Ann Arbor DDA Barely Passes Budget

$2 million contingency for city of Ann Arbor prompts debate

Ann Arbor Downtown Development Authority board meeting (March 3, 2010): The DDA board approved its $25 million budget for 2010-11 on Wednesday, but just barely. Four dissenting voices, plus mayor John Hieftje’s absence from the meeting, meant that the budget received the bare minimum seven votes required for approval by the 12-member body.

Keith Orr Map Man

The DDA board talked about more than just the budget. Who was that map man? As the nameplate says, it's DDA board member Keith Orr, who was introducing a draft of a bicycle map that the DDA is working on. (Photos by the writer).

Deliberations covered a range of issues. First, the budget needs to accommodate two major DDA capital projects: the underground parking garage currently under construction; and the Fifth Avenue and Division Street improvements, which are also underway.

Second, there’s a contingency written into the budget for $2 million. The contingency is there in case renegotiation of the parking agreement between the city and the DDA results in a continuation of the $2 million payments made by the DDA to the city for each of the last five years. Continuation of the payments is not legally required under terms of the current agreement, which assigns responsibility for administration of the city’s parking system to the DDA through 2015.

Third, the fund balances of the DDA – which reflect the DDA’s reserves – face a dramatic reduction. That’s an issue that city of Ann Arbor CFO Tom Crawford flagged back in the spring of 2009 during discussions about the construction of the underground parking garage. The concern caused the city council to scale back the size of the garage by 100 parking spaces.

And finally, decisions made by the DDA board over the last year have resulted in re-direction of revenues from two surface parking lots – 415 W. Washington and the old YMCA lot at Fifth and William – to the city of Ann Arbor. That has resulted in the elimination of line items for DDA programs for next year that were in this year’s budget.

Besides the budget, the board also discussed a number of other topics, including development of the Library Lot and results from two parking surveys.

We begin with background on the four funds that make up the DDA budget, and a discussion of reserve levels.

DDA Budget: The Four Funds

The DDA’s budget is divided into four funds: TIF (tax-increment finance), housing, parking, and parking maintenance.

DDA Budget: TIF Fund

Desposits to the TIF fund come from property taxes collected within the DDA district. It’s a tax-increment finance (TIF) district, which means that property taxes are collected on the difference between the baseline value of a property when the district was established and the value of a property after improvements. The Ann Arbor DDA TIF “capture” is on the value of the improvements at the point they are made, and does not include subsequent increases in property value due purely to market forces.

To illustrate how TIF works, consider a property that has a taxable value of $100,000 to start. Suppose the owner builds on the property so that its taxable value is $1,000,000. That $900,000 increment is the amount on which the DDA’s tax capture is based. Now suppose the property adds value at $10,000 a year for 10 years due to ordinary real estate market conditions. So after a decade, it has a taxable value of $1,100,000. Each year, the Ann Arbor DDA’s tax capture is based on the same $900,000. So in the 10th year, the basis of the DDA’s tax capture would not include the first $100,000 or the $100,000 by which the property had increased over the years.

DDA Budget: Housing Fund

The housing fund gets its deposits through transfers from the TIF fund. It was created in 1997, and historically the amount of the annual transfer has been $200,000. At the board’s February 2010 meeting, Sandi Smith summarized activity in the housing fund over the last decade:

Smith reported that in the last 10 years, 23 grants had been awarded and that the average amount of those grants had been around $80,000. Of the 23 grants, 11 had gone to one nonprofit – Avalon Housing. A total of $1.1 million from the housing fund had been obligated, Smith said. The breakdown of those dollars: (i) $400,000 for Village Green’s City Apartments project at First & Washington, contingent on issuance of a certificate of occupancy; (ii) $207,000 for the third year of a grant to Avalon; and (iii) $400,000 to $500,000 for Near North.

The Village Green project Smith mentioned in that summary is a planned unit development (PUD) proposal by Village Green Residential Properties LLC at the corner of First and Washington, across from the Blind Pig, which includes 156 dwelling units and 244 public parking spaces. The city council approved the project on Dec. 1, 2008.

At its May 18, 2009 meeting, the council authorized an extension of terms in order to give Village Green more time to arrange financing. From the cover memo accompanying the resolution:

In order to complete this project the Developer has requested an extension of the term of the Option Agreement until December 30, 2009. Staff recommends approving this extension plus authorization for two three-month extensions at the City Administrator’s discretion. We expect this amendment to provide the developer sufficient time to complete their financing arrangements and close on the sale of the property.

The extension is now covered under the first of the three-month extensions that can be made at the city administrator’s discretion. The city has already factored $3 million of proceeds from the land sale into its financing plan for the new municipal center under construction at Fifth and Huron.

If the City Apartments project were not to go forward, the $400,000 in the DDA housing fund that’s committed to the the project would be freed up, along with the projected $9 million it would take to build the parking deck component of the project.

DDA Budget: Parking Fund

The parking fund gets its deposits from the city’s parking system, which the DDA administers under an agreement with the city. The agreement was revised most recently in 2005, extending 10 years, through 2015. The DDA contracts out the management of the system to Republic Parking. The terms of the city-DDA agreement on parking provide for a $1 million payment by the DDA to the city per year, including an option for the city to ask for up to $2 million in any given year – with the condition that the total amount of payments through 10 years not exceed $10 million.

Rob Aldrich, who was a DDA board member in 2005 when the parking agreement was struck, raised a concern about the possibility that the city would ask for $2 million in each of the first five years of the agreement. From the board minutes of the March 2, 2005 meeting:

Mr. Aldrich asked if it would be possible for the City to draw the full $10 million in the first 5 years; Mr. Solo said yes. Mr. Aldrich asked what would happen in year six, which is to say, would the City be satisfied to receive no further rent for the remaining five years. There was no response to this question.

As it turns out, the city asked for and received $2 million from the DDA for the first five years covered by the agreement. The current status of the negotiations between the city and the DDA to revise the parking agreement has been an ongoing topic for the last year at DDA board meetings, and factored significantly into deliberations on the DDA budget on Wednesday.

