DDA Tackles Street Lights, Land Sale Issue

Final $280,000 allocation OK'd for Main Street light poles; claim to proceeds of former Y lot waived – to support affordable housing; audit formally received; 624 Church St. parking tabled for now

Ann Arbor Downtown Development Authority board meeting (Dec. 4, 2013): At its last regular meeting of the year, the board approved the final funding necessary to replace 81 light poles on Main Street, passed a resolution waiving a claim to reimbursement for the DDA’s costs associated with the former Y lot, and formally accepted its audit report for the fiscal year that ended on June 30, 2013 (FY 2013).

On Dec. 4, 2013, city administrator Steve Powers attended his first DDA board meeting as a member.

On Dec. 4, 2013, city administrator Steve Powers attended his first DDA board meeting as a member. (Photos by the writer.)

The board also considered a resolution added to the agenda on the day of the meeting, related to the contribution-in-lieu (CIL) parking agreement for the 624 Church St. project – but ultimately decided to table that resolution pending further review at the committee level.

The DDA’s Dec. 4 resolution allocating $280,000 for the Main Street light pole replacement ended the political wrangling over who should pay for those downtown Ann Arbor light poles. Replacement of the deteriorating poles was identified by the city as a need in the first half of 2012. The source of an estimated $600,000 required for the project was specified in the city’s CIP (capital improvements plan) that year as coming from the DDA – though the funds were at that time not authorized by the board.

In the spring of 2013, the city council weighed how it might clarify the city’s ordinance that restricts the DDA TIF (tax increment finance) capture. In that context, DDA executive director Susan Pollay told the council that the DDA might not be able to afford to pay for the Main Street light pole project – if the council changed the ordinance language to clarify the calculations in a way that did not favor the DDA. The question of the DDA’s TIF capture was not ultimately settled until the council’s Nov. 18, 2013 meeting.

In the interim, the city council voted at its May 20, 2013 meeting to request that the DDA allocate at least $300,000 for the $580,000 light pole project. After the council then declined at its Oct. 21, 2013 meeting to approve a budget allocation for the remaining $280,000 that was needed for the project, the DDA board passed its Dec. 4 resolution, citing the urgency of replacing at least 36 of the poles as the reason for its decision.

According to the DDA’s resolution, staff will use the DDA funding to begin now with replacement of those poles most in need of being removed, with the remainder replaced in the summer of 2014.

Also at its Dec. 4 meeting – in connection with the city’s pending sale to Dennis Dahlmann of the former Y lot, at William Street and Fifth Avenue – the DDA board passed a resolution that waived claim to $1,439,959 in reimbursements from the sale that the DDA has calculated it might be owed. The city council adopted a policy on Oct. 15, 2012 that included depositing net proceeds (after reimbursements) from the former Y lot sale into the city’s affordable housing trust fund.

So the DDA board’s action is an attempt to increase the amount that will be deposited into the affordable housing trust fund. The resolution passed by the DDA board also calls on the city council to waive the city’s claim to reimbursements. The city purchased the property in 2003 for $3.5 million and has made interest-only payments for the last 10 years on a loan for that amount. The agreed-upon sale price to Dahlmann is $5.25 million.

In another formal action taken on Dec. 4, the DDA board accepted the audit report from the most recently concluded fiscal year – FY 2013, which ended June 30, 2013. The auditor issued an “unmodified” or clean opinion.

The board also considered a request, which was ultimately tabled, from the developer of the 624 Church St. project. The developer is asking for an extension of the contractual agreement under which parking permits could be purchased using the city’s contribution-in-lieu (CIL) program. The program allows a developer to satisfy certain zoning requirements that parking spaces be provided for a project – by purchasing monthly permits in the public parking system at a premium rate, instead of building the spaces on site. The developer of the 624 Church St. project wants the ability to extend the 15-year minimum to cover a 30-year financing period – based on feedback from firms that would be providing the financing. The DDA board ultimately voted to table the question pending further review by the board’s operations committee.

The board’s newest members introduced themselves at the meeting: city administrator Steve Powers and Main Street retailer Cyndi Clark.

Also at its Dec. 4 meeting, the board heard a range of updates on various projects and public commentary. Highlights included a report from the Main Street BIZ (business improvement zone), which has enough money in its fund balance to handle sidewalk snow removal for the coming winter, without collecting the winter tax assessment to which it is entitled. In a separate update, there’s a possibility that downtown ambassadors could be hired by the DDA as soon as the summer of 2014.

Other topics covered in updates included the effort to save the State Theater, the NHL’s Winter Classic on New Year’s Day, and The Puck Drops Here festivities on New Year’s Eve.

Main Street Light Poles

The need to replacement the Main Street light poles due to rusting bases has been known since last year – in early to mid-2012.

Downtown Ann Arbor Main Street light pole

Downtown Ann Arbor Main Street light pole on northeast corner of Main & William. Photograph is from the city of Ann Arbor, taken in April 2012.

This spring, at city council meetings, replacement was characterized as an urgent public safety issue, because the bases of some of the poles are rusting. Various statements were made about the number of light poles that had failed, but responding to an emailed query from The Chronicle earlier this year, city of Ann Arbor staff indicated that in early 2012 two of the light poles fell – due to a structural failure at the base of the poles caused by rust. After inspection of all the poles, two additional light poles were deemed to be in immediate risk of falling and were also replaced.

The poles were part of the city’s CIP last year with the source of the funds identified in the CIP that year as the DDA’s TIF (tax increment finance) fund. The status of the funding – estimated at that time to be $600,000 – was identified as not yet authorized.

Over the course of the year, the replacement of the light poles became part of the fractious politics between the city council and the DDA.

In timeline overview form:

  • April 1, 2013: Initial approval of DDA TIF capture ordinance revision (Chapter 7). Main Street light poles were cited as a project the DDA might not be able to pay for if the Chapter 7 revisions were approved.
  • April 15, 2013: City council approves an amendment put forward by Sally Petersen (Ward 2) to the Chapter 7 revision, which delayed applying the revised language until FY 2015.
  • May 20, 2013: City council approves FY 2014 budget amendment that affects DDA budget.

    Whereas, The DDA is forecasted to receive $568,343 more in TIF revenues than anticipated in the proposed FY14 budget;
    Whereas, Council desires to support the public housing program in the DDA area;
    RESOLVED, The DDA TIF fund revenue and expenditure budgets be increased by $568,343 for the purposes of creating a one-time transfer;
    RESOLVED, The DDA Housing fund revenue and expenditure budgets be increased by $300,000 to reflect Council’s desire for the DDA to support affordable housing in the DDA area; and
    RESOLVED, Ann Arbor City Council requests that the DDA allocate at least $300,000 for the replacement of the light poles on Main Street.

  • June 5, 2013: DDA board meets and executive director Susan Pollay reports the council’s action. She tells the board that she’s meeting with city staff to figure out how the light poles will be paid for.
  • July 3, 2013: DDA board allocates $300,000 for the light pole replacement project at the same meeting it allocates $250,000 for other capital projects, and $59,200 to support the creation of a business improvement zone in the South University area. One “whereas” clause characterized the council’s action in a way that is not based on the wording of the city council’s May 20 budget amendment.

    Whereas, Through the 2013/14 budget approval process it was determined that the City would undertake this street light replacement in calendar year 2013, with the DDA allocating $300,000 toward the cost of the project, and the City allocating $216,000; [.pdf of complete DDA light pole resolution]

  • Oct. 21, 2013: City council resolution allocating $280,000 toward the project fails on a 7-4 vote. It needed eight votes for approval.
  • Oct. 31–Nov. 1, 2013: City staff inspect the 81 light poles, determining that 36 need to be replaced within 6 months and the remaining 45 within 1-2 years.

Until the Oct. 21 council resolution failed, according to city of Ann Arbor public services area administrator Craig Hupy and DDA executive director Susan Pollay, their intent was that a cost-sharing arrangement between the city and the DDA would allow for the DDA to purchase the fixtures for all the poles, with the city paying for the poles. The DDA proceeded with the purchase of the fixtures. That left insufficient funds to deal with the 36 Main Street light poles most in need of replacement. The initially planned splitting of the costs, which did not come to fruition, appears to have contributed to the timing of the DDA’s resolution to allocate the additional $280,000 on Dec. 4.

Main Street Light Poles: Board Deliberations

Roger Hewitt began deliberations on Dec. 4 by indicating he believed it was back in May when it was determined that the light poles on Main Street were rusting out at the bases, and that they all needed to be replaced. [The need to replace the poles was identified a year earlier in 2012, with the source of the funds identified in the city's CIP that year as the DDA's TIF fund. The status of the funding – estimated at that time to be $600,000 – was identified as not yet authorized in the CIP.]

Hewitt indicated that in May, the DDA passed a resolution that it would allocate $300,000 of the $580,000 for the total cost of the project – which would be carried out by the city, he said. [The DDA's resolution was actually passed on July 3, 2013. What was passed in May – on May 20, 2013 – was a city council budget amendment that included a request for the DDA to allocate at least $300,000 toward the light pole project.]

