Time to Pull the Plug on the Broad Street West Redevelopment Plan

TAPinto Summit

By John Miano

While the community is the midst of a break in the Broad Street West redevelopment plan (the fire station property), it is time to consider the obvious option for the fire station property that has been ignored. That is, get rid of the redevelopment plan, sell the property at a public action (as is normally required by law), and allow the buyer to build under the zoning (commercial, maximum of three stories).

Redevelopment is the statutory process for municipalities to address blighted areas as permitted by the state constitution. The redevelopment process was not intended as a mechanism for bypassing the statutory requirement for selling valuable public real property (such as fire station parcel) at auction. It would be hard to find any place in Summit that would legitimately qualify as blighted.

Council gave the community three general reasons for using the redevelopment process for the fire station property: financial benefit, affordable housing, and getting what the community wanted. So far, the redevelopment process has been a complete failure at all three goals.

In regard to finances, the city signed a letter of intent with the developers under which the fire station property ostensibly would be sold for $8M. In addition the agreement had the city supplying massive corporate welfare in the form of a $1.75M Development Area Bond (RAB) and a Payment in Lieu of Taxes (PILOT) that would save the developer about $18M in taxes over 30 years. The present value of the PILOT to the developer would have been around $9M–$11M  (depending upon the interest rate). When you subtract the present value of the corporate welfare from the sale price, you find that the agreement under the letter of intent would have the City of Summit effectively paying the developers $3M–$5M to take the property off our hands. 

As a means of addressing financial issues, the redevelopment process has been an abject failure.

Worse yet, the $8M proposed sale price is likely to be well under the true market value. Council stated that the $8M price was the best it could get under the redevelopment plan. The value of the property to a developer depends upon what the developer will build. Yet no alternatives to maximize the value of property have received serious consideration. Off-the-cuff estimates based upon comparables (including the City’s own purchase of part of the parcel on Cedar St.) I have received from those in the business suggest the market value without the redevelopment plan could be as much as $16M and $30M, depending up on what would be built. 

Astonishingly, while of hundreds of thousand of dollars have flowed to consultants as part of the redevelopment process, the city has not had an appraisal done to find the true market value of the property without the redevelopment plan.

In return for the massive direct corporate welfare and the likely underpricing of the property under the letter of intent, the city would have received the absolute minimum number of affordable housing units required by law.  That would not even qualify as consideration in contract law. The corporate welfare from the taxpayers under the letter of intent is almost $200,000 per unit of affordable housing. If the true market value of the property is $16M (a minimum indicated by city’s own purchase), the combination of corporate welfare and underpricing the property could have the city expending nearly $600,000 per unit of affordable housing. The same financial investment could build much more affordable housing by other means.

Meanwhile there are other development projects taking place in the City of Summit that are providing the same percentage of affordable housing without any corporate welfare at all. The redevelopment plan is a highly inefficient means for the City to provide affordable housing and the need for affordable housing provides no justification for the Broad Street West redevelopment plan.

As far as getting what the community wanted, redevelopment produced a plan for massive, cheap “5-over-1” building, with inadequate parking that would have been uglier than a baboon’s rear end. Few people in Summit wanted such a building. As a means of controlling what would be built, the redevelopment plan has been a total failure. The underlying zoning (without the redevelopment plan) would have provided the community better control than the redevelopment plan.

The Broad Street West redevelopment plan has been a comprehensive failure at meeting any of the goals Council put forth to justify its existence. In light of this failure, it is commendable that Council has paused the redevelopment process. Now is time to consider alternative means of dealing with the fire station property. 

The City of Summit needs to have appraisal done of the fire station that estimates the market value of the property for commercial development under the zoning and without the redevelopment plan that considers different types of construction. If the market value of the property is incrementally greater than the value under the redevelopment plan, the redevelopment plan should be repealed, payments to redevelopment consultants should cease, and the property should be sold at auction to bring the maximum value to the residents.

In parallel, it should be made clear to developers that any proposed project under the redevelopment process must conform to the redevelopment plan and the zoning requirements. Any proposal must satisfy the density and size requirements. Any proposal must provide all the required parking for any residents and businesses on-site because on street parking is totally unacceptable to the community. The reality of geometry is that, with a single level of parking, the fire station property can fit about 60 units of housing with 10,000 sf. of retail or 80 units of housing and no retail. Any proposal for denser construction is dead on arrival and would further erode the already tenuous credibility of council with the community.

John Miano, Summit