DDA Budget: Parking Maintenance Fund

The parking maintenance fund gets its deposits through transfers from the parking fund. The amount of those deposits per year is based on an inspection of the parking structures by an engineering firm, which estimates required maintenance over the next 20 years. That includes fixing rips in protective coatings, and repair of cracks to prevent seepage.

DDA Budget: Fund Balances (Reserves)

The DDA’s 2010-11 budget shows total fund balances dropping from $8,865,473 at the start of the year to $3,414,486 by the end. At Wednesday’s meeting, Roger Hewitt, who chairs the operations committee, attributed the bulk of the drop to down payments on two major capital projects: the underground parking garage at the Library Lot site, and the Fifth and Division streetscape improvements, which are both now underway.

In the 2010-11 budget, those expenditures are listed under “capital costs” in the amount of $2,796,507 from the parking fund and $2,020,753 from the TIF fund.

The DDA 10-year plan forecasts reserve levels dropping to their lowest point of $1,130,000 in the 2012-13 budget year, which is 5.65% of annual recurring expenses. After that, they’re projected to increase, as the new parking spaces being built start to generate revenue and rate increases begin to take effect.

The appropriate level of reserves for the DDA budget was a topic that drove city council discussion when the underground parking garage was approved last year, and ultimately led to the elimination of 100 spaces from the design.

From the Feb. 17, 2009 Ann Arbor city council meeting:

Crawford reported that on looking at the DDA’s financial picture, he noticed that they don’t have a minimum reserve policy. He said he generally used 15-20% as a minimum reserve. In light of the need to maintain adequate reserves, he said that in his view the project is “not affordable with the plans they have.”

The proposed structure would occupy area under Fifth Avenue. But [councilmember Carsten] Hohnke expressed concern that the cost of an extension along Fifth Avenue southward past the southern edge of the library lot all the way to William Street (part of the current plans) didn’t offer commensurate value for the investment. He was concerned that the cost would constrain the DDA in making other needed investments. He said that while there’s no doubt more space is required, he thought that the roughly 770 spaces to be built exceeded what’s required.

Hohnke then proposed an amendment that would slightly reduce the scope of the project, by whittling around 100 spaces off the total through eliminating the Fifth Avenue extension all the way to William Street. Even the reduced number of spaces would represent roughly a 10% increase in the 5,000 spaces currently in the city’s off-street parking inventory, Hohnke said.

Queried by Mayor John Hieftje, Hohnke said that cost savings of removing the 100 spaces would be around $6 million.

At the time, DDA board members were reluctant to accept Crawford’s assessment of appropriate reserve levels – reasoning in part that the city itself had no set policy specifying a reserve amount at that level. From The Chronicle’s coverage of the DDA board’s March 4, 2009 meeting:

[DDA board member, Leah] Gunn recounted how at council’s Feb. 17 meeting Tom Crawford, Ann Arbor’s chief financial officer, had expressed concern about the DDA’s fund balances. She said that the city of Ann Arbor had no policy on fund balances and that she thought the DDA’s finances were perfectly healthy.

However, on the fund balance issue, then-councilmember Leigh Greden wrote in an email sent on March 7, 2009 to Susan Pollay, executive director of the DDA, as well as to DDA board members Jennifer S. Hall and Leah Gunn:

I understand there has been some discussion at the DDA that the City does not have a minimum reserve policy similar to the one Tom Crawford has been recommending for the DDA. In fact, the City DOES have a minimum reserve policy, and has had such a policy – in writing – for years. The policy has been printed in the City’s Budget for years, and reads as follows:

The City shall “maintain an undesignated General Fund balance with a minimum range of 8% to 12%; provided that when necessary use of these funds occurs, subsequent budgets will be planned for additions to fund balance to maintain this standard over a rolling five-year average.”

Tom Crawford has repeatedly urged the City to exceed this policy by maintaining an undesignated General Fund reserve of 15%. Consistent with Tom’s recommendations, the City has exceeded our policy by maintaining an undesignated General Fund reserve of 15-20%. The existence of this policy and our success in exceeding the policy is one of the reasons that TWO ratings agencies upgraded the City’s bond ratings in late 2008. These higher bond ratings result in lower interest rates for bonds issued for City projects – including DDA projects. This is the background for Tom Crawford’s request that the DDA adopt a similar policy requiring a fund balance of 15%.

The policy that Greden cited is No. 7 on a list of 10 short-term financial goals in the city’s FY 2010 budget book.

Budget Discussion

With that background, then, here’s how the budget deliberations unfolded. The topic was broached first during public commentary.

Budget Discussion: Public Comment

Brad Mikus addressed the board about the proposed 2010-11 budget and noted several concerns that led him to conclude that “it’s a tight budget.” Among those concerns was a budgeted total revenue of over $16 million for the parking system, when revenues over the last 12 months had been only $14 million. In addition, Mikus pointed out that the budget relied on an increase in tax-increment finance (TIF) district revenues from $3.54 million to nearly $3.8 million, or by 7%. He told the board that it appeared the budget would only be met if things “worked out exactly right.” He thus encouraged the board over the next 12-18 months to look closely at the actual revenues as they came in.

Board Budget Deliberations: Part 1

Hewitt led off by noting the budgeted drop in fund balance from $8,865,473 at the start of the year to $3,414,486 was due to the two major capital projects started this year: the underground parking garage at the Library Lot and the Fifth and Division streetscape improvements. In the 2010-11 budget, those expenditures are listed under “capital costs” in the amount of $2,796,507 from the parking fund and $2,020,753 from the TIF fund.

Responding to Mikus on the question of TIF  and parking revenue, Hewitt said that the TIF estimates came from the city of Ann Arbor. The increase in parking revenues, Hewitt said, would come as a result of a rate increase that will go into effect on July 1, 2010. [Those increases are part of a series of already-approved incremented rate increases that started in July 2009 and will ultimately see hourly rates in parking structures of $1.10 by 2012.]

