DDA OKs Budgets, Gets Downtown Report

Ann Arbor Downtown Development Authority board meeting (Feb. 6, 2013): The meeting of the full DDA board reprised much of the same content of the operations committee meeting two weeks earlier, which focused on the organization’s budgets for the next two fiscal years. The board voted to approve budgets for FY 2014 and FY 2015.

For FY 2014, the DDA budget calls for $23.1 million in expenditures against $23.4 million in revenues. That would add about $300,000 to the total fund balance reserve, which is projected to end FY 2014 fiscal at around $5.5 million. The surplus from FY 2014 would be used in the FY 2015 budget, which calls for $23.8 million in expenditures against $23.5 in revenues, leaving the DDA with about $5.2 million in total fund balance reserve at the end of FY 2015. Reserve amounts indicated in the budget are about $800,000 more than the “true fund balance” – because the money lent to the DDA by Republic Parking for installation of new equipment is recorded as revenue.

Some of the larger categories of expenses in the $23.1 million expense budget for FY 2014, which is similar to FY 2015, are: payments to Republic Parking for operating the public parking system ($6.5 million); bond payments and interest ($6.6 million); payments to the city of Ann Arbor ($3 million in parking revenue and $500,000 for the police/courts facility); capital costs ($2 million); administration ($800,000); and alternative transportation ($615,000).

The alternative transportation allocation would fall a bit short of covering this year’s $623,662 request from the Ann Arbor Transportation Authority to support the getDowntown program, which includes a subsidy to cover the cost of rides taken with the go!pass. That compares with $553,488 granted by the DDA last year to support getDowntown. A presentation made previously to the operations committee – by Michael Ford, CEO of the AATA, and Nancy Shore, director of the getDowntown program – was also given to the full board at the Feb. 6 meeting. The presentation highlighted the fact that 31% of go!pass riders get on the bus east of US-23.

Money in the budget labeled “discretionary” could cover the gap between AATA’s request and the amount in the budget slated for alternative transportation. That money is one of a number of “placeholder” items included in the budget – like $250,000 for a possible arrangement with the city of Ann Arbor for additional police patrols in the downtown. Another $300,000 could be used for a range of capital projects – from sidewalk improvements for patio dining in the State Street area, to streetscape improvements for William Street, to alley improvements near the Bell Tower Hotel.

The board did not discuss remarks made earlier in the week by Ward 3 city councilmember Stephen Kunselman, who at the council’s Feb. 4 meeting called for a number of changes to the city’s DDA ordinance. If enacted, the changes could have a significant impact on the DDA’s revenue from its tax increment finance (TIF) budget. Of the DDA’s roughly $23 million revenue budget, about $4 million comes from TIF capture, with the remainder coming from the public parking system.

The DDA board meeting featured public commentary from Alan Haber, a self-described “agitator” for a public park on top of the Library Lane underground parking garage, and a briefing from Ray Detter, chair of the downtown citizens advisory council, on the status of the 413 E. Huron project. The previous evening, that proposed residential project had failed to achieve the six votes it needed for a planning commission recommendation of approval. The project is still expected to be brought to the city council for consideration, possibly on March 18.

The board was also presented with this year’s edition of the DDA’s “State of the Downtown” report, which summarizes a number of statistics about the DDA district.

FY 2014-2015 Budgets

DDA revenues come from two main sources – tax increment finance (TIF) capture and Ann Arbor’s public parking system. The DDA’s budget comprises four separate funds: the TIF fund, the parking fund, the housing fund and the parking maintenance fund. The housing and parking maintenance funds receive their revenue as transfers from the TIF fund and the parking fund, respectively. [.pdf of draft DDA budgets FY 2014 and FY 2015]

The DDA board was asked to approve budgets for two fiscal years – FY 2014 and FY 2015 – which reflects the city of Ann Arbor’s two-year budget planning cycle. Despite the two-year planning cycle, the city council adopts budgets one year at a time. Under the city charter, the council needs to make any amendments to the city administrator’s proposed budget and adopt them by the conclusion of its second meeting in May, which falls this year on May 20, 2013.

Budgets: Parking Fund

The parking fund is budgeted to receive about $19.3 million in revenue for FY 2014. Major expenses include a total of about $10.7 million in operations expenses (which includes a roughly $6.5 million payment to Republic Parking, about $500,000 to rent some of the surfaces lots, and roughly $3 million for the city of Ann Arbor, which receives 17.5% of gross parking revenues). The FY 2014 budget also includes a $4.4 million transfer from the parking fund to the parking maintenance fund. That’s an amount that is meant to make up for the last two years, during which transfers had not been made at the historically usual level of $2 million a year.