Hewitt continued by saying that the city’s portion was going to be $280,000, but when asked to approve the additional funds, that resolution “was not successful at the city council.” There was therefore a shortage of $280,000, Hewitt said. An examination had been done, and many of the light poles are a safety hazard, he said. So the DDA was recommending that $120,524 be allocated in this fiscal year. That’s the amount remaining in a bond fund for State Street improvements that were done back in 2000 or so, Hewitt said. It’s money that had been sitting in a fund that had been unspent for about 10 years. This would require changing the budget, he said. And then in the next fiscal year [FY 2015], Hewitt continued, the remaining money would be allocated. Hewitt alluded to the fact that the FY 2015 budget has not yet been adopted by the DDA board.

DDA board chair Sandi Smith

DDA board chair Sandi Smith.

DDA board chair Sandi Smith offered what she described as a “super friendly amendment” to change the description of the fiscal years to match the city of Ann Arbor’s labels. [The current fiscal year, which started July 1, 2013 is FY 2014 under the city's labeling scheme. The DDA has historically named the calendar years spanned by the fiscal year – e.g., calling this year FY 2013-14.]

John Mouat asked if there was conversation about the State Street improvement project. He wanted to know what the status of the project was. Hewitt told Mouat that the project was completed over 10 years ago. Hewitt said that in the upcoming fiscal year, the DDA should take a look at improvements in that area. Some of the improvements made back then had taken a beating, Hewitt said, so he felt it would be appropriate to spend some money in the State Street area to do repairs in the existing streetscape.

Mouat wondered whether some aspects of the State Street project had not been completed in the context of the moratorium on new streetlights.

By way of background, the “moratorium” on additional streetlights has its origins in a budget amendment approved by the city council in 2006. The history and current policy (which includes the moratorium) was reviewed in a message to councilmembers from city administrator Steve Powers this past summer. [.pdf of July 9, 2013 email]

At the Dec. 4 meeting, Hewitt said he didn’t think there were any streetlights that were a part of the State Street project plan that were not completed. DDA executive director Susan Pollay explained that as the lights were installed, the DDA discovered that the streetlights that had been selected didn’t cast as much light as they’d hoped. There were some very tall lights that fit that description, she said – at that time, light pollution was a very big concern, she added. The light levels were low, she said. Some light was supposed to be provided by store windows.

Pollay described how “dollars were held back” so that additional light could be added to the area. Ultimately the design, which looked good on paper, was not successful in achieving the desired light levels, she said. There’s an unofficial understanding that the city’s electric bills are not supposed to be increased by adding more lights. As the DDA waits to understand what the city policy on replacing streetlights might be, Pollay said it was appropriate to use that money to replace the light poles on Main Street. At some point, the light levels on State Street would be revisited, she said.

Mouat thanked Pollay for that clarification. John Splitt wanted to reaffirm that he hoped something could be done in the coming year in the State Street area – in connection with the lighting, as well as with the planters. Russ Collins offered what he called a “niggling point” about the Washington Street area: The streetlights on Washington Street are off – they’re not functioning on the south side, Collins said.

Outcome: The board voted unanimously to approve the additional $280,000 in funding.

Proceeds of Y Lot Sale

By way of background, at its Nov. 18, 2013 meeting, the Ann Arbor city council approved the sale of city-owned property downtown – a parcel north of William Street between Fourth and Fifth avenues – to Dennis Dahlmann for $5.25 million. The city purchased the property for $3.5 million 10 years ago and has been making interest-only payments on the property for that time. A balloon payment is due at the end of this year. The DDA has been shouldering roughly half of the interest payments on the loan taken out by the city.

The former Y building offered 100 units of single-resident occupancy (SRO) low-income housing. Soon after the city’s purchase, the mechanical systems in the building failed, and all the residents needed to be relocated. The building was subsequently demolished, which the DDA paid for. Equipment was installed so that it could be used as a surface parking lot until its ultimate disposition was determined.

At its Nov. 18 meeting, the council did not delve into the question of how the net proceeds of the pending sale would be defined, but some councilmembers indicated they were pleased that the result would be a deposit into the city’s affordable housing trust fund. A year ago at the council’s Oct. 15, 2012 meeting, councilmembers 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 …

That council policy was approved after the DDA board passed its own resolution on Sept. 5, 2012, encouraging the city to return to a previous policy that dedicated the net proceeds of sales of all city-owned land (not just the Y lot) to support affordable housing.

On Dec. 4, Keith Orr offered a replacement to the resolution that was included in the board packet. Orr alluded to the fact that he was bringing forward the resolution – because he served in the “Dave DeVarti seat” on the DDA board – even though many people had worked on it.

By way of additional background, during his period of service on the DDA board, DeVarti was a staunch supporter of funding for affordable housing. DeVarti was not reappointed, and in late 2008 Orr was appointed to replace him. After DeVarti left, board members sometimes have quipped that they were “channeling Dave DeVarti” when they spoke in support of affordable housing.

During public commentary at its Nov. 6, 2013 meeting, DeVarti addressed the board on the topic of the former Y lot, suggesting that the DDA purchase the lot outright, so that the need to repay the loan would be removed as the impetus toward selling the lot. That approach would give the city a lot more flexibility, he had argued.

The substitute resolution offered by Orr at the board’s Dec. 4 meeting included a separate “whereas” clause establishing the DDA’s position that affordable housing is in the interest of the downtown. The revision also named specifically the net amount that the DDA believes it has invested in the property: $1,439,599. And finally, the revised resolution separately recommended the city council waive its own reimbursement of its costs in connection with the sale of the former Y lot parcel.

Orr pointed out that the address of the property is 350 S. Fifth. He noted that the city now has a purchase agreement. Orr said that part of the sales agreement is that entities that had investment money in the property would be reimbursed. [Later in the meeting, city administrator Steve Powers, who was attending his first meeting as a DDA board member, corrected Orr's statement, pointing out that this was not part of the sales agreement but rather a city council resolution, passed in 2012.] The largest portion of the DDA’s contribution was paying for the demolition of the former Y building and picking up a portion of the interest payments.

A document provided at the DDA board meeting showed the demolition costs at $1.469 million and interest payments totaling $600,426 since 2004. The net contribution, factoring in the income the DDA received from the surface parking operations it established on the parcel after demolishing the building, was $1,493,959. So the resolution asked the DDA board to waive reimbursement of that amount. [The copy of the resolution distributed to the audience named $1,439,959 as the amount of the DDA board was waiving. That's the amount Orr named in reviewing the resolution. A separate document distributed at the meeting with the actual breakdown of payments and costs showed $1,493,959. The correct math based on those figures is the greater amount: $1,493,959.]

The resolution also asked the city council to waive its claim to reimbursements, which Orr said was around $ 2.7 million. The goal, Orr said, was to ensure that a substantial investment in affordable housing can be made.

Joan Lowenstein followed Orr’s description by saying that the DDA’s goal has been to see that the maximum amount from net proceeds of the sale go into the city’s affordable housing trust fund.

Orr confirmed Lowenstein’s understanding, but added that the resolution reflected everything that the DDA could do to maximize the investment in affordable housing as a result of that property sale. The DDA’s commitment to affordable housing, Orr said, was confined to investments within the district, or within 1/4 mile of the district. The city had more flexibility, Orr said.

Al McWilliams asked about the general motivation to use the proceeds from the Y lot to support affordable housing. Orr said that one reason is historical: The former Y building had included 100 single-resident occupancy units that provided low-income housing.

Orr continued by saying there’s always been this feeling that the proceeds of the sale should help low-income and affordable housing. Orr also pointed out that when board chair Sandi Smith served on the city council, the council was already talking about doing that. “It’s not a particularly new idea,” he concluded.

Bob Guenzel said that in his mind, it was more than a promise that those 100 units would be rebuilt in the downtown area, even if not on the same piece of property. That hasn’t happened for a number of reasons, Guenzel said, but the “substitute” is that the proceeds of the sale would be used for affordable housing. A lot of people remember that community commitment that was made, he concluded.

Russ Collins asked: Does the city have specific plans to build – or cause to be built – affordable housing? Collins wondered if there was any plan to contract with the Delonis Center [a homeless shelter located in Ann Arbor] to operate supportive housing? He wondered if there was any strategic plan to actually execute anything?

City administrator Steve Powers said that the city council’s first action would be to complete the sale of this property. He said he was not aware of any specific steps pending after that.

Collins ventured that there’s no strategic plan that the city is party to, other than “collect a bunch of money and use it for affordable housing?” “Council has no strategic plan …? If they do, that’s great,” Collins said. Powers responded to Collins by saying that the city is a party to work with the Washtenaw Housing Alliance (WHA) and the county’s office of community and economic development. There’s not a city-specific plan at this time, Powers said. WHA and the county’s office of community and economic development are talking about doing an assessment of affordable housing needs.

There’s a continuum, Guenzel said, from the very poorest to what is called workforce housing. He told Collins that there are a lot of discussions about it.

Historically, Smith said, there were funds in the affordable housing trust fund, and that has been spent down. There was no ability to plan for those funds, she said, because the balance is under $200,000 right now. It’s pretty nominal, she said, and you can’t build a unit for that amount. Guenzel noted that the question of whether some funds could be used for bricks-and-mortar versus supportive services was yet to be determined.