Hewitt described how the total reserves over the next three years would be relatively low, reaching their low point in 2012-13. That low is based on the projections of the 10-year plan putting the total fund balance at $1.13 million  – a number that does not include the housing fund balance. After that low in 2012-13, the 10-year projections show total fund balances (minus the housing fund balance) of $2.8 million in 2013-14, $4.5 million in 2014-15, and $10 million in 2015-16. [The housing fund balance is not considered available for other use and is thus not counted in the reserve.]

Hewitt noted that they would be cutting back on some programs, given the “relative tightness” of the fund balances. First, he said, for the next year and possibly for the next two years, transfers to the housing fund out of the TIF fund would be reduced from $200,000 to $100,000. The balances in the housing fund, said Hewitt, would be made up following that three-year period.

The housing fund balance, observed Hewitt, would be about $1.3 million, even with the reduced transfer. Hewitt also observed that historically, the DDA had found it difficult to find places to invest housing fund dollars. Board member Russ Collins noted that it was a way of being “prudent with funds,” as Brad Mikus had suggested during public commentary.

Sandi Smith, a board member who also represents Ward 1 on city council, objected to the strategy on the grounds that there was no mechanism for ensuring that the housing fund balances would be restored as Hewitt had described. She suggested a separate resolution laying out how that would happen. She noted that most of the money in the housing fund was already encumbered in different ways, even though it hadn’t been spent. The unencumbered fund balance, said Smith, was only $200,000. She allowed that it had been difficult to find ways to spend housing fund dollars, but said that it was also important to restore it.

Board member Leah Gunn weighed in, saying that the board could always restore the funding if there were a project where it was needed, if someone brought a proposal to the board. The next couple of years, however, they would need to be “on a diet” in terms of spending discretionary income. For the next couple of years, though, Gunn said she felt it should stay the way it was – reduced to $100,000.

Hewitt, picking up on Smith’s point about the housing funds being encumbered, said that around $400,000 of that was encumbered by Village Green’s City Apartments project at First & Washington, which had no clear indication of when it would be started or completed – the housing fund payment will not be required until certificates of occupancy are issued. Hewitt felt like the board would be past the tight period by the time that $400,000 would need to be paid.

Responding to a query from board member Newcombe Clark via speaker phone, Hewitt said that the DDA’s responsibility was to pay for a 250-space parking structure that will be built on the bottom floors – $9 million upon certificate of occupancy. Hewitt said that for budgeting purposes that money would be needed 2.5 years from now – the time it would take if it were to start immediately.

Besides the $100,000 reductions in the housing fund transfer, other programs would be reduced, said Hewitt, including: Phase II of the energy grant program would be reduced from $250,000 to $0; grants to the four merchant associations would be reduced from $75,000 to $0; travel to the International Downtown Association conference would be reduced by $15,000.

Board member Jennifer S. Hall asked whether those items had been assumed to remain constant, when the DDA board approved the budget for the underground parking garage.

The conversation with Hewitt and Russ Collins yielded some uncertainty about what had been forecast in conjunction with the parking garage, but Hall returned to the idea that promises had been made about what would remain constant. What was it that had changed, she asked, that had resulted in the reductions?

Joe Morehouse, deputy director of the DDA, allowed that one unexpected shift in revenue had been from the 415 W. Washington parking lot, as well as revenues from the old YMCA lot at Fifth and William. [The city council requested and received approval from the DDA board to direct net revenues from those lots to the city. The council's action on 415 W. Washington came at its June 15, 2009 meeting, and action on the Fifth and William lot came at its Dec. 21, 2009 meeting. The ballpark numbers for revenues to the city from those two lots are $100,000 from the Fifth and William lot and $70,000 from the 415 W. Washington lot.]

Hall characterized the DDA’s actions, agreeing to direct those additional revenues to the city, as confirming it “after they asked for it.” She stressed that she wanted everyone to understand why the DDA board was forced to reduce its programs in the coming year.

For her part, Sandi Smith said that the energy grant and the housing fund reductions gave her pause. The $350,000, she said, did not make that big of a difference. She said she did understand that if a proposal came up, money could be moved into the housing fund. With respect to the energy grants, however, she felt it was an essential program. She noted that for Phase II of the program last year, the program had required only $58,000. [Phase I is an energy audit phase, while Phase II is implementation of recommendations from the audit.] Fifteen buildings had installed $138,000 worth of improvements – of which the DDA had paid just $58,000 – which would save $25,000 a year, she said. She emphasized that it was “direct dollars stimulating private investment in the downtown,” and that was core to the mission of the DDA. For that reason, she said, she was reluctant to see that disappear.

Board Budget Deliberations: Restoration of Phase II Energy Grants

Smith thus moved a resolution to restore $100,000 for Phase II of the energy grant program. The motion was seconded by Keith Orr. Weighing in by speaker phone, Newcombe Clark seemed to be in favor of putting all the funds back, including the merchant association allocations. Clark pointed out in the interest of full disclosure that he was no longer president of Main Street Area Association board.

John Mouat drew out from Hewitt the fact that concern for the minimum fund balance had driven the decision, and that all areas of the budget had been examined.

Orr weighed in for reductions in amounts as opposed to outright elimination of the items from the budget. He agreed with Smith that the energy grants were part of the DDA’s  core mission. He also acknowledged his ongoing association with Kerrytown District Association, which is one of the merchant associations that the DDA has historically funded.

Leah Gunn noted that the $9 million for the parking deck in connection with Village Green’s City Apartments project would not be spent for a very long time, as well as the $400,000 for the affordable housing grant. Hewitt cautioned that tomorrow they could announce that they’re going “full blast” and the DDA would need to meet those commitments.

Russ Collins said he supported his partnerships committee co-chair 100% – that’s Sandi Smith. From a practical point of view, said Collins, the DDA could make good use of the energy grant money. On procedural grounds, Collins objected to the fact that the operations committee had effectively made a policy decision on behalf of the partnerships committee. A reduction would have had a budget impact, Collins said, but the elimination amounted to a policy impact. About seeing the budget, Collin said, “It’s terrible to be surprised, and that’s a surprise.” Collins characterized adding another $100,000 to the deficit is “not extremely imprudent.” But picking up on Gunn’s comment, he said that assuming the $9 million won’t be spent was imprudent.