The amount actually spent on parking maintenance could change, after the DDA receives its regular engineering report from its consultant, Carl Walker Inc., who does regular inspection of the parking structures.

Besides operation and capital maintenance of the parking system, revenues to the public parking system have historically been used by the DDA to support the getDowntown program’s go!pass subsidy. The go!pass is a bus pass that downtown employees obtain through their employers, who pay $10 annually for passes for each of their employees.

At the Feb. 6 full board meeting, Michael Ford – CEO of the Ann Arbor Transportation Authority – made the same presentation he’d made to the operations committee two weeks earlier. He requested a total of $623,662 to support the getDowntown program, including the go!pass subsidy. That compares with $553,488 granted by the DDA last year. For FY 2014, the DDA’s budget calls for a $600,000 allocation that could cover most of that request. The getDowntown program is administratively a part of the AATA.

This year’s draft budget also calls for $250,000 in parking revenue to be spent on a possible arrangement with the city of Ann Arbor to pay for additional downtown police patrols. At the board’s Feb. 6 meeting, Roger Hewitt said no decision had been made on that arrangement and that the goal of improved safety might be achieved in other ways. He said that the amount was available to be spent on the “safe” part of “clean and safe” – a motto the board has essentially adopted as a goal for the downtown.

Budgets: TIF

Another $300,000 in the FY 2014 budget that could be used somewhat flexibly is in the TIF (tax increment finance) fund budget, labeled “capital construction.” It could be used to fund sidewalk improvements between William and Liberty along State Street to facilitate patio dining for restaurants along that strip – or streetscape improvements for William Street, or even alley improvements near the Bell Tower Hotel.

In reviewing the TIF fund budget, Roger Hewitt noted that revenues were anticipated to be slightly under $4 million for FY 2014. The biggest chunk of the TIF budget is the $3.4 million bond payments associated with the Library Lane underground parking structure and the Fifth and Division streetscape improvement projects.

The professional services line item ($161,833) was described by Hewitt as including engineering and legal consulting work. Also highlighted by Hewitt in the TIF budget were (1) the line item for sidewalk repairs and holiday lights ($140,000) and (2) a transfer out of the TIF fund to the housing fund ($100,000). Hewitt also noted a $508,608 line item in the TIF budget as the DDA’s annual contribution to the city of Ann Arbor for the police/courts facility (known as the Justice Center). Hewitt also mentioned a $100,000 item for the DDA’s energy saving grant program. There’s also a $100,000 line item labeled “discretionary,” in addition to the $300,000 that could be flexibly spent on capital construction costs.

The DDA divides the salaries and benefits of staff equally between the parking fund and the TIF fund. The total for salaries and benefits is roughly $557,000. The TIF fund portion is roughly $279,000.

Outcome: The board voted unanimously to adopt the budgets for FY 2014 and FY 2015 as presented.

Budgets: Future TIF, Administration

The approval of the DDA’s budgets came two days after Ward 3 Ann Arbor city councilmember Stephen Kunselman told his council colleagues at their Feb. 4 meeting that he would be continuing to press for changes to the city ordinance regulating the DDA’s TIF capture and governance.

The change to the way that TIF is calculated would be based on a different interpretation of the existing language in the ordinance, but would result in roughly $600,000 a year less in TIF capture by the DDA. It’s the same proposal Kunselman made on May 21, 2012 – as a proposed amendment to the city budget last year. On that occasion, his proposal received just three votes on the 11-member council; however, the current composition of the council includes three new councilmembers. For additional Chronicle reporting of the TIF calculations, see: “Column: TIF Capture Is a Varsity Sport.”

Kunselman’s view on the correct interpretation of the TIF calculation is one that was shared at least at one time by the Ann Arbor city attorney’s office. An apparently overlooked clause of the city’s ordinance on DDA TIF capture led the board nearly two years ago, on May 2, 2011, to delay a vote on the new contract between the city and the DDA, under which the DDA administers the city’s public parking system. The Ann Arbor District Library, whose taxes in the district are subject to the DDA’s TIF, has also questioned the correct interpretation of the ordinance.

