Champaign council backs changes in campus development

CHAMPAIGN — City council members said they were OK with new plans for a marquee Campustown development project near Sixth and Green streets even though it has been significantly scaled back from the original proposal.

The city council in 2012 selected JSM Development from among three developers proposing the build high-rise towers on parking lot J. The city owns the land, and therefore has a heavy hand in what is to be built there.

JSM returned to the city council on Tuesday night with a significantly scaled back version of its proposal and altered requests for financial help from the city after construction bids came back $19 million over the $56 million cost they targeted.

"The good news is the economy is recovering," said City Manager Dorothy David. "The bad news is that as our economy is recovering, construction costs are going up."

The JSM Development project on parking lot J originally included plans for two 12-story towers connected by a glass bridge, a 6-story parking garage, 276 residential units, 108 hotel rooms, and 22,000 square feet of retail space.

Because of the hefty construction bids, JSM has redrawn its plans. The buildings will be lowered to six stories with 90 residential units, 95 hotel rooms, less than 12,000 feet of retail space, and no glass bridge. The parking garage will be lowered to four stories, but it will still contain 131 public parking spaces — the same number that the existing parking lot has now.

All nine city council members told administrators to go ahead with the changes.

JSM architect Scott Kunkel said the priorities of the project — the public parking spaces and the hotel business — have been preserved.

"We're excited now about what we have going forward," Kunkel said.

Lorrie Pearson, the city's land development manager, said the new plan "does really meet the spirit of the original proposal," and abandoning the hundreds of hours of work officials have spent on the project could set the redevelopment of parking lot J back two years.

Pearson said the smaller scope of the project has a surprising effect on what the city can expect to collect in hotel-motel tax. Market conditions allow the hotel to charge more for the rooms and still achieve a higher occupancy rate, resulting in about $20,000 more hotel-motel tax revenue for the city than originally expected. The annual property tax, however, would be less.

"This project actually is financially more attractive than it was potentially when it came in," Pearson said.

The city's financial involvement will change. JSM will purchase the land for $3.94 million, as outlined in the original proposal, but now those payments will be structured over 10 years with a $2 million upfront payment.

JSM had also agreed to share up to $160,000 in the $1.7 million reconstruction of Healey Street to accommodate the large development. That will not change either, but it too will be spread out in annual payments with interest over 10 years instead of an upfront lump sum.

To preserve the number of public parking spaces where Lot J will be eliminated, city officials had agreed to cover the deficit JSM would incur from running the parking garage until the garage started turning a profit.

Because public parking will now become a higher proportion of the overall garage — JSM will also build private parking for hotel guests — the deficit in the early years is expected to be larger. The city is raising the cap of what it will cover from $60,000 to $100,000.

Eventually, JSM will pay that back, but not until the garage turns a profit. Originally, the garage was expected to become profitable in the 13th year of its operation. New projections push that date back to the 14th year.

Council member Marci Dodds said she had some reservations about the parking arrangement. She wants to make sure the city isn't stuck paying the deficit for all 25 years of the development agreement.

"I at least want the city to be off the hook at year 14 at the very least," Dodds said. "I think that's not an unfair thing to ask. How we structure it after that can be in negotiations."

She also called the overall changes to the project a "reasonable start." She does not think the city needs to seek proposals again, as it did in 2012.

Back then, Core Campus had proposed a 12-story project and HERE Enterprises said it wanted to build a 20-story high-rise. JSM got the nod over the other two developers.

"I don't think we're being unfair to the other people who bid," Dodds said.

Pearson said the hotel component of JSM's project was the major driver of its selection, anyway. And with the other two bidders involved in other major projects — HERE Enterprises is building a tower just down the street at Fourth and Green streets — there's no guarantee they'd be interested in returning to the Sixth and Green corner anyway.

"There's no guarantee that we would have another development in a few years, and there's certainly no guarantee that we'd have another hotel development," Pearson said.

Mayor Don Gerard said he remains excited about the development. He pointed out that the high construction bids may be a reflection of all the activity in town.

"I'm still extraordinarily excited about the project," Gerard said. "There's so many things happening on campus."

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