City Council to Focus on Land Sale Policy

Policy on using proceeds for affordable housing dates back to 1996

In the coming weeks, the Ann Arbor city council will be taking up discussion of a policy that was changed a half-decade ago – as part of a land sale by the city.

Affordable Housing Fund Activity

Affordable housing fund activity from 2002-2011, based on data in the city of Ann Arbor’s Comprehensive Annual Financial Reports from those years. Red bars are expenditures and blue bars are revenues. The gray line is the fund balance. Image links to higher resolution file.

A June 4, 2007 city council action authorized the sale of city-owned property on East Eisenhower for $23,750. But the council’s action that summer also included a “resolved” clause that rescinded the city’s policy dealing with the proceeds from the sale of city-owned land. As a result of that “resolved” clause, proceeds from the sale of city-owned land were no longer required to be deposited into the city’s affordable housing trust fund.

The city council will soon be reviewing that policy, with this possible outcome: It could again become official city policy that the proceeds from sales of city-owned land will be designated at least in part to support affordable housing.

Leah Gunn, chair of the Ann Arbor Downtown Development Authority board, conveyed news of the upcoming policy discussion to her colleagues at an Aug. 29 meeting of the DDA’s operations committee. But it’s Sandi Smith – a city councilmember representing Ward 1 and a DDA board member – who is leading the effort to reconsider the land-sale-proceeds policy. She emailed her colleagues on the city council earlier in the week alerting them of her intention to revisit the issue – with an action item to come at the council’s Sept. 17 meeting.

Gunn will be seeking support from the rest of the DDA board, encouraging the city council to revert to the previous policy in some form – so that proceeds from the sale of city-owned land are designated to support affordable housing. That resolution of support will be on the DDA board’s Sept. 5 meeting agenda. Gunn also indicated that she’d ask her colleagues on the Washtenaw County board of commissioners to pass a resolution of support for the city council to change the policy. The county board’s next meeting is also on Sept. 5.

Any change in the current policy will come in the context of the DDA’s current planning effort, called Connecting William Street, for five city-owned parcels in downtown Ann Arbor, some of which could eventually be sold.

The upcoming council discussion, focusing just on this policy, will take place five years later than Ward 3 city councilmember Stephen Kunselman had wanted. On June 4, 2007 Kunselman had objected to including the policy shift as one of many “resolved” clauses in a land transaction resolution, saying that it wasn’t consistent with transparent governance.

The motivation for the change in policy back in 2007 involved a desire to put the $3 million in proceeds from selling the First and Washington parcel toward the building fund of a new police/courts building (now officially dubbed the Justice Center). The property was sold to Village Green, which is currently constructing City Apartments, with 156 residential units and a 244-space parking structure on the bottom two floors. The parcel was previously the site of a 199-space parking structure. Of the 156 units in the City Apartments project, 16 are supposed to be affordable to those earning between 60-80% of the area median income (AMI) – a requirement of the project’s planned unit development (PUD) zoning.

Provision of “affordable” housing within a project like City Apartments is one of at least two different strategies used by the city to address the need for a diversity of affordable housing options. Another strategy is for a developer to make a payment in lieu of providing the units themselves – a payment that is deposited into the affordable housing trust fund.  The idea behind that strategy is that affordable units might be constructed more economically elsewhere, using money from the trust fund.

While downtown Ann Arbor is in some ways an ideal location for affordable housing – because it’s easier to provide supportive human services to those residents who need them – the cost of real estate in the downtown area is higher than elsewhere in Washtenaw County. That’s a secondary piece of the policy discussion that the city council will likely have about the land-sale-proceeds policy.

In a phone interview with Mary Jo Callan, head of the city/county office of community and economic development, she described how one of her first tasks since taking the position in 2007 was to find strategies for replacing the 100 units of single resident occupancy supportive housing in the former YMCA. Those units had been lost when the building – owned by the city at that time – was condemned and subsequently demolished. Since the city’s affordable housing trust fund’s inception, Callan said the fund has invested in 399 units of affordable housing.

A look back to the city council meeting on June 4, 2007 shows that local government today still deals with many of the same topics – dog parks, affordable housing, transparency. Although the origin of the land-sale-proceeds policy and its connection to affordable housing goes back even further, to 1996, we’ll begin this report with the June 2007 action. 

2007 Policy Shift

The policy shift in 2007 took place as part of a relatively small land transaction: The city was selling a piece of land on East Eisenhower for $23,750. The proceeds were earmarked for the construction fund of the new municipal center, built at the corner of Fifth and Huron. But in order to put the money from the sale into that construction fund, the council needed to change the existing policy on land sales.

So one of the “resolved” clauses in the resolution was the following:

RESOLVED, That City Council revoke Resolution R-481-11-98 which provided that the proceeds from the sale of excess City property be deposited into the Affordable Housing Trust Fund; [.pdf of excerpted minutes from June 4, 2007]

In the course of deliberations, the council agreed to amend the resolution so that the $23,750 in proceeds from this particular land sale would still be deposited in the affordable housing trust fund – but left the basic policy change intact.

Chris Easthope assures his council colleagues that their deliberations will be posted by bloggers.

Chris Easthope assures his council colleagues that their deliberations are being broadcast on live TV and will be posted by bloggers – so the council was being transparent. (Image links to blog with odd video mashup from that meeting.)

The point of the policy change was not to ensure that the building fund might receive $23,750 – as the council’s amendment of the resolution demonstrated. The actual point of the policy shift anticipated the sale of the property at First and Washington – the proceeds of which the city had factored into the financing plan for the new municipal center.

Stephen Kunselman (Ward 3) was serving his first two-year city council term at the time. [Kunselman failed to win re-election in 2008, but ran again in 2009 and won, and was re-elected in 2011.] He objected to the idea that a major policy change would be handled as one of the several resolved clauses in a minor land transaction. He criticized the approach the council was taking as not open and transparent.

Chris Easthope, who later was elected judge of the 15th District Court, represented Ward 5 at the time, and took umbrage at the suggestion that the council’s action was anything less than transparent. He pointed out that the deliberations were taking place on live television [Community Television Network] and that bloggers would write posts of the council’s deliberations. And in fact the meeting was preserved by a blog post that provides a video mashup from that meeting – which also includes a councilmember anecdote about a dog encounter, in the context of a separate discussion about off-leash dogs.

The outcome of the council’s action in 2007 was to rescind the policy that earmarked the proceeds of city-owned land for the affordable housing fund.

1998 and 1996 Policy Shifts

The policy that the council rescinded in 2007 was established  through a council resolution passed on Nov. 5, 1998. [.pdf of Nov. 5, 1998 council minutes excerpt] Council membership has turned over completely since then, but subsequent elections have returned one member of the council from that era to the table – Jane Lumm. In 1998, she joined her Ward 2 colleague David Kwan in voting against the policy.

The 1998 policy shift was actually a change to an already-existing policy. What the council voted on in 1998 was to increase the portion of proceeds of city-owned land sales that would be earmarked for the affordable housing trust fund – from half to all.

The policy that put half of the proceeds from city-owned land sales into the affordable housing trust fund was established two years earlier in 1996. [.pdf of April 15, 1996 council minutes excerpt] The minutes of the meeting show that Lumm also voted against an amendment, made at the council table, to divide the proceeds of land sales (less costs) between “infrastructure needs and the housing trust fund regardless of budget year.” But the minutes show that the vote on the amended resolution was declared unanimous on a voice vote (not a roll call).

In 1996 part of the impetus for consideration of a land sale policy was driven by city-owned property at Packard and Main, which eventually became a part of the Ashley Mews development.

Recent History: Land Sale Discussions

The upcoming policy discussion comes in the context of a planning effort for five city-owned properties in downtown Ann Arbor, called Connecting William Street. [For recent Chronicle coverage, see: "Planning Group Briefed on Connecting William Street Project"]

Led by the Ann Arbor Downtown Development Authority at the behest of city council, the project’s goal is to build a framework to guide possible development of those sites, which are primarily surface parking lots: (1) the Kline’s lot (on the east side of Ashley, north of William), (2) the lot next to Palio restaurant (northeast corner of Main & William), (3) the ground floor of the Fourth & William parking structure, (4) the old YMCA lot (on William between Fourth and Fifth), and (5) the top of the Library Lane underground parking garage on South Fifth, which recently opened north of the downtown library.

For at least three of the parcels – the Kline’s lot, Palio lot, and former YMCA lot – an outright sale of the land is one clear possibility. Any development on the top of the new city-owned underground parking garage would likely be more complex than a simple sale, as would any arrangement struck for development on the lower floor of the Fourth & William parking structure.

In fact, the council’s deliberations at its most recent meeting, on Aug. 20, 2012, included a discussion of the possible sale of the old YMCA lot – in the form of a resolution brought forward by Stephen Kunselman, directing the city administrator to develop a timeline for disposition of the property. The move got no traction on the council, but that was primarily due to the timing – as other councilmembers were more inclined to let the Connecting William Street planning process play out.

The old YMCA lot has drawn more focus than other city-owned land, because the city paid $3.5 million to purchase the property in 2003 and borrowed the money to pay for it. The interest-only payments total around $140,000 a year. It’s not only Kunselman who has pointed to the property as worth the council’s focus. At their Dec. 1, 2008 meeting, the council authorized a five-year renewal on the terms of the loan from the Bank of Ann Arbor. Sandi Smith, at her second meeting since winning election a month earlier, put the interest payments in the context of the cost of supporting a homeless person:

In deliberations, councilmember Sandi Smith said that she would support the continued financing of the property, because they had no other choice, but that she urged her colleagues to begin thinking of master planning the area so that the city could divest itself of the property as soon as possible. Smith noted that given the $5,000 cost of supporting a homeless person, the interest-only payments could be used to support 27 people. The math goes like this: ($3,500,000)*(.0389)/5,000.

A six-foot-wide strip of that parcel has already been sold – for $90,000 to the Ann Arbor Transportation Authority, in connection with the new Blake Transit Center it plans to build immediately to the north of the parcel. The city of Ann Arbor will have the opportunity – in some sense, at least – to return some of those proceeds to transportation-related investment at the council’s Sept. 4 meeting. On the agenda is an item that would contribute $60,000 toward continued study of a transit connector that would run from the US-23/Plymouth area down through the University of Michigan’s campuses, through downtown and on to the I-94/State Street area.

Another parcel that received some attention at the Aug. 20 council meeting is the North Main Street, parcel where the former St. Nicholas Church stands. It’s slated for demolition by the Washtenaw County treasurer, and will go up for public auction on Sept. 6, having gone through a foreclosure process. If no one buys it at that auction or a subsequent auction in October, the city might somewhat unwillingly become the owner of the property.

Affordable Housing: Beyond a Fund to Overall Strategy

The upcoming policy discussion is likely to include more than the simple question of whether proceeds from a land sale are deposited into a special fund.

The affordable housing trust fund has historically received revenue from several sources, including interest on the fund balance, as well as developers paying into the fund – in lieu of providing affordable housing as a part of their project. Through 2009, the fund also received $100,000 annually, allocated by the city council as part of its budgeting process.

Although the $100,000 affordable housing trust fund allocation has not continued, the city has continued to make investments in other ways, most notably by investing in the Ann Arbor Housing Commission, which maintains an existing 355 low-income rental units.

The city of Ann Arbor isn’t the only local entity with a housing fund. The Ann Arbor DDA also maintains a housing fund – though it’s not specifically designated for “affordable housing.” The Ann Arbor Housing Commission approached  Ann Arbor DDA in late 2010 asking for a 50% match on a $1 million federal grant it had received to make capital improvements to Baker Commons, one of the commission’s downtown properties located at the corner of Main and Packard. The board determined that the DDA was not in a financial position to accommodate that Housing Commission request. At the time, the DDA was also considering grants to the Delonis Center, the local homeless shelter.

The DDA’s housing fund has a balance of $1.1 million, according to 2012 fiscal year-end balance sheets presented at the Aug. 29 operations committee meeting. Of that amount, $400,000 is obligated to support the affordable housing units included in Village Green’s City Apartments project. And $500,000 had been obligated to support Avalon Housing’s Near North project on North Main Street. With news that the Near North project won’t go forward, that frees up $500,000 in the DDA’s housing fund. That fund receives revenues through transfer from the DDA’s tax increment finance (TIF) capture.

When DDA board chair Leah Gunn relayed the concept of Sandi Smith’s proposal to her board colleagues at the Aug. 29 operations committee meeting  – that the city put proceeds of city-owned land toward affordable housing – it was met with a generally positive reception. Bob Guenzel, who served as chair of the DDA board last year, was at the table and expressed his support for the idea, noting that he is chair of the board of the Washtenaw Housing Alliance, a nonprofit with a mission to end homelessness.

The DDA board will vote on a resolution at its Sept. 5 meeting, stating that the board “encourages the Ann Arbor City Council to direct proceeds from the sale of the city owned surface parking lots in the downtown to the city’s Housing Trust Fund, to be used to support sustainable, affordable housing.” Jennifer Hall, executive director of the Ann Arbor Housing Commission, is on the Sept. 5 agenda to address the DDA board.

When The Chronicle spoke by phone with Mary Jo Callan, head of the city/council office of community and economic development, she said she was excited about the prospect of the policy shift. Smith has included Callan in her discussions of the idea. Callan noted that in 2007, when she first started on the job, a major task was to work with the city’s Housing and Human Services Board to  look at strategies for replacing the 100 units of single resident occupancy (SRO) units that were lost when the former YMCA building was condemned and demolished. [Coverage from 2008 of that issue: "The 100 Units of Affordable Housing"] That’s something she continues to work on, she said.

One of the secondary pieces of the policy discussion – the allocation of proceeds being the primary focus – will likely be the geographic focus for constructing affordable housing units. From Smith’s recent email sent to her colleagues:

Our current policies have us continuing to try to build units in the downtown, on land that is the most expensive in the County … I have come to believe that instead of trying to build the affordable units downtown, we need the downtown to provide the funding for the affordable units.

In her phone conversation with The Chronicle, Callan acknowledged the financial challenge represented by the land value, but also sees the upside of locating supportive housing units downtown – which offers greater efficiency in delivering human services, and better access to public transportation. She also pointed out that compared to a suburban neighborhood, the downtown environment could offer a social tolerance for a broader range of behavior – which residents of supportive units might display.

Smith’s email to her colleagues indicates that she expects to bring her proposal to the council’s Sept. 17 meeting.

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  1. September 1, 2012 at 3:41 pm | permalink

    Back when the Council first bought the Y rather than let it go to the AATA, Avalon Housing put together a comprehensive proposal for converting those units (with some renovation of the old building rather than new construction) into managed housing that would incorporate a front-desk method to keep it orderly and deal with emergencies. It was a full-blown supportive housing plan, including physical and mental health support and dealing with drug and alcohol dependence.

    The council ultimately rejected that because of the expense. Later they put out an RFP, which then was awarded to William Street Station.

    The point I wish to make is that bricks and mortar are not all that is involved in providing supportive housing. There are considerable ongoing management expenses, since both rent and services must be subsidized indefinitely. If council is leaning toward using land sale proceeds to build such housing, I would hope they would also have a fully-fleshed-out plan for the operation. Note that since we turned over our CDBG grant to the Urban County, we lost the ability to draw on that for nearly $400,000 yearly for human services. Since then, our emergency shelter has often been in crisis and we have had to direct general fund money to those human services. Any redirection of general fund money inevitably competes with other priorities. Council needs to make sure that any proposals pencil out.