But Kunselman’s remarks at the council’s Feb. 4 meeting went beyond the correct calculation of the TIF capture. Kunselman also called for changes to DDA governance, which would include term limits on board members, a prohibition against elected officials serving on the board, a requirement that any TIF expenditures outside the DDA district boundaries need the council’s approval, and a requirement that TIF “rebates” for projects require city council approval.

His remarks on Feb. 4 were consistent with criticism of the DDA that was part of Kunselman’s last campaign to represent Ward 3 on the city council (in 2011). That was a three-way race that included Ingrid Ault and Marwan Issa. Kunselman took out petitions for this year’s race on Nov. 3, 2012. He might face competition in that race from Julie Grand, current chair of the city’s park advisory commission, who is mulling a possible candidacy for Ward 3 city council.

Kunselman’s Feb. 4 remarks also included a criticism of the amount of “administration” costs in the DDA annual report from 2012, which was forwarded to the city council in January. The line item for “administration” in the annual report is $2,104,526.

Responding to a request from The Chronicle, DDA executive director Susan Pollay provided the following breakdown of that amount:

Staff, office, professional services    $1,018,259
Grant to the city for the Municipal Ctr   $508,608
Other TIF grants and projects             $110,267
Grant for go!passes, other alt programs   $467,392
Total                                   $2,104,526

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The “annual report” thus covers a different category of expenses than the budget line items ordinarily associated with “administrative overhead.”

During the presentations of the DDA’s budgets, mayor John Hieftje got confirmation of the amounts listed for administration, salaries and benefits, which total $814,430 for FY 2014. Kunselman is quoted in the February edition of The Ann Arbor Observer as saying that he will run for mayor, if Hieftje seeks re-election in 2014.

Parking Report

The monthly parking report is included as part of every monthly DDA board meeting. For detailed coverage of the most recent month’s parking data, from December 2012, see: “DDA Preps Budget for Transportation, Cops.” That report is based on a presentation from the Jan. 25, 2013 DDA operations committee meeting. Those numbers show an increase in revenues of about 7.2% compared with December 2011, and a drop in the number of hourly patrons by 8.5%. Those numbers come in the context of a 13% increase in the number of parking spaces in the system – from 6,870 to 7,805. Mitigating factors cited by Republic Parking manager Art Lowe at the Jan. 25 committee meeting include the fact that Midnight Madness fell this year in November, not December, and that in 2011 Christmas and New Year’s fell on the weekend.

At the full board meeting on Feb. 6, Roger Hewitt indicated that the operations committee was continuing to consider ways to provide more detail in the parking reports to give a more accurate barometer of actual usage of the system – instead of just using revenues and the number of hourly patrons.

Hewitt indicated that the numbers continue to show strong growth, and no real slackening in demand for parking or the number of people who are coming to downtown Ann Arbor.

Communications, Committee Reports

The board’s meeting included the usual range of reports from its standing committees and the downtown citizens advisory council. Here are some highlights.

Comm/Comm: Transit

Following the presentation by AATA CEO Michael Ford and getDowntown director Nancy Shore on their request for funding, mayor John Hieftje apprised the board of ongoing efforts to continue conversations with other communities on expanded transit.

By way of background, a new countywide transit authority was incorporated under Act 196 in the fall of 2012. But that effort at increased, expanded transit has been abandoned after the vast majority of jurisdictions exercised their right under the statute to opt out of the authority. What ended that particular effort for all practical purposes came when the Ann Arbor city council passed a resolution on Nov. 8, 2012 withdrawing the city from the new transit authority.

But the council’s resolution also gave direction to the AATA to continue conversations with immediately neighboring communities about options for improving local transit. The AATA has engaged in talks with communities about a smaller-than-countywide transit authority, with possible members to include the cities of Ann Arbor, Ypsilanti, and Saline, as well as the townships of Pittsfield and Ypsilanti. Involvement with the townships of Superior and Ann Arbor is also a possibility.

It’s those ongoing conversations that Hieftje described at the DDA board’s Feb. 6 meeting. [The mayor sits on the DDA board as provided in the state enabling legislation for DDAs.] Hieftje said he thought the AATA did a good job of outreach during the effort to expand to a countywide authority. After the Ann Arbor city council effectively ended that process, the conversations have continued, he said. The workforce that comes into Ann Arbor from the eastern part of Washtenaw County is very vital, Hieftje said. If that service were to be dialed back, he added, it would have an impact on a lot of people.

