DDA: Dogged Enough for Development?

At a three-hour retreat Wednesday morning, the Ann Arbor Downtown Development Authority board met to discuss ongoing negotiations about the city-DDA parking agreement. The DDA manages the city’s parking system under an agreement last amended in 2005, which provides for a total payment of $10 million in rent through 2015. This May, the DDA agreed to make an additional $2 million not required by that contract.

Wednesday morning’s retreat was meant to focus on the role of the DDA in future development of the downtown area and the role of the DDA in parking enforcement.

The outcome of the retreat was essentially that the DDA is interested in cleaning up various aspects of the parking agreement language, but not in pursuing a role for the DDA in the enforcement of parking regulations. Further, greater support was expressed for the DDA as a facilitator of process, rather than as a driver of development through land acquisition and sale.

Wednesday’s retreat was the third one of the year for the board. Two of them have focused specifically on a revision to the city-DDA parking agreement to provide for additional payments to the city by the DDA.

The board retreat in May of this year had been convened as the board’s “mutually beneficial” committee (MBC) prepared to begin negotiations with the city based on a term sheet with four key elements: (i) a role for the DDA in enforcement of parking regulations, (ii) a role for the DDA in enforcement of non-parking code violations, (iii) provision of services in the downtown area by the DDA for the city, and (iv) a role for the DDA as a development engine for downtown city-owned surface parking lots. [For Chronicle coverage of the May retreat, see: "Ann Arbor DDA: Let's Do Development"]

Now that the two committees have met several times through the summer, the DDA board decided at its Sept. 1 meeting to convene another retreat to give its committee some additional direction as the negotiations grind towards an Oct. 31, 2010 target for a completed new parking agreement. In the course of the summer meetings, elements (ii) and (iii) – non-parking code violations and provision of downtown services by the DDA – have dropped out of active discussion.

And a role for the DDA in parking enforcement seemed to have been pushed nearly off the table at the second joint meeting of the committees in August [See Chronicle coverage: "DDA Parking Enforcement Prospects Dim"]. But from the point of view of its technical feasibility, DDA parking enforcement was resuscitated as a possibility at the first committee meeting in September.

The part of the summer talks that had seemed to resonate most among DDA board members and city council members on the two committees was this: The DDA would take greater responsibility than it currently has for the development of city-owned downtown surface parking lots. [The most recent Chronicle coverage of those talks: "DDA-City Development Ideas"]

Based on discussion at the August partnerships committee meeting of the DDA and the DDA’s Sept. 1 meeting, there was interest among DDA board members in exploring land purchase – which would need approval by the city council – as one mechanism for the DDA to execute a development strategy. That strategy would depend on a process that would build on work done in the community over the last half decade. [.pdf of the current proposal for a DDA-led process]

But Wednesday morning, board member Gary Boren summarized for his colleagues his view of the way the negotiations over the summer had progressed. He drew a comparison to the early days of the League of Nations, when some negotiations had been described as appearing from the outside as if very little was happening – but when you scratched the surface, you saw that absolutely nothing was happening.

How Was The League of Nations Like the DDA?

At Wednesday’s retreat, DDA board member Gary Boren introduced the reference to the League of Nations reluctantly, he said. It came in the context of the DDA’s MBC members’ initial report out to the whole board on how the city-DDA negotiations had progressed. Boren is a member of the DDA’s MBC.

The Chronicle tracked down the specific reference Boren likely meant in a March 7, 2003 volume of the Congressional Record. The Congressional Record reports the remarks of Senator Warren Hatch, who quoted Secretary of Defense James Schlesinger, who cited a reporter’s summary [emphasis added]:

Will the United Nations prove as feckless as the League of Nations? Mr. Chairman, in 1935, Mussolini invaded Abyssinia. The League of Nations took note of this challenge to international order. Day after day, week after week, the League deliberated what to do. These sessions went on endlessly. After each session, there was a press conference. After some weeks, one of the reporters summarized the situation as follows: “On the surface, very little is happening – but beneath the surface, nothing is happening.”

As the chuckles from fellow board members faded, Boren stated that he was disappointed with the progress of the city-DDA talks. He noted that most recently, the talks had focused more on the idea of the DDA serving as a development engine for the downtown. He acknowledged that Carsten Hohnke (Ward 5) and Christopher Taylor (Ward 3) – members of the city’s MBC – had indicated they are receptive to the idea. He wondered, however, how significant the DDA’s role would be: Would it simply be “window dressing” or would it provide the DDA with “significant development muscle”?

