The Observation Deck

A second negative effect is the risk that the new development on the former hospital site will incentivize nearby building owners to increase rent for ground floor retail space resulting in a decline of existing retail on Detroit.

A third negative effect is that the City's subsidized construction of new, but excess, apartment units will depress rental rates.

(This could be a positive effect for at least some tenants.)

A fourth negative effect is that the City's subsidized construction of new, but excess, apartment units will discourage existing apartment unit owners from returning "off-line" units back into the market as they wait for demand to tighten. It may also work as a disincentive for the upgrade and renovation of older rental units. (Given the time-line used in the Market Study, this effect could last a decade.)

When a government provides public subsidies to a business, it establishes a bias in favor of that business. Conversely, it shows other business that they are less favored. Both still have to their taxes, but one --the subsidized one-- pays less tax.

A fifth negative effect is that the City's subsidized creation of excess capacity in apartment or townhouse units will deter developers from proposing more "right-sized" projects that fit tighter with Lakewood's unique character as a city.

A sixth negative effect is that the City's subsidized creation of excess capacity in apartment or townhouse units will just encourage developers to hold-out for larger public subsidies.

There are some modest positives to the proposed redevelopment of the former hospital site.

1. The temporary creation of some very good short-time construction jobs and employee income tax revenues associated with those jobs.

2. The proposed development will expand consumer choices in the local housing market.

3. Excess capacity in the housing market for apartments will probably benefit consumers by restraining rental costs.

I do not believe that these benefits justify the proposed subsidies for the project with public assets and public funds (estimated to be worth between $12M to $15M).

The City's market study shows that a lot of Lakewood rental capacity is "off-line" waiting for changing conditions to return to the rental market (See p. 24, Market Study).

This suggests, given both the federal data and the market study data, that future demand for rental units in Lakewood could be met at a fraction of the cost of the proposed public subsidies for One Lakewood Place.

There is a nice public policy argument that rental property owners be afforded additional public support in their efforts to upgrade and rehab their existing units.

This is, I believe, consistent with other program efforts in this area.

Ten Ways To Think Critically About The Redevelopment Of The Former Hospital Site

The proposed redevelopment project for the former Lakewood Hospital site is probably the wrong redevelopment project for the following reasons:

Reason No. 1. None of the mixed-use commercial/residential proposals reviewed by the City were financially viable without multi-million dollar public subsidies from the City of Lakewood.

Reason No. 2. Housing data provided by the federal government does not support the proposed construction of new apartment units at the former hospital site.

Reason No. 3. The housing data provided by the City's own consultant is even less supportive of the proposed construction of new apartments at the former hospital site.

Reason No. 4. The market study prepared for the city administration does not provide any support for the use of multi-million dollar public subsidies for the redevelopment of the former hospital site.

Reason No. 5. The proposed redevelopment project will not fully replace public revenues that were lost by the Mayor's decision to close the hospital.

Reason No. 6. There is no evidence of market failure that would independently justify the use of multi-million dollar subsidies for the redevelopment of the former hospital site.

Reason No. 7. There is a strong argument that the former hospital site be redeveloped for purposes that are broadly public, civic, beneficial, innovative and planned to achieve high on-site employment levels.

Reason No. 8. There is public employment data (in the market study) that suggests that any redevelopment project should attempt to capture future healthcare, social service and science/technology related jobs.

Reason No. 9. Projects with high levels of employment are more likely than the proposed project to generate employee income tax revenues and, therefore, will recoup the value of public subsidies faster.

Reason No. 10 The proposed redevelopment project (One Lakewood Place), due to the proposed multi-million dollar subsides, may have negative effects in the local rental market and these possible negative effects have not been studied or quantified.

Thank you for all of your patience and interest in this little public policy walk-about.

Please excuse me for typographical errors. I have seen a few already.

Is the deal with Carnegie finalized?

I have no specific information to update here. You should feel free to ask your council-member.

I just review public statements or public documents as I find them.

I take them at face value and attempt to draw reasonable inferences from what I read based upon my experience as a lawyer and former public official.

I have no special sources.

I'm just an interested citizen.

I'm not backing this idea, but in other places they are putting smaller (20,000-40,000 sq. ft.) grocery stores in with mixed use/residential developments. I mention it only because a grocery store would benefit more of us than many other options I've heard (pet store, dry cleaning, bigger Marc's store). Both Giant Eagle and Heinen's are about due to improve their local presence.

But I still say what we need most is a significant sized employer.

Dan Alaimo wrote:I'm not backing this idea, but in other places they are putting smaller (20,000-40,000 sq. ft.) grocery stores in with mixed use/residential developments. I mention it only because a grocery store would benefit more of us than many other options I've heard (pet store, dry cleaning, bigger Marc's store). Both Giant Eagle and Heinen's are about due to improve their local presence.

But I still say what we need most is a significant sized employer.

Worth noting the current proposal includes 100,000 square feet of office space. The reason New York Life left Lakewood is because they wanted Class-A space, and we have none.

Dan OMalley wrote:

Dan Alaimo wrote:I'm not backing this idea, but in other places they are putting smaller (20,000-40,000 sq. ft.) grocery stores in with mixed use/residential developments. I mention it only because a grocery store would benefit more of us than many other options I've heard (pet store, dry cleaning, bigger Marc's store). Both Giant Eagle and Heinen's are about due to improve their local presence.

But I still say what we need most is a significant sized employer.

Worth noting the current proposal includes 100,000 square feet of office space. The reason New York Life left Lakewood is because they wanted Class-A space, and we have none.

Would that office space be connected in somevway so that a single large employer could occupy it?

