LANSING - Despite the collapse of its lease with developer Joseph Nederlander, the state remains committed to finding private-sector investment for the redevelopment of the Michigan State Fairgrounds.

But in all likelihood, the fate of the 203-acre fairgrounds in Detroit will be left to the next governor.

Dan Wyant, director of the Michigan Department of Agriculture, said he would like to seek new redevelopment proposals. But he also said it's likely to be early next year before new concepts emerge.

The lease arrangement and legal disputes between the state and Nederlander ended late last month. Wyant said the issues for the state haven't changed: The year-round fairgrounds operation needs to be self-sufficient, and the grounds need substantial improvements that the state doesn't have money to pay for.

"It's a clean slate, and we start over," Wyant said. "We don't have a specific plan, we don't have a new partner. But we're open to ideas and proposals, because we still think the Nederlander-type model is the right model."

The Agriculture Department is regaining control of the fairgrounds two years into what was to have been a lease of up to 50 years with Nederlander's Bloomfield Hills-based State Fair Development Group L.L.C.

The public-private partnership hit several bumps, including negative publicity and legal challenges over an adjacent land sale, an auto racetrack and outdoor amphitheater, and disagreements between the state and Nederlander over redevelopment details.

Nederlander sued the state over a failed land deal for 34 acres next to the fairgrounds property. In April, the state began a proceeding to end the fairgrounds lease and take control of the property.

A settlement coordinated by Wayne County Circuit Judge James Rashid ends the lease and all lawsuits and reimburses Nederlander for the $4.5 million he spent on fairgrounds improvements.

But the state takes over year-round fairgrounds security, maintenance and utilities during tight budget times. Wyant said the lease spared the Agriculture Department about $2 million annually in such expenses stemming from operations other than the two-week state fair. He said he hopes revenue from this year's fair, which ran through Labor Day, will cover immediate needs of post-fair cleanup, maintenance and security.

The state will look to other ways to generate revenue year-round, he said, such as horse shows, renting campsites during the Woodward Dream Cruise and other entertainment.

One of the reasons for the Nederlander lease was to halt annual deficits at the fairgrounds. Besides receiving rent that started at $500,000 annually and at least $21.5 million in improvements, state officials expected to save $15 million over the lease's first 30 years as State Fair Development assumed year-round responsibilities.

Nederlander's plans called for upgrades to fair buildings, an equestrian center and possibly an amphitheater, saltwater aquarium and golf dome. Wyant said the state learned a lesson: It can't put a project into the fairgrounds that the community doesn't support. Public meetings early in the process and a formal request for proposals - which the state didn't do in selecting Nederlander's plan - are likely in any future state action.

But one privatization proponent said the state shouldn't be in the entertainment-venue business. Michael LaFaive, senior managing editor of the Michigan Privatization Report, said the land could be sold and fairgrounds events put on by private for-profit or nonprofit institutions. That would get government out of a nonessential function, said LaFaive, whose publication is a quarterly report from the Midland-based Mackinac Center for Public Policy.

Reprinted from Crain's Detroit Business, Sept. 2, 2002. Copyright Crain Communications, Inc.

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