Ann Arbor LDFA Gets OK Toward Extension

By

A 15-year extension of Ann Arbor’s local development finance authority (LDFA) has taken another step forward in action taken by the city council on Sept. 2.

The extension – which would still need approval from the Michigan Economic Development Corporation – depends on establishing a relationship between the Ann Arbor-Ypsilanti SmartZone and some other “satellite” LDFA. So the Sept. 2 resolution designates Adrian/Tecumseh as that satellite and approves an agreement with Adrian/Tecumseh.

The council’s vote was 7-4 over dissent from Sumi Kailasapathy (Ward 1), Stephen Kunselman (Ward 3), Jack Eaton (Ward 4) and Mike Anglin (Ward 5). It followed a discussion that lasted over an hour, with questions from councilmembers fielded by city CFO Tom Crawford and LDFA board members Eric Jacobsen and Stephen Rapundalo, a former city councilmember.

The Ann Arbor-Ypsilanti LDFA – branded as one of about a dozen LDFA SmartZones statewide – is funded through capture of public school operating millages within the geographic areas of the Ann Arbor and Ypsilanti downtown development authority districts. However, no capture is made of the Ypsilanti school taxes.

The LDFA contracts with Ann Arbor SPARK to operate a business accelerator, which is meant to move start-up companies in the tech and biosciences sectors more quickly to a stage in their development when they are generating revenue from paying customers and adding jobs.

The city contracts separately with Ann Arbor SPARK for general business attraction and retention services. Also at its Sept. 2 meeting, the council voted to take SPARK’s $75,000 annual contract up off the table and consider it again, having tabled it three months ago. That contract won approval from the council.

The council’s Sept. 2 resolution on the LDFA extension specified the following as findings:

  1. That the selection of the Adrian/Tecumseh LDFA as a satellite provides unique characteristics and specialties through its public and private resources including the location of Adrian College, Siena Heights University and Jackson College within its TIF District and the opportunities for research partnerships and student/young entrepreneur involvement. In addition partnership with another multi-jurisdictional LDFA provides opportunities for shared experiences.
  2. That the selection of the Adrian/Tecumseh LDFA as a satellite provides regional cooperation and collaboration benefits to the LDFA and the Cities of Ann Arbor and Ypsilanti with joint focuses on technology (including expanding green technologies and agricultural technology) and entrepreneurial services.
  3. That the selection of the Adrian/Tecumseh LDFA as a satellite provides value and support to the LDFA by strengthening existing collaboratives, making available a new/expanded technical assistance and support through its Innovation Center at Adrian College, and agricultural and manufacturing resources.

In connection with the extension, revisions to the Ann Arbor-Ypsilanti SmartZone TIF (tax increment financing) plan and development plan are being undertaken. Drafts of revisions are attached to the council’s Sept. 2 agenda item. Revisions appear to address concerns that have been raised about the current arrangement – to some extent by Ann Arbor city councilmembers.

Those concerns include the fact that TIF is not currently allowed to be spent outside the TIF district in the city of Ann Arbor; further, no TIF funds can currently be expended in Ypsilanti – inside or outside its TIF district – because no actual tax capture revenue is generated for the LDFA in that area. The revisions would allow TIF revenue to be expended anywhere in the entire cities of Ann Arbor or Ypsilanti.

In addition, the revisions specify in greater detail that TIF revenue can be used to pay for high-speed communications infrastructure. Specifically mentioned as eligible expenditures is the “installation of technology related infrastructure assets, i.e. fiber lines, nodes, or work spaces.”

The LDFA extension comes in the context of lingering questions about the impact on school funding of the LDFA tax capture. In FY 2013, the total amount captured by the Ann Arbor SmartZone LDFA was $1,546,577, and the current fiscal year forecast is for $2,017,835. About the same amount is forecast for FY 2015. The majority of councilmembers were convinced that the mechanism by which the state of Michigan funds public education means that the LDFA tax capture has no negative impact on  local schools funding.

Separate from the LDFA business acceleration contract with Ann Arbor SPARK, the city of Ann Arbor has historically engaged SPARK for business attraction and retention services. However, this year the $75,000 annual contract with SPARK was tabled by the council – in a vote taken at the council’s June 16, 2014 meeting.

It was taken back up off the table for consideration at the Sept. 2, 2014 meeting and approved on a 9-2 vote over dissent from Sumi Kailasapathy (Ward 1), Jack Eaton (Ward 4) and Mike Anglin (Ward 5)

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron.