DDA Passes Budget, Pig to Follow

Parking management incentive also approved

Ann Arbor Downtown Development Authority board meeting (March 2, 2011): At its regular monthly meeting, the DDA board approved its budget for the next two years – fiscal years 2012 and 2013. The DDA’s fiscal calendar is aligned with the city of Ann Arbor’s, which runs from July 1 to June 30.

Board members of the Ann Arbor Downtown Development Authority

DDA board members study the budget proposal they approved at the March 2 meeting. From left to right: Bob Guenzel, Sandi Smith, Russ Collins. Obscured, sitting between Guenzel and Smith, is John Mouat. (Photo by the writer.)

For FY 2012, the DDA is budgeting for $20,118,601 in total revenues – of that amount, $3,893,943 is forecast to come from tax capture, $16,162,752 from parking revenues, and $61,906 from interest earnings. Budgeted expenses, at $20,631,328, will exceed revenues by $512,727.

The board has not yet incorporated into its budget the likely revisions that will be made to the DDA’s contract with the city of Ann Arbor, under which it manages the city’s public parking system. Those contract revisions are expected to result in a total parking-contract-related payment to the city of $2.26 million in FY 2012. The approved DDA budgets for FY 2012 and 2013 include only the roughly $1 million of payments to the city that the DDA is currently obligated to make.

While the DDA expects to be drawing down its fund balances over the next two years – due in large part to the expense of the Fifth Avenue underground parking structure that’s under construction – the longer-range forecast by the DDA shows increases in revenue that are expected to replenish reserves. The DDA estimates that its tax capture revenue will increase from its current level of roughly $3.9 million to $4.7 million by 2020. Parking revenues are also forecast to increase – due in part to the increase in parking space inventory offered by the underground garage, but also due to increases in parking rates – from an estimated $16 million next year to $22 million by 2020.

About the underground parking garage, at the February 2009 board meeting, Russ Collins had said the board needed to keep alert for their next projects after “this pig makes it through the python.” At Wednesday’s meeting, mayor John Hieftje alluded to Collins’ remark in trying to emphasize the long-range projected financial health of the DDA.

In the other business item handled by the board at its Wednesday meeting, Hieftje cast the lone vote of dissent on a vote to approve $45,000 out of $50,000 for a discretionary management incentive that’s part of the DDA’s contract with Republic Parking, which manages day-to-day operations for the city’s parking system.

The board also heard its usual round of committee reports; however, no one addressed the board during either of the opportunities for public comment. Highlights from Ray Detter’s report from the Downtown Citizens Advisory Council included an update on plans for the new Blake Transit Center and a report from the city’s panhandling task force.

DDA Budget

On the board’s agenda was the approval of an operating budget for fiscal years 2012 and 2013. For FY 2012, the DDA is budgeting for $20,118,601 in total revenues – of that amount, $3,893,943 is forecast to come from tax capture, $16,162,752 from parking revenues, and $61,906 from interest earnings.

Budget: Background

For FY 2012, budgeted expenses will exceed revenues by $512,727 – expenses total $20,631,328. Budgeted expenses do not include terms of a new parking agreement under which the DDA manages the public parking system for the city of Ann Arbor. The $1,010,930 city payment that’s in the budget is based on the current arrangement between the city and the DDA. Under that arrangement, the DDA pays the city parking proceeds from the old YMCA lot and the 415 W. Washington lot, plus around $800,000 for the city’s street repair funds – an amount related to the cost of maintaining on-street parking spaces.

So the DDA’s FY 2012 budget does not provide for the equivalent of an additional $2 million “rent” payment to the city, which is currently being negotiated by two “mutually beneficial” committees (MBCs) – one consisting of city councilmembers and the other consisting of DDA board members.

A Feb. 28 meeting of the two committees had been announced four days earlier to discuss a draft of a new contract. But that meeting was canceled, when councilmembers Carsten Hohnke and Christopher Taylor were unable to accommodate the meeting, having just arrived back from their vacations. Board chair Joan Lowenstein appeared at the DDA offices at the scheduled time (8:30 a.m.) to advise any potential attendees that the meeting would not be taking place. Besides The Chronicle, the city’s public services area administrator Sue McCormick received the news of the cancellation from Lowenstein. The meeting is now scheduled for March 7.

At Wednesday’s board meeting, during his report from on the MBC’s activities, Roger Hewitt indicated that the two committee hadn’t met. But he reported that DDA board members who are attorneys – Bob Guenzel, Joan Lowenstein, and Gary Boren – had met with the DDA’s legal counsel, Jerry Lax, and had drafted a new contract. Because so many amendments would have been necessary, said Hewitt, they decided to try replacing the contract completely.

The DDA’s 10-year plan does factor in a new parking agreement with the city, under which all of the parking-related payments by the DDA to the city would come from a percentage of gross parking revenues. The percentage-of-gross numbers currently under discussion to be paid to the city are 14-15%, which would amount to a total payment of $2.26 million in FY 2012. The idea is to wrap into a single payment – based on a percentage-of-gross calculation – what’s currently a set of separate payments. Those include the “rent” payment of $2 million, a payment into the city’s street repair fund of around $800,000, and the revenues from two specific parking lots (the old Y lot and the 415 W. Washington lot). [.pdf of draft DDA draft budgets for FY 2012 and 2013]

Budget: Board Deliberations

Bob Guenzel was interested in getting some clarification on the status of the two additional payments Hewitt had mentioned in his review of the budget. Hewitt explained that they were not broken out separately. The $1,010,930 figure listed under “city payments” includes a payment of around $800,000 to the city’s street repair fund and roughly $200,000 in revenue from the old Y lot at Fifth and William and the 415 W. Washington parking lot.

By way of background, neither the old Y lot nor the 415 W. Washington lot were part of the city-DDA parking contract that was last amended in 2005 – with a term through 2015, which the DDA has the option to renew for at least three years beyond that.

But the FY 2010 city of Ann Arbor budget included a revenue assumption from the installation of parking meters in certain areas near downtown. And Sandi Smith – who represents Ward 1 on the city council, in addition to serving on the DDA board – led an effort to forestall installation of the meters by identifying alternate sources of revenue to the meters. That included a June 15, 2009 resolution passed by the council and a corresponding resolution passed by the DDA board on July 1, 2009, to raise rates and to direct revenue from the 415 W. Washington lot to the city of Ann Arbor, instead of the DDA.

The request to direct Fifth and William lot revenue to the city was handled at the city council’s Dec. 21, 2009 meeting, and the DDA complied with the city’s request at its Jan. 6, 2010 board meeting.

During deliberations on Wednesday, mayor John Hieftje stressed that the budget could be modified to accommodate additional payment to the city. He also pointed to increased tax revenue to the DDA from two new developments in the DDA tax capture district – Zaragon Place II at Thompson and William, and 601 S. Forest.

Russ Collins drew out the fact that the budget that the board was approving, when modified, would increase the $512,727 deficit in FY 2012 to around $1.75 million. [The FY 2012 budget includes a $1 million payment to the city, which is currently obligated. If the parking contract between the city and the DDA is revised so that the DDA pays the city 14% of gross parking revenues, then for FY 2012 it would work out to a total payment of roughly $2.26 million, or an additional $1.2 million, which together with the currently budgeted number of $512,727 yields the $1.7 million figure mentioned by Collins.]

Collins noted, however, that even with adjustments to the budget that will be necessary if the DDA accepts a revised parking contract with the city, the parking fund will still show a net positive balance. He also noted that parking revenues have historically been conservatively budgeted. It was this longer-term view that prompted Hieftje to adduce the pig-in-the-python analogy that Collins had previously made, though he narrowly missed on his first try, calling it a “pig in the snake.”

Board chair Joan Lowenstein mentioned the deferred maintenance on parking structures that is a part of the budget plan – the usual $2 million transfer from the parking fund to the parking maintenance fund will not take place for the current fiscal year, FY 2011, in order to maintain adequate reserves in the parking fund. The maintenance activities that will be delayed, Lowenstein stressed, are those identified by the DDA’s engineering consultant, Carl Walker Inc., as non-time-critical issues.