In an apparent allusion to the state legislature’s decision during its December 2012 lame duck session to include Washtenaw County in a new regional transit authority (RTA) for southeast Michigan, Hieftje stated that Ann Arbor’s “regional interest” was Ypsilanti. [The Ypsilanti city council on Feb. 5 passed a resolution supporting Ann Arbor's position in formally requesting that Washtenaw County be excluded from the RTA. In addition to Washtenaw, the RTA includes the counties of Wayne, Macomb, and Oakland as well as the city of Detroit. The Ann Arbor city council passed a resolution on Dec. 10, 2012 expressing opposition to the inclusion of Washtenaw County in the RTA.]

Comm/Comm: Connector Study

Roger Hewitt reported that the high-capacity transportation connector study committee had meet twice in the previous 24 hours, holding lengthy sessions both times.

By way of background, the study is meant to determine a locally-preferred alternative mode for a high-capacity transit system along the corridor that arcs from US-23 and Plymouth southward along Plymouth to State Street and farther south to I-94. In the fall of 2012, the DDA approved $15,000 as part of a total $30,000 commitment over two years for the project. Other funding partners for the $1.5 million project – which is supported by a $1.2 million federal grant – include the city of Ann Arbor, the AATA and the University of Michigan.

Hewitt reported that the topic of the meetings included the results of an initial effort at community outreach, and updates to the connector website. An initial discussion of appropriate routes and modes had taken place. Hewitt indicated that concerns about routing had started to emerge.

Comm/Comm: Downtown Real Estate

During communications time, mayor John Hieftje reported that a representative of Colliers International told attendees of the most recent meeting of the downtown marketing task force that good progress was being made renting out the former location of the downtown location of Borders bookstore, at Liberty and Maynard. Hieftje reported that the presentation from Colliers included observations that a major grocery store would require twice the residential density currently in downtown Ann Arbor. [The current residential population of downtown Ann Arbor is reported in this year's edition of the State of the Downtown report at 4,849.]

Comm/Comm: State of the Downtown

Distributed at the downtown marketing task force was this year’s edition of the “State of the Downtown” report, which summarizes a number of statistics about the DDA district. Reporting from the DDA’s partnerships committee, Joan Lowenstein mentioned the report, and urged board members to look through it.

Board members praised the DDA staff for their work in putting together the report. Roger Hewitt highlighted the 3.1 million square feet of new construction in the district since 1982, when the DDA was first established. Susan Pollay, executive director of the DDA, ventured that the kind of private investment that had been made in the DDA district would not have taken place without the efforts of the DDA. Lowenstein added the value of having the State of the Downtown document is that it compiles information that can be used by the convention and visitors bureau. Ann Arbor SPARK, the local economic development agency, can also use the document in its recruitment and retention efforts, Lowenstein said.

Comm/Comm: Top of the Library Lane Parking Structure – Skating Rink?

Alan Haber introduced himself as an agitator for a park and a “people’s place” on top of the Library Lane underground parking garage. Based on the Jan. 14 presentation by the DDA to the Ann Arbor city council about the Connecting William Street project, Haber said, more time would be taken to figure out what to do with the top of parking garage. Haber concluded that nothing would happen there very soon.

So he suggested that in the interim, while decisions are still being made, all or a substantial part of the surface parking on top of the Library Lane underground parking garage could be made available for people to develop activities there – to show the types of things that the community could begin do in the space, if it were to be developed as a park or as public open space.

Right now, there could be a skating rink at that location, Haber suggested. He contended that establishing a temporary skating rink on top of the Library Lane structure would cost about $50,000. The DDA could allocate a grant to cover part of that cost, he said. The costs would include a platform for establishing the artificial ice. A staff person could be employed there, paid a living wage, to supervise the activity. That would be a good experiment to see what could happen there, Haber said.

The DDA should also begin to look for activities that could be scheduled in the space, he said – like a spring party over the spring equinox weekend. Or there could be an Earth Day party, he suggested. The people of the community need to be invited to see what could be done on the surface of the underground parking garage, while nothing else is happening. It’s counterintuitive, he contended, to park cars on the surface of the underground structure – because people should learn to park underground. So why give people an option, just before they go underground, to park on the surface? The cars that currently are parked on top of the Library Lane structure could park elsewhere in the system, he said, because there is a surplus capacity.

There’s a lot of opportunity to allow people to experiment with stuff that they would like to do, Haber said. He returned to the idea of putting some money into setting up a skating rink, saying that a lot of people could have great fun there during the winter. “Get the cars off the top, let the people on there, and let the greening begin,” Haber concluded.