DDA’s Development Role

Woven throughout the discussion at the retreat were different attitudes about what is meant by the word “development” in the DDA’s middle name and what specific role the DDA should play in that. On one end of the spectrum was a view – espoused by board member Newcombe Clark – that is focused on the development of real estate, and sees the DDA as the entity to manage that development through the acquisition and sale of real property.

In their discussion at the retreat, board members acknowledged the political dimension to the nature of downtown development in Ann Arbor, and based on that consideration, seemed reluctant to given their support to the strong version of the DDA’s role envisioned by Clark. They were, however, content to let the DDA “take the heat” and “provide political cover” for elected officials to absorb some of the community criticism that could arise against specific proposals.

At the other end of the spectrum discussed by the board was a somewhat broader definition of “development” than development of real estate, extending to include “economic development.” This was a view espoused most energetically by board member John Mouat.

In the end, there seemed to be a consensus that the role for the DDA in development would be described best with words like “facilitate” and “assist,” not “manage,” “drive,” “oversee,” “control” – and especially not “commandeer.”

DDA’s Development Role: Significant Muscle

Advocating most specifically for the idea that the DDA should have a role in downtown development with significant muscle was Newcombe Clark. His enthusiasm was clear for the idea that the DDA should include not just city-owned surface lots in its downtown development strategy, but also lots owned by other parties – the county, for example.

Clark described how the DDA needed a willing seller of land to demonstrate that it is competent to develop real estate. Part of convincing the city of Ann Arbor to be a willing seller – which could provide a “clean and legal way” for the DDA to funnel money to the city of Ann Arbor’s general fund – could be a demonstration of the DDA’s competence with other parcels, he suggested.

Clark asked his fellow board members to consider a hypothetical situation where Google decides that in order to maintain its presence in Ann Arbor, it needs a new building. If the DDA had a few surface parking lots under its control, it might have the flexibility to solve that specific problem, he suggested. In the interim, those surface parking lots would continue to generate some revenue.

Another specific kind of suggestion mentioned by Clark is essentially now out of play – because the dirt currently being excavated for the underground parking structure is, according to Clark, being sold to a fill dirt broker. The idea, Clark said, was to look at the former MichCon property north of the Broadway bridges and use the excavated dirt as part of the environmental cleanup that would be required before that property can be developed.

Sandi Smith, who serves on the city council as well as the DDA board, stated that she did not think the DDA needed to focus on purchasing land, but rather more on mapping out the downtown critical assets and helping to broker properties. She stated that she was comfortable with the DDA as a “facilitator of process.” She said she was “less comfortable with the DDA commandeering a site and putting out an RFP,” referring to a request for proposals.

Smith did draw out the fact that the sale of public land within the DDA district – with zero taxes currently collected – meant that after a transfer of ownership and taxes began to be assessed, all the city taxes on the property would be captured through the DDA’s TIF – all other things being equal. However, it was pointed out that an adjustment in the amount of future TIF capture could be made a condition of the sale – lest the city of Ann Arbor be concerned that the only benefit to the transaction would be the sale price, with future taxes simply padding the DDA’s TIF.

Mayor John Hieftje, who serves on the DDA board, indicated that he did not imagine the city council would agree to sell land to the DDA. Roger Hewitt also said he didn’t see the city council selling public land without knowing what’s going to go there.

Russ Collins, for his part, noted that there was virtue in the DDA’s ownership of the land as a way to overcome political obstacles.

DDA’s Development Role: Impact of Politics

As the board discussed the role of the DDA in development – whether it is “community development” or “economic development” or “real estate development” – John Mouat characterized most of the board as “somewhat pro-development,” but noted that a lot of people in the community don’t feel that way. Things don’t always work very well for developers, he said.

Current board chair Joan Lowenstein asked how the political roadblocks could be avoided that the DDA had experienced in the past. Although Lowenstein did not cite the 3-Site Plan specifically as an example of that, Russ Collins did bring it up. Regarding the DDA’s  3-Site Plan, Collins noted that it was stopped by a political process.

By way of background, 3-Site Plan was a 2005 effort to develop city surface parking lots, including lots at First & William, First & Washington and the Kline’s lot – on the east side of Ashley Street, between William and Liberty. The concept underpinning of the 3-Site Plan was that parking could be decoupled from development – build a parking structure at First & William and free up the other two sites for development without the constraint of building on-site parking.

The 3-Site Plan was never voted on by the city council. The site at First & William provoked controversy that continued through most of 2005 when supporters of an Allen Creek greenway objected to the use of that parcel for a parking deck.

