2013-05-18 / Top News

Proposed Main Dock Inn Development

Hardship Claim Denied
By Stephanie Fortino

The Mackinac Island Historic District Commission denied Main Dock Inn developers Melanie Libby and Ira Green their plea for financial hardship at a special meeting Monday, May 13, preventing demolition of a historic building, but did defer to the city council the possibility that demolishing the building could be for the “community good.” Such demolition would be allowed under a proposed deed restriction whereby the city would trade that concession, plus $2 million to Main Dock 7271, LLC, for the rights to the air space over lot 128, which encompasses the entrance from Main Street to the Arnold Dock. The city has sought to restrict building on that lot above 16 feet.

(The city council subsequently did not execute this agreement at its meeting Wednesday, May 15, covered in a story on page 22s in this issue.)

The original plans for Main Dock Inn sought a three-story hotel spanning the dock entryway, with 15-foot-high passageways on both sides for pedestrian, carriage, and fire truck access to the dock. If the city were to purchase the air space above 16 feet, the hotel would only replace two buildings at one side, but not span the dock entrance. Both plans would require that two existing buildings be torn down, but since one of the buildings has historical significance, the developers needed to prove a financial hardship to clear the way. To do that, they have been arguing that they purchased the property shortly before the city enacted its downtown historic district, and the price they paid was based on the assumption that they could tear down the two existing buildings and build three stories high. In enacting the historic district, the city deemed that one of the two buildings contributes to the historic inventory the city seeks to preserve. Earlier reports on this issue are available in The St. Ignace News (www.stignacenews.com).

Of the original hotel plan that was to span the dock entrance, Commissioner Lorna Straus said at the outset of the meeting, “I am troubled by the fact that that view in either of the two directions would be lessened by a structure….I want us to pay close attention to what we should and must do.”

She also expressed concern over the fact that the project includes demolition of the two buildings and that the Historic District Commission was being asked to allow it, just months after enactment of the historic district.

“The fact that [demolition of a contributing structure] would be one of the early actions that this group takes troubles me very much. I hope that the commission, and we as a community, can respect the establishment of the historic district, preserving our historic heritage,” Mrs. Straus said.

Discussion turned to the Libby-Green financial hardship case. The denial came after HDC chairman Andrew Doud discovered “a simple but significant error in the appraisal” of the Main Dock 7271, LLC property, he said Tuesday, May 14. There were also other inconsistencies with additional financial information the developers presented at previous HDC meetings.

To go forward with their proposed hotel plans, the developers must gain approval from the HDC to demolish the contributing Selma’s Fudge building.

Ms. Libby and Mr. Green purchased the property, lots 127B and 128, for a combined total of about $5 million, which has added a complicated nuance to their hardship claim. Only one of their three appraisals included a specific value for lot 127B, which Mr. Doud said contains the flaw.

The appraisal was determined by using a sales comparison approach, which takes sale prices of nearby buildings to determine a value for a property up for sale.

During the HDC meeting, Mr. Doud explained that the sales comparison approach used contained incorrect sale values for two downtown properties: the first listed a comparable price of $2.9 million for 7377 Main Street (Frank Shama’s Gifts), when the actual sale price was $1.7 million; and the second listed a comparable price of $2.1 million for 7330 Main Street (Sanders candies), when the actual sale price was $1.4 million.

Mr. Green and Ms. Libby used the appraisal in question to determine their purchase price and did not know about the errors until shortly before the May 13 HDC meeting, through no fault of their own, Mr. Doud told the Town Crier. He also explained his reasoning to seek denial of the hardship claim by posing the question, “How can we accept a purchase price when the comparables are wrong?”

“I see a lot of misinformation that’s not your fault,” Mr. Doud told the developers, “and I have a difficult time accepting that the economic hardship is proven.”

Mr. Doud’s motion to deny the hardship claim was passed by the HDC, with commissioner Lee Finkel voting against the action to deny.

The HDC’s task during the review of the hardship claim was to determine if the government action of creating the new historic districts had caused undue financial hardship on the developers. Ms. Libby and Mr. Green purchased the property from Union Terminal Piers with a specific “bundle of rights,” Ms. Libby said at the meeting, which included the ability to demolish buildings and construct a new structure three stories high, lot line to lot line, in accordance with city zoning standards. When the Market and Main Historic District was adopted by city council shortly after Ms. Libby and Mr. Green purchased the property at the head of the Arnold Dock, the rights of that property changed, according to their case.

There was also discussion of the project potentially benefitting the common good. The city has been involved in discussions to purchase the development rights of a portion of lot 128 to preserve the open view. The City of Mackinac Island can purchase the air rights of the property for $2 million and/or other considerations contained in a deed restriction agreement outlined in the February issue of the Town Crier.

City attorney Tom Evashevski explained the procedure more fully, saying, “They only thing that has been denied is your hardship request,” and added, “The historic commission has the ability at any time to grant relief based on a different section of the statute, which there is some indication [the HDC] will view favorably depending on what the final package is.”

Mrs. Straus also inquired about the lawsuit filed by Walden Ventures against Arnold Transit and its operating companies, which includes a section referencing demolition on the property in question. The lawsuit stated that written consent from the mortgagee must be obtained before demolition occurs, so she asked Mr. Evashevski whether the HDC should take the lawsuit into consideration. The city is not named in the suit. Mr. Evashevski said he was unfamiliar with the part of the lawsuit Mrs. Straus referenced, but said that the matter was “probably more of a private issue.”

The commission decided to formally investigate the possibility of the project benefiting public good if the option agreement is exercised. The motion was made by Mr. Finkel and was passed unanimously.

The Main Dock 7271, LLC financial hardship case has been a learning experience for the HDC, Mr. Doud said, and he also appreciates the applicants’ patience and forthrightness with financial information during the complicated process.

Commissioners also pointed out that there is a process for appeal if the developers wish to challenge the denial of the financial hardship claim.

Earlier in the meeting, Mr. Doud addressed Ms. Libby and Mr. Green, saying, “There is an appeal board. You can go to Lansing, and I hope you do because… this is the first case that has come to us. It has a lot of layers; it’s two pieces of property.”

“We’re doing the best we can,” he said, adding that the commission needs to decide upon and fully understand the process for future hardship claims.

Mrs. Straus expressed similar sentiments:

“If our decision is wrong and your request is correct, you end up exactly where you hoped to end up before we took any vote whatsoever. You have a route to follow. So it seems to me that’s not a dead end, it’s simply a door that is opened by you, not by us, that you can choose to go through or not.”

Mr. Green and Ms. Libby declined to comment about whether they will consider appealing the decision.

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