As a hedge – against the possibility that not all the due diligence is completed and the closing on the sale of the former Y lot is delayed past Dec. 16 – the Ann Arbor council has approved a six-month extension on an installment purchase agreement with Bank of Ann Arbor for $3.5 million. That’s the amount the city owes as a balloon payment on the property it purchased 10 years ago.
An agreement to sell the old Y lot on William Street between Fourth and Fifth avenues downtown – to hotelier Dennis Dahlmann for $5.25 million – was approved by the council at its Nov. 18, 2013 meeting. [.pdf of rider] [.pdf of sales agreement]
The interest rate on the loan extension would be the same as the interest rate at which the city is currently borrowing the money – 3.89% with no penalty for pre-payment.
If additional interest is owed due to the extension of the loan, presumably the Ann Arbor Downtown Development Authority would also continue with its share of the payments. That was an arrangement agreed to in 2003 through action by the DDA’s executive committee, not the full DDA board. The DDA’s portion of the interest payments could factor into the calculation of the net proceeds from the former Y lot sale.
A year ago at the council’s Oct. 15, 2012 meeting, the council adopted a resolution that indicated the proceeds of the sale would:
“… first be utilized to repay the various funds that expended resources on the property, including but not limited to due diligence, closing of the site and relocation and support of its previous tenants, after which any remaining proceeds be allocated and distributed to the Affordable Housing Trust Fund …
However, two days after the council met on Dec. 2, the board of the Ann Arbor DDA will be considering a resolution that would waive any need to repay the DDA for those interest payments or for the expenditures by the DDA to demolish the old Y building in 2008. [.pdf of Dec. 4, 2013 draft DDA resolution on Y lot proceeds]
Possibly relevant to the question of whether the DDA can simply waive any required repayment by the city to the DDA is the source of funds used by the DDA to make those payments. In recent years, the DDA has used parking funds to make the interest payments. To the extent that in earlier years, funds captured under the DDA’s tax increment finance (TIF) may have been used to make interest payments, it’s not clear if the DDA could simply allow the city to retain those funds as part of the proceeds of the Y lot sale.
This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow.