Ypsi's Water Street debt is officially getting paid off. How did we get here and what's next?

Earlier this month, Ypsilanti voters approved a plan to get the remaining $13 million the city owes on the Water Street Redevelopment Area off the city's books for good.


On Aug. 8, voters approved a 2.3-mill proposal that will generate about $650,000 per year towards the city's annual debt payment of at least $880,000 on the mostly long-dormant property just east of downtown on Michigan Avenue. Any amount levied in taxes from the Water Street property must be used to pay off the city's debt, so if the property is sold to a developer it's possible that the millage will end or be reduced before it expires in 2031.


"The consensus was that we needed to act as quickly as possible because the city was in the process of putting in place $600,000 in cuts to the annual budget," says Adam Gainsley, manager of the pro-millage campaign Citizens for Ypsi. "Even one year without some sort of revenue generation to pay the debt was going to be pretty detrimental to the city, so we got onto the ballot as fast as we could and got to work."


The passage marks the end of a long-running community debate about how to address the city's massive debt on the property, but there's considerably more history to Water Street than that – and much more to come.


History of Water Street


From 1999 until 2003, the city purchased parcels that now make up the 38 acres of the Water Street property in hopes of redeveloping the land and increasing the city's tax base. But the city has struggled to bring proposals to fruition due to soil contamination and failed development projects.


The property has hosted numerous industrial uses, including a landfill, a lumber mill, a plastics factory, a heating and cooling business, and car manufacturers – all industries that are among the worst environmental contaminators. But many of the companies that contributed to the property's contamination no longer exist, so there’s no way of holding them accountable, according to Beth Ernat, the city's director of economic development.


The city has always known about the contamination on the Water Street property, but the degree of contamination became a problem that the city hadn't bargained for. Contamination in some areas has changed over the years as chemicals in the soil have broken down.


The city estimates that it would cost between $4 million and $8 million to conduct environmental remediation on the entire Water Street property. Prospective developers have been told they will be responsible for cleaning up the contamination before they can break ground on their projects.


While the city continued to acquire parcels of the Water Street property, it was under contract with Biltmore Development on a project that was primarily residential but included a commercial frontage on Michigan Avenue. The city and the developer parted ways in 2004 after long-running disagreements over the development.


In 2006, the city worked with a second developer, Joseph Freed and Associates, on a project similar to the Biltmore development, but Freed backed out of its proposal due to the poor state of the economy. The city then marketed the property, though Ypsi city council member Beth Bashert says there was very little hope of developing it for several years. Voters denied an initial 4.94-mill proposal to pay off the property's debt in 2012.


Water Street briefly housed a totally unique kind of "development" in 2013, when three locals adopted an acre of the property and seed-bombed it with native wildflowers. An informal sculpture garden arose further back on the property as a result, just out of sight of Michigan Avenue, and it briefly became a semi-clandestine gathering place for those in the know.


In 2014, the city started working with Herman and Kittle Properties on an affordable housing project, but it was halted after the Michigan State Housing Development Authority (MSHDA) determined that the land was too contaminated in 2015. MSHDA loans would have financed a significant portion of the project.


"MSHDA made it abundantly clear that as long as there’s environmental contamination, they will not approve a project," Ernat says.


The only development project on the Water Street property that has come to fruition over the years is the Family Dollar store at 216 E. Michigan Ave. Construction on the store started in 2014 and wrapped up in 2015.


Another project – the Eastside Recreation Center, which would have included a pool, a gym, and other exercise facilities – bit the dust in 2016. The city worked with Washtenaw County Parks and Recreation on the project for five years, but the Parks and Recreation Commission announced last year that it was withdrawing its interest in the project due to the estimated costs of development and remediation.


Last year voters turned down a 2.3-mill proposal to pay off the Water Street debt by just 39 votes, prompting Gainsley and others to mount a better-organized campaign for this year's millage. More than 1,500 residents voted in favor of this year's proposal and almost 870 residents voted against.


