Stories indexed with the term ‘tax increment’

DDA Delays Parking Vote Amid TIF Questions

Ann Arbor Downtown Development Authority board meeting (May 2, 2011): At its Monday meeting, the DDA board was expected to ratify its side of a new contract under which the DDA would continue to operate the city of Ann Arbor’s public parking system.

John Hieftje Roger Hewitt

Mayor John Hieftje (left) and DDA board member Roger Hewitt (right) head to their seats to start the DDA's board meeting. (Photos by the writer.)

Instead, the board received this news from the chair of its bricks and money committee: The city has raised the possibility that the DDA might need to return money to various taxing entities – including the city of Ann Arbor – from the taxes captured through the DDA’s tax increment finance district. The city communicated its concern to the DDA on Monday morning, the day of the noon meeting.

The issue concerns the DDA’s TIF plan, which was renewed in 2003, and language in the city’s ordinance establishing the DDA under the state’s enabling legislation. The TIF plan contains projections for the growth in taxable value of property (both real and personal) in the district. The city’s ordinance stipulates that if the actual “captured assessed valuation” grows at a rate faster than the expectation expressed in the TIF plan, then at least 50% of the additional amount must be returned proportionately to the taxing authorities from which the taxes were captured.

The vagueness of the ordinance language leaves several open questions that will require further review by the city attorney’s office and the DDA’s own legal counsel, as well as the financial staff from both organizations.

Those questions include: (1) What’s the relevant time period? (2) Which set of TIF plan estimates are applicable – the one labeled pessimistic, optimistic or realistic? (3) Who is the responsible party for adherence to the ordinance? (4) Does the ordinance language refer to real property only or also to personal property? (5) Do payments already made by the DDA to the city of Ann Arbor out of the TIF for the new municipal center count towards any sum that might need to be returned?

After hearing the news, the board decided to table the resolution on its agenda that would have ratified the DDA’s side of a new parking contract under which it would continue to manage the city’s parking system. [Previous Chronicle coverage: "Column: Ann Arbor Parking – Share THIS!"]

Board members recognized that it would likely be necessary to convene a special meeting of the board, given the city’s need to approve its budget on May 16. Later the same day, on the evening of May 2, the city council struck from its agenda the item that would have ratified the city’s side of the new parking contract. The city council has not yet weighed in on the text of the contract, but did express its view on the financial terms at its April 19 meeting.

As DDA board members absorbed the news about the TIF question, they heard their usual set of reports from their committees and wrapped up the meeting is less than an hour – they had no further business to transact. Board member Russ Collins, who was prepared to call in to the meeting from Detroit, where he’d been summoned for federal jury duty, did not need to do that.  [Full Story]

Column: Impact of DDA-City Parking Deal

Just before their Thursday post-election meeting on Nov. 4, Ann Arbor city councilmembers heard a work session presentation from the Ann Arbor Downtown Development Authority. The hour-long work session covered the DDA’s proposal for a process to develop city-owned downtown surface parking lots. It’s a process in which the DDA would play a leading role. The DDA’s proposal has evolved in the course of ongoing discussions between the city and the DDA since early summer.

The DDA will make  another work session presentation before the city council’s meeting on Monday, Nov. 15 – this one about the parking contract under which the DDA uses city-owned assets like decks, lots, and streets to manage the city’s parking system. The current $10-million contract runs through 2015. But the DDA has already paid the city $12 million on that contract, and the city wants an even better deal. Although it won’t be part of the parking contract language, the DDA sees the ability to take more leadership in the development of city-owned surface lots as part of the benefit it would get from a renegotiated parking deal with the city.

For the city, the parking deal is crucial for its budget planning for FY 2012. Already at its mid-October meeting, some city councilmembers began to raise questions about projections for FY 2012. The council must approve the FY 2012 budget this coming May. [The city's fiscal year begins on July 1 each year – the current budget year is FY 2011.] This past May, the city’s projected budget deficit for FY 2012 was $5 million, which already assumed an additional $2 million payment from the DDA.

There are likely enough votes on the 12-member DDA board to approve the new deal. And based on the most recent city-DDA discussions, the new arrangement is likely to take the form of a percentage-of-gross arrangement – 17.5% of gross parking revenues would be paid to the city.

But here’s a different way to describe the arrangement: The city of Ann Arbor would impose a 17.5% parking tax on downtown motorists. That is, downtown parking patrons will pay exactly 17.5% more to park than is actually required for the public parking system to sustain itself, in order that general fund revenues for the city of Ann Arbor can be supplemented.

And to derive support for the city of Ann Arbor general fund from the parking system, the DDA’s parking fund will operate at a greater deficit for the next few years than it would if the city honored the current parking contract. During that period, the DDA’s tax increment finance revenues – the amount it captures from other taxing authorities besides the city of Ann Arbor – will need to remain uninvested on behalf of the broader community. The unspent TIF fund balance will be able to offset the parking fund deficit, leaving the DDA still solvent, but barely so.

Two important questions have been ignored in the course of the city-DDA negotiations: (1) Is it appropriate to use non-city TIF funds – from the county, Ann Arbor District Library, Washtenaw Community College and Ann Arbor Transportation Authority – to offset the parking fund deficit caused by striking a new parking deal with the city? and (2) If the city’s public parking system generates more revenue than is required to operate and maintain it, what investment of that excess revenue would yield the greatest and best return for the community? [Full Story]

Is DDA District a Disproportionate Burden?

Six-million-dollar oval.

The bottom line according to a 2005 city of Ann arbor analysis of DDA costs versus payments. (The circle means "negative") The DDA sees it differently.

On Monday evening, March 23, several Ann Arbor residents took advantage of an entire city council session devoted to public comment on the recent A2D2 zoning revisions. The  zoning revisions apply to an area that  coincides almost exactly with the Downtown Development Authority district. We thus take the opportunity to focus on this district, and how taxes are collected in this geographic area, in light of recent community discussion on the topic.

The Chronicle has previously reported a remark by made by Mayor John Hieftje at a recent Sunday night caucus, in which he stated that the parking agreement between the DDA and the city was renegotiated in 2005 due in part to the fact that the DDA area represented a disproportionately greater burden on city services. Also previously reported, Kyle Mazurek, vice president of government affairs for the Ann Arbor Area Chamber of Commerce, posed several questions to the DDA board at its meeting on March 4, including one about the possibility of disproportionate use of city services in the DDA district: [Full Story]