Bowling Alley Block Developers Through the Eyes of Their Old Employers at Ann Arbor

[XLFD]

I originally presented an introduction to the family behind the development of the Ludington bowling alley block in this article:   Proposed Bowling Alley Block Developer Had AA Problems.

That article was done without being able to contact any resources dealing with the difficulties that arose from the project and the fault that should be attributed to the developers, Mike and Bob Jacobson.  Fortunately, Ludington Torch member Barney Reinberg was able to contact some of the councilors associated with that business that occurred roughly a decade ago.  He filed the report that follows. 

Hostel Development Former Ann Arbor Councilmen Speak Out

It has been years since either man has really spoken about the William Street Station.
Some facts have been lost in time, but the memory of a development gone wrong still
remains. Former Councilman Steve Rapundalo, Steve Knuselman and Margie Teall talk
about how “all the right intensions, went so wrong”.

Request for Proposal

In 2003, the YMCA decided to sell its building and move to a new location. There was
nothing special about the building except is located in a prime Ann Arbor location and
part of the building was set up a hostel. The hostel provided short term and inexpensive
living for travelers and some of the less fortunate individuals in of the city.

The property looked too good to pass up and the city purchased the property.  Unfortunately, before purchasing the property, the City of Ann Arbor did not inspect the  property and they found the building need to be condemned. City councilors decided to  post a “Request for Proposal” (RFP) and the Jacobson’s answered the call. Mike and Bob Jacobson were select to develop William Street Station.

Working with the city council, the Jacobson’s planned to develop a “mixed use” property
with low income housing. This was something the city councilors wanted. Well, some of
them. Councilman Rapundalo was not sold on the idea. He states, “I never understood
how they were going to make money with low income housing.” Councilman Steve
Knuselman went even further; the city should not be involved in “speculative
development.”

The Yellow Brick Road

To understand one reason for the failure, you have to understand the attitude of the Ann
Arbor City council. At the time, the city counsel was comprised of several attorneys and
individuals holding PH d’s. As Knuselman described them, “there were a lot of egos, a
college town and some wanted to be seen as progressive”. Besides, “who is not in favor
of low income housing?” “We had a lot of intelligent people, but none had any
experience in this area.”

Bed Rooms and Botany

It soon became clear to the city that low income housing was not going to be a financial
success. So plans were redesigned to include a luxury hotel on the site. The new plans
call for two towers, one low income and second for the hotel. The buildings were to be
connected by a buss terminal.

The new design did not go over well with Rapundalo or Knuselman. They felt there
would be issues with the appearance of the luxury hotel next to the low income housing.

Not to mention the exhaust from the busses. As Council Kunselman remembers one part
of the plan, “there was going to be a big circular sunlight connecting the buildings”. The
William Street Station was headed down the road to redesigns and project delays.

Anatomy of Failure

Both Councilman Rapundalo and Kunselman agree that problems started soon after the
project began. Both have differing opinions as to which Jacobson was in charge of the
project. Councilman Rapundalo recalls Mike Jacobson “he met with the councilors but
once the project started it was clear that “Bob was in charge”. Kunselman only
remembers Mike being involved and had little interaction with Bob.

Councilman Steve Rapundalo gave a more personal view of the city’s relationship.
“Mike was easy to get along with, Bob was much more difficult, and it was hard to get a
straight yes or no answer from him concerning deadlines even getting to admit his
signature on documents”.

Councilman Stephan Kunselman’s view of the Jacobson’s is quite different. “It was not
their fault; I don’t blame them at all”. Kunselman puts most of the blame on the Ann
Arbor city’s council to enter into a public and private real estate development agreement.

Councilman Teall still has regrets that the project was scrapped. She believes that is was
a good project and that they just needed to be more patient and give the Jacobson’s more
time. It saddens her to see the former YMCA in its current state. “It’s an empty lot.”
The property was sold to Dennis Dalhmann of Dalhmann Properties in April of 2014.

Promises, Promises

As the William Street Station development was hit with delay after delay, the city counsel
considered selling the property to the Jacobson’s. This would have freed the city of its
financial obligation and sever ties with the Jacobson’s. The proposal was taken to the
counsel and vote down it what Rapundalo called “a close, a very close vote”.

