Ann Arbor DDA Ponders Response to City

“I’m confused,” she said. “Well,” he replied, “you need to work out your own confusion!”

That conversational exchange is unlikely to occur when a proposed parking customer service phone line goes live. The plan for the phone service was conveyed to the Downtown Development Authority’s operations committee by DDA deputy director, Joe Morehouse, at the committee’s meeting this past Wednesday.

But it’s exactly the back-and-forth that unfolded between board chair Jennifer Hall and board member Russ Collins during the operations committee meeting. The seeming exasperation conveyed by Collins came well into a discussion that had started before his arrival at the meeting.

Before Collins arrived, Hall and operations committee chair Roger Hewitt had already been at odds over how the DDA should respond to a recent request from Ann Arbor city council. Hewitt: “In all due respect, Jennifer, you haven’t been to very many of these operations committee meetings, and I’ve been doing this for years, and for you to tell me how to do parking demand management …” Hall: ” … I’m not trying to tell you how to do it!”

What was it about the council’s most recent request that provoked the energetic back-and-forth among DDA board members? And what was it about a prior council request that had led to what Hewitt called at Wednesday’s committee meeting “a shouting match” between him and a councilmember?

Request One from City Council: Start Discussions on the Parking Agreement

We begin with that prior council request.

As reported in The Chronicle from city council’s Jan. 20, 2009 meeting:

A second item involved a call for the DDA to begin discussions of the parking agreement on metered parking between the DDA and the city. The word “discussions” was a replacement for “negotiations” in the original wording. It was approved.

At the subsequent Feb. 4, 2009 meeting of the full DDA board, their discussion of city council’s request was reported this way in The Chronicle:

“We don’t know where those discussions will lead,” said Hewitt. To which Gunn quipped, “Yes, we do!” Hewitt continued wryly, “Lacking such information at this time …” The future discussions with the city, said Hewitt, made it important to record a contingency in the 2010-11 budget. [Mayor John] Hieftje, for his part, said that he thought Hewitt’s “ability to forecast the future” was probably “right on.”

Board chair Hall took pains to emphasize that the contingency was “a placeholder.” The amount should not be perceived by anyone, said Hall, as reflecting a final, done deal, but rather a starting place for the discussion.

[The original lease agreement between the city and the DDA to operate the parking system dates back to 1992. It was renewed in 2002, and adjusted in 2005 to increase DDA payments to the city. As one "whereas" clause put it in 2005, the rationale for the increase was "The City is facing a funding crisis and has asked the DDA to significantly increase its payments under this Agreement in order to help the City address this crisis."]

The budget contingency discussed by the DDA reflected a possible revision to the parking lease agreement to the tune of $2 million. That is, under the possible revision, the DDA would transfer $2 million to the city, which under the current unrevised agreement would remain with the DDA.

A key fact confirmed at the operations committee meeting by councilmember Sandi Smith, who also serves on the DDA board: At city council’s budget retreat in January, the projections for the city’s finances were based on an assumption that the $2 million would be transferred from the DDA to the city.

Request Two  from City Council:  Show Us Your Financial Plan

The second request to the DDA from city council, which also came in the form of a resolution, was passed at council’s last meeting on Feb. 17. The context for the topic of the request – assurances of adequate reserves in the DDA fund balances – was the Fifth Avenue underground parking garage, for which council authorized the issuance of bonds at the Feb. 17 meeting. At that meeting, Tom Crawford, chief financial officer for the city of Ann Arbor, provided his assessment that the DDA needed to maintain reserves of 15-20%, and in that context, the project was not affordable.   The text of the unanimously-passed council resolution:

Whereas, The City has fiduciary responsibility for any bonds issued for Downtown Development Authority (“DDA”) projects; and

Whereas, The City Council is committed to working with the DDA to ensure its financial stability;

RESOLVED, That the City Council requests that the DDA provide the City Council, within thirty (30) days, a financial plan to increase revenue and/or defer projects to ensure adequate contingencies and fund balances for fiscal years 2010 and 2011, and that the proposals may include, but are not limited to, (1) prompt implementation of a demand-based pricing system for parking facilities, (2) increases in fees for “bagging” parking meters, and/or (3) deferring scheduled capital projects.