Collins had concerns about how prudent it is to allocate money toward a generally good idea without a clear strategy of what to do. “It’s great to do nice things. The DDA tries to do nice things, and we’re told that we’re a shadow government,” he said. If there’s no community strategy for addressing this, the DDA is doing something that might be nice in the future, he said, but he indicated he didn’t feel this was genuinely addressing the issue.

Smith replied that she didn’t necessarily think the DDA was the organization to tackle affordable housing. Smith noted the DDA has historically set aside money for affordable housing – and it’s now built into the DDA ordinance that the DDA is required to set aside $300,000 annually for affordable housing. She strongly supported the resolution because the DDA would then be able to leverage funds with the city and the county. She pointed to the last “resolved” clause that called on the city to follow the DDA’s example. Then those resources could be used to create a solid plan and move forward, she said.

John Mouat asked if it would be possible to take advantage of the city’s housing and human services advisory board (HHSAB). That would be a good entity to consult with in its advisory capacity. Powers indicated that he thought HHSAB had already had those kinds of discussions.

Outcome: The board unanimously approved the resolution waiving the DDA’s interest in proceeds of the sale of the former Y lot.

Proceeds of the Y Lot Sale: Parking Contract

Toward the end of the meeting during communications time, John Splitt indicated that he had some concerns about the sale of the former Y lot, based on the contract – under which the DDA manages the public parking system for the city. Under the contract, he said, the DDA is supposed to be given notice about the removal of parking spaces from the system. Sandi Smith stated that “We have not received written notice.”

Roger Hewitt responded to Smith by saying that he’d reviewed the most recent contract and he was not sure that the city actually is required give notice. DDA executive director Susan Pollay said that the contract refers to a “lease” and not a “sale.” Splitt said he just wanted to make sure that there was enough time to move equipment.

City administrator Steve Powers responded by saying that the city would be providing information about that, quipping: “It’s in the mail.” In connection with the sale of the property, the city would work through the removal of the parking equipment with the DDA, Powers said.

From the parking contract [emphasis added]:

The City shall not lease any portion of individual Facilities to third parties where such lease (either alone or cumulatively with other leases in such Facility) would reduce the number of usable parking spaces in such Facility by more than one percent (1%) or five (5) parking spaces, whichever is less, without first (i) providing DDA with thirty (30) days prior written notice; (ii) consulting with DDA about the location and terms of use of such leased spaces to reduce the impact of such use on DDA’s use of the Facility; and (iii) upon DDA’s written request delivered no more than fifteen (15) days after notice of the proposed lease, executing a side letter between City and DDA, the sole purpose of which is to make DDA whole for the loss of Gross Parking Revenue associated with the reduced parking spaces.

FY 2013 Audit

Board member Roger Hewitt made the motion to accept the DDA’s 2013 financial audit. Every year the DDA has an audit performed to ensure the DDA’s financial position is accurately stated. [.pdf of DDA FY 2013 audit]

DDA board member Roger Hewitt

DDA board member Roger Hewitt.

The DDA uses the same firm as the city [Rehmann], Hewitt said. The audit came back this year with an “unmodified” opinion, meaning there were no changes. He explained that the outcome essentially means that it was “clean” and that the DDA’s financial statements are an accurate reflection of the DDA’s financial position.

There was a suggestion, he allowed, to have an independent review of general journal entries. That’s been put in place, he said. A CPA the DDA has on contract will review those journal entries, he reported.

“Everything is just fine, according to our auditor,” Hewitt said. The conversation with the auditor was a good conversation that will help shape the budget in the upcoming year, Hewitt said.

Outcome: The DDA board voted unanimously to accept the FY 2013 audit report.

624 Church Street Parking CIL

By way of background, on Nov. 6, 2013 the DDA board approved the purchase of 48 parking permits under the contribution-in-lieu (CIL) program for a revision to a proposed residential development at 624 Church St. in downtown Ann Arbor. The spaces were approved to be provided in the Forest Avenue parking structure.

The CIL program allows a developer the option of purchasing permits to satisfy a parking requirement that would otherwise be satisfied by providing parking spaces on site as part of the project.

The original proposal for 624 Church, which received site plan approval from the city council at its March 4, 2013 meeting, was for a 13-story, 83-unit apartment building with approximately 181 beds. And for that version, the Ann Arbor DDA had authorized the project to purchase up to 42 monthly permits through the city’s contribution-in-lieu program.

The newly revised 624 Church St. project, which still needs planning commission and city council review, is larger than the original project, with roughly 122 units and 232 beds. The parking requirement is a function of the by-right premiums for additional square footage beyond the basic by-right of 400% floor area ratio (FAR). So the parking requirement for the revised project is greater than for the original version of the project. That’s why the DDA was asked to increase the number of permits from 42 to 48. The number of required parking spaces for the revised version of the project is actually 53, but five of them will be provided on site.

The DDA makes the decision about whether there’s adequate capacity in the parking system to allow the sale of additional monthly permits – because the DDA manages the city’s public parking system under a contract with the city.

Ann Arbor’s “contribution-in-lieu-of-parking” program was authorized by the city council on April 2, 2012. That program allows essentially two options: (1) purchase monthly parking permits in the public parking system for an extra 20% of the current rate for such permits, with a commitment of 15 years; or (2) make a lump sum payment of $55,000 per space. It’s option (1) that the 624 Church St. project is using.

624 Church Street Parking CIL: Public Commentary

Brad Moore, architect for the 624 Church St. project, appeared before the DDA board during public commentary time at the start of the meeting. He asked board members to consider modifying the terms under which the 624 Church St. project would be able to lease spaces monthly parking spaces under city’s contribution-in-lieu (CIL) program. Currently the project has been allocated 48 spaces for the minimum period under the CIL, which is 15 years. It’s come to the attention of the developer (Opus) that as it lines up financing, the financing companies would like to have two 10-year extensions added to the agreement, so that the length of the agreed-upon leasing of the parking spaces would cover at least a standard 30-year mortgage.

Moore said that Opus was asking that the agreement be amended – to add an option for two 10-year agreements that would exceed the minimum financing period. DDA executive director Susan Pollay told Moore that the item could be brought to the board in the next few minutes as an action item during the operations committee report.

624 Church Street Parking CIL: Board Deliberations

A draft resolution was distributed to the board at the meeting that would have addressed the issue that Brad Moore had raised. Roger Hewitt said the issue had only been brought to his attention that day.

He said that in his experience, funding for large commercial real estate projects tended to be for a 20-year financing period. He referred to Village Green’s City Apartments project as well as Ashley Mews as examples.

The resolution would add an additional five years to the existing agreement so that it could run, at the owner’s option, for 20 years instead of 15 years.

The indication from Moore was that the five-year extension would still endanger the financing for the 624 Church St. project. Hewitt indicated a reluctance to commit to a parking agreement for the length of time that Moore was requesting. He wanted to see some evidence that a 20-year financing plan – which in his experience is typical – is not possible before setting a new precedent.

Russ Collins ventured that the matter could be tabled until more information is received. Moore said that the parking would not necessarily be tied up in a single structure. Hewitt reiterated his concern that a 30-year term in this case would set a precedent for other developers.

Al McWilliams proposed an approach that would provide for optional renewal.

After some back-and-forth, Sandi Smith indicated that her preference would be for Moore to come back to the operations committee and allow the committee members to “chew on it” a bit more. The next operations committee meeting will take place on Dec. 18 at 11 a.m. Hewitt said.

Outcome: The board tabled the question of the CIL agreement in connection with the 624 Church St. project.

Communications, Committee Reports

The board’s meeting included the usual range of reports from its standing committees and the downtown citizens advisory council, as well as public commentary. In addition to information reported earlier in this article, here are some highlights.

Comm/Comm: Main Street BIZ

During public commentary time at the start of the meeting, Ellie Serras introduced herself to the DDA board as the community relations director for the Main Street Business Improvement Zone (BIZ).

By way of background, the Ann Arbor DDA board voted on April 1, 2009 to award $83,270 to defray various costs associated with the formation of the Main Street BIZ. Those costs included accounting, auditing, operations and legal services.

On Dec. 4, Serras told the board she was there to bring them up to date on the organization’s activities and plans for the future, and to thank the board for their investment from the very beginning. A BIZ allows property owners to establish a vision and to select services compatible with that vision, she said. The DDA’s support of the Main Street BIZ allowed development of a successful campaign that has grown into a fully-functioning provider of important services that have improved the quality of the Main Street neighborhood, she told them.

The Main Street BIZ was established in 2010 according to the state enabling legislation, receiving overwhelming support from property owners in the three-block area of Main Street from Huron Street down to William Street, she said. The Main Street BIZ provides sidewalk snow removal, sweeping, handbill removal and landscape improvements in that area.

The services and contractors had been “skillfully managed” by the Main Street BIZ board of directors within the parameters of an annually approved budget, Serras said. Funding for the BIZ is generated by an assessment added on to the property owners’ summer and winter tax statements, she said. The BIZ board had been diligent in protecting the property owners’ investment and as a result, the existing fund balance is adequate so that even if this winter brings a severe snowstorm, the snow removal could be handled without imposing the winter tax assessment this year.