Dan Alaimo wrote:

Dan OMalley wrote:

Dan Alaimo wrote:I'm not backing this idea, but in other places they are putting smaller (20,000-40,000 sq. ft.) grocery stores in with mixed use/residential developments. I mention it only because a grocery store would benefit more of us than many other options I've heard (pet store, dry cleaning, bigger Marc's store). Both Giant Eagle and Heinen's are about due to improve their local presence.

But I still say what we need most is a significant sized employer.

Worth noting the current proposal includes 100,000 square feet of office space. The reason New York Life left Lakewood is because they wanted Class-A space, and we have none.

Would that office space be connected in somevway so that a single large employer could occupy it?

Good question- I’ll ask. For reference, New York Life and its 350 employees occupied around 75,000 square feet at Lakewood Center North.

Just an FYI: This is happening all over - notably with Carnegie developing the Lucky's Market at 117th and Clifton - but here is a press release about a Cub Foods urban grocery store in Minneapolis. See any similarities? Again, I'm not advocating for this or criticizing the possibility that this might happen, but just trying to add to Mark's "Vision" conversation.

New CUB® Store to Anchor Future Apartment Development in Minneapolis¹ Longfellow Neighborhood
Urban store offers new look and caters to walkable neighborhood
STILLWATER, Minn. (Mar. 7, 2018) ­ CUB® announced today that it will be opening a new 46,000-square-foot store located at 46th and Hiawatha Avenue in Minneapolis.
Scheduled to open in the spring of 2019, the new urban grocery store will anchor a five-story, 148-unit apartment development by Excelsior-based Oppidan Investment Company. The store will cater to the unique Longfellow neighborhood and appeal to customers who pass by the store daily via Hiawatha Avenue, the nearby light rail train, or a future multi-use path connecting Minnehaha Falls to the Midtown Greenway.
³This store brings a great new concept to the CUB portfolio as it will be our first store embedded into a residential complex,² said Anne Dament, Executive Vice President of Retail, Marketing, and Private Brands at SUPERVALU. ³We¹re evolving our look and feel while showcasing new shopping innovations for a better experience for our customers. We feel this new format CUB is a perfect fit for this neighborhood.²
The versatile and modern design of the 46th and Hiawatha store will meet the needs of the traditional shopper while providing enticing solutions for time-strapped customers. The store will feature a large deli area with Quick and Easy® and made-to-order meals, a theater-feel popcorn shop, a farmer¹s market layout in the produce section, enhanced floral gift space, and a pharmacy.
With planning for multiple entrances and indoor café-style spaces that welcome guests to take a break or plug-in for work, the 46th and Hiawatha store will accommodate a variety of lifestyles. Visitors will also be able to enjoy a spacious outdoor seating area, complete with bicycle parking as well as a walk-up window serving coffees, ice creams, and signature cookie sandwiches year-round from the Refresh! bar.
"We¹re very excited to see the culmination of over a year of planning and development,² said Drew Johnson, Vice President of Oppidan Investment Company. ³CUB has done a great job responding to and incorporating stakeholder feedback into their store design. The finished project will be a tremendous asset to the neighborhood.²
About CUB
CUB, based in Stillwater, Minn., was established in 1968 as one of the nation¹s first discount grocery stores. The organization was purchased in 1980 by SUPERVALU® and operates 80 grocery stores in Minnesota and Illinois that offer customers fresh produce, a wide selection and food expertise throughout the stores to meet their everyday grocery needs. As the hometown grocer for 50 years, CUB has made it a priority to be a good corporate citizen by helping to create healthy and thriving communities that enhance the quality of life for its customers, employees and neighbors. For company news and information, follow us on Twitter® at @CUBFoods and Facebook® at www.facebook.com/CUB, or visit our website at www.CUB.com.

I will continue to suggest that we are witnessing the "build-it-and-they-will-come" mentality at work here.

If you give a close read to the City's market study, that study tells us that there is a 20% vacancy rate with respect to commercial office space and much like the market study's conclusions with respect to the future need for apartments, most of the expected, but light, future demand for office space could be met by upgrades in existing buildings or current new construction.

I will argue that Lakewood Center North is being converted to apartments and not being rehab-ed into Class A office space, because Class A office space is already overbuilt in the sub-market.

The question is not whether One Lakewood Place should be built, but how much public funding or public assets should be committed to a project that is not likely to be viable on its own independent merits (absent proposed significant public subsidies.)

There is already new grocery capacity (both big and small) in the 15-min PMA in the market study (Earth Fare, Whole Foods, Constantino's,)

The growth in office space is predicated on capturing the new growth in Healthcare, Social Services, Professional, Scientific and Technical employment. How good has Lakewood been at that?

The city administration has done just the opposite with its actual implemented plan to drive-out just these kinds of jobs.

1. By eliminating 1,662 (the city's own number) high-paying professional jobs and semi-professional jobs at its former hospital.

2. By eliminating the city's base of independent physicians and other healthcare professionals by demolishing their office building.

Even with this "puffy" market study, the market indicators for the proposed One Lakewood Place project are thin.

This is being marketed to the public as follows: "The hope for the downtown development between Belle and Marlowe is that it will create a sense of place in Downtown Lakewood..."

Each day, I rarely leave Lakewood, but, amazingly enough, I already have a complete sense of place here.

I do not need to see public assets and public funds diverted to third-parties to achieve an enhanced sense of place or community.

This all will come, inevitably, with future tax rate increases to retroactively cover the subsidies. Thanks, but no thanks.

Your last paragraph fits my sentiments exactly Mark.