Guenzel said that as the newest member of the board, he appreciated the hard work that had gone into the preparation of the budget. He appreciated the clarity of the presentation. He noted that if someone simply picked up the budget, you’d say there’s a deficit, but that the supporting material put that deficit in context.

Outcome: The DDA board unanimously approved the organization’s budgets for FY 2012 and 2013.

Parking Management Incentive

Before the DDA board was a resolution to pay $45,000 as the discretionary component of a management incentive for Republic Parking. While the city of Ann Arbor contracts with the DDA to manage the public parking system, the DDA in turn contracts with Republic to handle day-to-day operations. The DDA’s contract with Republic covers Republic’s expenses – roughly $5.8 million annually – plus pays Republic a “management incentive” of up to $200,000 per year. Of that amount, $150,000 is paid in monthly installments as a part of the contract, with the remaining $50,000 left to the discretion of the DDA board.

In making a recommendation to pay Republic $45,000 out of the maximum $50,000, a memo from DDA deputy director Joe Morehouse points to: (1) parking customer survey results that show 6-7% responses in the lower two scale points on a 5-point scale, and over 55% in the top two scale points; (2) an operating surplus that exceeded budget by $243,438; (3) independent facility cleanliness audit ratings of 93.7% – a slight increase over last year’s average of 93.4%; and (4) a dead ticket average of 1.61%, which is within the target of 1.75%, but more than last year’s 0.65%.

Parking Management Incentive: Board Deliberations

In the course of introducing the background to the resolution, Roger Hewitt stressed that the incentive is supposed to be awarded based on measurable criteria, which he then reviewed. He praised Republic Parking’s manager, Mark Lyons, for bringing Republic’s expenses in under budget – through judicious scheduling of personnel. Hewitt also praised Lyons for the cooperative spirit in which Republic had worked with the DDA on various pilot programs, such as the “early bird” program for the top floor of the Fourth and William deck.

Keith Orr wanted to know how many surveys had been completed to yield the data in Morehouse’s memo. Morehouse explained that the data was based on roughly 4,000 surveys. Board members noted that the percentage of non-responsive surveys had increased from last year to this year – from 12.1% to 20.1% – but satisfied themselves that the numbers reflected satisfaction with the service.

Part of the supporting memo highlighted a $5 prepay program for event parking that Republic had helped implement – it’s a way for people to pay on entering a parking structure, so that when the event is over, the mass exit from the structure flows more smoothly. Board member Russ Collins quipped that “not everyone considers that a highlight.” [The system makes parking validation somewhat complicated for organizations like the Michigan Theater, which offers such validation as a benefit of membership – Collins is executive director of the Michigan Theater.] Hewitt said the idea behind the program is to deal with the challenge of the large number of vehicles associated with some special events, and that the DDA and Republic were working to find a way to address Collins’ concerns.

Mayor John Hieftje cast a vote of dissent on the approval of the incentive, as he has in previous years, but this year offered no comment at the board table on the issue.

In 2009, both Gary Boren and Hieftje voted against the award of the management incentive. It was reported in The Chronicle this way:

Hieftje said that while he thought Republic does a great job, with current economic conditions, now is not the time to hand out a bonus.

Board member Gary Boren said that when he first joined the board, the cultural practice of the bonus mystified him, characterizing it as “an expected tip” at the end of the year. He said he still didn’t understand it. Hewitt said the discretionary amount was previously greater and had been changed to the fixed fee plus a discretionary amount. DDA staff has argued for retaining some discretion, Hewitt said, so that the DDA could have some clout.

And last year, Hieftje alluded to the fact that he’d expressed his reasons before about why he did not feel the award of an incentive was appropriate.

Outcome: The board voted to approve the award of the $45,000 management incentive to Republic Parking, with dissent from Hieftje.

Communications, Committee Reports, Commentary

The board’s meeting included the usual range of reports from its standing committees and the Downtown Citizens Advisory Council. Every board meeting includes two opportunities for public commentary – one near the start of the meeting and the other at its conclusion. No one addressed the board during those two opportunities.

