EXCLUSIVE: Royal Oak Businesses Fight City Over Office Project, No-bid Contract, and Giving $5.5M in Public Funds to Developer
The Royal Oak City Commission will weigh in on a $100 million redevelopment project on Monday.
Photo Courtesy: City of Royal Oak
A planned $100 million redevelopment project billed as the catalyst for a renaissance of Royal Oak’s city center is going before the City Commission for approval on Monday night amid protests by a coalition of area business and property owners who filed lawsuits accusing city leaders of bad faith backroom deals and sweetheart no-bid giveaways to outside developers.
In their lawsuit, the group of downtown business owners say the city is planning to gift $5.5 million in public funds to the developers for a planned office tower. The city will have no interest in the building. In turn, they maintain Central Park was awarded the project without competitive bids.
Those issues notwithstanding, at the crux of the lawsuits is the chronic downtown Royal Oak problem — lack of convenient parking — that has plagued the city ever since it became one of metro Detroit’s trendiest night life destinations following the opening of I-696 in 1989.
The 11 restaurant, business, and property owners in the coalition fear that the city’s plan to turn over three city-owned parking lots for the development will only exacerbate Royal Oak’s chronic parking shortage and likely cripple, if not close, their enterprises that have long depended on the lots for customer parking.
They also say converting the three parking lots to the civic center development will also endanger the city’s historic Farmer’s Market.
As a result, the group filed two lawsuits in Oakland County Circuit Court challenging the deal the city entered into with a politically connected Lansing-based developer, Ron Boji, principal of the Boji Group.
Boji is also the lead partner in Central Park Development, the entity the city selected without a public bid to build a seven-story Class A office building that will anchor the new civic center project. Also involved with Boji in Central Park is Surnow Co. in Birmingham.
Earlier this month, the business group won a victory against the city when Oakland County Circuit Judge Cheryl Matthews put the project on hold, ordering the city to maintain the status quo pending a resolution of the case. At the same time, Matthews denied the business coalition’s request for a preliminary injunction to stop the project.
However, on Aug. 16, lawyers for Central Park intervened in the case, and in a hearing before Matthews withdrew the development’s application for permits for the office building, which would anchor the new city center.
By withdrawing the applications for the permits that had been approved by the city’s Planning Commission, the lawyers succeeded in getting out from under the judge’s order by having her dismiss the case since the disputed permits no longer existed.
“This was a completely legal tactic to sidestep the judge’s order, a crafty one I might add,” says Ethan Holtz, a partner with the law firm of Jaffe Raitt Heuer and Weiss in Southfield, which is representing the business and owners coalition. “That is the clear and obvious intent, and they see it as having probably no downside because (since) they got a rubber stamp from the planning commission once, why wouldn’t they get it again?”
The developers are in position to start anew and sign a new development agreement and go back to the planning commission on Monday night and reapply for site plan approval and zoning and special use permits.
Those moves are in the works as a new site plan listed at the last minute today on the agenda for the City Commission meeting on Monday night. Normally the city releases the commission’s agenda at 4 p.m. Thursday to alert the public of items of interest.
Shepherd Spencer, owner of Little Tree Sushi Bar and the Dixie Moon Saloon along Main Street, just south of 11 Mile Road, and a plaintiff in the lawsuits, says he believes in Royal Oak where he has been in business for more than 20 years.
“During that time I have spent millions of dollars creating four restaurants in downtown Royal Oak and paid hundreds of thousands of dollars in taxes,” he says. “I never believed that one day I would be suing Royal Oak, but when we found out how the Commission and Mayor Mark Fournier proposed this deal we were flabbergasted.”
He maintains the city is proposing the largest development in its history without doing required studies as to future traffic flow, parking needs, or impact on businesses like his. “They approved this site plan is a back room deal we never saw coming,” Spencer says.
The controversy dates to 2014 when the city and the Downtown Development Authority created a task force to research and recommend a plan to revive and reposition Royal Oak’s central business district for the future.
The task force concluded that the city center needed more downtown foot traffic in the daytime and suggested a Class A office building that would bring about 700 workers into the area.
In 2015 the city announced it had chosen Central Park Development Group as its partner to execute a plan that would include a seven-story office building, a new city hall and police station, and a park in the area where the city hall now stands.
The 190,000- square-foot tower would be constructed on a city-owned parking lot on Main Street with two floors containing 25,000 to 30,000 square-feet of space for the new city hall as an exchange for the parking lot.
A six-story parking deck with 450 spaces would go up on a second city-owned parking lot north of the office building. Spencer says that the city is committing 300 of those spaces to the office building, which would result in a overall loss 900 parking spaces in the lots with 700 new people coming downtown daily.
The new police headquarters would go up on a third parking lot adjacent to the Royal Oak Farmer’s Market. The current city hall would be razed and the site turned into a park. The deal was to be funded equally with Central Park Development Group putting up $47.5 million and the city $50.9 million.
Earlier this year, that plan was scrapped. Now the city wants to build a separate city hall east of the park. The office building will be privately owned and would now contain a restaurant with a liquor license on the ground floor. The city would sell the parking lot it valued at more than $900,000 to the developers for $1. The business owners maintain that the parking lot is worth closer $3 million.
In subsequent meetings of the planning and city commissions, members of the business owner coalition learned about new aspects of the deal. The city would advance Central Park $5.5 million in cash (public funds) to be put into an account with $8.5 million of the developer’s money to get the project started.
The developer’s money would be spent first with the city’s contribution coming second. The city would also pay for the city hall, police station, parking deck, and park with $73 million worth of municipal bonds it would issue, though it is believed the city has reached its bonding capacity.
In court papers, the city and developers denied any improper actions. City leaders maintain $5.5 million is an acceptable incentive for the project that will have a $234 million impact on Royal Oak.
At the same time, the city has been unable to explain why its needs to invest $5.5 million into a privately owned office structure that it will not have an investment interest in.
For example, Etkin LLC in Southfield is building an office building on a surface parking lot just east of the U.S. Post Office in downtown Royal Oak. The four-story, 74,000-square-foot office that will offer space for ground floor retailers and restaurants is 100 percent leased, and the city did not invest any money in the project. Signed tenants include Etkin, Gongos Inc., and Stout Risius Ross. The building is expected to be completed in spring 2018.
In turn, the city is building a large parking structure at 2nd and Centre streets that will offer ground floor retail space.