So the BIZ board has determined that no BIZ assessment would be on their 2013 winter tax statements. Even though the assessment will not be imposed, the area will still receive the same level of consistent services that it has over the last three and a half years, Serras said.

The Main Street BIZ is now currently contemplating the possibility of expanding its boundaries, she reported, based on positive comments from surrounding property owners. As it contemplates such an expansion, she continued, the Main Street BIZ would be using the blueprint that had been developed in connection with the grant that the DDA had awarded to the Main Street BIZ. The blueprint will be updated to include changes to the state statute and the procedures used for establishing a BIZ.

In appreciation to the DDA, Serras said, the BIZ board wanted to invite the DDA board to join the BIZ for coffee and pastries to talk about the BIZ – on Jan. 28 at 9 a.m. at the DDA offices. The BIZ would not be asking the DDA for anything, but wanted to express its appreciation for the DDA’s support. She alerted the board to the BIZ website: annarbormainstreetbiz.com

Comm/Comm: Downtown Citizens Area Advisory Council

Ray Detter addressed the board as chair of the downtown area citizens advisory council. He told the DDA board that the CAC has a holiday party every year when it discusses developments over the last year and things that it wants to work for in the coming year. He said the CAC supports more public art, more trees – and taking better care of those that are already in place. The group also supports improvements to the alley between East Liberty and East Washington near The Liberty Square parking structure, to make it a more public place, he said.

The CAC supports the DDA’s development of a streetscape framework plan, and its parking and transportation management plan. The downtown transportation plan is part of a transportation plan for the entire county, Detter said, that includes Zipcars, mopeds, the Ann Arbor Area Transportation Authority’s AirRide service and the getDowntown go!pass program. Detter continued by mentioning the north-south commuter rail project (WALLY), and the possible connector. The CAC wanted to avoid any need for additional above-ground parking structures, Detter said.

But the two most important areas of focus, he said, were population and retail. Retail will not thrive, he said, without a commitment to residential. The CAC applauded the success of Urban Outfitters, Bivouac and Renaissance, but was appalled by the loss of Selo/Shevel Gallery and Seyfried Jewelers.

Comm/Comm: State Theater

Ray Detter, speaking on behalf of the downtown area citizens advisory council, continued by saying that the CAC was committed to the survival of the State Theater as part of a historic theater district in downtown Ann Arbor. The theater helps define the essential identity of downtown Ann Arbor, he said. Detter noted that many people remembered the Campus Theater.

Detter acknowledged the demand for office space, but that can’t equal the value of the two theaters, he contended. The Michigan Theater, Detter said, had provided the venue for the first “talking pictures” in Ann Arbor in 1928 and the State Theater had been around since 1942. [DDA board member Russ Collins, who's executive director of the Michigan Theater, corrected Detter, pointing out that it was the Orpheum that was the first "talking picture" movie theater.]

The State Theater attracts 50,000 people a year, Detter said. Some people “might think it’s a dump at this point,” but there are ways of fixing it up, he said. Detter added that he was looking forward to the expansion of the Cinetopia series with the State Theater as one of the venues.

It’s a challenge to save the State Theater, Detter said. But the Michigan Theater board has taken the initiative to open a conversation with State Theater LLC to work on a way for the community to purchase and retain the State Theater as part of the “theater district.” The DDA should be a part of that process, Detter said. Other DDAs have done this kind of thing, “and we can do it, too.” Detter said he still remembered the $250,000 that had been given by the DDA for the lobby of the Michigan Theater.

Later in the meeting, Russ Collins followed up on Detter’s commentary by saying it was not a DDA matter per se. But regarding the State Theater, the Michigan Theater is in talks with the owners of the State Theater building. He was hopeful that would have a positive outcome with respect to preserving the cinema exhibition capability at the State Theater. He was happy with the owner’s willingness to talk.

Comm/Comm: New Board Members

Board chair Sandi Smith invited the new board members who’d been added since the last meeting to introduce themselves.

City administrator Steve Powers quipped that he would not need four minutes [the time limit afforded public speakers]. “It’s a pleasure to be with you,” he said. When mayor John Hieftje had asked him to serve, he’d agreed with enthusiasm, he reported. He appreciated and understands the importance of the DDA to the overall mission of the city. The city council had confirmed his appointment Monday night [Dec. 2]. He told the board he’d worked as city administrator for a little over 2 years. In that time, he’d gotten to know executive director Susan Pollay and had enjoyed the professional relationship between the city and the DDA. Powers saw his service on the board as strengthening that existing relationship between the city and the DDA.

Cyndi Clark introduced herself as a retail owner on Main Street for Lily Grace Cosmetics. A month ago, she’d just opened up a second business, she said – a spa. She was delighted to be on the DDA board. Her family lives in Ann Arbor and she was born and raised here, she said. She was delighted to be working with everyone. “It’s a full term for me!” she concluded.

Comm/Comm: Connector

By way of background on the connector study, the Ann Arbor Area Transportation Authority is currently conducting an alternatives analysis study for the corridor running from US-23 and Plymouth southward along Plymouth to State Street, then farther south along State to I-94. The alternatives analysis phase will result in a preferred choice of transit mode (e.g., bus rapid transit, light rail, etc.) and identification of stations and stops. A previous study established the feasibility of operating some kind of high-capacity transit in that corridor.

Roger Hewitt participates on the technical committee for that study. The DDA has contributed funding toward the study.

At the Dec. 4 DDA board meeting, Hewitt reported that three public meetings had been held on the connector project recently. The board then watched a video created to explain the project. After presentation of the video, Hewitt described the public meetings as an effort to get input on the different route options. The turnout was pretty good, he said. The morning session wasn’t all that well attended, with perhaps 10 people, Hewitt said, but the noon and evening sessions each had over 25 people attend, he said. People had a lot of questions and a lot of information was exchanged, he said, but he allowed there wasn’t as much feedback on specific transit routes as they would have liked.

Unless you’re in the “nitty gritty of it,” Hewitt felt that it’s a bit overwhelming to consider all the possibilities. The next meeting of the technical committee would take place on Friday [Dec. 6], he said, with a follow-up meeting the next Monday [Dec. 9]. The study needs to be completed in the first quarter of 2014, he said. The outcome of the study would be the “preferred local option,” Hewitt said, and he’d keep the board up to date on that.

Joan Lowenstein asked Hewitt to confirm that in the context of the basic “boomerang” route, there would still be a significant impact depending on how the route was planned through the downtown. Hewitt confirmed that, and said there had been a lot of discussion about it. One possibility that had been suggested was to just head south on State Street. There are significant problems with the width of all streets. He’d been pushing for the idea that the route needed to come at least as far west as the Blake Transit Center [on Fifth Avenue].

Right now, the group is looking at two stations – one in the central campus (State Street area) and one in the center of downtown (Main Street area). Neither the route nor the station locations have been determined, he said. There was some desire not to cross Main Street, he noted. That’s because the amount of federal support would depend on a demonstration that there’d be a savings in travel time – because “that’s how the feds measure things,” he said.

If the route crosses Main Street, then it would have to cross back over Main Street to get to the South State Street area, Hewitt explained, and with the current traffic backups on Main Street, it would be easy to get backed up during rush hour in the Main Street area. So the group is looking to stay east of Main Street.

From left: John Mouat and Roger Hewitt

From left: John Mouat and Roger Hewitt.

John Mouat asked for an analysis of the economic impact of such a project. In that context, he asked about the planned timing of the project. Hewitt responded by saying, “We’re talking about a while!” He noted that this is the second phase of the study, after the initial feasibility study. That study had shown that the existing ridership justifies a more robust form of transit than is currently in place. The current phase is an alternatives analysis, which would determine the local “favorite” route and mode of transportation. After that an environmental study would be done.

After all of that, you “stand in line for federal dollars,” Hewitt said. For a project that meets the right criteria, the federal government might fund up to half the cost of the project, he said. The cost, depending on the route and the mode, could be as little as $100 million and as much as $500 million. After getting the federal dollars lined up, he continued, you’d have to line up the local match. The University of Michigan has stated publicly that they’d be involved, he said, without putting a particular dollar figure on their participation. After construction and ordering of vehicles, Hewitt said, we shouldn’t expect anything rolling for 10 years.

But this phase of the study, Hewitt said, would be completed in the next three months or so. He felt that a decision was pretty close for the downtown route. It would mean a pretty big change to downtown, Hewitt said. He allowed that it’s hard to get people excited about this now, when the project is 10 years off.

Comm/Comm: Bicycles, Alt Transportation

Keith Orr gave an update on the bike share program. A representative from B-Cycle, the selected vendor, had been brought in by the Ann Arbor-based Clean Energy Coalition (CEC). They looked at potential sites for locating stations. The few on-street spots were too narrow for a station, Orr reported. So as of now, there were no requests from the CEC of the DDA for an on-street parking spot. The CEC still anticipates an Earth Day opening in the spring of 2014. Right now, the plan is for 14 stations, Orr said. Stations will be located as far north as the University of Michigan north campus, and as far west as Ashley Street.

Orr also reported out on the first usage stats for the Bike House – an enclosed facility in the Maynard Street parking structure. Orr reported that people love having it there, saying that it’s largely a commuting option for people. The time records for when people use it show that people use it primarily at the beginning of the day and the end of the day, he said, but it’s not the same people all the time. He concluded that people who are using the Bike House are not relying on one mode of transportation. Discussion is taking place about other locations where similar facilities could be constructed, Orr reported.