Further context for the request by council that the DDA lay out its plan to ensure adequate reserves is provided by the exchange between councilmember Sabra Briere and Crawford at the Feb. 17 council meeting, which The Chronicle reported this way:

Briere continued her questions with Crawford.

Q: Would the DDA be able to build the underground parking garage and make bond payments if they didn’t raise parking fees?

Crawford didn’t mince words: “No.”

Q: Is the plan before us – even cut down by $6 million – within reach of currently available funding?

Even with the reduced size, said Crawford, it’s still really unaffordable, but it’s within reach for the DDA to explore other options.

Asked by Briere as a followup to that, if the DDA would need to raise parking rates even further, replied Crawford: “That would be up to the DDA.”

Operations Committee Discussion of the Two Requests

With respect to the more recent request by council for the DDA to lay out a plan to increase revenue to maintain adequate fund balances, Roger Hewitt made it plain at the outset of the committee meeting that he did not feel it was appropriate to offer council the response that the fund balances were, in fact, adequate and that “everything is fine.” That, said Hewitt, would be like the DDA board thumbing its nose at council. Hewitt stressed that, “Thumbing our nose at them is not an appropriate response.”

In the wording of the parking fee increases, already submitted to city council, Hewitt saw the opportunity to address the specific suggestion from council in their resolution: “… prompt implementation of a demand-based pricing system for parking facilities.” Hewitt described the wording in the parking rate increase proposal as “vague,” noting that this vagueness worked to the DDA’s advantage. The language he described as vague reads as follows:

After much discussion over several months, at its February 2009 monthly meeting, the DDA voted to recommend parking rate increases shown below which upon consultation with City Council may be used by the DDA as an average amount [emphasis added] across the parking system.

Hewitt contended that an “average” could be computed in myriad ways, and that the DDA had not committed to any particular understanding of the “average,” so that it represented an area of flexibility. Especially with the imminent rollout of the new E-Park stations, Hewitt saw an opportunity to increase rates at high-demand metered spaces, which he felt would not be met with much objection, because most parkers would not even notice the increase. [The E-Park stations are wirelessly-connected payment kiosks that allow different rates to be set for different geographic areas and different times of day and to be easily adjusted.] The fact that the E-Park stations will accept credit cards would also reduce the probability that people would notice and decrease any resistance to the increase, suggested Hewitt.

Sandi Smith was not convinced people would not notice an increase from, say, $1 to $1.40. Susan Pollay, executive director of the DDA, warned that some people would notice and that the increase would be analyzed as “caused by the machine.” She also cautioned that talking about raising rates “sounds easy to do in this room, but outside this room,  you’re going to hear about it.”

Hall was not concerned with the raising of rates per se. She pointed out that she had opposed delaying the proposed rate increase. [Hall was joined by Hieftje in voting against the two-month delay until July 2009.] What she was concerned about was the apparent attempt, she said, to increase revenue under the guise of parking demand management.  Increasing revenue, she said, was not the point of parking demand management. Increasing rates in one area would need to be coupled with a decrease in rates in another area, she said, in order for the mathematics of “average” to work out.

Hall wanted the board to be clear about the message it was sending in its response to city council. If the DDA board was going to contemplate raising parking rates further, then there needed to be clear communication to council and to the public about the reason. Without  the $2 million transfer from the DDA to the city, Hall contended, the DDA actually would have reserves that met Crawford’s criteria. She was therefore resistant to implementing a concrete policy (further parking rate increases) based on a specific request (for $2 million) that had not yet been given concrete form. In this, she reiterated at the operations committee meeting the same sentiment she’d expressed at the last full board meeting: the DDA board should not accept the $2 million payment as a done deal. She objected multiple times during deliberations to treating it as such.

