The board of the Ann Arbor Downtown Development Authority has voted to waive any claim to a reimbursement of about $1.4 million it might have had coming from the net proceeds of the pending sale of the city-owned property known as the former Y lot. The property is located on William Street between Fourth and Fifth avenues downtown.
Waiver of that claim could lead to the transfer of the money to the city of Ann Arbor’s affordable housing trust fund, under a policy established by the Ann Arbor city council a year ago. The DDA board’s action came at its Dec. 4, 2013 meeting. [.pdf of unamended Dec. 4, 2013 draft DDA resolution on Y lot proceeds]
The DDA board resolution also calls on the city council to waive the city’s own reimbursement, so that the entire net proceeds of the sale could be transferred to the city’s affordable housing trust fund. The fund has been essentially depleted over the last several years. The DDA board’s resolution was amended slightly at the Dec. 4 meeting to include a specific amount to be waived ($1,439,959) and to highlight a request that the city council follow the DDA’s example.
The gross proceeds of the sale are defined by the $3.5 million paid by the city in 2003 for the property and a recent agreement to sell the property to hotelier Dennis Dahlmann for $5.25 million. That purchase agreement was approved by the city council at its Nov. 18, 2013 meeting. [.pdf of rider] [.pdf of sales agreement] The city originally purchased the property by exercising a right of first refusal, to prevent the acquisition of the site by the Ann Arbor Area Transportation Authority. The AAATA’s Blake Transit Center is located just north of the property, and the AAATA has a continued interest in using some portion of the property for staging buses, so that space on Fourth Avenue is not taken up with bus boarding areas.
The city of Ann Arbor has financed the $3.5 million under an arrangement with the Bank of Ann Arbor to make interest-only payments on that amount for the last decade – with the DDA shouldering roughly half of those interest payments. A balloon payment is due on Dec. 16, 2013. The DDA’s share of the interest payments has amounted to a total of $600,426 since 2004, according to a document provided at the board’s Dec. 4 meeting.
The DDA also incurred the costs of demolishing the former Y building and installing the equipment necessary to convert the lot for use as surface parking ($1,469,804). But the DDA has received a total of $1,043,277 in parking revenue from the lot since 2009, when it was converted. That’s balanced by parking operating expenses of $342,006. In sum, the DDA calculates that it might be able to claim reimbursement of $1,439,959. The DDA manages the public parking system under a contract with the city of Ann Arbor.
The former Y building offered 100 units of single resident occupancy low-income housing that the city council of a decade ago expressed a desire to see preserved in the downtown area, if not on that specific parcel. 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 …
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 issue was not addressed during the Dec. 4 board meeting.
This brief was filed from the DDA offices at 150 S. Fifth Ave., Suite 301. A more detailed report will follow: [link]