And based on recent go!pass stats, it continues to be a very robust program, Orr said. [The DDA funds the go!pass program, which is administered by getDowntown, whose staff are employees of the Ann Arbor Area Transportation Authority.] More rides were taken and more cards were sold and used. Orr concluded that it continues to be a very popular and important program.

Comm/Comm: Winter Classic, The Puck Drops Here

By way of background, two major events are scheduled for New Year’s Eve and New Year’s Day in Ann Arbor: The Puck Drops Here and the National Hockey League’s Winter Classic Game. In connection with the NHL Winter Classic Game to be played on New Year’s Day, the Ann Arbor Area Convention and Visitors Bureau is hosting a New Year’s Eve event called The Puck Drops Here, which will mimic the dropping of the lighted ball in Times Square, but with a 6-foot diameter lighted “puck” that is being fabricated by METAL.

At the DDA board’s Dec. 4 meeting, DDA executive director Susan Pollay reviewed highlights of the strategy that will be deployed for the NHL Winter Classic and The Puck Drops Here events.

For New Year’s Eve, the Fourth and William parking structure, as well as the Forest structure, will have a flat rate fee. That way, people will not have to stop at the cashier booth on their way out.

On New Year’s Day, the city council had approved the street closures that will be in place. The NHL has asked that staffing be provided at public garages, Pollay said. That would allow for the reservation of a parking space in advance. If people reserve in advance, that would allow them to drive directly to a specific location.

Staff would also be handing out maps – mostly with an eye to help people after the game find the place where they’d parked. Pollay also told the board that the names of those businesses that are going to be open on Jan. 1 would be listed on the back of the map.

At all structures and lots, Pollay said, a flat fee of $5 would be charged on New Year’s Day. It’s meant to reimburse the DDA for its costs, not to make a lot of money.

John Mouat asked if anyone had developed a projection of how many people will be needing to park. Pollay said that to her knowledge, no. As much as possible, people are being encouraged to use the buses and shuttles that will be provided. They’re also working to communicate to people about the parking that’s available at locations away from the stadium.

City administrator Steve Powers noted that lawn parking will be allowed, as it is on home football game days.

Comm/Comm: Downtown Ambassadors

By way of background, for several years, the Ann Arbor DDA has had an interest in maintaining some kind of additional police patrol presence in the downtown. In the mid-2000s, the DDA entered into a contract with the city of Ann Arbor with the implicit hope that the city would maintain the dedicated downtown beat cops. That contract was structured at the time to pay the city $1 million a year for 10 years, with the city able to request up to $2 million a year for a maximum of $10 million.

That hope was not realized, and the DDA has since discussed the idea of providing additional funding for police or for “ambassadors.” The idea of ambassadors was explored in the context of subsequent re-negotiations of the contract between the city and the DDA under which the DDA operates the parking system. The DDA wanted to be assigned responsibility for parking enforcement (a function performed by the city’s community standards officers) and imagined that activity to be performed in an ambassador-like fashion.

At its June 3, 2013 meeting, the city council approved a resolution encouraging the DDA to provide funding for three police officers (a total of $270,000 annually) to be deployed in the DDA district. DDA board members visited Grand Rapids this fall to observe a new downtown ambassador program in that city. The initial report from that visit was given at the Ann Arbor DDA board’s Nov. 6, 2013 meeting.

At the board’s meeting on Dec. 4, Roger Hewitt reported that the operations committee had a lengthy discussion about the idea of hiring ambassadors, based on the visit by some board members to Grand Rapids to see the ambassador program there. A number of views were expressed, Hewitt said, but most people thought it was a good idea and that the Ann Arbor DDA should aggressively pursue it. At the next operations committee meeting, Hewitt said, it would be pursued. Personally, he said, he would like to see something in place for the summer of 2014, if it’s possible to move that quickly.

Comm/Comm: Prosperity

Joan Lowenstein reported out on the partnerships committee discussion about the A2 Ypsilanti Regional Chamber’s annual Impact conference.

Keith Orr, Joan Lowenstein

Keith Orr and Joan Lowenstein.

The focus this year was based on a presentation made by Lou Glazer of Michigan Future Inc. Glazer’s work suggested that there’s a strong connection between prosperity and placemaking, and attracting young talent. The trends indicate that prosperous states show a higher proportion of wages from the “knowledge industries” – medical, technical and legal professions, Lowenstein said. Prosperous states also have a high proportion of college grads. Taxes don’t play as much of a role in prosperity, she said – it’s all about educational attainment and quality of place. Michigan and Ann Arbor are lagging behind other places in terms of the number of young professionals who are attracted here.

For example, she said, Madison, Wisc. has twice the number of young professionals as Ann Arbor does, Lowenstein reported. Glazer had said that Ann Arbor has an important role to play in prosperity, but the elements that are key to that need to be embraced: transit, private sector growth and density, she said. A lot of people want to attract families, but attracting young professionals will lead to that, she said, because people tend to establish families where they get their first job. Ann Arbor needs to do a better job of engaging young professionals in the community by giving them a better voice, Lowenstein said.

One of the panels at the Impact conference included young people who are reluctant to put themselves out in public positions, because of the nature of the media and social media – because you can get trashed by putting yourself out in public, Lowenstein said. She called it an unfortunate element of our modern life.

DDA board member Al McWilliams

DDA board member Al McWilliams will be working on DDA communications.

Lowenstein also reported that the partnerships committee meeting will establish a subcommittee focused on communications. Al McWilliams and Rishi Narayan will head up that subcommittee, she said – noting that McWilliams is involved in that sort of thing all the time. [McWilliams is founder of the ad agency Quack!Media.]

January’s board meeting, which was originally scheduled for Jan. 1 – because it’s part of the first-Wednesday meeting pattern – was shifted to Jan. 8. There was no traction for the possibility of changing the day of the week or the noon meeting time for the regular board meetings.

Comm/Comm: Pedestrian Crashes

During public commentary time at the end of the meeting, Ed Vielmetti addressed the board about pedestrian safety issues. He noted the outcome of the city council’s recent action on the city’s crosswalk law [and the announcement by mayor John Hieftje that he would be vetoing the change the council had voted 6-4 to approve]. The current ordinance mostly addresses outside-downtown issues, Vielmetti said, with its reference to non-signalized crosswalks. In preparing for the city council meeting, Vielmetti said, he’d looked at about eight years of car crash data. What he’d noticed consistently is that the majority of pedestrian crashes happen in the downtown and campus area – probably because lots of people are walking downtown.

The narratives in some of the accident reports often describe how the pedestrian was crossing with a walk light, while the car had a green light and was turning, but didn’t see the pedestrian, Vielmetti said. This is an issue that’s within the purview of the DDA to address, he added. There’s only so much education you can do, with a transient student population. And there’s only so much enforcement you can do without adding to the police force. But the engineering could be addressed, he said – through careful attention to the built infrastructure where people cross the street, or near parking structures where there are a lot of pedestrian-car interactions.

Present: Al McWilliams, Cyndi Clark, Bob Guenzel, Roger Hewitt, Steve Powers, John Splitt, Sandi Smith, Russ Collins, Keith Orr, Joan Lowenstein, John Mouat.

Absent: Rishi Narayan.

Next board meeting: Noon on Wednesday, Jan. 8, 2014, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date]

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  1. By John Floyd
    December 11, 2013 at 10:50 pm | permalink

    “For example, she [Lowenstein] said, Madison, Wisc. has twice the number of young professionals as Ann Arbor does, Lowenstein reported. ”

    Doesn’t Madison also have twice the population of Ann Arbor?

  2. By Luis Vazquez
    December 12, 2013 at 1:49 am | permalink

    Why not make replacement of the light poles into a local artists contest to see who could design the best ones, and then use monies from the percent for art fund to pay for it? Everybody goes home happy: some local artists go home with some cash prizes, the percent for art funds get used for a real need that the city and DDA capital funds don’t get tapped into, downtown gets some new locally designed lighting, and best of all it takes away from the city’s growing population of anti-development whiners’ arguments to not re-invest in our city. C’mon city council luddites, start thinking out of the box!

  3. December 12, 2013 at 8:37 am | permalink

    Re (1): Madison had 240,000 in the 2010 census. It also has several close-in suburbs and the total population of (otherwise mostly rural) Dane County is nearly 540,000. Madison is the state capital and the UW is not only the flagship university of the state but also the land-grant university. (I received my degree from the College of Agriculture there.) So Madison is the equivalent of Ann Arbor, Lansing, and East Lansing combined. And it has only twice the number of young professionals?

  4. December 12, 2013 at 9:41 am | permalink

    RE: Ann Arbor compared to Madison in terms of young professionals

    I think that Lowenstein’s characterization of the comparison of Madison to Ann Arbor in terms of young professionals might more generously be interpreted as a reference to proportion than to raw numbers. That finds some support in a 2008 report, also by Glazer’s shop: “There are 8,000 young professional households in Ann Arbor. For Ann Arbor to be at the same proportion as the Madison it needs to have 13,000 young professional households in the city.”