Councilman Kunselman agreed. Why they voted the proposal down? The Jacobson’s
would be free to develop the property as they see fit. “We promised low income
housing” said Kunselman. “We would have had egg on our face if we sold”.

Instead, they ended the agreement with the Jacobson’s who later filed suit. “It was a
flivorious lawsuit” Kunselman said. “They did not have a leg to stand on; they sued for
housing discrimination or something like that”. Rapundalo agreed as well, city attorney
Steve Postama provided good legal representation.

House of Cards

There were project delays and deadlines were not met. Extensions came and went. This
was the reasoning for firing the Jacobson’s, but it may not be the reason the project failed.
Kunselman gave a couple of reasons for the failure.

First, no one really had any “skin in the game”. The city of Ann Arbor had a piece of
property invested. “What is a three million dollar investment in a thirty million dollar
project? It’s really nothing. We were making interest only payments plus living
arrangements (rental voucher for prior YMCA residents) we were not going to give
more.” The city did not have any more money to put into the project. Contrary to some
beliefs, the city of Ann Arbor was not an ATM machine.

The Jacobson’s were faced with a different set of problems. First, there was no financial
interest in the property. It is difficult to secure funds on a property that you do not own.
Second, was the funding deadlines missed by the Jacobson’s. The deadlines in question
were MISDA funding deadlines.

The Jacobson’s would request the city sign off on the funding documents and since prior
deadlines were missed, city council would refuse to sign. The fear of another missed
deadline was always forefront in the minds of some of the counsel members. Margie
Teall has a more pragmatic view. “Deadlines were missed, but that is not an uncommon
occurrence. We had other projects that missed deadlines. We just needed to be more
patient.” She adds.

There were a lot of reasons for the failure of the William Street Station. To directly
single out the Jacobson’s would not be fair. But we can not ignore that the Jacobson’s
freely entered into the agreement with the city of Ann Arbor. Margie Teall may have
summed it up best with “I just think we all bit off more than we could chew.”

North by Northwest

Following the trail of the Jacobson’s, the next stop is the city of Grand Rapids, Michigan.
In 2009, they started Baker Lofts and followed this up with Century lofts. These projects
were much different than William Street Station.

Both were old standing factories and were privately owned by the Jacobson’s. The
Jacobson’s requested from the city Paid in Lieu of Property Taxes (PILOT) and tax
credits from the city. Former Mayor George Heartwell summarizes his experience with
the Jacobson’s. “It was a straight up development deal. We (the city of Grand Rapids)
had no skin in the game. They did what they said they were going to do.”

Missed deadlines and paperwork were never a problem in Grand Rapids because the
properties were privately own and the city had no vested interest in them. The cities only
“real” interest was the low income housing the projects would bring to the community.

The End Game

With this information what can we possible expect from the proposed development in
Ludington? It really depends on the city and how much, if any vested interest they have
in the property. If they desire to hold title to the property, you could see another William
Street Station. If the property is sold to Jacobson or privately held, prospects are good
that the project will move along in a normal timeline.

It is quite difficult to lay a lot of the blame for William Street Station at the feet of the
Jacobson’s. They were put in an impossible situation. The project was destined to fail
almost from the start. The city of Ann Arbor with all its “good intentions” is equally to
blame for entering into this private and public agreement.

[shinblind]

Here are some reviews for the Baker Lofts Apartments 

http://www.apartmentratings.com/mi/grand-rapids/baker-lofts_9199332...

Seem like they have a few unhappy campers.

As far as I can tell the other apartment/condo building renovated by the Jacobsons in Grand Rapids is called  Klingman's Loft not Century Loft. 

The only review I could find there since it has only been opened about 4 months is this which is more a commentary on the subsidised renter than an actual review.

https://www.facebook.com/pages/Klingman-Lofts/1473840499599594

[XLFD]

Good job, shinblind, I found those reviews myself nearly two weeks ago to be interesting about Baker's Loft's.  It seems that the Jacobson's create these things, reap the gross profits from their running and go on to other projects.  Here's something of interest they did in Traverse City with Cottage 36 at the old state hospital.  Crazy stuff involving management:

Cottage 36 is the second housing project developed by Bob Jacobson of LC Consultants at the Commons. Thirty-nine units at the 630 Lofts project opened last year in Building 50, the former state hospital’s main complex building.