Collins allowed that the elimination of funds supporting the merchant associations had received a lot of discussion over the years, so the elimination of those didn’t bother him at all. He didn’t want to be “looped into” the sentiments in favor of keeping financial support for the merchant associations.

Jennifer S. Hall said she supported Smith’s amendment, but wanted to contemplate another one that would restore the other funds after voting on Smith’s proposal.

Mouat returned the conversation to the fund balance, expressed as a percentage of annual recurring operating expenses. Hewitt said the city wanted to see 15%, while Morehouse said he was looking to preserve 5%.

Smith echoed Collins’ sentiments that there could have been better communication from the operations committee. Board chair John Splitt clarified that when the operations committee had discussed the energy grants, they’d talked  about whether the money would actually be spent. They did not feel it would affect what would happen “on the ground,” Splitt said. At that point, Gunn called the question.

Outcome: The amendment to restore $100,000 to Phase II energy grants was approved, with Clark and Hewitt dissenting.

Board Budget Deliberations: Reduction of $2 million Contingency for the City

In following up on the intention she’d expressed to bring an additional amendment forward, Jennifer S. Hall proposed that the $2 million budgeted as a contingency for the city of Ann Arbor should be reduced to $1.65 million, with the balance of $350,000 allocated to the DDA programs that had been slated for elimination. The amendment was seconded by Newcombe Clark.

Hall noted that Joe Morehouse had indicated the change in the financial picture necessitating those eliminations had been the re-direction of parking lot revenues – from 415 W. Washington and Fifth and William – to the city of Ann Arbor. The $2 million contingency was there, she said, in order to accommodate a revenue request from the city. The revenue from those parking lots, she said, should be credited towards that $2 million.

Russ Collins cautioned that just because a line item has existed in a budget in the past does not mean it should exist in the future. Collins noted that the DDA’s “mutually beneficial” committee was in a good faith process with some good work already done, and that the resolution, he felt, would undermine that work. Leah Gunn told Collins that she did not want to see the negotiating position of the “mutually beneficial” committee weakened.

Hall recounted how the DDA had made a good faith effort to negotiate and how the city council had not followed up.  From a December 2009 Chronicle article: “City-DDA Parking Deal Possible“:

  • Jan. 20, 2009: City council passes a resolution asking the DDA to begin discussions of renegotiating the parking agreement between the city and the DDA in a mutually beneficial way.
  • March 4, 2009: DDA board establishes a “mutually beneficial” committee to begin discussions of the parking agreement between the city and the DDA. On the committee: Roger Hewitt, Gary Boren, Jennifer S. Hall, and Rene Greff. The DDA’s resolution establishing their committee calls on the city council to form its own committee.
  • May 20, 2009: During the mid-year DDA retreat, mayor John Hieftje states publicly that city councilmembers object to Jennifer S. Hall and Rene Greff’s membership on the DDA’s “mutually beneficial” committee.
  • June 3, 2009: DDA board chair Jennifer S. Hall removes herself from DDA’s “mutually beneficial” committee, replacing herself with Russ Collins.
  • June 15, 2009: Mayor John Hieftje nominates councilmembers Margie Teall (Ward 4), Leigh Greden (Ward 3) and Carsten Hohnke (Ward 5) to serve on the city council’s “mutually beneficial” committee, and they’re confirmed at the city council’s July 20 meeting.
  • July 1, 2009: DDA board chair Jennifer S. Hall appoints Sandi Smith to replace outgoing DDA board member Rene Greff (whose position is filled with Newcombe Clark) on the DDA’s “mutually beneficial” committee. Smith is also a city councilmember, representing Ward 1.
  • August-December 2009: Sandi Smith, the chair of the DDA’s “mutually beneficial” committee, reports at each monthly DDA board meeting that there is nothing new to report.
  • Dec. 5, 2009: Dissolution of the DDA is included in an “everything is on the table” list for discussion at the city council’s budget retreat.

Her position all along, said Hall, was that the arrangement needed to be mutually beneficial.

For his part, Clark noted that the contingency was simply there as a tool. “We’re not removing anything. It’s arbitrary.” Clark said he was not going to be in favor of cutting programs until the board understood exactly what the city was requesting: “It needs to be off the table until it’s on the table.”

Joan Lowenstein noted that the $2 million is not an arbitrary amount – it is the amount that has been paid under the parking agreement for the last five years. Lowenstein rejected Hall’s contention that the revenues from the 415 W. Washington and Fifth and William lots should count towards the $2 million, saying that those were”separate pools” and not a part of the same negotiation. Separate decisions were made on a separate basis, she said. The resolution, Lowenstein feared, would show that the DDA board was trying to “play games” with the city council.

Gary Boren, who also serves on the DDA’s “mutually beneficial” committee, said he was sympathetic to Russ Collins’ point of view about the resolution potentially undermining the committee’s work. However, it hurt the DDA when they had to cut programs that were working, he said. Boren noted that the DDA did not need to back off of the $2 million, but that the resolution would make clear to the city council that “this will take some skin out of us.”

Gunn expressed disappointment that the merchant associations did not report back about how they’d spent their money. Keith Orr responded by noting that a representative from the Kerrytown District Association had addressed the DDA board [at its Feb. 3, 2010 meeting] on that subject. Orr also suggested that the idea of “mutual benefit” could be replaced by “mutual sacrifice.”

Smith said she appreciated the spirit of the resolution, noting that the window display contest money was an example of a small amount of dollars that could go a long way.

Russ Collins called the question.

Outcome: Hall’s resolution to reduce the $2 million contingency by $350,000 failed, getting support only from Hall, Clark, and Boren.

Overall outcome: The budget was approved with support from Boren, Collins, Gunn, Hewitt, Lowenstein, Mouat, and Orr. Voting against it were: Hall, Clark, Smith, and Splitt.

Development Issues

The DDA board meeting included a variety of issues related to new development in the downtown area.

