Column: DDA – The Sure Thing

In 1985, Rob Reiner made a movie called The Sure Thing, starring John Cusack as a college student who made a 3,000-mile journey on a break from school in order to meet up with a “sure thing” – a girl who didn’t need any convincing to have sex.

Given the movie’s plot, it was a little odd to hear a scene from it cited by an Ann Arbor city councilmember to bolster a budget argument.

Carsten Hohnke, who represents Ward 5 on Ann Arbor’s city council, used the “credit card scene” from that movie – without naming the movie or giving the broader context of the plot – during a meeting of two committees on Monday morning, April 4, 2011. Known as the “mutually beneficial” committees, one is composed of Ann Arbor Downtown Development Authority board members and the other is made up of city councilmembers.

To understand the reference to The Sure Thing scene, it’s useful to have some brief background on the city-DDA parking drama. Understanding that drama, in turn, leads to some interesting conclusions about the relationship between the city and the DDA, and about what city councilmembers might be willing to say to get what they want.

Setting the Scene

The committees are now nearing the end of a long journey of negotiations. Since June 2010, they’ve been trying to strike a new parking agreement under which the DDA would operate the city’s public parking system. The current 10-year contract expires in 2015 and gives the DDA the ability to extend it at least through 2018.

From 2005 through 2010, the DDA paid the city $10 million worth of “rent” to use the city-owned parking facilities, which was the maximum total amount specified under the contract. The current contract actually calls for an annual payment of $1 million by the DDA to the city, with a proviso that the city can request up to $2 million in any one year – as long as the $10 million cap is not exceeded for the period of the contract, which ends in 2015.

The DDA unilaterally decided to pay the city an additional $2 million for 2011, bringing the total rent paid to the city since 2005 to $12 million. That amount does not include other payments made by the DDA to the city in connection with operation of the parking system – for street maintenance and repair, for example. Those other payments total around $1 million a year.

The arc of current negotiations between the city and the DDA is towards a new contract that would subsume all parking-system-related payments by the DDA to the city under a percentage-of-gross parking revenue arrangement, intended to approximate roughly the sum of all payments currently made. This issue was addressed on Wednesday, March 30, at a meeting of the DDA’s bricks and money committee (formerly the operations and capital improvements committees), which was attended by 10 of the 12 DDA board members.

At that meeting, the DDA board came to a consensus to adjust upward its previous percentage-of-gross offer – from 14% in the first two years and 15% in years thereafter (a 14-14-15 scenario) – to 16% in all years. The city’s negotiating position has for some time been that it prefers a 16-16-17.5 arrangement. So the DDA and the city appear now to be in agreement for the first two years, but separated by 1.5% in the third and subsequent years.

At the April 4 morning meeting, the two mutually beneficial committees covered familiar territory in talking about why the DDA was reluctant to agree to the city’s request of 16-16-17.5. For the city’s part, this amount is seen as less than what they’re used to getting compared to previous years. Councilmembers point to increases in the DDA’s tax-increment-finance (TIF) revenue due to the 601 S. Forest and Zaragon II projects as additional DDA revenue sources that should be calculated into the mix.

For the DDA, the issue is related to fund balance reserves and the ability to use the parking system as a downtown development tool. On the fund balance side, the 16-16-17.5 scenario would result in a projected total DDA fund balance of 7.4% of revenues in fiscal year 2016, which is a bit less than the 8-12% range recommended by the city’s chief financial officer Tom Crawford, and a lot less than the ideal range he’s identified as 15-20%. [For additional background on fund balance issues at the DDA, see previous Chronicle coverage: "Parking Money for City Budget Still Unclear"]

Joe Morehouse, deputy director of the DDA, has previously said that aside from the fund balance percentage issue, he feels that the actual cash-on-hand is also important. He’s put that minimum number at around $3.5 million. On the 16% straight-across-the-board scenario, the total cash reserves for the DDA are projected to be around $1 million less than Morehouse’s ideal cash reserve for FY 2013-16.

On the development side, at the DDA’s March 30 committee meeting, DDA board member Sandi Smith said that while the fund balance is interesting to watch, the real issue is the ability of the DDA to leverage the parking system for downtown development. Smith also serves on the Ann Arbor city council, representing Ward 1. At the April 4 meeting, DDA board member Roger Hewitt made the same point by saying that if a developer approached the DDA and asked them to provide support similar to what the DDA is providing to Village Green, they would have to say, “Sorry!” The DDA has committed to support Village Green’s residential development at First and Washington with a parking deck on the first floors of the building. That parking deck project will require bonds worth around $9 million.

Credit Cards Work on a Totally Different Kind of Lock

Hohnke was being patched through to the April 4 meeting by speaker phone. Susan Pollay, executive director of the DDA, had just raised the specter of a mere 3% reduction in parking demand completely erasing the DDA’s fund balance.

Responding to Pollay’s concern, Hohnke adduced a scene from a “great movie a while back.” He described it as involving a couple taking a cross-country trip, and finding themselves in circumstances where they have no money and are somewhat desperate. When one observes that they have a credit card, but that it’s only for emergencies, the other replies, “Well, maybe one will come up.” Hohnke concluded: “That’s what fund balances are for!”