Comm/Comm: Money

Roger Hewitt reported out from the board’s bricks and money committee that parking revenues had basically been flat compared to last year – they were down less that half a percent. [$1,161,632 in January 2011 compared to $1,166,545 January 2010]. Hourly patrons were down by around 4%, he reported. [169,653 this January, compared to 177,111 a year ago for January.]

Comm/Comm: Bricks

John Splitt gave a report about the progress on capital projects, specifically the construction of the Fifth Avenue underground parking garage. He said that the previous Saturday, 567,000 5,670 yards of concrete had been poured, making it the largest pour in the city in anyone’s recent memory. The pour took place over the course of 37 uninterrupted hours – from 5 a.m. on Saturday to 6 p.m. on Sunday. A total of 30 trucks had been used, which together made 570 trips. It had been boring, he said, which was a good thing. None of the various back-up systems that had been put into place needed to be used.

Dewatering of the site continues, he said, and it’s hoped that the pumps can be turned off by mid-April. All lanes of Division Street are expected to be open by mid-March, he reported. There would be temporary lane closures in the future, but the permanent closure would end, he explained. [Fifth Avenue between Liberty and William will remain completely closed, though it might be reopened this summer in time for the 2011 Ann Arbor art fairs, to be held July 20-23.]

When asked by Gary Boren, Splitt said that overall the project is on schedule. John Mouat, who is an architect, commented that usually it’s a significant milestone when the foundation is complete and a building emerges above the ground. Although the underground parking structure won’t reach that visual milestone, it’s roughly at the same stage, he said.

Comm/Comm: Economic Development Committee

Joan Lowenstein reported out on the last meeting of the economic development committee, when committee members heard a presentation from Mary Kerr, president and CEO of the Ann Arbor Area Convention and Visitors Bureau. At the same meeting, the committee heard a presentation from Ann Arbor SPARK’s director of business development, Jennifer Owens.

Lowenstein told the board that feedback from Kerr and Owens about the downtown included the fact that it is perceived as safe and that people like its vibrancy, walkability and eclectic mix. Lowenstein asked her board colleagues to guess what stumbling block had been identified by the two presenters, and there was no shortage of voices around the table who said, “Parking!” When Lowenstein confirmed a perceived lack of adequate parking had been the negative point, John Mouat quipped that he was “shocked – shocked” that this could be the case.

Lowenstein said Owens had reported that many businesses downtown have employees who simply prefer to drive their cars. At the committee meeting, which The Chronicle attended, Owens said that one business owner had told her the average employee at their company makes $90,000 a year and that they simply were not interested in riding the bus. Owens had also pointed to the perception that development of a new building in downtown Ann Arbor to house a new company was perceived in the business community as slow. It’s perceived as requiring around two years to move it through the approval process – the business community has an expectation of closer to one year, she said.

The image of the state of Michigan is also a big hurdle for marketing Ann Arbor, Lowenstein reported from the presentations. However, once people visit, they’re sold.

Lowenstein reported that the Ann Arbor CVB had a budget of around $2 million a year. [It receives its funds from a hotel accommodations tax, which was raised from 2% to 5% in November 2008 by the Washtenaw County board of commissioners, to bring the tax rate in line with other counties in the state.] In 2010, Lowenstein said, 152 meetings had taken place in Ann Arbor, which resulted in $14.6 million in direct spending in the area – Kerr had characterized that as a 16:1 return on the investment. Lowenstein also noted that the CVB invites travel writers to visit and that when they write about Ann Arbor for various national publications, that gives the city advertising exposure that doesn’t need to be paid for.

Lowenstein reported that Kerr’s experience is that visitors to Ann Arbor do not report parking to be an issue. Russ Collins noted that the only thing worse than having a parking problem is not having a parking problem.

Lowenstein also reported that Kerr had said the outlying hotels say their guests all want to be downtown.