  5. By John Floyd
    December 12, 2013 at 10:19 am | permalink

    @2 Mr. Vasquez

    “the city’s growing population of anti-development whiners’ arguments to not re-invest in our city.”

    I could be even more clueless than my kids think, but I am not aware of people who oppose re-investment in our city – much less a growing population of them. On the other hand, any number of people (including me) have spoken of developments that make more or less sense, depending on their location, scale, purpose, fit with context, and other place-making considerations. Are you confusing pro-place making with anti-development, or is there another set of people to whom you are referring?

    Your idea of engaging local artists to design Main Street light poles is a great idea, what ever its funding source. I, myself don’t think that even great ideas, like yours, suddenly make it OK to transfer un-related bond funds into an “Art” fund, but I still like your idea about locally designed light poles. Perhaps we can get some action on it. Local aesthetic touches on city infrastructure make more sense to me as expressions of our artsiness, than, for example, That Thing in front of city hall, designed by A Guy from Somewhere Else, that is neither beautiful, nor functional, nor reflective of our community.

    @4 Dave,

    I get your point about a possibly omitted reference to “per-capita” yuppies, but I’m not certain that that trumps Vivienne’s point about the greater centrality of Madison in the overall scheme of Wisconsin vs. that of Ann Arbor in Michigan, which in turn affects their relative demographics. It also would be interesting to me to understand what the rationale is behind the idea that Ann Arbor is somehow suffering a Yuppie gap. Were this gap real, why would it matter? I confess that I do not see the blight that only a disproportionate influx of Yuppies can cure.

  6. December 12, 2013 at 12:45 pm | permalink

    Re (4): I would hesitate in making any assumptions that 2008 figures apply to 2013. The country and the economy have undergone some major shifts since then.

    I’d like to look at the raw numbers. First, how do we define “young professional”? Age range? Income? Education? Profession? (I haven’t tried to read Glazer.) But those qualities are not easily found in census figures, at least not in combination. Where are the data on this and who has been collecting them?

  7. By Steve Bean
    December 12, 2013 at 6:39 pm | permalink

    “Taxes don’t play as much of a role in prosperity, she said – it’s all about educational attainment and quality of place.”

    That statement (and that’s not to say that Joan) overlooks those members of our community who are currently unemployed, retired, otherwise on a fixed income, in deep medical-bill debt, children in the homes of those others, or some combination thereof.

  8. By Sandi Smith
    December 13, 2013 at 7:23 am | permalink

    Joan was reporting briefly on a presentation. For more statistics and why they matter, try this: [link]

  9. December 13, 2013 at 11:18 am | permalink

    First, I did not intend to be presenting support for Glazer’s point as conveyed by Lowenstein, but rather to be framing the conversation in the terms I believed it had been defined: proportions, not raw numbers. I think one could lead to an interesting conversation, while the other begins not so usefully, by implying that Lowenstein/Glazer are daft.

    Here’s some numbers passed along by former city councilmember Carsten Hohnke, who happened to have pulled the following summary data on educational attainment and earning from 2007-2011 American Community Survey data. It shows Madison and Ann Arbor as roughly parallel in terms of proportions on those two metrics – but Hohnke pointed out that slicing the data by household might give different results:

    Proportion with bachelor's or higher
          AA    Madison
    25-34 15.5% 13.6%
    25-44 24.2% 21.6%
    Proportion making 4x poverty
          AA    Madison
    25-34  6.2%  7.1%
    25-44 12.9% 13.2%
  10. December 13, 2013 at 11:18 am | permalink

    Thank you for the link (8). The report does not address the questions I raised, and it does not mention Madison. It compares the economies of Minnesota and Michigan over the period 1990-2011. It draws some broad conclusions about the problems that the focus in Michigan on the auto industry caused, in comparison to more focus on knowledge-based industries in Minnesota. This is the key summary statement:
    “The lesson Michigan needs to learn is also clear: The places that are doing best today and almost certainly will do the best in the future are those states and regions that are concentrated in knowledge-based services,not factories or any other sectors of the economy.”

    While that may be a well-substantiated conclusion, it does not lead directly to the solutions that many are offering, including a concentration of dense development in the downtown. The discussion of “placemaking” in relation to attraction of “talent” needs a much more expansive forum than this comment chain.

  11. By Steve Bean
    December 13, 2013 at 1:21 pm | permalink

    Re: #8, I got as far as the first paragraph before finding a pretty glaring flaw.

    “The lesson Michigan needs to learn is clear: The places that are doing best today and almost certainly will do the best in the the future are those states and regions that are concentrated in knowledge-based services, not factories.”

    That’s chasing the last trend (wave). Asserting that they “almost certainly will do the best in the future” is based on emotion, not reason. Knowledge-based services don’t produce electricity, solar panels and wind turbines (made in factories) do. They don’t grow food, farmers and gardeners do. They don’t build houses, people do. They don’t produce, they only consume (or, at best, reduce consumption, as in the case of weatherization services and such).

    These distinctions are especially important at this juncture. The US stock markets have (finally) passed their peaks (with the possible exception of the NASDAQ, which might have one last uptick—still well shy of it’s all-time high in 2000, further evidence of the terminating uptrend being a bear-market rally, not a bull market). Stocks are now following all other financial asset classes (excepting US dollars and some cash equivalents) downward, all of them having previously topped at different points in the past 15 years.

    I flipped through enough of the report to see that the theme wasn’t something other than what I quoted above. It covers 1990-2011, which comprises the entire financial topping period, including the decade at the end of the secular bull market. Not a good basis for what’s ahead.

    The lesson Michigan has to learn is from almost a century ago, not from the recent past, because even 2008 only gave us a limited experience with how challenging the coming years of extended economic depression will be (absent some sane, global paradigm change).

    i’m a “knowledge-based” worker myself: I design and program computer database management systems. I’m quite clear that most of my clients could very well be out of business in a few years (or not be able to afford continuing services) due to the economic impacts of deflation. Making their operations more efficient simply won’t prevent that. And so (and for other reasons) I’m becoming a producer at home, and am investing as much as possible in local producers by buying their produce almost exclusively.

  12. By Dan Ezekiel
    December 26, 2013 at 1:21 pm | permalink

    Re #11: You owe me a pitcher of beer at the Old Town, Steve. In a comment left on a previous article [link], you stated: “So watch for the S&P to drop below 1573 by some time between Thanksgiving and Christmas.” However, the S&P closed at 1806 the day after Thanksgiving and at 1833 on Christmas Eve. I don’t believe the index ever went below 1750 during the period.

    As I told you in a personal email:
    “….the idea that there is any mathematical model that can predict stock market fluctuations seems to me to fly in the face of common sense and logic.

    Markets are made by averaging the bets (with real money) of numerous very smart, experienced people about the future value of certain commodities. If there were a mathematical model that could predict market behavior, and if one knew that formula, he or she could do one of two things:

    1. Keep it a closely held secret and make trillions of dollars.

    2. Publish it widely in newsletters and emails. If the model was valid and predictive, its results would already be priced into the market, because markets are made of bets on future (rather than current) values of commodities. For everyone who believes your model, there is apparently another who doesn’t believe it and is willing to bet real money against it. You think they are suckers, and they think the same about you.”

    As I also told you in my personal email:

    ” I would like to posit that it is a sucker bet to wager against the ingenuity and resilience of the human species and its markets. Paul Ehrlich and many others have prematurely predicted the catastrophic near-demise of our species and our quality of life, based on an assortment of (real) ecological ills, and so far the apocalypse has failed to arrive, at least in the near term. We keep coming up with ways to postpone (the end of) the millenia-long economic boom.”

    The point of this post is not to crow, but to offer a data point that arose from a testable hypothesis (I am a science teacher, after all). Thank you, Steve, for helping me to refine my thinking about the meaning of markets. Investing 101: Take all predictions about future market behavior, no matter how impressively cloaked with math or scientific jargon, with a grain of salt. Many an investor has impoverished him or herself by trying to “time the market”.

    To an even larger point: Markets are a prediction of the future. The future will reveal itself in all its strangeness in its own time. Who would have predicted twenty years ago that today we would all be interacting through incredibly powerful minicomputers disguised as portable phones? That phenomenon alone has vastly increased the amount of wealth in the world, and the resilient brainy human species may yet outrun the treadmill of ecological ruin. We must put forth our best effort and thinking, then wait and see….

    I wish all the readers who finished this lengthy comment a happy, green, and prosperous 2014.

  13. December 26, 2013 at 4:00 pm | permalink

    I guess that the end of the year is a good time for a debate on the future. Predicting the future is indeed unfruitful, since one would have to figure in every possible variable to do so. I have no faith in the Elliott Waves, which in my opinion are observational, not predictive. How could a repeating model of that sort predict the effect of the Fed’s pouring money in to boost the stock market?

    But positing that if certain trends continue, a certain future is possible does make sense. We then can take steps to moderate the variables. As a nation, we consume less fuel for automobiles than we did. (Why the gas tax is now not paying enough for roads.) Many of us have changed the way we live in order to reduce our environmental impact, and it does add up. That was based on predictions of future outcomes.