  2. September 1, 2012 at 4:01 pm | permalink

    “Note that since we turned over our CDBG grant to the Urban County, we lost the ability to draw on that for nearly $400,000 yearly for human services” I don’t think that’s a complete characterization, because I think it leaves the impression that our ability to allocate human services funding dropped by $400,000, when the drop was actually closer to $200,000. We previously had the ability to spend $396K of the block grant on human services, which dropped by about half on joining the Urban County, but did not change the amount of the grant, only the discretion to allocate as much as we were to human services. And that was to some extent counterbalanced by additional funds that Ann Arbor’s participation in the Urban County made us eligible, which helped

    From The Chronicle’s coverage of the Ward 5 candidate forum for the Democratic primary election for city council:

    [... Ann Arbor had a "grandfathered-in" ability to spend more of its CDBG (community development block grant) on human services than other communities. Joining the Urban County meant that without an additional waiver, Ann Arbor would become subject to the same 15% cap as every other community for its expenditures on human services. In actual dollars, this meant dropping from $396,000 to about $196,000 in human services expenditures. But it did not affect the amount of the CDBG funds for Ann Arbor – just the way it could be allocated. Based on an email to The Chronicle from Mary Jo Callan, head of the joint city/county office of community and economic development, Ann Arbor is currently operating within the 15% cap.

    The additional money, to which Armentrout alluded, stems from the fact that Ann Arbor's joining the Urban County, according to Callan, created a "... large enough entity to receive a direct allocation of ESG (Emergency Shelter Grant) funds from HUD [the U.S. Dept. of Housing and Urban Development]. These funds are directed to housing and homelessness agencies, just as CDBG human services funds had been previously. In addition, we began utilizing a previously-unused eligible activity within the CDBG funding, called Community Based Development Organization (CBDO). Through this designation, we were able to provide funding to Community Action Network and Peace [Neighborhood Center] (previously funded through either CDBG or General Fund human service dollars) that carry out neighborhood revitalization efforts.” Peace Neighborhood Center, coincidentally, is where the candidate forum was held.]

  3. September 1, 2012 at 4:09 pm | permalink

    But CBDO activity is not the same as general human services funding. I acknowledge that I haven’t followed up in detail how money has been allocated but relied principally on Callahan’s 2008 memo about the effects. Nevertheless, we have had a shortfall in human services funding and the county also reduced its contributions considerably over the last few years. Any new venture like a 100-unit supportive housing facility needs to be accompanied by a funding proposal, and it does not look as though we can expect any outside agencies (i.e., Federal, State, or County governments) to pay for it.

  4. By Margaret S
    September 2, 2012 at 4:46 am | permalink

    Thank you for clearing up the confusion created by the story. I very much appreciate the history you’ve provided here. The story makes this sound like a brand new idea out of nowhere from Gunn and Smith.

    I have a couple remaining questions I hope you (Dave and/or Vivienne) can answer.

    Now that NENO is not going forward (at least not in the form approved in 2009) can the DDA turn the unused $500K grant over to the city’s affordable housing trust fund? Is this city fund now administered by the Urban County? What is the history of the DDA controlled affordable housing fund (current balance $502K) and what is the source of these funds? Must the DDA controlled fund be used only for new construction?

  5. September 2, 2012 at 9:14 am | permalink


    The current balance in the DDA’s housing fund, as reflected in the FY 2012 balance sheets presented to the operations committee last week is about $1.1 million. Of that, $400,000 is obligated to the support the affordable unit component of the Village Green City Apartments project, and $500,000 was authorized for the Near North project.

    The source of the funds in the DDA’s housing fund is transfers from the DDA’s tax increment financing (TIF) fund. It’s worth noting that the DDA’s fund is meant specifically to support residential, but not necessarily affordable residential.

