Removal of an on-street metered parking space will cost developers in Ann Arbor more than $45,000 per space as a result of a policy approved by the city council at its Jan. 6, 2014 meeting. The payment would go to the Ann Arbor Downtown Development Authority, because the DDA manages the public parking system under a contract with the city.
Added at 11:07 p.m. after initial publication: An amendment to the policy made during the Jan. 6 meeting requires added payment to compensate for the projected revenue over the next 10 years, generated by the space to be eliminated. For an average space that would work out to around $20,000 in addition to the $45,000.
A further amendment to the policy made by the council during the Jan. 6 meeting ensures that the city will receive 17% of the payments made under the policy’s requirement that lost revenue be compensated. In the existing contract with the city under which the DDA operates the public parking system, the city is paid 17% of gross revenues to the system.
The resolution had been postponed for the second time at the council’s meeting on Dec. 16, 2013. It was first considered, but postponed, at the council’s Dec. 2 meeting.
The rationale for postponing the item on Dec. 2 – offered by Christopher Taylor (Ward 3), who sponsored the resolution – was that because the policy amounts to a fee, a public hearing should be held on the matter before the council voted.
After the public hearing held on Dec. 16, the council’s deliberations focused on the question of the accounting procedures to be used by the DDA in tracking any money that might be paid under the policy. Given that the rationale for the policy is that the money would be put toward the cost of construction for new parking spaces, councilmembers wanted to know how the money would be reserved for that purpose.
At its Dec. 18, 2013 meeting, the DDA operations committee discussed the matter and concluded that the money paid under the meter-removal policy would be shown as a restricted amount in the DDA’s parking maintenance fund.
In setting a price for parking space removal, the council is acting on a four-year-old recommendation approved by the Ann Arbor DDA in 2009:
Thus it is recommended that when developments lead to the removal of on-street parking meter spaces, a cost of $45,000/parking meter space (with annual CPI increases) be assessed and provided to the DDA to set aside in a special fund that will be used to construct future parking spaces or other means to meet the goals above. [.pdf of meeting minutes with complete text of March 4, 2009 DDA resolution]
The contract under which the DDA manages the public parking system for the city was revised to restructure the financial arrangement (which now pays the city 17% of the gross revenues), but also included a clause meant to prompt the city to act on the on-street space cost recommendation. From the May 2011 parking agreement:
The City shall work collaboratively with the DDA to develop and present for adoption by City Council a City policy regarding the permanent removal of on-street metered parking spaces. The purpose of this policy will be to identify whether a community benefit to the elimination of one or more metered parking spaces specific area(s) of the City exists, and the basis for such a determination. If no community benefit can be identified, it is understood and agreed by the parties that a replacement cost allocation methodology will need to be adopted concurrent with the approval of the City policy; which shall be used to make improvements to the public parking or transportation system.
Subject to administrative approval by the city, the DDA has sole authority to determine the addition or removal of meters, loading zones, or other curbside parking uses. [For more background, see: "Column: Ann Arbor's Monroe (Street) Doctrine."]
The $45,000 figure is based on an average construction cost to build a new parking space in a structure, either above ground or below ground – as estimated in 2009.
Taylor, the resolution’s sponsor, participated in meetings during the fall of 2013 of a joint council and DDA board committee that negotiated a resolution to the question about how the DDA’s TIF (tax increment finance) revenue is regulated. In that context, Taylor had argued adamantly that any cap on the DDA’s TIF should be escalated by a construction industry CPI, or roughly 5%. Taylor’s reasoning was that the DDA’s mission is to undertake capital projects and therefore should have revenue that escalates in accordance with increases in the costs to undertake capital projects.
Based on Taylor’s reasoning on the TIF question, and the explicit 2009 recommendation by the DDA to increase the estimated $45,000 figure in that year by an inflationary index, the amount now, four years later, would be closer to $55,000, assuming a 5% figure for construction cost inflation. The city’s contribution in lieu (CIL) parking program allows a developer (as one option) to satisfy an on-site parking space requirement by paying $55,000. (The other option is to enter into a 15-year agreement to purchase monthly parking permits at a 20% premium.)
The actual cost of building an underground space in the recently completed (2012) underground Library Lane parking structure could be calculated by taking the actual costs and dividing by 738 – the number of spaces in the structure. Based on a recent memo from executive director Susan Pollay to city administrator Steve Powers, about 30% or $15 million of the cost of the project was spent on items “unneeded by the parking structure.” That included elements like oversized foundations to support future development, an extra-large transformer, a new alley between Library Lane and S. Fifth Avenue, new water mains, easements for a fire hydrant and pedestrian improvements.
The actual amount spent on the Library Lane structure, according to DDA records produced under a Freedom of Information Act request from The Chronicle, was $54,855,780.07, or about $1.5 million under the project’s $56.4 million budget. Adjusting for those elements not needed for the parking structure yields a per-space cost of about $52,000. [(54,855,780.07*.70)/738] [.pdf of Nov. 22, 2013 memo from Pollay to Powers][.pdf of budget versus actual expenses for the 738-space Library Lane structure]
By way of additional background, the Ann Arbor DDA’s most recent financial records show that last year, on-street parking spaces generated $2,000 in gross revenue per space or $1,347 in net income per space annually. The contract with the city under which the DDA operates the public parking system stipulates that the city receives 17% of the gross parking revenues. So the city’s revenue associated with an on-street parking space corresponds to $340 annually.
This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]