    Dan Ezekiel’s comment reminded me of a recent book review which appeared in the December 5 issue of the New York Review of Books. [link – there is a paywall.] It relates the bets made between Julian Simon and Paul Ehrlich on just such matters. I’m still on Ehrlich’s side, though the review points out inadequacies on both sides.

    Suggested reading on this subject: “2052″ by Jorgen Randers (update on the classic “Limits to Growth” based on computer modeling). “Treading Softly” by UM professor Thomas Princen (challenges the notion of salvation through human ingenuity). Many publications of the Earth Policy Institute (Lester Brown) [link] which appear to me to be data-driven and nonideological.

  14. By Steve Bean
    December 26, 2013 at 7:18 pm | permalink

    @13: “Predicting the future is indeed unfruitful, since one would have to figure in every possible variable to do so.”

    Like that the sun will come up tomorrow, for example? Predictions, both about such things as the weather and about the markets by the Elliott wave principle (EWP) are based in probabilities, not certainties. Attempting to make it about certainty isn’t helpful to anyone. This one also happens to be within a very large and measurable context of global financial asset markets. That is, there’s supporting evidence of the trend. (Kind of like the sky getting lighter in the morning before the sun is actually visible.)

    @12: I thought it would be nice to have a beer with you in any case, Dan. Are you trying to make me regret it by sharing a one-sided account of our email exchange?

    1. The EWP is *not* a “mathematical model” or “formula”. It’s a set of rules and guidelines that describe the movements of certain market prices (such as the stock indexes). There are some mathematical aspects to it, such as Fibonacci number relationships between wave lengths, for example. It’s not a closely held secret, it’s just challenging to put into use in certain circumstances, fourth waves and B waves, in particular, as I’m learning.

    2. The EWP *is* widely publicized. Many traders make successful use of it. But most people aren’t aware of that and had no clue when the bottom dropped out in 2002-2003 and 2008 while those traders were shorting the market to take advantage.

    You’ve offered nothing beyond your single “data point”, Dan, to counter what the EWP points to as a high probability event, based on 300 years of market data. Attempting to teach me a lesson and suggesting complacency to our fellow community members is hardly scientific. I’ve pointed to a body of knowledge that might help people make those decisions, without a financial stake of my own in the doing. Your trivial(izing) beer bet is a distraction.

    This isn’t about timing the market, it’s about avoiding a loss far, far greater than whatever interim-period, pre-peak gains might be attained on paper (but likely not actualized—that is, by selling) and preparing for the broader economic fallout. (It’s also not about ecological collapse, so let’s not conflate the two matters.)

    If I had it to do over again I might do it differently. I wouldn’t have held back my warnings, just probably not talked about the imminent top so much. You’ve demonstrated what’s probably a common reaction to all that info: ‘if he’s wrong, then I don’t have to think about this anymore.’

    That’s not to say that I regret being (multiply) wrong about what appeared to be the final top (still a little ways off yet, it seems) in real time. People have either taken advantage of the opportunity to (re)consider their investments or not, and there’s still time to do so. Just maybe, when the market is down 30% they will not just take what they’re told about it being a “buying opportunity” and such, and instead will look at the overall financial picture and the deflationary trends in all asset classes, and decide to hold cash through the remaining downward waves. On the other hand, if they base their decisions on the fact that ‘Steve Bean was wrong about the top’, then all my efforts were wasted on them in any case. (But, of course, you’ll have had your beer, so…)

    “To an even larger point: Markets are a prediction of the future.”

    I’ll grant your point and raise you one: social mood predicts the markets. That’s what I learned from studying the EWP. And how does social mood move? In waves. Optimism is at record highs. (So you’re not alone.) That’s what suggests a top, not a bottom or middle.

    We’re at the top of a huge (largest ever, actually) B wave (coincidentally, sometimes referred to as a “sucker” wave), which will be followed by a correspondingly large downward C wave. Or not. And that light in the morning sky might not be the sun, either.

    I’m buckled up.

  15. By Steve Bean
    December 27, 2013 at 11:02 am | permalink

    Re 12: “How could a repeating model of that sort predict the effect of the Fed’s pouring money in to boost the stock market?”

    It predicts that those moves would play out in Elliott waves. It’s not a “repeating” model in the simple sense. The “boost” from the Fed’s actions create a greater distance to fall when the inevitable corrective wave plays out, reaching down to the area of the fourth wave of one lower degree. That target, the 1974 low, hasn’t moved.

  16. By Rod Johnson
    December 27, 2013 at 1:09 pm | permalink

    Steve, I’m curious: what would it take for you to decide that the model was wrong? I’m not asking this to be obnoxious (I hope)–I’m just trying to judge to what extent this is an empirical thing as opposed to a matter of faith.

  17. By Steve Bean
    December 27, 2013 at 3:49 pm | permalink

    @16: Evidence, Rod. Not evidence of the fallibility of those of us trying to label the waves in real time. There’s plenty of that. In the long run, as I’ve noted, the principle has ‘fit’ 300 years of data with only a few (literally, two, IIRC) exceptions at the minutes time scale (and none above that), at least according to Bob Prechter.

    Those of you who have seen me comment online over the years might have noticed that I question or challenge pretty much everything. Any of those of a ‘faith-based’ nature? Any dogma behind them? If this principle didn’t hold up, I would have said so the moment I suspected as much.

    I’ve been following the S&P 500 quite closely for more than a year now and reading EWI’s regular updates, and I’ve not seen a questionable labeling by them in all that time. Wrong in hindsight? Yes, multiple times. All clarified with time, and usually matching their alternate count up to that point. My own counts are less accurate, but I don’t have the tools they do or the fine-level data. Still, the waves are mostly obvious, and the rules and guidelines are evident.

  18. By John Q.
    December 27, 2013 at 5:10 pm | permalink

    Sorry Steve but it’s hard to take seriously a model that’s supposed to hold true even as all of the underlying fundamentals of what it has been measuring have changed over that time period. It reminds me of the discussion of the “Hindenburg Omen”, which is “revised” each time it fails to pan out. EWT should be predictive – there shouldn’t be any need to make the data fit after the fact.

  19. By Steve Bean
    December 28, 2013 at 8:15 pm | permalink

    @18: John, I’m not sure what you’re referring to as the underlying fundamentals. As I noted in #14, the markets are a reflection of social mood. Yes, it’s hard to take something seriously that one doesn’t understand. I get that. What it reminds you of is irrelevant to an objective assessment, wouldn’t you agree? Saying it should be predictive is similarly irrelevant. It is what it is.

    The only relevant predictive aspect at this juncture is whether a downward C wave of large magnitude follows a large upward B wave in an expanded flat in a fourth wave structure. History shows that it does, often approximately 1.618 times the length of the A wave (in this case, the overall drop from 2000 to 2008—that A wave was itself an expanded flat, which is a corrective wave formation wherein the B wave extends above the start of the A wave, and the C wave extends below the end of the A wave).

    According to Frost and Prechter’s 1978 book, Elliott Wave Principle, “B waves are phonies. They are sucker plays, bull traps, speculators’ paradise, orgies of odd-lotter mentality or expressions of dumb institutional complacency (or both). They … are are rarely technically strong, and are virtually always doomed to complete retracement by wave C.” (p. 81)

    In contrast, “[d]eclining C waves are usually devastating in their destruction. … It is during these declines that there is virtually no place to hide except cash. The illusions held throughout waves A and B tend to evaporate and fear takes over.” (p. 83)

    If you look at a graph of the S&P 500 (or the DJIA) for the last 15 years, note the steepness and deeper extent of the C wave from 2007-2009 compared to the A wave from 2000-2002. That was one degree lower than the C wave that’s about to begin (if it hasn’t already).

    “1930-1932 was a C wave. 1962 was a C wave. 1969-1970 and 1973-1974 can be classified as C waves.” (p. 83)

    It hadn’t happened yet when that book was written, but October 1987 was a C wave (of three degrees lower scale than the coming one).

    Elliott Wave Principle and Prechter’s later book, Conquer The Crash, are available from AADL.

  20. December 28, 2013 at 10:12 pm | permalink

    The reason I describe the Elliott Wave as an “observational” phenomenon is that it has no causal implications. What you are saying bears that out. It simply says that “these patterns have been observed and if they hold true, we could make certain predictions”.

    Let’s consider global warming and climate as an example of a model that seek to correlate previously observed phenomena and to build a model based on that. No one even now supposes that precise climatological events will occur because those models have been elucidated. They simply indicate a probability based on previous information. In 1988 the world was getting noticeably warmer. No one could have predicated the eruption of Mount Pinatubo and its cooling effects that persisted for some years. I assume that set any predictions based on the model back some years.

    Economic phenomena may follow certain well-known cycles but they are still determined by many unpredictable global and local events. The existence of a pattern is not deterministic.

  21. By Rod Johnson
    December 29, 2013 at 11:10 am | permalink

    I muddied the waters by reframing my question. I’m not asking why you believe, but what it would take to convince you the model was wrong–what kind of evidence might there be that would falsify the model in your eyes.

  22. By Steve Bean
    December 29, 2013 at 12:13 pm | permalink

    Anything that didn’t clearly fit the developing pattern, Rod. There are lots of possibilities. What does it matter? My opinions and beliefs are irrelevant, right? They’re informed, but that doesn’t matter, does it? People will believe what they believe. Kudos for asking a question, though. That’s rare.

