City releases more information about funding

DEARBORN — Before the scheduled study session on the Dearborn Administrative Center/City Hall/Artspace on June 20, the city released a report with a comprehensive overview of the proposed deals.

In a 75-page document placed on the city’s website, an analysis of the project and its benefits for the city was laid out as well as copies of important documents, including a copy of the proposed contract between Artspace and Dearborn for the sale of City Hall and more information about the history of communication between the city and Severstal concerning the $8.5 million donation that is on the table for the city to use.

The DAC is the proposed new location of city hall. The city purchased the center — at 16901 Michigan Ave. — last year and it is located just west of the Henry Ford Centennial

According to the report issued by the city, the move would comply with “the City’s ongoing efforts to reduce annual personnel
and overhead costs; create catalytic projects to drive economic benefits; find unconventional revenue sources to finance investments
with long-term returns; and, improve customer service and convenience
despite limited resources.”

It is estimated that moving the city’s operations to this new facility will save the city $400,000 annually. Additional space in the DAC that the city can lease out to other interests
could raise the city an extra $120,000 to $180,000 annually.

The current city hall, which is in an 91-year-old building, costs the city just over $1 million in operating costs annually. It is also in need of a new parking deck and updates to outdated systems inside the building, which would cost $2 million and $6.2 million, respectively.

The move to the DAC has projected redevelopment costs of $5.5 million, with $4.1 million of that used in construction and the remaining $1.4 million used for professional and contingency costs.
The gross total of the cost of the DAC complex and its renovation to the city is $9.4 million, but with the sale of the current
city hall building for $1.65 million the total cost is reduced to $7.75 million. That figure is $450,000 less than the costs associated
with maintaining operations at the current city hall.

Artspace is a Minneapolis-based nonprofit real estate developer that wants to renovate the city hall building to house and create work spaces for artists as well as spaces for art studios, art organizations and creative businesses.

This would be its first property in Michigan. Artspace official shave agreed to pay the appraised price of $1.65 million
to the city for use of the building, but will not receive City Hall Park or the parking lot south of John Nagy Drive as part of the contract. In addition they would invest approximately $17 million into the building in renovations.

Artspace also is submitting an application for financing from the Michigan State Housing Development Authority in August under the Low Income Housing Tax Credit Program. They should hear back in November whether they’re approved or not. If they are approved, the city will move out of the building in June 2014. If the funding is not approved until February, the city will not move until
the fourth quarter of next year.

Renovations to the building are expected to take 12 to 15 months with the first tenant moving into the development in October 2015.

Other factors in the contract for the building are that the building is being sold “as is,” no exterior changes can be made to the building and a non-refundable deposit of $50,000 must be submitted
with the signed agreement for the purchase.

There also are two rules which would revert the property back to the city if they are not followed. In the first, Artspace or its affiliates must remain owner and continue to use the building
for 30 years, and in the second, the project must be completed within two years from the date of closing.

Severstal North America is offering $8.5 million in donation money to be used in the project in exchange for naming rights.

Broken down into its individual items it would be $5.05 million for redevelopment of the DAC, $1.5 million for the development of a Veterans/Memorial Park adjacent to the DAC, $1.45 million in contributions to Artspace for the city hall project and $345,000 to Artspace for pre-development feasibility and design.

Donation money to the city has been received by the city since 2005, the year after Severstal purchased the former Rogue Steel Works at the Ford Rouge Complex. Severstal initially donated $52,000 in 2006 and $613,000 in 2007 for a participation agreement between the parties based on the success of the revitalized steel operation. The payments were to continue through 2023, but the “turbulent economic conditions” resulted in no additional payments being made to the city.

In 2009, Severstal officials informed the city that it would rather contribute a one-time large sum rather than smaller annual ones and the donation contract was amended.

They also wished to make it a naming rights agreement.

A conference center at the Hyatt Regency Dearborn was planned, but never implemented because of the closure and sale of the hotel. Approximately $155,000 of the current $8.5 million donation
was expended on the planning and feasibility studies for this conference center.

(Bob Oliver can be reached at