Artspace Project is Hot Topic in Election Year

Political election years are often ripe with contention.

This is certainly true in Dearborn, when the topic on everyone's mind is the pending sale of city hall to Artspace, a nonprofit artist housing development company.


The elephant in the room came Tuesday about midway through the city council's meeting. Prior to voting on an agenda item to approve the East Dearborn Downtown Development Authority's community revitalization plan, Council President Thomas Tafelski asked for further clarification on a proposed $8.5 million payment from Severstal North America that may be used to help fund the Artspace project.

Last month, the council approved the sale of city hall to Artspace for $1.65 million, the amount determined by mutually hired appraiser. Artspace plans to invest $17 million to renovate the building and add 45 artist lofts in the building’s wings, spaces for the artists’ studios, arts organizations and creative businesses in the concourse.

In order to do that, however, it needs to apply to the Michigan State Housing Development Authority in August for a low income housing tax credit. That money would be used to renovate the artist lofts, and cannot be applied to the building concourse.

As part of the project, O'Reilly said Artspace will rely on independent investors, including Severstal, to fund renovations to the building's main concourse. The steel company is offering to pay the city $8.5 million to buy out of a profit sharing contract.

O'Reilly said the $8.5 million for Artspace can be compared to the Ford Motor Company's $5 million donation for naming rights on the Community & Performing Arts Center.

Therein lies the problem, according to Tafelski. During Tuesday's meeting, the council president clarified that Ford Motor Company approached the city outright with a donation for naming rights on top of taxes it was already paying on a voter-approved millage for the performing arts center.

In contrast Severstal wants to give the city a one-time lump sum payment in order to fulfill its contractual obligation with the city that both entities agreed to in 2005 as part of a PILOT (payment in lieu of taxes) program.

Debra Walling, corporation counsel for Dearborn, affirmed Tafelski's statements.

"To say that the two incidents are similar and present that statement as 'fact' to voters is not right," Tafelski said after Tuesday's meeting. "There's nothing similar about these two issues."

The city and Severstal entered into a profit sharing contract after the Russian-based business bought Rouge Steel. However, Severstal hasn’t had profits to share for several years, so it offered a one time lump sum instead of waiting for the contract to expire in 2025.

The city and Severstal signed a second contract in 2009 to put the $8.5 million toward a proposed conference center next to the former Hyatt Regency Dearborn (currently the Adoba Hotel). When the hotel was sold, the conference center was put on hold and the 2009 contract expired, so the agreement reverted to the 2005 contract.    

Tafelski said that the 2005 profit sharing agreement with Severstal never included naming rights for city-owned property.

"We received two payments in excess of $600,000 and that money was put into the city's general fund," he said. "Naming rights were only brought up after Severstal approached the city about the possibility of buying out the contract."

The city council president says he believes O'Reilly's office purposely tried to mislead voters in a campaign letter sent out prior to the Aug. 6 primary election.

"To put the comparison of Ford Motor Company and Severstal in his campaign literature knowing its not accurate shows me that the mayor is willing to do anything to drum up support for the Dearborn Administrative Center," Tafelski said. "This is about good government and fiscal responsibility, not about building a legacy."

O'Reilly disagreed, stating that his explanation to voters is an accurate representation of current events.

"Both Ford and Severstal are making voluntary contributions to the city above and beyond paying their taxes. And, both donations involve naming rights. That is why I used the word ‘similar’ in referring to the Ford Motor Company and the proposed Severstal contribution," O'Reilly told Patch.

"The donors have the right to control the use of the donated money and they have the right to have their donation recognized in a prominent and permanent manner. The city of Dearborn has the right to reject or negotiate their offer, and we have," O'Reilly continued. "Severstal felt (Artspace) would be a good substitute for the convention center. Severstal does not have to do anything and they do not owe the city any money at this time."

[RELATED: Dearborn City Council Paves Way for Artspace Purchase of City Hall]