  23. By John Q.
    December 29, 2013 at 1:10 pm | permalink

    Steve, tells us how the modern markets share anything in common with the financial markets of 300 years ago.

  24. By Steve Bean
    December 29, 2013 at 2:40 pm | permalink

    John, I’ve told you twice already: they’re driven by social mood, which plays out in waves.

  25. By John Q.
    December 30, 2013 at 12:32 pm | permalink

    But the markets which respond to those changes in social mood share almost nothing in common with the financial markets of 300 years ago. Those markets don’t exist in a vacuum, they change and evolve over time and one would expect that over time, they would respond differently to changes in social mood. But not according to a principle that can look back over 300 years without accounting for those changes. Looking at the pronouncements that Steve has shared over the past year, it’s clear that the “end is nigh” predictions coming from EWP admirers have missed the mark. Of course, if you make them long enough, eventually the markets will go down and those predictions will have been validated, if they missed the mark slightly. Of course, the problem won’t be that EWP failed once again. Instead, it will be the fault of the charters or the chart readers who didn’t capture some distinction that is clearly seen after the fact but couldn’t be discerned at the time.

  26. By Steve Bean
    December 30, 2013 at 1:50 pm | permalink

    @25: Maybe we’re both trying too hard, John. It sure seems to me that you are. I probably am too.

    Just ignore me. That should resolve things to your satisfaction. Dismiss all this since I was wrong. Most everyone else has probably already just ignored it anyway.

    Have a happy new year.

  27. By Timothy Durham
    December 31, 2013 at 11:16 am | permalink

    It’s not just Steve, of course. Nor is it just the Elliot Wavers: [link]

  28. By Jack Eaton
    December 31, 2013 at 11:59 am | permalink

    I always enjoy a good naysayer. While many of us might argue that the glass is half full or half empty, Steve is always ready to warn us that the glass just might explode into dangerous flying shards.

    As for Elliot wave theory, I don’t think investor mood is as significant in today’s markets as the possibility of a financial crisis in China. If China’s economy goes through a sudden calamity, the Chinese will no longer be available to lend money to debt-addicted U.S. consumers. The lack of a lender will have an impact on more than just investor mood.

  29. By John Floyd
    January 4, 2014 at 12:40 am | permalink

    @10 This spot-on comment makes the key point, the vital point, that A2D2 missed entirely. Place making is the thing, not density. Unattractive high rises appear to have been a pre-determined “answer” in search of a “question” to which it could be attached. This forum may not be the only, best, place for such an important, wide-ranging discussion, but right today, it seems to be the only public forum where such a discussion can happen.

    @11 et al

    Dan & Steve, I think you guys need TWO beers, AND a whiskey chaser, to boot. If it helps, I’ll buy.

    And Steve, your “That’s chasing the last trend” observation is also spot on. Industrial policy can gain temporary advantage in specifically targeted areas, but it cannot create The Future (see Japan). The Future happens on its own. Industrial policy didn’t create Facebook and the social media phenomenon, and it won’t create the next new source of wealth creation, what ever that might be.

  30. By Steve Bean
    January 5, 2014 at 9:13 am | permalink

    In an attempt to offer a more constructive response to John Q’s looking my gift horse in the mouth, here’s some food for thought (that might also get at your question, Rod).

    If the markets *don’t* play out in waves (of social mood) in the present as they did in centuries past (assuming that they did then—and the evidence supports waves if not necessarily also the social mood driver), how was Robert Prechter able to predict the bull market of the 1980′s during the tail end of the late ’70s fourth wave as well as many turns at many levels since then? And why did that bull market end in 2000 after five complete waves, to be followed by a sideways, A-B-C expanded flat as fits EWP guidelines? And more generally, why do they ocntinue to consistently play out in Elliott waves from the Super-Cycle level all the way down to the Minute level? I don’t have any idea. Coincidence? Does Occam’s Razor apply? That is, is the EWP the simplest explanation? It is for me, but then I’ve studied it, and I’ve found flaws in the explanations of other market and finance writers.

  31. January 5, 2014 at 10:16 am | permalink

    But Steve, we are not dealing only with social mood. We are dealing with outright and unapologetic economic engineering. Our Fed chairman has stated many times that he is keeping the interest rate nearly zero in order to support the stock market. The result has been a wealth transfer from the great majority of the population to the financial markets. This series of summary graphs [link] from the New York Times tells the story in many ways, though the first one (Economic Winners and Losers) is perhaps the best.

    The few times we have seen a dip this year have been when the Fed seemed to be backing off their policy. Then the party started again.

  32. By Steve Bean
    January 5, 2014 at 2:27 pm | permalink

    @31: Prechter devotes a chapter in Conquer the Crash (“Can the Fed Stop Deflation?”) to that topic, Vivienne.

    The Fed has been doing its thing for decades. It’s just one more factor that influences social mood. Prechter made a pretty good case in one of his newsletters this year that the Fed doesn’t set rates, the market (money market, not the stock market) does. If I can find the specific case I’m thinking of, I’ll share it later. The Fed just follows along. Rates have risen. Did that happen before or after the Fed announced the new rates along the way?

    Growing optimism allowed the Fed to do what it has done to influence the stock market (the only bright financial spot over that past couple of years aside from a countertrend bounce in real estate). But that appears to have run its course. The Fed couldn’t prevent the deflationary crashes of 2002-2003 or 2008. How will it prevent this next one?

    “Then the party started again.”

    Yup. Another wave of optimism. This S&P 500 B wave played out in a double zigzag, and it’s wrapping up. Similarly in the Dow and NASDAQ. Resistance trend lines have been met, and other indicators (record high levels of investor optimism and leverage) support a top, not the middle of a rally (as in the case of a hypothetical triple zigzag, for example).

    The economic indicators you linked to support the B wave interpretation: not a strong recovery, but a phony built on speculation and leverage.

  33. By Steve Bean
    January 9, 2014 at 10:42 am | permalink

    The non-confirmation of the new NASDAQ high today by the Dow and S&P are strong indications that the latter are now headed downward at the highest level of trend.

    I’m curious: I’ve been warning people about this inevitability for a year, both here and via email. Is anyone paying more attention to this now than they would have otherwise? Has anyone taken preparatory action? Anyone care to share examples?

    Any thoughts on what the city and county governments (or the DDA, AADL, etc.) should be doing policy- or otherwise to protect financial assets and make our community more resilient to the economic stresses we’ll face? Pretend it’s 2007 and you know that 2008 is ahead. What would you suggest we do?

    (If there were another forum to discuss this kind of thing, I’d be writing this there, but there isn’t. The city’s environmental commission considered a resolution several years ago to create a peak oil task force, which could have served that purpose—energy and finance are intimately connected—but CMs Teall and Hohnke led the ‘we’re-already-doing-enough’ complacency camp in voting it down. So here I am. I continue to appreciate the Chronicle allowing my attempts to ‘be generous’ in this way.)

  34. By John Q.
    January 9, 2014 at 8:44 pm | permalink

    Did the EWP proponents go “all in” on the stock market in 2008 – 2009? I did my best at the time. As I saw it, there were two outcomes – a rebounding stock market or an even deeper depression at which point, the problems were going to be far bigger than my additional push of money into the markets.

  35. By Steve Bean
    January 10, 2014 at 11:11 am | permalink

    @34: I don’t know, and don’t particularly care. That’s a separate topic. I imagine some did, as I recall that they called that bottom pretty closely and they’d identified by that time that the bear markets in commodities and some others were underway. Gold and a few others didn’t top until 2011, and real estate has rebounded. :-/

  36. By Steve Bean
    January 11, 2014 at 9:57 am | permalink

    Then again they could be sticking with 3-month T Bills, which outperformed the S&P +31.47% to -7.01% over the first 10 years of this century, according to this page: [link]

    With rates rising it’s still an extremely safe way to outperform stocks over the longer term in this sideways fourth wave market.

    Of course, all markets go up and down in waves fractally, so I also imagine that they trade the wave turns at certain points of higher confidence.

  37. By John Q.
    January 11, 2014 at 1:34 pm | permalink

    The reason that I ask is that you were asking if anyone is taking action based on your EWP guidance. The last major “reversal” in the markets was in 2008 – 2009 where, if EWP provides any actionable guidance, advocates should have been taking advantage of the market bottom to get in on the stock market and ride it to the current highs. The last 4 years have done wonders for my retirement and taxable stock portfolio thanks in part due to moves I made at the market bottom, accomplished without guidance from EWP advocates.

  38. January 11, 2014 at 9:29 pm | permalink

    The full-on presentation from Glazer looks to be the lead-off presentation for the city council’s Jan. 13, 2014 work session. The .pdf of the slide presentation is already posted to Legistar: [link]

  39. By Steve Bean
    January 12, 2014 at 10:11 pm | permalink

    @38: It’ll be interesting to see how they define prosperity. I get the impression from the pdf that it’s income focused, not giving consideration to relative cost of living or other factors. Unless they take COL (minimally, not to mention debt load) into account, they’re likely misinterpreting a trend based on an incomplete picture. The various city and state comparisons lack context almost to the point of having no value.