Library Lot

In August of 2009, the city of Ann Arbor issued an RFP for development proposals for the top of an underground parking garage currently under construction on the city-owned Library Lot, between Fifth Avenue and Division Street just north of the Ann Arbor District Library. At its Wednesday meeting, the DDA board got updates on construction and planning for the top of the structure.

Reporting out from the capital improvements committee, John Splitt gave an update on the construction of the underground parking structure along Fifth Avenue. Earth retention preparation work was nearly complete on the “dogleg” – the section of the lot abutting Division Street. [The work consists in part of drilling large holes deep into the ground and inserting steel beams into those holes.] That means people will start to see “real digging” as soon as next week, Splitt said. [As of Thursday, March 4, digging in earnest seems to have commenced, based on Chronicle observation.]

Bid package #3, Splitt reported, which is for the concrete and steel work, would be opened publicly at 2 p.m. in DDA offices the following day. [The bids will first be reviewed for numerical accuracy. Then any conditions specified by the contractors checked, and interviews will be held with the lowest three bidders to review the scope of work – a meeting for that is scheduled on Tues., March 9.]

In his report out from the Downtown Citizens Advisory Council, Ray Detter said that the DCAC opposed the placement of a large park on top of the Library Lot, where the underground parking garage is being constructed. [The two open space proposals submitted in response to the city's RFP have since been set aside for further consideration by the committee: "Two Library Lot Proposals Eliminated"] The DCAC did, however, support the idea of taking the next two years to plan that entire area of the downtown, said Detter.

Reporting out from the Library Lot RFP review committee, John Splitt said that Ann Arbor city administrator Roger Fraser had not yet hired a consultant who would be examining the financial aspects connected with the two proposals that are being given further consideration by the committee.

Sandi Smith noted that the RFP schedule was designed so that if a decision were made to move ahead with a particular proposal for development, changes in the design of the underground structure could be undertaken. She noted that the window of opportunity seemed to have been missed by now, and wondered if that did not perhaps remove some of the timing pressure to get to a decision. Susan Pollay, executive director of the DDA, confirmed that the parking garage was “on its way” now as designed. However, she pointed out that the design teams of the two remaining proposals under consideration were very familiar with the underground parking garage design, and that they would be able to accommodate their projects to its design.

Jennifer S. Hall inquired about the possibility that the extra supports designed into the underground garage – so that something could be built on the top of the underground garage – could be stripped out. [Proposers of a public gathering space, the Ann Arbor Community Commons, have called for such a strategy in order to free up money to pay for implementation of their commons.] Pollay told Hall that stripping out those supports would actually entail re-engineering the design of the garage and would, in fact, add cost.

Zingerman’s Expansion

In his report out from the Downtown Citizens Advisory Council, Ray Detter called the board’s attention to a public participation meeting for a proposed expansion of Zingerman’s Deli operations scheduled for March 8 at the deli, 422 Detroit St., starting at 5 p.m. Zingerman’s plan generated “heated discussion” at DCAC, said Detter. The deli is located in the Old Fourth Ward historic district. He said they agreed that Zingerman’s is an essential part of the community, but that they needed to make sure there’s not a precedent set that would undermine planning. The decision needed to be oriented around the city’s planning documents: the downtown plan, the central area plan, and the historic district.

Downtown Zoning and Design Guidelines

In remarks made at the end of the meeting during a time allotted to bring up other DDA business matters, Roger Hewitt expressed some frustration about the city council’s appointment of a task force charged with the responsibility of establishing design guidelines for downtown zoning. By way of background, Hewitt had served on the A2D2 steering committee that oversaw a years-long rezoning process, along with city councilmember Marcia Higgins, and Evan Pratt, of the planning commission.

City council ultimately approved the downtown zoning amendments, but did not enact the design guidelines, pending completion of a design guideline package that would include some kind of mandatory process with voluntary compliance. [See Chronicle coverage: "Downtown Planning Process Forges Ahead: New zoning approved, design guides will take longer"]

At the February 2010 DDA board meeting, Hewitt’s remarks showed that he had not been kept apprised of the fact that the A2D2 committee had been dissolved, after the city council had approved the rezoning component but before the design guidelines were completed:

In reporting out from the A2D2 oversight committee on which he serves, Roger Hewitt stated that the last meeting had been canceled and so he had nothing to report.

Later in the meeting, John Hieftje told Hewitt that the A2D2 oversight committee had actually been dissolved. This seemed to come as news to Hewitt, who said simply, “Oh!”

Said Hewitt about the design guidelines: “Apparently we’re going to revisit the entire process.” He noted that there was no representation from the DDA on the design guidelines task force, even though it would have a “profound impact” on the downtown area. Russ Collins wondered how that might be best addressed. Hewitt responded with humor, suggesting that he might talk to any councilmembers that Collins might know, who might be sitting next to him – the allusion was to Sandi Smith, who serves on the city council, representing Ward 1, in addition to serving on the DDA board. Smith and Collins co-chair the DDA partnerships committee.

In his report out from the Downtown Citizens Advisory Council earlier in the meeting, Detter said that they were glad to see the city council appointment of a task force to look at the design guidelines that will accompany the A2D2 rezoning of the downtown. That task force would be led by councilmember Marcia Higgins, he said, with Wendy Rampson (the city’s head of planning), Kevin McDonald (senior assistant city attorney), Kirk Westphal (planning commissioner), as well as Norm Tyler, Peter Pollack, and Tamara Burns. Detter said that out of the task force’s work they expected to get a system of required compliance with a process, including a review by a design board, and voluntary compliance with the outcome of that process.

Parking Surveys

Roger Hewitt reported on two surveys – one conducted online as part of the DDA’s effort to gauge public opinion about parking issues in preparation of a report it will make to the city council in April.

Online Parking Survey: Principles and Implementation

The online survey ran for 10 days between Feb. 9, 2010 and Feb. 19, 2010 and received 1,283 responses. Of those respondents, 73% reported being Ann Arbor residents, while 27% reported being non-residents. Almost an equal number of residents – 41% and 40%, respectively – reported being 51-71 years old and 31-50 years old.

