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LeDuff: Check the Fine Print -- County Jail Deal with Gilbert Is Bad for Taxpayers

April 04, 2018, 8:05 PM

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The unfinished Wayne County Jail.

By Charlie LeDuff

Imagine if you will, New York City in need of some quick cash. The mayor decides he's going to sell off Times Square to a connected developer -- let's say Donald Trump Jr.

This imaginary deal to sell the intersection of 43rd Street and Broadway is a no bid arrangement. It carries no property appraisal and no other developers are asked to offer a development proposal or price. The mayor asks a real estate broker what he thinks the land is worth. The real estate broker comes back with a low-ball number based on Times Square's potential value as a parking lot.

That's right. A parking lot. Never mind that it is the premium piece of property in the heart of New York. It's valued as a parking lot.

Seems preposterous? That would never happen in New York City, you say? Probably not.

But this is Detroit. And that's exactly what we've got going on with the new criminal justice complex proposal agreed to between real estate mogul Dan Gilbert and Wayne County Executive Warren Evans.(Despite media reports, the agreement has not been finalized since the County Commission is still holding hearings.)

The deeper you dig into the particulars of this arrangement, you start to get the feeling that this may be the worst jail deal since the last one under Evans' predecessor, Bob Ficano.

In Ficano's defense -- and that ain't easy to do -- at least his failed and never completed jail was put out for bid, the properties carried certified appraisals, and Ficano at least made himself and his financial officers available for questions.

With Evans, not so much.

Next to Gilbert's Jewel

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Wayne County Executive Warren Evans

The first soiled sock in this massive public works project is the valuation of the land. The downtown properties in question are 13 acres, including the site of the failed jail, the current jail, the county courthouse, the juvenile detention center and the maximum-security jail -- all next to Gilbert's crown jewel, the Greektown Casino. 

A real estate broker from Southfield who was hired by the county, described the property as "a once in a lifetime opportunity for a developer." Be that as it may, the broker decided that all the properties together would command the highest value as a parking lot, seeing as "parking in Downtown Detroit is a hot commodity."

The broker valued this dream lot at $74 million. 

When reached by phone, the broker said he had conducted no search for comparable real estate prices. He did not factor in that a Toronto firm had offered $100 million for the very same properties five years ago when the city was in the throes of bankruptcy. 

Detroit real estate experts tell me commercial property in some parts of the city have increased 100 percent since 2013.

Office space is a premium downtown. Apartments are 98 percent occupied, we're told. The city center is teeming with new bars and restaurants. And yet the price of 13 acres of the most prime real estate in Michigan fell by 25%?

Seriously?

I asked Christian Hauser, a prominent construction lawyer in the region, to look at the particulars of the pact with Gilbert and the county,

The Mythological Price

While the press releases say Gilbert will bring $153 million to the no-bid criminal justice center proposal, it appears that when complicated land transfers, conveyance credits and parking concessions that are folded into the contract are taken into account, Gilbert's Rock Economic Development Group will own all the property and bring in as little as $74 million to the project, Hauser said.

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Dan Gilbert

And remember, $74 million is the mythological price of the giant parking lot.

"This deal gives me concerns," said Hauser. "The numbers need a deeper look. You'd want a better idea of payment structure. And you'd prefer a proper appraisal or two with the properties."

You'd think. But Evans and his financial wizards declined to make themselves available to answer simple questions.

 "Dan Gilbert came to us with an unsolicited bid and that is perfectly legal," said James Martinez, a spokesman for Evans. "Everything is out in the open and the documents are on line," he said, offering to send me a press release. I declined.

Don't blame Gilbert. He's not a nun. He's a businessman trying to maximize profit. Maybe Evans and the county commissioners could learn a few things about negotiations from him. Because this whole boondoggle could -- considering this deal, the last one, interest payments and possible IRS penalties -- end up costing taxpayers more than $1 billion.

That ain't parking change.



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