Tax breaks saved mental hospital site, developer says

“Blight” and “Traverse City” aren’t often used in the same sentence.

But one large, historically significant property in the picturesque northern Michigan community was so blighted that local officials who wanted to redevelop the site were unable to make much progress -- until it was approved as a tax-free Renaissance Zone.

The Traverse City Regional Psychiatric Hospital, a sprawling campus of buildings spread over 135 acres, was established in 1885 and closed by the state in 1989. It remained vacant for more than a decade as various development plans collapsed.

But in 2000, the Minervini Group reached an agreement to begin redevelopment of the property, located west of downtown and adjacent to Munson Medical Center. The project was designated as a 15-year Renaissance Zone in 2002.

The property, which encompasses land in Traverse City and adjoining Garfield Township, also received a $1 million brownfield clean-up grant.

Raymond Minervini II, a partner in the family-owned Minervini Group, said the property fit the spirit, as well as the letter, of the Renaissance Zone law.

Located a mile or so from the bay vistas Traverse City is noted for, the property had sort of a haunted, creepy air about it.

“It was a completely abandoned, graffiti-marred, insane asylum,” Minervini said. “Had (Renaissance Zone approval) not happened, I know there was no way we could have carried the property while it was being developed.

“And we wouldn’t have had anyone purchasing property or expanding their businesses here,” he said.

While much work is needed to complete the development, The Village at Grand Traverse Commons, as it’s now known, contains an attractive collection of condominiums, offices, retail shops, a winery and restaurants.

Trattoria Stella, located in a section of the old main hospital, known as Building 50, is considered one of the finest restaurants in the region.

Minervini and individual business owners have invested $60.8 million in the project, creating 358 jobs.

Critics say that targeted tax incentives are mostly ineffective in creating sustained economic growth, and Renaissance Zones are no different.

Gov. Rick Snyder is winding down the original geographic Renaissance Zone program by no longer allowing expansions of the geographic zones or extending the length of the tax exemptions. His administration also is revoking abatements on personal and corporate income taxes generated by the zones.

“Lansing politicians simply drew little boxes around particular geographic areas that they believed deserved special treatment,” said Michael LaFaive, director of fiscal policy at the Mackinac Center, a free market think tank in Midland.

“It is little different than state industrial policy by geography instead of by industry or business, and we know those type of programs have failed, too,” he said.

Minervini said he understands the criticism that programs such as Renaissance Zones distort market economies by picking business winners and losers.

But he said successful tax-abated developments will result in a payoff of more taxes in the future for state and local governments when the abatements expire.

“The public should get value for its investment,” Minervini said. “That’s exactly what’s happening here.”

He said he also believes that geographic Renaissance Zones have had some impact on protecting the environment by controlling urban sprawl.

“Continued sprawl is more harmful, damaging and costly than anyone understands,” Minervini said. “The state shouldn’t be making it easier to plow over a cornfield. The state should be making it easier to redevelop brownfields.”