Collins responded to Hall’s desire for concreteness by saying that if they waited in every case for things to become concrete, the DDA would always be behind. It was important, he stressed, to have a practical strategy in place to deal with what was fairly apparent would happen – pointing to the mayor’s comments at the previous board meeting saying that the $2 million sounded about right as an amount that would emerge from discussions of the parking agreement.

Hall still lamented the fact that the mechanism that led them to that day’s policy discussion had been based on interactions at the level of one individual to another (city staff or councilmember to individual DDA board members – a possible allusion to Hewitt’s self-described shouting match) as opposed to one body to another.

The committee’s deliberations showed some possibility of blooming into a broader discussion of what the relationship of the DDA should be to the city of Ann Arbor. Sandi Smith mooted the idea that the DDA could operate the parking system on behalf of the city, take out its expenses and forward the surplus to the city just as a matter of course. Pollay observed that under such a system, long-term planning by the DDA for the parking system would be difficult. Collins noted that even if the DDA took a more adversarial approach, choosing to “fight it out” each and every year over the amount to be transferred to the city, it still makes good practical sense to have a strategy that accommodated the possibility than the DDA would end up making substantial fund transfers to the city.

Early in the meeting, Hewitt had cautioned against an adversarial approach this year, wondering if that could lead council to rescind the bonds for the Fifth Avenue underground parking garage. “How much ‘chicken’ do we want to play?” he asked. Hall’s reply was that she didn’t think a game of chicken would end poorly for the underground parking garage, noting the impassioned speeches on the need for more parking that councilmembers had given to support their approval of the bonds.

In the end, it boiled down to Hall wanting to be satisfied that the board was crystal clear in communicating why the parking rate increases were being undertaken. Leah Gunn’s response: “Because we’re building a big-ass parking structure  and undertaking Fifth and Division streetscape improvements.” Hall agreed. At the last board meeting, Hall had stressed that the delay in parking rate increases had implications for the parking structure project. What, wondered Collins, was wrong with what he had given earlier as a reason?

What he had said pointed to the gloomy economic conditions nationally as well as statewide: “What the public needs to understand is that even though the city has done a good job of reducing costs, lowering expectations for city services is a reality everyone will have to deal with.” Hall agreed with that, but said that she did not hear anyone else saying that as a reason. “Can someone else say it, too?” joked Collins. “And that will make it true!”

In identifying the city’s economic conditions as a reason for raising parking rates, Hall felt that the board could give a more honest response to city council’s request for a plan to increase revenue. She said that council’s request itself was not honest, inasmuch as it did not acknowledge that the reason the DDA needed to increase revenue to meet Crawford’s suggested reserve fund targets was council’s own as-yet unofficial request for a $2 million transfer from the DDA.

Resolutions for Consideration by the Full DDA Board

There will be a couple of resolutions brought next Wednesday, March 4, to the full board out of the operations committee meeting. They correspond to the two requests from city council. One resolution will form a DDA committee to participate in discussions of the parking agreement with the city.

The second resolution will be a response to the request for a financial plan to increase revenues to ensure adequate reserves. It will present a “menu” of options identified in priority order. There was a general consensus in the operations committee that increasing the meter bag fee by $5 a day (netting around $180,000 per year) was a good place to start, even if it counted as somewhat symbolic.

Another menu item that would be less symbolic would be for the DDA to reduce its meter rent payment to the city by the $1.5 million municipal bond fee paid in fiscal year 2009-10. This would result in a 10-year projection in which the year with the lowest reserve (fund balance as a percent of annual expenses) would be 17.74%. That year would be fiscal year 2011-2012.

That would mean that every year’s reserve would meet the 15-20% criteria suggested by Crawford. There was, however, no enthusiasm at the DDA operations committee meeting for adopting a minimum reserve percentage of any kind as a policy. No one was able to find evidence of similar formal policies across other governmental agencies. Leah Gunn summarized: “As soon as we set a policy, it burdens us. The city doesn’t have a policy – why should we? We have a 10-year plan that we’re comfortable with.”