Hewitt said there was “strong alignment” with the basic principles the DDA used, but more divided opinion about the specific implementation of those principles. For example, there was a 17-17 split between positive and negative comments on the investment in the underground parking structure. And support for some specific policies depended on respondents’ use of parking services: 59% of parking permit holders supported improving bicycling infrastructure, while low-frequency parkers supported it at an 81% rate.

Of the 54 respondents who weighed in on extended evening meter hours, 85% wanted evening parking to remain free. About the new e-park system, 61 respondents commented on the machines, and the written summary indicates that frustration was expressed about the “speed of the machines, screen visibility and reduced convenience and ease.”

On-Street Parking Survey: e-park

A second, on-street survey described by Hewitt at Wednesday’s meeting targeted e-park users specifically. Users of e-park stations on State, Liberty, Detroit, and Main streets were surveyed between Feb. 19 and Feb. 25 – 95 people responded. Hewitt characterized those responses to the survey as “pretty overwhelming” on the positive side, with 91.4% of respondents characterizing the machines as very easy, easy, or somewhat easy to use.

Hewitt also mentioned that paying by phone was not described by respondents as useful, perhaps because many of them indicated that they did not know it was an option. Hewitt suggested that some marketing work could be done on that. [.pdf of e-park survey results]

How useful are the following e-park features:
                                                   Don't Know,  Response
                    Very useful Useful Not useful  Never Used   Count           

Pay by credit card    61.1%     29.5%     0.0%       9.5%        95
Pay with coin         38.7%     53.8%     1.1%       6.5%        93
Add time at any epark 57.0%     24.7%     4.3%      14.0%        93
Pay by cell phone     20.4%     10.8%     8.6%      60.2%        93


Other Business

The board heard a number of other reports and comments.

Wireless Washtenaw

Reporting out from the partnerships committee, Sandi Smith told the board they’d received a presentation on Wireless Washtenaw from Tom Crawford, the city of Ann Arbor’s CFO. Smith said that Crawford had explained that the priority for the rollout of wireless high-speed Internet access had been in rural areas, where there was currently no access at all. [James McFarlane, who manages Washtenaw County's information technology operations, gave county commissioners an update recently on the status of the Wireless Washtenaw project.]

Smith also reported that Crawford had told them about another possibility for wireless access. There’s potential that the bandwidth made available by TV stations previously used to broadcast an analog signal could eventually be available for wireless Internet connectivity.

DDA Board Retreat

Roger Hewitt announced that the DDA retreat had been scheduled for March 16 with the gathering for lunch starting around “noonish.” The retreat will be held at the offices of Bodman LLP in Suite 400 at 201 S. Division. One main topic of the retreat will be urban versus suburban identity, as well as the comprehensive parking plan.

Sandwich Sign Boards

Reporting out from the transportation committee, Keith Orr gave an update on the status of the sandwich sign board ordinance that the city council had considered, which would have made the signs legal, but put a permitting system in place. Susan Pollay, executive director of the DDA, had appeared before the council at its Feb. 16, 2010 meeting to ask the council to adopt the new ordinance, minus the permitting system:

Also during the public hearing, Susan Pollay, executive director of the Downtown Development Authority, read a brief statement on behalf of the DDA, saying that sandwich board signs are part of what makes for a vibrant downtown experience. She suggested that the system be adopted without permits and then reviewed after one year to determine if there was adequate compliance.

Orr reported that the city council had voted down the ordinance – which Sandi Smith then stressed meant only the demise of the current attempt to make the sandwich boards legal and to regulate them somehow. The fact that the sandwich sign boards remain illegal was, said Orr, “perhaps not the desired result.” Russ Collins kidded Orr as to whether he was recommending that merchants commit acts of civil disobedience.

Bicycle Hoop Requests, Maps

Reporting out from the transportation committee, Orr called attention to a feature on the DDA website that allowed people to request installation of bicycle hoops. He also indicated that DDA intern Amber Miller was working on a bicycle map for downtown.

Downtown Citizens Advisory Council

Ray Detter gave his report from the Downtown Citizens Advisory Council, which meets the evening before the DDA board holds its regular Wednesday noon meeting. [The majority of Detter's comments during his update are reflected in previous parts of this meeting report.]

He said that DDA board member (and Ann Arbor city council member) Sandi Smith had attended the meeting. The DCAC had covered a number of topics, Detter said, including efforts to improve maintenance and safety at Courthouse Square – a housing complex for seniors at the southwest corner of Huron and Fourth Avenue. Detter told the board that the DCAC continued to support the DDA’s efforts at transportation demand management.

Present: Gary Boren, Newcombe Clark (via phone), Jennifer S. Hall, Roger Hewitt, John Splitt, Sandi Smith, Leah Gunn, Russ Collins, Keith Orr, Joan Lowenstein, John Mouat.

Absent: John Hieftje.

Board retreat and next regular board meeting: A retreat will be held on Tuesday, March 16 at the offices of Bodman LLP, Suite 400, 201 S. Division, starting at noon. The next regular board meeting is at noon on Wednesday, April 7, 2010, at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]


  1. By David K
    March 6, 2010 at 8:42 am | permalink

    Leave no stone unturned to find cash for the city, but rather than just pruning expenses how about the following:

    - Complete annexation of Ann Arbor Twp. island parcels within the city boundaries, as agreed upon in the mid 1990s.

    - Non-resident fees or surcharges at city parks, pools, and golf courses? Our neighbors in the townships benefit, but have no financial burden. There are cities that line the shores of Lake St. Clair that don’t even allow non-residents access unless they are accompanied by a resident.

  2. By Tom Whitaker
    March 7, 2010 at 9:52 am | permalink

    Is it common practice (and legal in terms of the OMA, etc.) to have a board member participate in a public meeting by phone, including the casting of votes? I don’t think I’ve ever heard of this before.

