Executive Warren Evans says Dan Gilbert’s offer to build a new Criminal Justice Center “has potential” that Wayne County officials are obliged to “vet further.”
“I certainly wouldn’t dismiss it out of hand,” Evans told The Detroit News Tuesday. Gilbert’s Rock Ventures LLC is offering to build a new county jail, juvenile detention center and criminal court complex on East Forest east of I-75 for the $300 million the county estimates it would need to spend to complete the half-finished jail on Gratiot Avenue.
“But I need to go ahead with the existing site because ... otherwise my leverage is gone,” Evans said. “I’m not going to slow Walsh Construction down one bit” on the existing jail site “while our consultants vet this proposal. I’m going to work the dual track until I know one track is better than the other.”
He should, because there’s a lot riding on making the right call, including continued reshaping of downtown and closing an ugly financial chapter for Wayne County. Whatever happens, county taxpayers still will be paying $1.2 million a month to service debt on a project that’s been sitting half-finished astride what Gilbert calls a “gateway to downtown.”
Restarting the existing project on Gratiot would require the county to raise another $300 million, a legitimate prospect now given the county’s improved credit rating under Evans. Accepting Gilbert’s offer to build a new complex in exchange for the Gratiot site also would require raising $300 million — even though Rock estimates the project would cost Team Gilbert some $420 million to complete.
Either way, county taxpayers would be shouldering additional debt payments to upgrade the embarrassingly dilapidated jail, juvenile detention and criminal courts. Doing nothing is not an option, but doing the smart thing could be.
This is an offer that should be hard to refuse considering the alternative: restart construction on an unpopular site with only one bidder, Chicago-based Walsh Construction Co., willing to resume the project; renovate the aging Frank Murphy Hall of Justice; and block Gilbert’s plans to invest roughly $1 billion redeveloping a site that would generate sales, income and property taxes for the county and the city.
Worse, the county would assume responsibility for project management, cost overruns and construction delays, sources of the concrete boondoggle on Gratiot. At Rock’s East Forest site, Gilbert’s team says it would assume the financial risks on the project.
After the mess his predecessor, Bob Ficano, made of the jail project, Evans is right to insist on a deeper vetting of Rock’s proposal. What kind of jail, juvenile detention and courtroom facilities would the county get for its $300 million? What would constitute the “operational savings” detailed in Rock’s offer, what would they cost the county and for how long?
Which project would get done sooner, a concern already aired by some county commissioners? Evans says a restart of the existing jail soon could culminate in an opening sometime in 2019. Rock’s proposed timeline sets an “anticipated completion date” on East Forest at March 2020.
More urgently, would the county and Rock be successful persuading the Internal Revenue Service that tax credits on bonds issued for the original jail project should not be “clawed back” because the site is being moved? Rock’s offer stipulates that it would work to resolve the issue, “including possibly obtaining a Private Letter Ruling,” and that it would reimburse the county for any third-party expenses.
“I don’t have any reason to believe we can’t work it out,” Evans said. He added that if the county chooses to restart construction at the Gratiot site, he’s confident there would be no complicating IRS issues connected to the original bonds issued under Ficano.
This is an inflection point for the county, its commissioners and Evans’ tenure as executive. When Evans took office two years ago, Wayne County looked to be headed for Chapter 9 bankruptcy, an emergency manager or both.
But the new county executive recruited a financially savvy team and used the harsh lessons of Detroit’s historic bankruptcy to wrest concessions from unions. He began to shore up county pension funds, and he schooled commissioners on financial reality and the cost of denial.
The half-finished jail project is a symbol of that denial. It’s a memorial to the financial cluelessness of the Ficano era, forever marred by the $150 million in bond money his administration wasted there. That dough is what developers call “sunk cost,” which means taxpayers (and their duly elected commissioners) will never realize any value for it. It’s gone.
Judging by the terms of Gilbert’s offer, the chairman of Quicken Loans Inc. turned downtown empire builder wants this jail deal, badly. Why else would he take $300 million for $420 million project? Because he’s right on the merits.
A gateway to the east of downtown should look like one. His billion-dollar redevelopment on the Gratiot jail site would include a Major League Soccer stadium, a hotel, office space and residential units — all of which could generate as much as $2.5 billion in economic activity, Rock says.
That ain’t nothing, even if the numbers may be exaggerated and the soccer franchise doesn’t materialize. Private investment and job creation on prime downtown real estate can produce revenue for government at all levels. Government buildings on the same site are cost centers for taxpayers, however necessary, that only consume revenue.
None of this is news to Evans and his team. That’s why they’ll be vetting Gilbert’s offer, however long it took to arrive. It makes a lot of sense.
Follow Daniel Howes on Twitter at @DanielHowes_TDN