The large hole in the ground next to the Ann Arbor Public Library will be filled with an underground parking structure by next year, but officials have yet to determine what exactly will sit on top of it.

The city of Ann Arbor is currently considering two development proposals for the space — one by New York-based Valiant Partners LLC and the other by Acquest Realty Advisors Inc. of Bloomfield Hills, Mich. Both schemes offer plans for a hotel and associated conference center. But Ann Arbor Mayor John Hieftje says he would like to see a proposal that centers around something other than a hotel and conference center.

The three objectives for the Library Lot, as stated in the request for proposals for the site, are beneficial use of the site, environmental benefits and financial return. Hieftje, who said part of the development area would be put aside to build a park, said he wasn’t convinced a hotel or conference center would constitute the best use of the space.

“I would really like to see a large employer come in, a business that wanted to use that as a headquarters or an office facility,” he said in an interview.

The prime location of the Library Lot, between the Main Street and State Street areas, makes it “vital to downtown’s future as it knits together the two primary activity areas,” according to Susan Pollay, executive director of the Ann Arbor Downtown Development Authority.

A committee appointed by the Ann Arbor City Council hired The Roxbury Group LLC, an external consulting firm, to review the two hotel-conference center proposals and draft a recommendation.

According to a report prepared by The Roxbury Group, Valiant proposed 178,000 square feet of new development, which includes a conference center, a four-star hotel, six high-end condominiums, extensive office space, a restaurant and a public plaza.

The report states that Acquest has plans for a 148,000-square-foot development, with space for an eight-story boutique hotel, ground-level retail space and a public plaza. This proposal would eventually place a conference center across the street at the former YMCA site on South Fifth Avenue, but Acquest doesn’t plan to construct that facility immediately.

Acquest Vice President Douglas Smith said in an interview that having a separate conference facility provides the city more flexibility in terms of future expansion.

“Because (our proposal) de-coupled the hotel and the conference facility, it provided a longer-term opportunity to grow that conference-convention business in order to support the downtown,” Smith said.

However, the Roxbury report, which is available on the city’s website, found that Acquest’s proposal did not provide enough details about the financing of the project.

“The Acquest team chose not to provide a specific proposal outlining how it would finance its project, relying instead on its track record of financing other similar projects as evidence of its capacity,” the report’s executive summary states.

Valiant’s more comprehensive financial strategy led the Roxbury Group to decisively recommend the Valiant proposal for the Library Lot site. According to the report, Valiant offered voluntary revisions to its original proposal, making it a more attractive offer. The modified scheme reduced the size of the conference center, added one floor of office space and guaranteed against any financial shortfall, eliminating debt liability for the city.

Smith said Acquest had no plans to revise its proposal.

According to Pollay, the city of Ann Arbor hasn’t officially reviewed Roxbury’s conclusions.

“A City Council-appointed committee reviewed the Roxbury report and is recommending that the developer recommended by Roxbury be put forward to City Council for approval,” she wrote in an e-mail interview.

However, Hieftje says he’s in no hurry to accept a proposal because construction isn’t supposed to be completed on the site until December 2011.

“The real estate we’re talking about won’t even be available for another year and a half because it’s a big hole in the ground,” Hieftje said in. “There’s just no rush to do anything about it given that particular circumstance.”

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