  3. March 7, 2010 at 10:29 am | permalink

    I have participated in meetings where some member was present via conference call. As long as those comments are audible to the other board members and the public, and are correctly recorded, I don’t see a problem. Voting might be different, though. It would be instructive to examine the DDA bylaws to see whether it defines votes as someone being “present”. Many boards do not allow voting by proxy, and this is a next step in that direction.

    It might especially be critical if there were a quorum issue, or if a supermajority were required, etc. The US Senate has a long tradition of carrying members in on stretchers for critical votes.

    In this case, the person participating by telephone was on the losing side of votes. But if he had been the deciding vote, it might have been necessary to examine the rules more carefully.

  4. By Tom Whitaker
    March 7, 2010 at 11:11 am | permalink

    Obvious concerns include (and these are general concerns, I’m not picking on the DDA here):

    –How is the identity of the individual on the phone verified?
    –Who is in the room with them on the other end and what input are they receiving on that end that those in the meeting room are not privy to?
    –What if they’re multi-tasking instead of paying attention to the meeting discussion?
    –If you allow telephone, or skype, or whatever means of “virtual” attendance, where do you draw the line? Could 5 or 6 members all participate this way and still have it be considered a public meeting?

  5. March 7, 2010 at 11:33 am | permalink

    Good questions. Now that we’re hearing more and more about virtual meetings, maybe they need to be explored more fully.

  6. By Dave Askins
    March 7, 2010 at 11:33 am | permalink

    Re: “Is it common practice (and legal in terms of the OMA, etc.) to have a board member participate in a public meeting by phone, including the casting of votes?”

    Only one other example over the last year and a half comes readily to mind: Paul Ajegba participated in an Ann Arbor Transportation Authority board meeting by conference phone.

    With respect to Open Meetings Act, a number of states have explicitly looped in various electronic tools for use in participation in public meetings. Utah, for example: Utah Code Ann. § 52-4-2 (“‘Meeting’ means the convening of a public body, with a quorum present, whether in person or by means of electronic equipment, for the purpose of discussing or acting upon a matter over which the public body has jurisdiction or advisory power”).

    Michigan’s OMA does not explicitly address that issue. However, I have a vague recollection of reading through a Michigan’s Court of Appeals case in which a conference call among a quorum of members of a public body was ruled a meeting under the OMA.

    Though not logically contradictory, it would seem odd to me to rule out participation by phone in a properly noticed meeting, but insist that an unnoticed conference call among all members is a violation of the OMA.

    Use of technology to increase the ability of a variety of individuals to serve on public bodies is a good thing. In the case of Clark’s participation at the DDA board meeting, the quality of the audio as heard from the back of the room was not great. I strained to make out what Clark was saying.

    What Clark’s participation highlighted is that non-verbal communications — that are very useful in managing a meeting — get lost when participation is by phone. So while Clark was weighing in by phone, he could not respond to cues from other board members and the chair of the meeting that they thought he had finished up a speaking turn. Likewise, they could not see Clark and interpret any non-verbal cues he might have been giving that, no, he was just pausing. It wasn’t by any means the case that chaos broke out. But I think that with greater frequency of use, board members would become more adept at managing participation by phone.

  7. By Mary Morgan
    March 7, 2010 at 11:44 am | permalink

    Three of the past four University of Michigan Board of Regents meetings have included one regent participating by phone: Julia Darlow for the November 2009 and February 2010 meetings, and Andrea Fischer Newman for the December 2009 meeting. Given that the board’s votes are almost without exception unanimous, and given the extremely limited discussion that takes place during those meetings, it would be hard to argue that participating by phone makes a substantive difference.

  8. By Tom Whitaker
    March 7, 2010 at 1:08 pm | permalink

    Good point on the Regent’s meetings. Given the lack of any actual discussion in those meetings, I suppose the temptation is great to simply “phone it in.” You’d be missing out on the free lunch, however.

    Just seems to me that officials currently serving on any public body should actual discuss this and develop a policy on it, rather than simply allowing it to happen here and there, in various forms, without question. It would be refreshing to see some forethought on the use of technology at meetings instead of waiting for a lawsuit or another scandal to force the issue.

  9. By Rod Johnson
    March 7, 2010 at 4:45 pm | permalink

    It’s not uncommon for doctoral defenses to involve some participation by phone (or increasingly via teleconferencing). When there are travel expenses involved, it’s often the only thing that makes economic sense. And it happens in industry board meetings all the time. I haven’t really heard of governmental bodies doing it, though.

  10. By Leah Gunn
    March 7, 2010 at 5:12 pm | permalink

    Please note that the DDA does not capture the entire tax for any property. In Dave’s example, about the $900,000 TIF capture, the DDA’s share would actually be about $450,000, because the DDA does not capture Ann Arbor Public School District taxes. Commercial buildings pay 18 mills to this fund.

    Also, although most DDAs in Michigan capture taxes on the increased value (here used in the example as $10,000 a year) the Ann Arbor DDA does not. The taxes from the increase in value go to the various original taxing jurisdictions, such as the city, the county, the library and the community college.

  11. By Jack Eaton
    March 8, 2010 at 5:33 pm | permalink


    Thanks for another informative article. I especially appreciate the background information on the four funds, the discussion of reserve levels and the cross references to prior meetings and related information. You created the proper context for understanding the discussions in this meeting.

  12. By John Floyd
    March 8, 2010 at 7:19 pm | permalink


    Could you fill us in on the governmental units whose taxes are siphoned off to the DDA? The City of Ann Arbor? Washtenaw Community College? The Ann Arbor District Library? It would be handy to have a definitive list.

    Sooner or later, it would also be handy to have a list of the governmental units whose taxes are siphoned off the the LDFA (Local Development Finance Authority, funder of SPARK).


  13. By Dave Askins
    March 9, 2010 at 12:04 am | permalink

    Re:[12] “Could you fill us in on the governmental units whose taxes are siphoned off to the DDA?”

