Owner of former Leo’s Tavern seeks OPRA district and 12-year abatement for $4.8M rehabilitation; council sets public hearings

Petoskey City Council set public hearings after the building owner and developer presented plans to rehabilitate 434 East Mitchell Street — the former Leo’s Tavern — using multiple financing tools, including an OPRA exemption, an MEDC grant and federal historic rehabilitation tax credits.

Tom Johnson of the Landmark Group and building owner Randy Flynn described a $4.8 million rehabilitation that would restore the main level for a family dining establishment, convert the basement to a speakeasy-style dining area and create eight residential units above and at garden level. The project team said the building is historically significant (circa 1895), is in poor condition and would be economically difficult to renovate without public assistance and tax incentives.

Council voted unanimously (5-0) to set a public hearing on establishing an OPRA district for the property and to set a separate public hearing on the owner’s OPRA certificate application. The motions were procedural steps required before the council can consider granting tax abatement under Michigan’s Obsolete Property Rehabilitation Act.

Key project numbers and financing requests presented to council: - Total development cost: about $4,800,000 (acquisition plus construction and related costs). - Projected post-rehab assessed value estimated by the applicant: roughly $2.6 million (appraisal pending). - MEDC grant request: up to $1,500,000 (maximum available under MEDC historic rehab grant program). - Owner request: a 12-year OPRA tax abatement to freeze existing tax payments while the project is completed; the applicant estimated that the abatement would save roughly $24,008 per year under the proposed schedule. - Historic tax credit financing: the applicant plans to syndicate federal historic-tax credits through a bank investor (Mercantile Bank letter of intent reported).

Housing and rents: the developer said the upper floor would be configured as four 1,100-square-foot apartments that the applicant estimated could rent at market rates around $2,400 per month; garden-level suite-style units were estimated at about $900 per month. The applicant acknowledged the project could run at a low margin or negative cash flow in early years and that the abatement, grant and tax credit proceeds are necessary to close financing.

Timeline and risks: project proponents told council they expect to start construction after financing is firm, estimating 12–18 months for completion; they warned that construction costs, interest rates and grant timing create funding risk. City staff and the developer said the OPRA approval process includes public notices to other taxing units (schools, ISD, county) and that the State Tax Commission must approve any final certificate.

Council action: two separate motions to set public hearings (one to establish an OPRA district and one to hear the certificate request) were approved on July 7 by unanimous vote. Separate public hearings and formal council consideration will follow the statutory notice period.

What to expect: public hearings will allow affected taxing units and members of the public to comment before council takes a final vote on establishing the OPRA district or issuing any tax-exemption certificate. Staff said they will return proposed findings and a certificate to council if the applicant proceeds with a formal application.