DALLAS -- Wayne County, Michigan announced Friday that it does not intend to restart construction on its abandoned, half-built, bond financed jail in downtown Detroit and is closer to reaching agreement with Rock Ventures LLC to build a new criminal justice center elsewhere.
Wayne County Executive Warren Evans said Friday morning that he is confident the county can finalize agreement.
Evans said that negotiations with the developer tentatively have Rock Ventures footing a $500,000 stipend to Walsh Construction, which had been the lone bidder offering to complete the unfinished jail at the Gratiot Avenue site in downtown Detroit.
“The stipend ensured we received a proposal so we could fully evaluate finishing the jail at Gratiot," Evans said in a statement. “As we dug into the project with an actual proposal, the more we recognized it had too much inherent risk for the county at too high a price. We’re negotiating a deal with Rock that caps the county’s costs and creates the best solution available to our jail problem.”
The stipend compensates Walsh for the costs associated with submitting a substantive response to the county’s RFP. In February , the Wayne County Commission approved Evans’ recommendation forthe county to pay the stipend to Walsh if its proposal to complete Gratiot was not accepted.
“We’re making progress and moving toward a deal with Rock. But there hasn’t been a simple step in this entire process, nor will there be,” Evans said. “We’ve had to vet two proposals, are working to acquire land from the city, need to settle an issue with the IRS and are negotiating a half a billion dollar development deal – it all takes time, but we’re confident we’ll get there.”
The county's decision to abandon plans to finish the jail at the Gratiot site in downtown Detroit comes the week after Detroit City Council approved a deal for the county to acquire the land needed to proceed with the criminal justice center. The county is also awaiting a decision from the IRS regarding the use of jail bonds at a new site.
Under the land swap agreement, Wayne County would take ownership of a portion of a Detroit Department of Transportation property where the new jail would be built under the proposal being pursued by Rock Ventures. In return, the city would receive ownership of the 1.4 million-square-foot former American Motors Corp. site on Detroit's west side, which is currently owned by the county land bank.
Rock Ventures would build the county a new criminal justice center with a 2,280-bed jail, criminal courthouse, prosecutor offices, sheriff administrative offices and a juvenile detention facility at an approximate cost of $520.3 million.
The county would be responsible for $380 million plus the cost of acquiring the land and Rock would cover any cost overruns. The $380 million would be funded through a combination of unused proceeds from a $200 million direct-pay, taxable recovery zone economic development bonds sold in 2010 by the Wayne County Building Authority and the issuance of about $200 million of new bonds, according to Evans.
County officials say the plan still hinges on an IRS decision on whether the county can use jail bond proceeds from the original borrowing to build on the alternative site.
Rock Ventures originally intended to use the Gratiot site to build a professional soccer stadium but has since abandoned that plan. It is unclear how the land would be developed.
The IRS in July 2015 began conducting a targeted audit of the Wayne County Building Authority's 2010 bonds due to concerns about possible tax code violations, according to a disclosure notice the county filed. Jail construction began in 2011 but was halted in 2013 due to rising costs.
The IRS notified the county about six months ago that the audit was resolved without any adverse action and no penalties would be imposed as long as about $50 million of remaining proceeds were used to complete the project on the current site.
Opting to move the site would expose the authority to losing the federal subsidy payments the county receives for the taxable bonds that were issued under the recovery zone economic development bond program. At risk is a total of about $170 million in subsidies, which includes more than $50 million the county has received so far.