    C’mon, the conventional parlance is that tax-increment finance entities “capture” taxes of other taxing authorities, which has this idea that the funds would otherwise go someplace else baked right in. In any case, I think the other taxing authorities whose taxes are captured by the Ann Arbor DDA are those you’ve named, plus Washtenaw County. From a May 2009 Chronicle article:

    What are the “respective taxing bodies” to which the legislation refers? In the case of the Ann Arbor DDA, there are three other taxing authorities besides the city, whose taxes the DDA captures: Washtenaw County, Washtenaw Community College, and the Ann Arbor District Library.

    As DDA board member, and county commissioner, Leah Gunn, points out in her comment above, the Ann Arbor DDA does not capture school taxes. Those are captured by the LDFA, also under a TIF arrangement, and the LDFA then contracts with SPARK to operate the business accelerator. In very round ballpark numbers, it’s about $1 million that goes to the LDFA. Given that our local school district is looking at a several million dollar deficit, could that LDFA money help with the gap? No.

    Or at least not directly. That school tax revenue would go to the state anyway, which would then redistribute it from the School Aid Fund on a per-pupil basis to all the schools of the state. [I believe that in setting up the Smart Zone LDFA's, the state gave an assurance that schools would be "held harmless."] Ann Arbor is a “donor district” for the School Aid fund, which means that AAPS gets back less from the School Aid fund than its property taxes put in.

    It’s fair to see the LDFA as a way to benefit Ann Arbor by keeping local school dollars in our community that would otherwise go to other districts via the state’s School Aid Fund. Whether it’s good public policy for Ann Arbor to have this benefit at the apparent expense of other communities in the state is a matter of debate. Part of that debate is whether it’s good public policy to have a redistribution of school tax money so that Ann Arbor is a donor district in the first place. Also a part of that debate is this: If the state is really using funds, say $X, to supplement the loss of Ann Arbor schools taxes to other districts so that the schools across the state are held harmless, why doesn’t the state just use $X directly to fund business accelerators in particular communities.

  14. March 9, 2010 at 9:02 am | permalink

    Those school taxes that are supposed to go into the School Aid Fund are siphoned (oops, redistributed) under a number of economic development initiatives by MEGA. One of the brownfield programs also receives them in a similar arrangement.

    At a time when schools (statewide) are not receiving what they were promised from the state, maybe it is time to re-examine that policy and practice. School taxes are not a “free” way to sponsor development projects or any other economic initiatives in a state where everything is a zero-sum game.

  15. By Tom Whitaker
    March 9, 2010 at 9:17 am | permalink

    Regarding the last paragraph of #13: In principal, I suppose I could see some benefit in keeping local dollars local, but the bigger question is whether the LDFA and SPARK are the best substitutes for spending local dollars that would otherwise have gone to support basic City and County services as well as public education (whether it’s the Ann Arbor schools or schools statewide). Where’s the best bang for the buck–especially in these very hard times?

    Personally, with the meager results and inflated salaries at SPARK, I’d rather see the money go to the City, County, and the schools. And Vivienne is right about what goes on at the State level, too. In lean times, our schools should receive priority over corporate incentives.

  16. By Karen Sidney
    March 9, 2010 at 10:58 am | permalink

    The state may have promised that school taxes diverted to the LDFA would be refunded to the schools but that’s not what’s happening. In a recent conversation with AAPS finance department staff, I learned that there is a problem with the form used to ask for the refund. When the AAPS fills out the form, it shows they are due $0 from the state, even though the LDFA diverts about $1 million in taxes from various school funds. Local school districts have been arguing with the state but so far to no avail.

    And even if the AAPS was getting the money, it would just mean more cuts to other state programs. Tax diversion is not free money. It’s a decision to spend tax money on development and other types of subsidies rather than on other government services.

  17. By John Floyd
    March 10, 2010 at 5:17 pm | permalink

    Dave, thanks for the list. I should have known that the Chron would already have published it. I was a tad lazy, and hoped to get you to remind me of the list.

    My skepticism of Tax Increment Financing not withstanding, the word “syphon” was not meant to give you – or anyone else – a poke. I did want to moisten a dry subject with a slangy term.


  18. By brad
    March 11, 2010 at 7:09 pm | permalink

    I agree with Jack about the write-up, but unfortunately, you can’t replace the audio cues either.

    Please forgive me as I make the discussion about budgets as dry as a hot prairie wind.

    The DDA Board said all of the $1.3m increase between this year’s projection and next year’s budget was from rate increases.

    If that’s true, why is there a $300k increase in meter revenue when meter rates will be constant? Add another $100k for validations and misc revenue, and next year’s budget contains about $400k in volume increases.

    Given the relative tightness of the DDA budget, a $400k decrease might be the difference between maintaining an adequate fund balance and eliminating some programs.

    Also, a few items in this year’s projection deserve more explanation. I’m not suggesting they’re wrong, but it seems odd that First & William is at $112k thru 6 months, but they project $130k for the whole year.

    I think the DDA is doing some good work, but they have a substantial budget, and with that, they deserve close oversight.

  19. March 12, 2010 at 12:08 am | permalink

    Brad, the increase in meter revenues might be due to the 100 or so new spaces being added to 5th Ave and Division St.

  20. By brad
    March 13, 2010 at 1:34 pm | permalink

    Good point, but in order to fill the extra capacity, the number of people parking needs to increase…which runs counter to the board’s claim. Think about Ford Field. Would the Lions earn more revenue just because they built 1,000 more seats?

  21. By Tom Whitaker
    March 13, 2010 at 6:49 pm | permalink

    There are new meters on the west side of Division, between William and Packard (also north to Huron, but those are still bagged). The ones operating between William and Packard–I’d guess there might be 30 or more of them in these two blocks–have had no more than 4 cars parked at them at any one time since they were installed.

    Also, when these meters were installed, dozens of new street signs went in to mark where to park, where not to park, and “No Parking, 3AM-6AM.” If the DDA installed these meters and are projecting them to add revenue, then they should revisit the actual numbers.

    If the City put them in as part of their dubious scheme to increase revenue by adding meters to neighborhoods, then I think the results are clear and this scheme has proven to be the farce most people thought it was. I also wonder if the cost of all those new enforcement signs was factored into the net revenue projections for the meters?