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A new mixed-use development that includes residential and retail is proposed for Water Street in the area outlined in red. The east-west street is Michigan Avenue, and the north-south street is River Street.

(Courtesy of the city of Ypsilanti)

YPSILANTI, MI -- In October, a Michigan State Housing Development Authority report suggested the Water Street parcels where Ypsilanti proposed a $12 million affordable housing project were too contaminated with lead, arsenic and PCB's to build on.

In response, Mayor Amanda Edmonds and other city officials slammed MSHDA and media reports stating that the area is contaminated.

Six months later, it's confirmed the site is indeed contaminated, leading officials to scrap the project, which took over two years to plan.

The development, which was to be called Riverwalk Commons, was controversial and loudly opposed by many in the city who didn't want affordable housing built on the 38-acre Water Street site.

But on Tuesday, city staff presented a new plan that calls for a two-story, mixed-use affordable housing and retail development fronting Michigan Avenue.

By a 5-1 vote the Ypsilanti City Council approved a resolution allowing staff to start negotiating over the new proposal with developer Herman & Kittle. The plans must go back before council by the end of May.

Mayor Pro Tem Lois Richardson said she had some concerns but liked the project's new look.

"I think, yes, there was a lot of contention over the project and affordable housing before ... but the fact that there will be businesses on Michigan Avenue makes it a lot different, and I think it makes it viable and sellable to our community," she said.

Plans previously called for a four-story, 75,000-square-foot multiunit complex that would have housed 80 apartments on a 1.7-acre parcel in Water Street's southeast corner.

The new development is proposed for two parcels totaling three acres near the River Street and Michigan intersection that wrap around the Family Dollar. Plans call for a mixed-use building with approximately 14,000 square feet of first floor commercial space and 80 residential apartments ranging from one bedroom to four bedrooms on both stories. The site would also include a 150-space parking lot and a tot lot.

Mike Rodriguez, a development analyst with Herman & Kittle, said the new location could address MSHDA's concerns.

"(MSHDA) was concerned about digging up contaminated soil and fugitive dust," Rodriguez said, adding that the new site appears to be contamination-free.

A significant portion of the project's funding comes from MSHDA, so the authority must be satisfied that the site is safe enough for human habitation. That's a requirement for it to provide loans and protect itself legally. Without those loans, there is no development.

Two areas that appear to still be contaminated on Water Street are in and around the three-acre site of the now dead project.

Aside from the two areas of concern, MSHDA also found that contamination boundary lines delineating contaminated areas aren't accurate, and contamination on the site is 10 to 40 times what's considered safe by state and federal regulations in some spots.

"Moving the location addresses many of MSHDA's concerns with future developments and the impact of construction of the development. The proposed development will create natural boundaries with garages on the site," Beth Ernat, the city's economic development director, said.

"We are cautiously optimistic. (Herman & Kittle) had a preliminary discussion with MSHDA and it looked positive, but part of this is starting the process and moving quickly," she added.

Council Member Brian Robb was the lone vote against the resolution. He offered a list of reasons why he opposed it including:

-The city originally expected to net $1.1 million for the two parcels, and Herman & Kittle is offering $170,000 for the land.

- Herman & Kittle is still asking for a tax break in the form of a PILOT, and the new PILOT provides a bigger break.

-Herman & Kittle isn't committing to as much infrastructure improvements - like building roads and installing underground electric - to the site.

-The plan calls for breaking from the grid plan developed and adopted by City Council and the Planning Commission "after months of public hearings."

Robb said he also isn't enthusiastic about where the development would sit on the property. The city envisioned the type of mixed-use development Herman & Kittle proposed, he said, but the PILOT would cost the city $25,000 in annual tax revenues and up to $750,000 less over the PILOT's 30-year life. That significantly cuts the project's actual value to the city.

"This takes a project that a lot of people hated and moves it into a prime real estate location," he said. "This is like putting the senior high rise down there. This projects keeps morphing and morphing further from what we wanted."

"I think this is the wrong project for the site."

Robb added that he is hesitant to provide a Water Street tax break to a developer just as the city is preparing to ask voters to pay off the rest of its Water Street debt.

"This will destroy any chance we have of doing a Water Street millage, and we have to decide what's more important," he said.

Several council members agreed with concerns over the PILOT, but Ernat stressed that city staff has yet to negotiate with Herman & Kittle.

"We have not sat down and discussed in any way how this would look," Ernat said.