I was a junior in college when Rob Reiner’s The Sure Thing came out. I can no longer quote extensive passages from it, but the scene was easily recognizable to me. The “couple” consisted of Cusack’s character Gib and his accidental traveling companion – his nerd classmate, Alison, played by Daphne Zuniga. They mostly hate each other for the duration of the journey. The goal of Cusack’s road trip, the “sure thing,” was played by Nicollette Sheridan. Her companionship had been arranged by Gib’s high school friend Lance, played by Anthony Edwards.

They find themselves in a downpour, having lost the ride they’d hitched as well as their money, and they’re trying to break into a trailer to get out of the rain. Here’s the full exchange between Gib and Alison:

Gib: It’s locked! Good! This is very good! It’s important that this place should have an air-tight security system – in the middle of nowhere!
Alison: I might have a nail file …  (she’s rummaging in her bag) I have a credit card. I have a credit card!
Gib: Credit cards work on a completely different kind of lock.
Alison: No, you don’t seem to understand. I have a credit card!
Gib: You have a credit card?
Alison: I have a credit card!
Gib: You have a credit card.
Alison: Oh. My dad told me specifically I can only use it in case of an emergency.
Gib: Well, maybe one will come up.

Hohnke intended to be making a point about the nature of fund balances: They’re there for emergencies, so if one comes up – if demand for parking dips by 3%, for example – well, then you just use your fund balance.

But the scene Hohnke chose to make his point is set in the context of a Rob Reiner film that’s more than a teen road trip comedy with a funny credit card scene.

But Do You Love Development?

When Gib arrives at his destination to take advantage of his “impending good fortune,” he finds that the “sure thing” is in fact a sure thing – but wants to hear him say “I love you” first. He can’t do it. At the end of the film, an essay he’s written for an English class is read aloud by his professor:

It was exactly how it was supposed to be. He brought her to his room. The lights were soft, the moment was right. Then she leaned over and whispered in his ear, “Do you love me?” Thoughts raced through his mind. Did she really want him? What had he done to deserve this bounty? Does God exist? Who invented liquid soap and why? “Do you love me?” Staring into her eyes he knew that she really needed to hear it but for the first time in his life, he knew these were no longer just words and if he said it, it would be a lie. “Do you love me?” she whispered. “Do you love me?” It would not be tonight. The answer was no.

The city of Ann Arbor is in one way like Gib. The city council has made the equivalent of a 3,000 mile journey, starting in June 2010 when it began negotiations with its “sure thing” in public view. There was very little doubt from the beginning that the DDA would say yes. Based on the conversation on the morning of April 4, the DDA committee members will take back to the board the city’s response to the DDA’s compromise: The council would still like to have the 16-16-17.5 scenario, but perhaps some accommodation to extend the term of the contract to 15 years could be  entertained.

If an agreement on a term extension can be reached, I think the DDA will be a “likely thing” for the 16-16-17.5 scenario. If, in addition to a compromise on the length of the contract’s term, the city also says, “I love development,” then the DDA will be a “sure thing.” We’ll probably find out at the DDA board meeting on Wednesday, April 6.

What mechanism can the city use to say, “I love development”? On the council’s agenda for the evening of April 4 is an item that would establish a process for the DDA to lead development of city-owned downtown surface parking lots, finding alternative uses for those sites. That would be one way for the city to say to the DDA, “I love development.”

Though presented as separate items, the parking contract and the DDA-led development process have been discussed together, as part of the same negotiation. If the city council can pass the resolution tasking the DDA with a development process, then I think the DDA will be a sure thing for the 16-16-17.5 parking contract scenario. The council has considered but postponed the DDA-led development proposal at two previous meetings – councilmembers have had the text since December 2010. At the April 4 morning meeting, councilmember Christopher Taylor (Ward 3) indicated he was actually going to try to get it passed that evening.

It would be better if the city council were more like Gib and recognized that you shouldn’t say what you don’t really mean, just to enjoy a pretty girl’s affections. The resolution itself makes sense, but I’m not convinced that the city council as a body really believes in it. I don’t think the city council really wants a DDA that actually does serious development work – so why pass a resolution you don’t believe in?

If the city council really believed in using the DDA aggressively as a development tool for the downtown, there would never be any question that excess parking revenues should be invested directly in adding to Ann Arbor’s ability to get people into the downtown and back out again. That would mean spending excess parking system revenue on parking or other transportation infrastructure.

It’s fine to reject the idea of growth of the downtown fueled by additional investments in transportation/parking infrastructure. In fact, there’s some fraction of the electorate – though I don’t think it’s a majority – that will actually straight-up say they’re against growth like that.

But if you do believe in growth based on investment in transportation/parking, then you should, as a councilmember, not even contemplate using public parking dollars for anything except that kind of growth. And certainly you should not be telling the DDA you love development, just to cinch the deal to get parking money for the city’s general fund.

So I think that the city council should not vote for the DDA-led development proposal on Monday night – it would be like Gib telling the “sure thing” that he loves her. Gib couldn’t do it.

But I’d guess the city council will.