By way of additional background, at its Dec. 19, 2012 meeting, the DDA’s operations committee was provided with a draft of ideas for a policy on special events at the Library Lane mid-block cut-through and the top of the Library Lane parking garage.

The preamble to the draft includes the expectation that the site would eventually include a building with public open space, but indicates support in the interim for the kind of activity that Haber called for:

The structural component of the underground Library Lane structure was designed to anticipate the construction of a future building and a future public open space area. In the meanwhile, until such time as these elements are designed and constructed, the DDA is supportive of community groups using the Library Lane surface parking lot and the adjoining Library Lane for events, public gatherings and meetings.

In the draft, the main bureaucratic requirement is approval by the city of Ann Arbor for a special events permit, which currently costs $34.

Comm/Comm: 413 E. Huron

Reporting from the most recent downtown citizens advisory council meeting, Ray Detter told the DDA board that the city planning commission had voted on the 413 E. Huron project the previous evening, Feb. 5. He noted that after four hours of deliberation and 33 speakers during the public hearing, the commission voted 5-3 on the recommendation for approval. He noted that six votes are actually required in order to achieve a recommendation of approval. He allowed that the proposal would still be moved on to the city council by the developer. [Responding to an emailed query, city planning manager Wendy Rampson indicated that March 18 might be the earliest possible council meeting when a vote might be scheduled. Any scheduling of a council vote on the project is still tentative.]

By way of additional background on the project, it’s proposed for the northeast corner of Huron and Division, and is estimated to cost $45 million. It calls for combining three lots on that corner and building a 14-story, 271,855-square-foot apartment building with 216 units (533 bedrooms) and underground parking for 132 vehicles. [.pdf of aerial map for the project] It meets the criteria for D1 (downtown core), which is the zoning for the area.

Detter noted that even those planning commissioners who voted for it expressed their dislike for the size, mass, and design of the project. If it’s constructed, he said, it would be the largest building in downtown Ann Arbor. The downtown citizens advisory council took the position that no project should be described as “by right” until it conforms with the adopted city plans and ordinances, and does not have a negative impact on its neighbors. That is not true of 413 E. Huron, Detter contended.

Detter recalled how just a few years ago, the city council had approved the Ann Arbor Discovering Downtown (A2D2) rezoning process and the design guidelines. At the time, Detter said, the downtown citizens advisory council believed that a satisfactory job had been done on that. But the expectation had been that after a year, the outcome of that process would be reviewed. Now is the time, he said, for some changes to be undertaken.

Among the changes the citizens advisory council is calling for, Detter said, are changes to the requirements for public participation meetings. Those meetings are not happening the way they’re supposed to, he contended. In the case of 413 E. Huron, developers had called a meeting, ignored what was said by the participants, and then written an inaccurate report, he said. That report was given to the planning commission. Detter did not want that to happen again.

The developer had also appeared at the one required meeting before the city’s design review board (DRB), and listened, but made none of the changes suggested by the DRB, Detter said. Those changes included suggestions on massing, setbacks and ways to reduce the project’s impact on the nearby historic residential neighborhood. Detter noted that the city’s Historic District Commission had passed a resolution in opposition of the project. He noted that compliance with the recommendations of the DRB is voluntary on the part of developers. So at an upcoming meeting of the DRB, one topic of discussion will be the consideration of future changes to the design review process, Detter reported. The design guidelines need to be clear and more specific, he said, and the ordinance needs “more teeth.” The planning commission and the city council need to be willing to discuss the developer’s response to design guideline recommendations as a part of the process, he said.

The Connecting William Street project recommendations – about the future use of five city-owned properties downtown – call for the planning commission to report to the city council about how developers incorporated changes by the DRB into the project. He contended that the D1 zoning for the 413 E. Huron parcel is wrong. He observed that immediately adjacent to city hall is a surface parking lot – formally used by the Ann Arbor News, and now in use by the University of Michigan Credit Union – which is zoned D1. So it would be possible to build a structure 18 stories high from lot line to lot line on that parcel. That zoning needs to be changed, Detter contended.

Present: Nader Nassif, Newcombe Clark, Roger Hewitt, John Hieftje, John Splitt, Leah Gunn, Russ Collins, Keith Orr, Joan Lowenstein.

Absent: Bob Guenzel, Sandi Smith, John Mouat.

Next board meeting: Noon on Wednesday, March 6, 2013, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date.]

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