Only about 15 percent of Ypsi's registered voters weighed in on the ballot measure. Even though that's a fairly low percentage, it's still slightly higher than expected based on the area's voting history, according to Gainsley.


Now a new development project is in the works for Water Street, but it's not yet clear how it will pan out.


Future of Water Street


In May, the city announced a mixed-use residential and commercial project proposed by a development company, International Village Advisory, LLC, on the remaining 36 acres of the Water Street property. The project currently is estimated to cost at least $250 million. It could be funded by the EB-5 Immigrant Investor Program, which provides a pathway to citizenship for those who invest a minimum of $1 million in a commercial enterprise creating at least 10 full-time jobs.

Troy-based Chinese-American developer Amy Xue Foster plans to market a portion of the project's housing component to international residents, with an emphasis on Asian immigrants as well as American-born students at Eastern Michigan University and the University of Michigan.


Foster's son attended Eastern Michigan University, so he provided the connection because he knew about the Water Street property. Ernat describes him as "a big proponent of doing work in Ypsi."


Ernat points out that the International Village proposal is very similar to the original Biltmore proposal of commercial buildings on Michigan Avenue with varying types of residential buildings throughout the property. She says the biggest difference between the two projects is the aspect of bringing a strong cultural element to the International Village proposal.


The International Village's goal is to serve as a landing pad for immigrants and a housing option for foreign students who are studying abroad or immigrating to the area.


"The purpose of it is to create a cultural experience for people who live here now, plus people first coming into the country," Ernat says.


Bashert agrees that the project will benefit both existing residents and new residents who are attracted by the International Village. She thinks the International Village project will "add a new and exciting twist to our already diverse mix of people."


"It’s a perfect fit for us," Bashert says.


Ypsi resident Ben Connor Barrie, who volunteered with Citizens for Ypsi and serves on the Parks and Recreation Commission, says he'd like to see the city either use the Water Street property for something or sell it.


Barrie thinks it would be exciting to welcome new residents into the community with the International Village proposal, but he's worried about the potential for current Ypsi residents to be displaced via the effects of gentrification. He believes the city should use the revenue it makes from the sale of the land or property taxes generated by a development to strengthen Ypsi's affordable housing supply in some way.


"What I’d like to see the city really do is start thinking sort of holistically about how to not displace people," Barrie says. "If the International Village happens, it would be a good opportunity to start addressing those issues."


Ypsi resident Steve Pierce, who ran the anti-millage campaign Stop City Increasing Taxes in 2016 and informally organized against this year's proposal, wants the city to hold off on developing the property until the right proposal comes along.


"We’re sort of fixated on what we have to do with Water Street and sometimes the best decision is to wait," he says.


Pierce says he doesn't care what's done with the property, but he wants the city to make better use of taxpayer money. Even though the property is contaminated, he argues that it's worth much more than the city is willing to sell it for due to its location next to the Huron River and its connection to the county's park systems.


Before any development on the property can begin, the Michigan Department of Environmental Quality still must approve a due care compliance plan, detailing how contamination remediation will be carried out. The proposed purchase price for the International Village deal is $1 per acre, based on the investment the developer would have to put into clean-up, remediation, construction, and infrastructure improvements. The city was previously marketing the property at $335,000 an acre, based on its amount of debt.


International Village Advisory, which currently is in a due diligence period, must decide by Sept. 20 whether it will move forward with the project.


At that point, the development company could say that it's no longer interested, but Ernat believes it will either request an extension of the due diligence or a purchase agreement and negotiation with the city. She expects a final decision to be announced within the coming months.


"It’s such an asset to the community to have this parcel [and] to be able to shape the direction of the development," Ernat says. "Especially now that the millage has been passed, I hope that we can stop making it our beast of burden and start embracing it a little bit more … and being excited about the future and not relishing so much in the past."


Brianna Kelly is the embedded reporter for On the Ground Ypsi and an Ypsilanti resident. She has worked for The Associated Press and has freelanced for The Detroit News and Crain's Detroit Business.

All photos by Doug Coombe.
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