The project was financed largely though Michigan State Historic Tax Credits and Michigan State Housing Development Authority Low Income Housing Tax Credits.

http://www.mlive.com/business/west-michigan/index.ssf/2012/11/kentw...

A former apartment manager for several buildings at the Grand Traverse Commons has been accused of going into tenants' homes and stealing from them....  [Apartment Manager] Lewis became the prime suspect in a case last summer involving nine tenants at the Grand Traverse Commons who lived in Cottage 36 and the 630 Lofts. The tenants reported missing money, medication and jewelry.

http://upnorthlive.com/news/local/former-apartment-manager-charged-...

[Barney Reinberg]

shinblind,

I believe you are correct.  I must have got Klingman and Century lofts mixed up.  XFLD proofread the article, so I'm going to blame him : ) .   I have read the articles on the tenant reviews, I briefly talked with mayor Heartwell about income generation with low income housing.  It is possible the Jacobson's are part of the property management portion of the development, but I would not draw a direct relationship with the Jacobson's and property management.  One thing to note with relationship of the rental units is the City of Grand Rapids has a rental inspection program.

It is something the city council should address with Mr Jacobson in an open meeting and get it in on record.

[XLFD]

I follow COLDNews editor Steve Begnoche's philosophy of nurturing my budding journalist's fragile egos by not being overly active with my red pen when they get the facts wrong. 

Like heck!  Reinberg this better not happen again or you're Death and Dismemberment Insurance will not only be rescinded, but sorely needed.

The Jacobson's are the shrewdest of businessmen, who undoubtedly learned from this experience, but the mechanics of every development deal they get involved with are very similar.  They line up millions of dollars in state grants, millions from local PILOTs, millions from local TIFs, etc.  They coordinate all this loot with the state's corporate welfare barons in the MEDC, MSF, and MEGA. 

By the time they wind all this government funding up, the amount of grants and tax breaks (taken over time) may exceed the cost of the project-- as they do in Ludington.  This isn't how development should be done: our tax dollars paying developers to take your money, so their growth can result in more taxes for you to handle the growth's demands on infrastructure and public services.  If you understand how this stuff works, how can you justify it?  Someone help me.

[Brad]

From what I hear from people who are very against another bad idea from this city government, the only way this project can be stopped is to sue the city.... for mis'wording in the purchase agreement.

[XLFD]

Perhaps you are familiar with the anti-BAB-development manifesto referenced in the COLDNews.  I would advise using any sort of advantage you have available to hold off the state funding for this project in this year's cycle of grants.  Hopefully, in a year's time we can have a different looking and more educated group of city councilors overseeing the terms of any development taking place, and a more informed public.

[Barney Reinberg]

Clear and Present Danger

After watching the COL council meeting I wanted to make a couple of comments about Mr. Jacobson’s presentation.  Most of which was covered in the past article but I thought it was worth mentioning again.  Although Mr. Jacobson’s presentation was informative, he was comparing apples to oranges.  All three developments he brought up were privately owned.  Be the Jacobson’s themselves or in the case state hospital, it was owed by a developer, The Minervini Group . 

All three developments were existing structures.  A “tear down” and new development was not proposed.  All the risk was assumed by the developers and no PILOT funding was requested.   The only real comparison to the Ludington project is the failed William Street Station project in Ann Arbor.

I find it troubling that the only question posed to Mr. Jacobson about this project was “when can I move in”?  When researching Mr. Jacobson, I tried to be as fair as possible to him.  I don’t see where he gave anything close to a “full disclosure” of his past history.  Nor do I feel the COL counsel performed its due diligence in this matter.

What concerns me the most about this project is something that former Ann Arbor councilman Steve Knuselman commented on concerning the Ann Arbor project (development and construction).   He talked about how no one on the council had “any experience” in this area.  As for the COL, the closet thing you have to “experience” is a mayor who is a manager at Home Depot. 

Nepotism

If anyone has been critical of this development it has been here on the Torch.  Nowhere in any of the discussions has there been a mention of “those people”.  Who brought up the suggestion that the reason some citizens did not what this project because of “those people”?  Two individuals got up and addressed this topic.  One, Ms. Heather Tykowski.  Two, a “content manager” from WMOM.  Sorry, I don’t have his name at this time.    As we all know, Ms Tykowski is married to councilmen Nick Tykowski and the “content manager” works with councilmen Gary Castonia at the fore mentioned WMOM.  If some individuals feel the need to raise a “false flag” on an issue, it is far better to do it with individuals who do not have a personal/working relationship with council members.

