Threat of lawsuit lingers with Ann Arbor officials unsure of City Place developer's next steps

In the aftermath of one of the more unusual decisions in Ann Arbor City Council history, city officials are left wondering what's on the mind of City Place developer Alex de Parry.

Will he actually try to construct the apartment complex nobody in city hall wants developed? Will he file a lawsuit against the city over delays with the project and the recent moratorium on development around his property? Will he try to pull demolition permits to tear down seven century-old houses that stand in his way?

"I don't understand what the developer is doing," said Mayor John Hieftje. "This is about as convoluted and complicated a development issue as I've seen. I think it's going to go down as one of those things people will be talking about years from now and say, 'Hey, do you remember that time we had that proposal? That was something.' It's been kind of a saga."

For fear of triggering a lawsuit against the city, the City Council voted 11-0 on Monday in favor of a by-right site plan for City Place, a project city officials have opposed for more than a year. Officials don't believe the plans to raze seven homes and construct apartments are good for the Germantown neighborhood nor do they think the plans are compatible with the city's Central Area Plan.

But they agreed the site plan meets all the requirements of the city's zoning ordinances and therefore required approval from the City Council.

The by-right site plan - different from a planned unit development proposal for City Place that includes a more attractive streetscape - is little more than two apartment buildings separated by a surface parking lot. The plan would allow Fifth Avenue Limited Partnership to build two three-story buildings with 24 units, 144 bedrooms, and 36 surface parking spaces on 1.23 acres at 407-437 S. Fifth Ave.

City officials say a six-month moratorium on development - which they plan to extend for six more months in February - will hold up the project until next September when an ad-hoc committee will report back to City Council on the historic significance of the Germantown neighborhood. Several city officials, including Hieftje, already are convinced the district is worth granting historic district status, which likely would keep any current version of City Place from being developed.

Asked on Wednesday whether he has any intent of pushing forward with development of the by-right site plan or suing the city, de Parry declined to comment, saying those are legal issues that he'll leave up to his attorney. De Parry acknowledged he is modifying a PUD for City Place based on recent neighborhood input and is awaiting revised color renderings from his architect.

"We are doing revisions to both the massing and the look of the streetscape PUD that address comments that were made at our neighborhood meeting in August and suggestions we have received from interested citizens," de Parry said, adding that he welcomes continued discussions with the community once those are done.

Before the developer brought back the by-right site plan, city officials and de Parry were under an agreement that a revised PUD would be crafted and would come back to the City Council in January. City officials are convinced that de Parry - who they believe has no intention of building the by-right project - is merely posturing.

They think the developer plans to use the by-right site plan as leverage to say, "Hey, I could build this, so why don't you let me build one of my PUDs." But de Parry's tactics this week haven't left him in good standing with the City Council.

"He threatened us. He dared us to deny the matter of right project," said Council Member Sabra Briere, D-1st Ward. "And he told us that if we did, he'd sue us. It's an amazingly antagonistic position to take."

The threat of a lawsuit became apparent in the days leading up to the City Council's Aug. 6 vote to enact a moratorium. Lawrence R. Ternan, an attorney representing Fifth Avenue Limited Partnership, wrote to city officials on July 30 that the developer "vigorously" objected to the moratorium and believed it contradicted the agreement reached July 20 to have the developer work out a revised PUD.

"It is difficult to conclude that this moratorium has any other goal except preventing the redevelopment of the City Place site, and it could be construed as an attempt to stop the City Place project without having to formally deny a site plan or PUD," Ternan wrote.

The attorney's letter concluded that the moratorium represented an unlawful taking of de Parry's development rights and rights to due process.

"We think we've acted in a proper way, in a legal way, and in good faith throughout," Hieftje said, commenting this week on the risk of a lawsuit. "The historic district, that's all in statute and I think it's very difficult to challenge."

If the Germantown neighborhood officially becomes a historic district, de Parry would have to take his development before the city's Historic District Commission, which could reject his apartment complex on historic grounds alone.

Ellen Thackery, a field representative for the Michigan Historic Preservation Network, said her organization has closely followed the issues surrounding City Place and feels the Germantown neighborhood is worth preserving. She believes the city acted within the scope of its powers by implementing a moratorium and historic study.

The Germantown Neighborhood Association, a coalition of nearby property owners, continues to strongly oppose the current plans for City Place but says it would support a project that respectfully restored the seven houses on Fifth Avenue and added some units in a way that was in keeping with federal guidelines for historic rehabilitations.

Briere said she's looking on the positive side and considering City Place a learning experience and an opportunity to reexamine the safeguards intended to protect Ann Arbor's near downtown neighborhoods.

"Because this has been such an unpleasant experience, we've been given the gift of experience, one that we wouldn't have thought as a council," she said. "It's forced us to look at our complacency, our belief that things were more or less going to continue the way they were, the belief that our Central Area Plan protected us, that the good will of developers protected us. All of that has proven to be wrong, and so that means that we should rethink how we do things and we have a moment to do that."

Ryan Stanton covers government for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529.