Muskegon City Commission Mulls Lack of Harbor 31 Development and Growing Bond Payments

Editor Note: This story originally stated that the first of three recent owners of the property was no longer involved with the property. This first modern owner, Lakefront Development LLC, is a partnership formed of partners at Parmenter O’Toole, and technically is not involved in the current situation described below. However, they are not completely detached from the future outcome, as their current building resides within the otherwise underdeveloped parcel of land in question. The story below has been edited to reflect this reality.

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Andrew Trzaska | August 12, 2013

“It is a relatively complicated situation that has occurred over the last ten years.”

Muskegon city manager Bryon Mazade summed up the epic story of the Harbor 31 property at the north end of Muskegon’s downtown, which includes state support, a long-running casino battle, multiple owners, and growing tax liability for the city.

Formerly marketed as Edison Landing, the 34-acre business park was founded in 2002 as a SmartZone, a scheme created by the state to create business incubators in specific cities, which in theory would jumpstart tech job development in those areas and pay for the Michigan Alternative and Renewable Energy Center, MAREC, situated on the land.

This didn’t pan out, and the city is on the brink of having to pay more for MAREC’s bonds than it had bargained for.

The SmartZone designation allowed cities like Muskegon to pay little on the properties in the first 10 years after receiving the label, giving developers the ability to grow businesses on the site. If successful, those businesses would theoretically pay taxes on the properties, but since Harbor 31 has not developed, the city has looming debt obligations coming, in the six-figure range on a yearly basis.

Aside from an unfinished low-rise condo development and the Parmenter O’Toole law firm, the property has attracted no businesses. The city collects no taxes from the MAREC facility.

Some of the lack of development can be traced to the history of ownership of the property. In the far past, the site used to be home to the Teledyne Continental Motor plant. That industrial legacy has made it a brownfield site in the present day.

Since 1996, three different groups have owned the property. The first of these three owners was an LLC that included partners from Parmenter O’Toole. This group, Lakefront Development LLC, sold the property before questions of its development progress truly began.  Belmont Farms LLC is the second modern owner, who purchased the property in 2007.  When their plans for residential and business development failed during the Great Recession, they opted to sell the property and transfer their development agreement with the city to Muskegon Lakefront, LLC.

This third owner, led by Dick Anderson of the Archimedes Group, hoped to gain recognition from the federal government as a Native American tribe, allowing them to build a casino on the property. However, no progress has been made on the state and federal level to achieve this recognition, including placing the land in trust.   Yes Muskegon, the group supporting the development of the casino, claims that they will receive recognition as a tribe soon, but no timeline has been laid out.

Further hurting the city’s stance, the city has delayed special assessments on the property, the current owners are a just short of two years behind on taxes, and the Community Foundation for Muskegon County will soon end its yearly assistance of $75,000 per year to help the city pay taxes on the property.

Monday’s planning commission discussions started with large amounts of information from Mazade, followed by opinions from commissioners.  As the discussion wound down, the city found it had to make a decision: either do nothing and hope the property will eventually develop, or speed up tax assessments on the property to get the owners to pay the city more of what it is owed.

Taking away the property is not something the city currently can do, because they aren’t in foreclosure territory when it comes to paying their past-due taxes, nor has the city have  any other claim of ownership on the property.

“I’m reluctant to speak on behalf of the owner,” said Mazade. “It becomes very clear to me that they would not want to dispose of their property just for the sake of it. They have plans.”

City staff recently revived communication with the owners. Mazade said that last week, he and the city’s finance director Tim Paul met with the current owners of the property to explain the city’s situation. Specifics were not nailed down at that meeting, but Mazade shared his perception that the owners and the city are closer to being on the same page:

“What I took away from that meeting was a sense that they were understanding of our situation, and were at least willing to explore working with a city to help us with our financial situation.”

In the end, the commission directed city staff to communicate with the owners about paying up on the property, or other future plans.

Commissioner Willie German seemed to want to give the developers more time.

“I look at the City of Muskegon and I look at the new Farmer’s Market property. That sat there for about 10 years. Now we have a farmers market going in there. Some things just take time.” Said Willie German. “I think we should maybe give them a little more time to see what happens.”

Commissioner Lea Markowski argued that the Farmers Market move was not similar, as it was presented as an alternative for the property when development didn’t happen. She said that the Harbor 31 owners have not even presented an alternative since their initial plan has not worked out.

“If this were any residential situation… we would hold them accountable for such,” said commissioner Lea Markowski. “I personally think we need to take some course of action that makes us become current on payments.”

Vice Mayor Larry Spataro characterized Muskegon Lakefront, LLC, as well as Belmont Farms before them as being in a form of de facto default, since they have not complied with their development agreement.  One provision includes the development of two more units on the land by December 1, 2012, which has not happened.

“They’ve done a lot of harm to this community, quite frankly. They are hurting our budget. They don’t have a realistic plan for developing this property,” said Spataro. “I think we need to consider them in default of their agreement.”

“I would rather take land than cash. Then we can turn it around and make things happen.”

Spataro continued by addressing the topic of the possible casino on the site, which Muskegon Lakefront LLC continues to hold out hope for.

“The process of getting the casino, despite what people think, is out of our hands,” said Spataro.  “If everything went smoothly going forward, we’re talking 10 to 20 years going forward to get a casino. But we don’t have 10 to 20 years. We have bills to pay today.”

At this time, city staff will continue discussions with the owners of the property.  Any vote considering a change in tax assessments or other policy changes will require a vote from the commission.