State doubles funding for blight removal at former Marquette hospital

Lansing — The Michigan Strategic Fund on Tuesday awarded another $8 million toward the cleanup of a former hospital site in Marquette, doubling state funding for a project that prompted a Marquette lawmaker to request an investigation that was rejected by the attorney general.

The roughly 23-acre site of the former Marquette General Hospital received $8 million in Community Development Block Grant funds less than eight months after the Michigan Legislature allocated $8 million toward cleanup at the site in the fiscal year 2022-23 budget. The total blight cleanup, according to recent analyses, was expected to cost $18.5 million to $20.5 million.

Marquette officials on Tuesday expressed support for the project, which they said would help to clear the area and make way for potential developers on a block in the heart of Marquette that serves as the gateway to Northern Michigan University.

"The support from the MEDC and MSF through these CDBG blight elimination funds will allow the blight elimination operation to actually occur," Marquette City Manager Karen Kovacs said.

State Rep. Jenn Hill, D-Marquette, argued the state aid was needed to clear the 11 structures and associated blight on the property. The property has been left vacant for some time after Duke Lifepoint bought it in 2012 and built a new hospital downtown, UP Health System-Marquette, where it relocated most services and administration.

"With the cuts to local government that have happened over the years by previous legislatures we don’t have the funding to deal with that," Hill said. "The state through its investment arm in economic development understood the potential.”

The $8 million demolition grant through the Legislature was made to the Northern Michigan University Foundation, while Tuesday's $8 million demolition and blight cleanup grant will go to the city of Marquette.

The roughly $16 million in state grants is expected to offset the site's brownfield redevelopment request, meaning local governments could begin collecting taxes on any eventual for-profit development sooner, said Brad Canale, CEO of the Northern Michigan University Foundation.

The grant comes about eight months after then-state Rep. Sara Cambensy, D-Marquette, raised concerns about the project and the $8 million included in the state’s $76 billion annual budget that was largely negotiated behind closed doors.

Cambensy wrote Attorney General Dana Nessel a 13-page letter on July 28 raising concerns about a potential conflict of interest and misuse of state and local money regarding the 23 acres near Northern Michigan University’s campus.

Cambensy alleged that the NMU board facilitated a transfer of the property from for-profit Lifepoint to Marquette-based real estate development and hotel management firm Veridea Group, whose president Robert Mahaney, who was a member of the NMU board of trustees at the time. An appointee of former Gov. Rick Snyder, Mahaney's eight-year term on the board ended Jan. 1. Gov. Gretchen Whitmer recently replaced him with Greg Toutant, CEO of the Great Lakes Recovery Center.

Cambensy, in the wake of the $8 million legislative appropriation, also questioned the terms of the deal that required NMU to pursue tax relief measures and demolition or blight removal grants for the site.

Nessel in September declined to weigh in on the case, noting the office had not been provided "with sufficient grounds to open an investigation at this time."

Veridea was selected as master developer partner for the site through a national request for qualifications process, Canale said, and the foundation was at all times transparent about Mahaney's ties to the university. Veridea was the only company to respond to the request for qualifications.

The foundation currently is the sole owner of the property, Canale said, after acquiring it from Lifepoint for $1 and an about $4 million contribution from Lifepoint that will allow some Lifepoint staff to remain on site for about 18 months. It is likely that a future for-profit limited liability corporation with Veridea will result in Veridea having some equity in the site, Canale said, but those terms are yet to be negotiated.

Mahaney last year called the accusations “meritless and reckless” and said they “besmirched the integrity” of those involved in the deal.

eleblanc@detroitnews.com