance, and common area maintenance. While leasing these spaces, the City was responsible for its cleaning and maintenance.

Who will manage and schedule activities at the Wilson Center? Are you going to need to hire someone? The people that are fans of the auditorium seem willing but pretty much all of them are not young people and many do not even live in the city. What happens when they are no longer able to do so? Will the auditorium still be fully used? Then there is the gym to consider. If I want to use the gym, who am I going to contact?

When the City leased the gym, the public could rent the gym facility through the city’s MyRec webpage. This is how residents currently rent the depot building and pavilions in our parks.

How much money has been spent on this project so far? Please include all the money paid to the architect and for media consulting.

Please see Slide 11 from the City’s presentation on the Wilson Center. The preliminary engineering, 50% of document preparation, and purchase price paid to date make up the total amount paid as of today.

When will the cost and estimates for the abatement become available? Will this be done prior to the City agreeing to pay for it?

The abatement of the Wilson Center is the responsibility of the developer per the purchase agreement signed on September 15, 2022. The purchase agreement states in the event Dymaxion Development discovers any environmental issues during any abatement or construction efforts, they may not pass along such costs, in whole or part, to the City of St. Johns. It also states the seller will provide the abatement plan to the City when completed. As a condition of closing, Dymaxion must provide clearance testing results to the City.

Will property values be addressed with the low-income housing coming in? This will decrease property value.

The development and associated apartments that will be constructed and managed by Dymaxion are market-rate apartments. They are not low-income apartments. The property value will increase based on the actual investment in real property. The estimated investment by the developer is over $4 million. The estimated tax capture for all taxing entities over a 15-year period based on this investment is $1,970,000.

Will there be a clause in the agreement where the City won't become responsible for the building if the property cannot get renters and the whole plan falls apart?

The clauses and requirements that speak to this issue are outlined in detail in the Master Deed and related exhibits that can be found on the City’s website under the main Wilson Center web page.

Are there any guidelines to the parking spaces that must be created? (No parking garage/structure?) Will this parking be open to all city residents free of charge?

A parking plan has already been submitted and approved in the original site plan by Dymaxion. This allowed for permitted overnight on street parking.

With regard to the current parking lot, any structures would first have to be approved by the planning commission and the Clinton County Building Department. This parking lot is located on private property and available only to residents of the Dymaxion development.

What is the projected bottom-line cost for the City to keep ownership of the auditorium and gym? Can you present a number?

This cost is currently estimated to be $2,820,355.

Parking is still a problem. Even once the original parking lot on the south side of the building is refurbished, that will only be enough for the residents but not for City office workers and auditorium/gym attendees.

Moving City offices into the Wilson Center is not part of the documentation being considered by the Commission. There are 83 parking spaces proposed to be constructed in the parking lot currently located at 101 W. McConnell. Parking usage for the gym and the auditorium is not overnight parking – unlike the residential parking in the McConnell lot.

Is the City stating an open agreement for use of the courthouse parking lot for events?

The courthouse parking lot has been used since it opened for overflow parking to serve the general downtown needs, parking for local churches and for other large special events downtown. The lot would continue to serve the City in this respect. Larger events are typically planned for weekends or times when the courthouse is not open to the public.

How else can more parking be created? Perhaps pave the west side (where adventure club once was) and designate several handicapped spots there since it’s near to the entrance to the handicap elevator?

Second Set of Questions

The Commission commented on these inquiries at the regular Commission meeting on September 25, 2023. For those who would like to listen to the comments of the City Commission, please use the link to the meeting recording. The commission commentary on the Wilson center begins at 44:42 and ends at 1:33:38.