MARQUETTE – Duke LifePoint Healthcare has reached an agreement with the city of Marquette to purchase nearly 40 acres of city-owned property that will be the site of UP Health System-Marquette’s new hospital.

Under the agreement, which was signed Monday by company officials and the Marquette City Commission, Duke LifePoint will pay the city $4 million for 37 acres of land to the south of West Washington Street, west of Seventh Street and north of U.S. 41 near downtown Marquette.

In 2012, Duke LifePoint acquired Marquette General Hospital and, under that finalized agreement, is required to invest a minimum of $300 million in capital improvements over 10 years.

According to a news release from the city, the new hospital project is expected to generate a minimum capital investment of $170 million, create 150 new jobs and retain 2,300 jobs.

“This has been a lot of work,” Marquette Mayor Mike Coyne said in the release. “It’s taken a year of negotiations with many different parties participating, and we’re very happy this agreement was reached. Now Duke LifePoint and UP Health System can get the process of building a new hospital going in earnest.”

Construction of the new facility is expected to include a 265-bed hospital, 80,000 square-foot medical office building and a parking deck.

“We are extremely grateful to the leaders of the city of Marquette for their collaboration and support throughout this process, making this land purchase possible and providing an ideal site for the new hospital project,” said Tom Butler, LifePoint Health’s Eastern Group chief financial officer and representative of Duke LifePoint. “We are truly excited to celebrate this major milestone, as we can now move forward with our vision to create what will be a world-class hospital facility.”

The commission approved the agreement by a 6-1 vote, with Commissioner Sara Cambensy voting against it. Cambensy has said before there were too many uncertainties with the project, including what will happen with the city’s Municipal Service Center that is located on part of the property slated for the new hospital.

The service center is expected to be relocated and funding for that is to come from Tax Increment Financing mechanisms related to the hospital’s brownfield plan, which allows for a portion of local and state property tax captures to be used to reimburse development and other eligible activities on blighted or functionally obsolete properties.

In February, the Michigan Strategic Fund Board approved roughly $55.8 million in local and school tax capture for reimbursement of those expenses, including up to $18 million to relocate the service center.

The city has chosen a site to the north of Wright Street near Northern Michigan University’s facilities services building for its new service center, though most of the property is owned by NMU and no announcement regarding negotiations for that property has been made.

The city, its brownfield authority and Duke LifePoint are also expected to complete a development agreement, a requirement under the brownfield process.

Among other items, that agreement is expected to include a 12-year, 50 percent tax abatement on the property and all improvements.

Duke LifePoint would be required to ensure the city receives enough TIF revenues to pay off any bonds issued.

Related road projects could include realigning Baraga Avenue to tie into Spring Street, upgrading West Spring and Seventh streets, a new roundabout on U.S. 41 near the hospital and an overpass on the highway at Grove Street.

If the property is sold to a nonprofit or in another way becomes tax-exempt, Duke LifePoint or the then owner of the property would be required to annually pay off the city’s bond obligation, up to $20 million.

“This is such an exciting time for not only the city of Marquette but the entire Upper Peninsula and the families this hospital serves,” said Judy Watson-Olson, chairwoman of UP Health SystemMarquette Board of Trustees. “In addition to building a state-of-the-art facility that will truly enhance the quality of care we provide the community, we are also able to contribute to the environmental health of the city and bring an historic area back to life.”

The city is anticipated to vacate the service center by next spring to allow for groundbreaking in May. Construction of the hospital is expected to be completed by 2018.

Ryan Jarvi can be reached at 906-228-2500, ext. 242.