Lowenstein concluded that given the efforts of the CVB and Ann Arbor SPARK, it’s not realistic for the DDA to become a centralized repository for all things related to downtown marketing. Instead, she said, it probably makes sense for the DDA to fill in gaps and to work with the CVB and SPARK. To illustrate the kind of thing the DDA might do, Lowenstein suggested including contact information for the CVB on the wayfinding signs that the DDA has installed in the downtown area.

Comm/Comm: Transportation

John Mouat reported out from the DDA’s transportation committee. They’d heard a presentation from the Ann Arbor Transportation Authority on the development of three different scenarios for the AATA’s transportation master plan for countywide service. [See Chronicle coverage: "Transit Planning Forum: Saline Edition"] Mouat said that the next meeting of the transportation committee would focus on two-wheeled vehicles.

Commenting on the AATA transportation planning effort, mayor John Hieftje said he was hearing “overwhelming support” for the “Smart Growth” scenario. He also said that the latest idea for implementing a high-capacity connector along the Plymouth-State Street corridor was a “gondola” type system where the vehicles would be suspended from cables strung between towers.

Comm/Comm: Partnerships – Roger Fraser

Russ Collins began his report from the partnerships committee by noting the announcement of city administrator Roger Fraser’s departure at the end of April. He said he appreciated the ability to work with Fraser. He then drew a laugh from the board by thanking Bob Guenzel for agreeing to step in for Fraser. Guenzel revealed he’d been paying attention, by cheerfully stating, “I’m retired!” [Guenzel stepped down as Washtenaw County administrator last year.]

At the conclusion of the meeting, mayor John Hieftje said that Fraser is excited to be going to work for the state treasurer’s office and bringing his expertise to bear as deputy treasurer. He also said that the city had a staff organization in place so that people would not notice even a ripple with his departure.

Comm/Comm: Partnerships – Energy Grant Program

Russ Collins gave an update on the energy saving grant program, which is a way for downtown businesses to get DDA-funded energy audits and to have a portion of the costs for those physical changes recommended by the audit matched with DDA funds. Collins said the program would be scaling back a little bit and that they would need to make decisions about how to allocate expenditures between audits and the matching dollars on projects that business owners wanted to undertake. [The budget for FY 2012 includes $100,000 for the energy grant program – over the last three years, the DDA has allocated a total of $650,000 for the program.]

Sandi Smith pointed out that the resolution recently passed by the city’s energy commission, on Feb. 8, 2011, includes a resolved clause encouraging the continuation of the program. That clause reads:

Now, therefore be it resolved that the Ann Arbor Energy Commission formally acknowledges the effort and success of the Ann Arbor Downtown Development Authority’s Downtown Energy Saving Grant Program and encourages the DDA to provide continued funding for the program in their 2011-12 budget.

Mayor John Hieftje said that he sits on the city’s energy commission and said that there’s an acknowledgment on the commission that the program might not be able to be funded. He said he felt that the recent state PACE (Property Assessed Clean Energy) legislation might make up the gap.

Joan Lowenstein pointed out that PACE is designed more for larger projects, whereas the DDA’s program makes it possible even for smaller businesses to contemplate making energy improvements. Keith Orr said that Dave Konkle – former head of the city’s energy program and now consultant for the DDA on the energy saving grant program – would be in a good position to communicate with those businesses he’s worked with on the DDA’s program to make sure they’re aware of the various options that are available, including PACE.

Comm/Comm: Planning, Urbanness, Open Space

Sandi Smith reported out from the partnerships committee meeting that Wendy Rampson, head of planning for the city of Ann Arbor, had attended the last committee meeting to discuss what might be included in an effort to plan for the downtown area in a more detailed way than current master plans envision. The idea, she said, is not to focus on one specific individual lot, but rather to plan a larger area of the downtown.

By way of background, Rampson’s visit came in connection with a proposal for the DDA to lead an effort to redevelop city-owned parcels that are currently used as surface parking lots. At its Jan. 18, 2011 meeting, the city council postponed consideration of a resolution that would have formally established that DDA-led effort. It’s now on the city council’s March 7 agenda.