Those People

Before Ms. Tykowski got up and told us who “those people” actually were, all the uninformed citizens may have believed them to be societal reprobates.  People who don’t care, don’t clean up after themselves and spend their money frivolously.  One only needs to look at the PM Bayou, the city marina, The West End Project and of course the downtown development.  Who really are the reprobates of Ludington?  Be careful Ms. Tykowski, you just might be sleeping with one.

[XLFD]

Nice post, Barney, I had wanted to comment on this too, but haven't had the time this last week.  My criticism has been rather specific and the Bowling Alley Block Manifesto is also rather specific, and I have heard of no other publicly proclaimed criticism of the project referencing what these two individuals brought up about "those people".  I'm sure they would have been included in the council packet if we had some uninformed person declare their dissent using those terms, but there wasn't. 

This is a tactic that has often been employed by the Democratic Party, designed to stifle dissent of an otherwise controversial issue by claiming that those opposed to the issue are racists, bigots, sexists, etc., even when that is far from being the case.   Listen to the language they use in the latest meeting when Ms. Tykoski spoke during the public comment (and was given 3:20 to do so).

Heather T:  "... as was brought up to me and several members of the council was the nature of the development, some comments that we received also considering the North Washington project, and people referring to others as "those people", which I personally find extremely offensive.  When looking at that we want to know who are "those people"?  Who are the people affected by this development?"  She then goes and shows a prepared chart of respectable occupations in the area that would qualify to live at the downtown project and how our area has such a need for affordable housing. 

Flashback to 2015 when dozens of landlords, tenants and others came in front of the council to say the same thing and how the rental inspection ordinance passage would greatly aggravate the situation.  Ms. Tykoski at that time shilled for the city in forcing this ordinance through, even when what she would refer to as "those people" came forth and told the council that they would lose their long-term affordable housing if it passed. 

I find it extremely offensive that she didn't care a whit for them then, and how the hypocrite who once said this website "insighted (sic) a mob mentality" among 'those people' and others doesn't care a whit for them now; she just wants her job to be secure when all that grant administration money starts coming in to the city, and everyone else and their grandkids who live here get effectively stuck with paying off the taxes that Mr. Jacobson is mostly avoiding over the next fifty years.  This is corporate welfare to the max, and if anybody in the know ever refers to "those people" on these pages, they will either be referring to well-to-do out-of-town exploiters or our equally-at-fault deadheads at city hall giving away our resources.

[Willy]

Good posts Barney and X. Another thing I noticed is that this project is referred to as housing for the elderly when in fact that is an inaccurate and misleading statement. Any Government subsidized construction / housing is open to any and all qualified person who receive Government assistance. This means not only senior citizens but also includes alcoholics, drug addicts, mental patients refugees, etc. Anyone who qualifies must be given a chance at obtaining housing if available. This housing is not just for seniors. All the people mentioned can relocate from anywhere in the States to Ludington and they must be permitted access if they qualify. They cannot be denied. With the developers connections to the Detroit Metro area it wouldn't be hard to imagine a massive migration of life's less fortunate, from alcoholics to Islamic refugees landing in Ludington. Don't think this can't happen here.

[XLFD]

Providing everybody follows the rules here in Michigan, the "elderly" housing can only be inhabited by people over the age of fifty (55 if there is only one household member), that is detailed here in subsection 5(d), where the definition of 'elderly' is here.

Of course, MSHDA may decide that they can only fund general low income housing at 200 Loomis, at which point the following tenants receive go-to-the-head-of-the-class treatment (see definition of low income person here):  "Among low income or moderate income persons, preference shall be given to the elderly and those displaced by urban renewal, slum clearance, or other governmental action."  One can easily say refugees are displaced by government action.

Syrian/Iraqi/Mexico refugees and Detroit/Chicago/Atlanta/Miami gangbangers will thus get a better chance than a WMOM news anchor or the most destitute person in Ludington in getting these apartments when they apply-- those are the rules, and they will be applied fairly by some management agency likely based in Southeastern Michigan.