    The DDA board could re-allocate the $500,000 previously designated for Near North towards whatever housing purpose it sees fit. But I think it’s unlikely that in the short term the DDA board would decide to deposit that money into the city’s affordable housing trust fund. I think that more likely for the short term is for the DDA board to say: Let’s wait and see what comes next from the Near North development team – because there’s an interest in seeing the location become something more interesting that just emptiness; but if something else specific at some other location comes along, with earlier prospects of coming to fruition, we should think about pursuing that instead.

    There’s not a requirement that the DDA’s housing fund be spent exclusively on new construction – for example, the grant made in 2010 by the DDA to the Washtenaw County Shelter Association (for washer/dryers, HVAC stuff, a generator and the like) was made from the DDA housing fund. A grant made in 2009 to Avalon for rehab of units was also not new construction. Based on deliberations around the allocation to the shelter, however, the DDA board sees the DDA housing fund as one that supports housing capital needs not operational needs. So if a request were made to the DDA to allocate the salary of a social worker at the shelter, my guess is the board would not see that as something payable from the housing fund.

    Remaining questions:

    Is the city’s affordable housing trust fund administered by the Urban County? I’m almost certain it is not, but the fact that you’re asking leads me to want to pin that down more definitively.

    What is the history of the DDA’s housing fund? It was established back in 1997. But I suspect that what you’d really like is a record of its financial history year-by-year, along the lines of the chart included in this article for the city’s affordable housing fund. That I don’t have. A site-constrained search of the DDA’s website will give you a flavor for the sorts of things the DDA has allocated money for out of its housing fund. Use this as the Google query: “housing fund” resolved

  6. By Margaret S
    September 2, 2012 at 10:00 am | permalink

    Thank you for the thorough response Dave. I don’t need the financial history of the DDA housing fund, I was just interested in what the intended purpose was when it was created. From your response, I understand that it was to facilitate the addition of residential units downtown, not necessarily affordable housing.

    The issue of Urban County control over the housing fund becomes important if there is a possibility that the city’s money could then be used outside the city.

    As for what happens on the NENO site now, as a neighbor to the property, I would still like to see some affordable/supportive housing returned there. My hope for the process is that the current owners (the non-profit Near North LLP, not 3 Oaks) are transparent in their planning and actively involve the neighbors all along the way. Our neighborhood has been extremely patient and supportive and we deserve to be informed.

  7. By Tom Whitaker
    September 3, 2012 at 1:04 pm | permalink

    While I fully understand the temptation to restrict funds from use by a mayor and city council who have been fixated on one enormous capital project after another, I think this is bad policy.

    All we heard from this mayor and council over the past few years was how their hands were tied from using funds from one bucket to pay for more police, or firefighters, or other important services. Meanwhile, they found ways to divert money to public art, Fuller Road Station, free parking for Google, etc., a huge city hall addition, a new maintenance facility, etc., etc.

    However noble the intent, the last thing we need to do is create yet another restriction on revenues that will only impair the ability of future, more fiscally responsible councils to manage our money properly.

  8. By Alan Goldsmith
    September 4, 2012 at 6:52 am | permalink

    If the City wants to move forward on ‘affordable housing’ they need to look at other sources than Avalon Housing. That organization seem unable to provide their ‘service’ without tacking on a tremendous about of overhead, which results in less housing in the final analysis. While I don’t trust the DDA to do anything right, some of the spotlight needs to shine on the cost of doing business with Avalon as well.

  9. September 4, 2012 at 8:34 am | permalink

    Re (8) Alan, this goes back to my original point. If we are to have the type of housing that Avalon has historically provided (supportive housing), we should have a financial plan in place to pay those high maintenance (service) costs over the long term, not just the money to construct buildings. I don’t have an opinion or information about how efficient Avalon is in providing those services, but that would be the reason for high overhead in such housing.