Smith reported that city of Ann Arbor park planner Amy Kuras would attend the committee’s next meeting to discuss open space in the downtown. Russ Collins commented on a theme he’s often explored, namely the idea that Ann Arbor is ostensibly a suburban community and that when people talk about the downtown, often they speak of it as if it’s an urban area. But the types of parks that are effective in a suburban area, Collins said, are not necessarily effective in an urban area. In urban areas, he said, density, activity and noise are positive attributes, even though those features are considered anathema in suburban areas. It’s important to separate the urban from the suburban, Collins concluded.

Mayor John Hieftje noted that the recent revision to the PROS (Parks and Recreation Open Space) plan included University of Michigan property in its catalog of open spaces – at least in the footnotes – that is available to downtown visitors. Approval of the PROS plan is on the city council’s March 7 agenda.

Comm/Comm: Blake Transit Center

During his update from the Downtown Citizens Advisory Council, Ray Detter said that the planned replacement of the Blake Transit Center was a topic of discussion at the advisory council’s meeting the evening before. The advisory council, he said, was pleased with the latest plan, which included some improvements to the customer services area. They were also pleased, Detter said, with the planned pedestrian connection between Fourth and Fifth avenues. The building itself, Detter said, was planned to be a LEED platinum level building. The foundations, he said, would be designed to support future additional development beyond the height of the currently planned two-story building.

Detter expressed  a hope that Blake would become a real transit center, not just a bus station, perhaps in the context of the planning effort that the Ann Arbor Transportation Authority is currently undertaking to develop a countywide transportation master plan.

Comm/Comm: Downtown Panhandling Task Force – “Have a heart, give smart”

Also during his update from the Downtown Citizens Advisory Council, Ray Detter reported on the efforts of a city council-appointed task force that had been established in September 2010 and charged with coming up with recommendations for addressing the problem of panhandling downtown. [Detter is a task force member. Though officially called the "downtown street outreach task force," it's informally known as the "panhandling task force." Previous Chronicle coverage: "Ann Arbor Task Force Consults Panhandlers"]

Detter reported that the task force had settled on a slogan – “Have a heart, give smart” – for an educational program to help downtown visitors act in a responsible way towards panhandlers. He said that generally speaking, panhandlers are not homeless. The task force’s recommendation hopes to establish a sustainable communication system that will make downtown visitors aware of what options exist. The task force is also suggesting some updates to the city’s panhandling ordinance, which would prohibit soliciting funds within 12 feet of the downtown library, or near the entrance to certain pedestrian passageways.

Detter said the task force would be making its report to the city council at its March 21 meeting.

Comm/Comm: Library Lot RFP Committee

John Splitt reported that the committee charged with reviewing proposals for future use of the top of the Fifth Avenue underground parking structure – known as the Library Lot – had not met since the DDA board’s February meeting. He indicated that the committee would be meeting on March 3. [Later that day, the announcement came that the meeting had been postponed due to anticipated lack of full attendance. Subsequently, the meeting was rescheduled for Tuesday, March 8, 2011 from 3-5 p.m. in the city hall fourth floor conference room.]

Present: Gary Boren, Bob Guenzel, Roger Hewitt, John Hieftje, John Splitt, Sandi Smith, Leah Gunn, Russ Collins, Keith Orr, Joan Lowenstein, John Mouat

Absent: Newcombe Clark

Next board meeting: Noon on Wednesday, April 6, at the DDA offices, 150 S. Fifth Ave., Suite 301, Ann Arbor. [confirm date]


  1. March 7, 2011 at 7:32 am | permalink

    Let me be the first to nominate Susan Pollay to take Fraser’s position. Susan epitomizes transparency and would be a breath of fresh air in City government.

  2. By Stephen Landes
    March 7, 2011 at 10:28 am | permalink

    I’m not surprised that the mayor voted against the management bonus for Republic Parking. I don’t believe he understands the concept of pay for performance — Republic has apparently performed better than expected/budgeted; that kind of performance should be rewarded. The mayor seems to prefer outrageous actions like the “fountain to nowhere”.