Council extends Fakhoury development agreement

Photo by J. Patrick Pepper

Photo by J. Patrick Pepper

The vacant Bally’s Vic Tanny, 22340 Michigan Ave., is a key location for developer Hakim Fakhoury’s Dearborn Village Partners project. Fakhoury says the building, which is scheduled for demolition in the spring, could be the future site of an Emagine! movie theater.

“I think we are going to be back here in the same place next year, voting on another extension.” — Councilman George Darany

Times-Herald Newspapers

DEARBORN — The Hakim Fakhoury-led Dearborn Village Partners LLC will get another year to secure investors for a west downtown development.

City Council members voted 5-1 last week to grant the extension.

The development is slated for the city-owned parking lot on Garrison between Military and Howard and tentatively would include a hotel, a parking deck and housing suites aimed at University of Michigan-Dearborn students. The extension gives DVP exclusive development rights to the property until the end of 2010.

In favor of the measure at the Dec. 21 meeting were Council President Thomas Tafelski, Councilman Robert Abraham, Councilman Mark Shooshanian, Councilwoman Suzanne Sareini and Councilwoman Nancy Hubbard. Councilman George Darany cast the lone dissenting vote. And absent was five-term Councilman Douglas Thomas, who missed the final vote before he cedes his seat to newcomer Brian O’Donnell in January.

As part of the vote, the city agreed to raze three vacant Fakhoury-owned buildings along the periphery of the development site, including the former Brothers Tuxedo, Giuliano’s restaurant and Bally’s Vic Tanny fitness center. The city will recoup the costs through tax-capture revenues when new buildings are constructed, or if new buildings are not constructed, through liens on the property.

“The point is to move forward and show progress on this (development),” Mayor John O’Reilly Jr. said.

Despite the near-unanimous margin, the decision seemed far from a sure thing. In the two hours preceding the vote — and in the weeks leading up to it — council members questioned Fakhoury and city advisers on every aspect of the oft-changing project. Central to most of their queries was roughly $41.7 million in state and local tax incentives first granted to Fakhoury when the project was approved three years ago.

The two major components of the incentives are a Michigan Business Tax Credit and a brownfield reimbursement plan. The $9.2 million MBTC equates to 10 percent of the project’s initially proposed $91 million of private investment. The brownfield plan would allow Fakhoury to recoup building costs up to $32.5 million through increased state and local tax revenues on the new development.

In light of the project’s dramatic downsizing over the past 18 months (see related story) some councilors questioned whether the tax credits are still applicable, if they could be transferred to a new developer or if they could be awarded for a new project on the same site.

Economic and Community Development Director Barry Murray said the state has indicated that they would be flexible about changes to the project, given the recent economic downturn. As for transferability, Murray said the only way for a new developer to access the credits would be through acquisition of DVP.

The council also was critical of the fact that several of Fakhoury’s Michigan Avenue properties are vacant and tax delinquent. He said the delinquencies, which have become an annual occurrence, would be addressed in due time, and that the vacancies were a result of not wanting to fill individual buildings that were intended to be part of the broader development plan.

“I could redevelop these garbage buildings one by one, but the whole point is to have them included in this project,” Fakhoury said, noting, “If (the city) got involved, we could have a developer’s agreement by the end of the year.”

That assurance rang hollow for Darany, who advocated rebidding the deal to see if there was any interest from developers with the financial wherewithal to move forward on the project. As it stands, Fakhoury is something of a matchmaker, looking to leverage the tax incentives and his own adjacent properties to bring better-capitalized companies to do the actual building for the project.

“I don’t have confidence in (Fakhoury) to move this project forward,” Darany said. “I just think we are going to be back here in the same place next year, voting on another extension.”

But for his council colleagues who supported the extension, it amounted to a choice of pragmatism over pessimism.

“As much as I don’t have a lot of faith in (Fakhoury) doing the development,” Tafelski said, “he, fortunately or unfortunately, holds the keys to the tax credits that would make possible a transformational project in the downtown west end.”

In making his case for the extension, Abraham said the city would be ill advised to end the agreement.

“We have no risk, we have no costs, and it isn’t like other developers are beating down our doors,” Abraham said. “The point is, why walk away from this?”