A $520.3-million offer from billionaire developer Dan Gilbert’s Rock Ventures that would build a criminal-justice complex near I-75 in Detroit and replace Wayne County’s unfinished jail with a $1-billion commercial development will move forward, according to Wayne County officials.
But, they cautioned, the plan isn’t a done deal yet.
Wayne County Executive Warren Evans said more work will be needed to propel the deal forward, and so an offer from Walsh Construction to complete the unfinished jail on Gratiot remains on the table, if the deal with Rock Ventures can’t be worked out.
According to Evans, his team is working with Rock Ventures’ representatives to negotiate terms of a deal to create a new criminal-justice center, but if negotiations don’t result in a contract that’s in the best interest of county residents and taxpayers, the county has 120 days from June 28 — the date Walsh submitted its proposal — to restart negotiations to complete the unfinished jail.
“While both proposals remain options, I’ve directed my team to dedicate their time and resources toward attempting to reach a contract with Rock Ventures,” Evans said in a statement. “The Rock Ventures proposal has more upside, less risk and a smaller financial gap than Walsh Construction’s proposal. There are, however, many issues to resolve with Rock Ventures before I could recommend the approval of a contract to the county commission and the county Building Authority.”
The decision on which proposal to move forward with stemmed from a cost analysis that raised concerns that the Walsh proposal to finish the jail and renovate the Frank Murphy Hall of Justice would likely cost as much — if not more — than the county’s contribution to the Rock Ventures-proposed criminal-justice center, officials said.
According to the county, the fact that the Walsh proposal put the county at risk for cost overruns, unlike the Rock proposal, factored heavily in the decision to focus on Rock’s offer instead.
“On behalf of Rock Ventures, I’d like to thank Warren Evans and his dedicated team for their hard work throughout this process and their confidence in us moving forward together,” Matt Cullen, principal at Rock Ventures, said in a statement to the Free Press.
“We are more confident than ever that this project represents a great opportunity for Wayne County, its residents and our entire community. We remain committed to working together to make the vision of a new criminal-justice complex and mixed-use gateway project become reality.”
Walsh’s proposal includes two jail options at Gratiot: one with nearly 1,608 beds at $269 million and another with 2,200 beds costing $317.6 million.
The county has said it needs at least 2,000 beds.
Gilbert wants the land where the stalled jail project sits. A group led by Gilbert and Pistons owner Tom Gores wants to build a 23,000-seat stadium on the site to host a Major League Soccer team. The investment has been estimated at $1 billion. The application for an expansion team filed in January listed only the jail site as a location.
In exchange, the Gilbert group in February offered to build the county a criminal-justice complex on East Forest, just east of I-75 in Detroit. But the amended proposal Gilbert submitted last month moves the proposed complex to a nearly 13-acre site owned by the City of Detroit, bounded by the I-75 Service Drive, East Warren, East Ferry, Russell and Frederick. The site is home to a Detroit Department of Transportation maintenance facility and administrative offices.
Gilbert also outlined the time line for the project, saying the company expects the county to reach an agreement with the city for land control of the Warren/Detroit Department of Transportation site by Sept. 15. Construction would begin March 6, 2018, and be completed Nov. 5, 2020.
Evans said the county will continue to work toward an agreement with Detroit for purchase of the land while it awaits an IRS determination on a closing agreement that provides for the use of jail bonds at a site other than that of the unfinished jail — specifically, at Rock Ventures’ proposed site.
The Wayne County Commission would also need to approve the purchase of the city’s property, and the county Building Authority would need to approve the closing agreement with the IRS for resolution of the use of the jail bonds.
According to county officials, either of these issues could be obstacles to completing a contract with Rock Ventures.
“Over the past few weeks, we’ve made progress with both Rock Ventures and the City of Detroit, and we’ll continue those efforts,” Evans said. “Having a new criminal-justice center is the better option, but there remain significant obstacles that need to be resolved. We will continue to work tirelessly to address them.”
According to the new proposal, Rock’s plans for the redevelopment of the Gratiot site include office and commercial space, a hotel, residential space, parking and potentially a Major League Soccer stadium in conjunction with Platinum Equity.
Gilbert and Rock Ventures has purchased dozens of buildings downtown over the years and have renovated and repurposed many. They have had their eye on the Gratiot site for at least four years, ever since construction on the jail was halted in June 2013 because of a projected cost overrun of about $90 million. The site is just a few streets over from Gilbert’s Greektown Casino.
Walsh’s submission came a month after the county agreed to grant Walsh a six-week extension on coming up with a plan.
Walsh asked for more time to re-evaluate programming, layout and structures outlined in the request for proposals for the jail facility so it could create a proposal that meets the county’s needs.
Rock’s initial proposal was to build a 1,600 bed jail and criminal complex if the county paid the first $300 million and an undetermined amount for operational savings. Rock initially estimated the cost of the project at $420 million and promised to cover any cost overruns.
According to the county, both proposals provide for increased bed capacity to allow the closing of the Division III jail, as well as Divisions I and II. The increased capacity from 1,600 to 2,200 or 2,280 beds costs between $55 to $60 million for either project.
The annual operational savings to the county from an expanded jail will offset the additional capital costs in constructing a larger jail, Evans said.
According to the county, a study done by CGL, the county’s consultant, estimates an annual savings of $7.2 million a year by closing Division III, and according to Evans, this analysis includes the initial capital costs of building the larger jail.
“Based on where we are today and looking to the future, it makes sense for the county to spend the additional money for the expanded jail,” Evans said. “The county’s improved finances and credit rating have given us the option of financing the larger project in order to achieve this long-term benefit.”
In an interview with the Free Press, Cullen called the potential deal “exciting.”
“We feel good about it,” Cullen said. “It’s a lot of work to do the programming and the preliminary design and the estimating, so it took a lot of work on everybody’s part, but we’ve come through that and we feel really good about the project and the opportunity.”
What’s left now, he said, was “just the refinement of everything” to get it to a final agreement.
“We’ll be working with the county to prepare all the legal documents that would govern the overall relationships,” he said. “Hopefully, in fairly short order, we could have a document in place and be prepared to move forward.”
Wayne County Commission Chairman Gary Woronchak said the county has “sound reasons” to consider Rock Venture’s proposal.
“The determining factor for me is still whatever direction meets the county’s jail needs at the best value for taxpayers,” Woronchak said in a statement to the Free Press. “While I am hopeful that an agreement can be reached with Rock, I remain prepared to return to the plan to complete the partially built jail on Gratiot at I-375 if that turns out to be in the best interest of the county and its residents.”