Press Release

ISSUE UPDATE

Status Report to Owosso Citizens About the Hotel Owosso

            We at City Hall believe there is strong community interest in the Hotel Owosso, the 1928 five-story structure that is vacant and dilapidated beyond repair. The City owns the building, located at the southwest corner of Washington and Main, through acquisition from a State of Michigan tax sale and a title clearance process culminating in the County Circuit Court on March 24, 2002. 

This message to the Owosso public will offer information on all aspects of our involvement.  It is our intent to communicate the variety of factors we are managing to have a new structure with similar bulk and compatible architecture take the hotel’s place.  Our efforts are directed at: 1) public demolition; 2) a city parking structure, and; 3) site redevelopment with a private sector partner. 

            The evolution of a troubled building.   The Hotel Owosso had 83 rooms and was opened just prior to the Depression.  By 1934 the business was in bankruptcy.  We have no record that this building was very successful after that event.  Hotel room rentals ceased in 1985-86; all activity in the building ended in 1998.  The building was already in decline in the early 1980’s and during one of the many interim ownership stages, the City conducted architectural evaluations for rehabilitation and recruited a developer for the site.  It could not be financed for a variety of reasons.  A 1990 private acquisition was soon followed with orders from the City for strategic structural repairs.  The order was partially fulfilled and we continued to work for gradual compliance with the owner.  From experience we were aware that full prosecution of the orders would only have resulted in site abandonment. 

Other developers looked at the building over a period of years—most with an interest in low-income housing or assisted living.  The proposals could not move forward because there was inadequate support in the real estate marketplace to sustain the costs of renovation.  No amount of available public resources could exceed the influence of a weakened structure and poor real estate response.  The City’s 2002 tax sale acquisition was accomplished after concluding that the building would have to be demolished, and that task, as with too many abandoned sites, would become a public responsibility. Since 2002 the building has been managed so that public safety was assured. 

Community support develops.  A year before the City’s acquisition the Chamber of Commerce rated this site as their number one priority for community improvement.  The Chamber invested in architectural renderings of a replacement structure and hired a marketing consultant to demonstrate potential uses of a new building.  It was clear that the community wanted a comparably large building to replace the hotel.  With that guidance, the City conducted a developer search to identify investors who would redevelop the vacant site.  The selected partnership is Dixie Development LLC from Flint.  This company has vast experience about the state in construction and leasehold management and long-standing ties with the Owosso community. 

The selection process only began a series of steps that are required for the project to move forward.  There is not an easily explained sequence to all of this, but the essence of the work lies in demolition, more marketing analysis, public parking engineering, architectural planning for the building, financial packaging, and construction.  

 The Demolition.  There are two dimensions to demolition.  One is the physical removal and the other is the financial means to do so.  So that we can dedicate our limited resources to other needs of the project, an effort to acquire State or Federal funding has been ongoing for two years.  Our estimate of the demolition is about $350,000.  Findings from a recent asbestos survey complicate this stage and could raise that cost.  The groundwater underneath the structure is contaminated from an off-site source but should not interfere with the demolition or new construction.  The physical removal involves a crane with a wrecking ball operating first on the lower level in the southwest corner and then drawing the taller building sections upon itself and away from Main and Washington Streets—about a 30-day process.  Some hopes from many citizen inquiries for detonation of the structure were dashed because of greater expense and the site’s proximity to other structures. 

            Marketing Analysis.  The developer is quite positive about commercial tenants on the first two floors but has been uncertain about housing options for the next two to three floors.  The Owosso Downtown Development Authority conducted a housing demand analysis for downtown living and revealed very positive opportunities for moderately upscale apartments and condominiums.  The study found that many amenities were required that include safe and convenient parking. 

            Parking Support.  Financial analysis, marketing analysis and site analysis all reveal the necessity of a 50-space parking structure in the vicinity.  Two options have proceeded through preliminary engineering—one with a parking deck above the existing lot in this city block and another with underground parking on the same site as the building.  Either choice involves a $750,000 to $1,000,000 cost and must be borne by grants from state and Federal sources and a tool called tax increment financing from the downtown district. Because the site is considered a brownfield—with contamination, blight and obsolescence—taxes from the value of the new building can be dedicated to the new parking structure costs until the debt on the parking structure is paid.  The lease of parking spaces pays for the operational costs.

            Developer Commitment.  The developer desires to build a “signature building” at the principal intersection of Owosso.  The building will have a ground floor with a business that generates foot traffic and mutual support with other businesses in the downtown.  The second floor will follow suit or become office space.  At this time it is undecided if the residential floors will be apartments or condominiums—apartments are preferred for now.  The cost of a five-story structure is $6,000,000.  Because the building is in a low-income neighborhood and a downtown where rental rates do not support a new high-rise structure, federal and state tax incentives are available to offset the “gap.”  There are many complexities to acquire the tax incentives and the project is fully immersed in this stage of development.

            The building will be demolished with or without grant funds and when the developer completes the tax incentive process.  It is important for the developers to use the city investment in the demolition in proximate relationship to private financing.  At a future date the public and private actions described above will be placed before the City Council for their evaluation and action.