Underachiever On State Street

A giant building on State Street in downtown Traverse City almost “hides in plain sight,” though it takes up over half the block, seemingly sits mostly idle, and is tax exempt, at least as far as the City of Traverse City is concerned.

Jean Derenzy, who took over as executive director of the Downtown Development Authority (DDA) last year, has noticed: The AT&T building at 142 E. State is valuable real estate, and it’s going underused, she says.

Derenzy says the DDA has approached AT&T to start a conversation about doing something different with the property, though nothing has yet materialized.

“We are trying to start those discussions with AT&T, and I’m trying to reach out to them to find out about their future plans,” she says.

Asked for comment, an AT&T spokesperson asked for questions to be submitted via email and then did not respond to the questions.

Derenzy says she believes ideally the building would include office space on the first floor and, perhaps, residential units on the three floors above.

The building’s location will take on even more significance in the coming years because it overlooks the site of the $18 million FishPass project on the Boardman River, an experimental dam and development that’s slated to include public spaces like an amphitheater.

The building is also just a stone’s throw from the hoped-for location of a civic square Rotary Charities plans to develop in concert with the organization’s hundredth anniversary in 2020. In general, though, a building that spans most of a block on State Street is a crucial piece of real estate in today’s climate, as parcels throughout downtown are reconsidered and redeveloped, Derenzy says.

She also notes another unique aspect of the building – that it’s actually two buildings, and the older part of the structure deserves consideration for historical preservation. The original building was completed by Michigan Bell in 1939. The modern addition was completed in 1972.

“The structure and the artwork (of the older part) is pretty awesome,” she says. “It fits into the historic character of the downtown.”

The building is exempt from local property tax assessment under state law: it is a “state assessed property” as designated by Michigan PA 282 of 1905, which put telephone, telegraph and railroad properties under state rather than local control.

Joe Minicozzi, an urban planner in Asheville, N.C. and principal at the national consulting firm Urban3, who surveyed taxable values of properties in Grand Traverse County in 2016, says such examples of phone utility building tax exemptions are common across the country.

“They used to be filled with of all sorts of equipment,” he notes. “Basically, it was a switching station, like a computer, and those days are long gone.”

Minicozzi says he’s heard of instances where phone utility buildings have been sold off for private development or were redeveloped, but those are challenging deals to make, because the phone companies have little incentive to act.

“There’s really no motivation for them to sell,” Minicozzi says. “They’re not paying taxes on it.”

There are arguments to be made that a property like Traverse City’s AT&T building should be taxable, or at least pay fees to the city to cover the cost of maintaining the infrastructure surrounding it, he adds.

“There are cities that are starting to charge systems fees,” Minicozzi says. “That’s another way of dealing with it.”