The political process to which Collins alluded was one that saw city councilmembers declining to put the 3-Site Plan on their meeting agenda for a vote in early 2005, just after the city-DDA parking agreement was signed. DDA board members at the time apparently believed, based on information they received from city councilmembers, that there were sufficient votes on the council early in 2005 to approve the 3-Site Plan. But councilmembers apparently wanted additional time to lobby to ensure that the vote was more decisive than 6-5 on the 11-member body.

Later in Wednesday morning’s discussion, Newcombe Clark said the DDA needed to be able to “take the heat” and that if they “freak out because we don’t have complete unanimity, then we don’t move forward.”

Russ Collins suggested that in connection with the Delonis Center – the homeless shelter on Huron Street which was spearheaded by the county – Bob Guenzel could attest to the fact that not all projects have unanimous support from start to finish. [Guenzel, the recently retired former Washtenaw County administrator, was appointed and confirmed by the city council last month as the DDA board's newest member. He replaced Jennifer S. Hall on the board.]

Guenzel weighed in just once during the 3-hour meeting, saying that he thought the proposed plan for a development process the two MBCs were exploring showed “tremendous vision” and stressed the importance of identifying both the available properties as well as the need for land and building space. The question, he said, was whether the process was good enough that the city council will approve it – there has to be a partnership with the city, he concluded, where the city has “buy in.”

Joan Lowenstein suggested that a long-term strategy can’t rest purely on city councilmembers, because they serve two-year terms. Roger Hewitt suggested that the development of a long-term strategy could only emerge incrementally – the DDA could not go off and work “in a cave somewhere” isolated from everything, and then bring forth some proposal.

For his part, mayor John Hieftje said at the retreat that whether there is public support for a project depends on what you try to do. In Ann Arbor, he said, the public has a strong voice. If a project is perceived as a benefit, then support is “cut and dry.” On the other hand, if the public perceives a project as planned to be “big and ugly,” then the developer needn’t bother.

Hieftje also said that elected officials tend to hear from a very narrow segment of residents – the council hears from the same individuals over and over. He implied a contrast between those individuals and the general public, by posing as a question: How do we educate the general public about what we’re doing?

Leah Gunn appeared to concur with Hieftje’s assessment of the public’s voice, saying that from her experience most public enthusiasm tends to be against something as opposed to for something. But she noted that Hieftje’s support among voters is obvious. [He outpolled Democratic primary challenger Patricia Lesko in August by an 84% to 16% margin.] It’s a noisy, loud crowd, she said, but does not represent the vast majority of people.

Board member Newcombe Clark – who is running independently for the Ward 5 city council seat currently held by Democrat Carsten Hohnke, and is joined in that race by Republican John Floyd – responded to Gunn and Hieftje’s remarks by asking: “Why let a vocal minority hold back a city of over 100,000 people?” Later in the discussion, Hieftje characterized Clark’s sentiments as a call to “ignore the public,” which Clark said was an attempt by the mayor to put words in his mouth. Clark did eventually say that he did ignore those people who always say no and never offer any alternative.

Hieftje indicated that he did not believe that city councilmembers base decisions on whether they’ll be re-elected or not, but rather based them on the interest of the whole public, including everyone. Clark attempted to counter that idea based on the fact that the DDA’s recommendations on the A2D2 rezoning plan had not been incorporated in the package that the city council approved last year.

DDA’s Development Role: Facilitator of Economic Development

Fitting into the idea of economic development was Clark’s allusion to the hypothetical example of the DDA helping retain Google by being in a position to develop specific real estate parcels. But other board members seemed to indicate an interest in seeing the DDA pursue economic development through means other than construction of new buildings. “‘Development’ is a tricky word,” said John Mouat, “There’s building buildings, and then there’s economic development.”

Keith Orr suggested that one role the DDA could play would be to provide “political cover” as well as help to market a development strategy. There seemed to be a general consensus that the DDA would be the “point of the spear” without necessarily being in control of the spear’s handle.

Sandi Smith indicated that the DDA’s role might not be to control, but rather to facilitate. The DDA role would not be to find companies and attract them to Ann Arbor – that’s more the role of Ann Arbor SPARK – but rather to facilitate or broker existing properties. As part of developing a more comprehensive vision, instead of a one-parcel-at-a-time approach, she suggested grouping various of the city-owned lots into “zones.”

Mouat, for his part, was not telling his fellow board members anything they hadn’t already heard about his view of the DDA’s role in economic development. At the board’s May retreat, Mouat had this to say:

Mouat suggested that they marshal their energies in the area of “economic development” – attracting businesses, attracting the next Google, and other start-up companies. Mouat said he felt like it would be a more exciting and palatable way to approach development. The vision should go beyond a building being built. A developer putting up a building on speculation had not been very successful in Ann Arbor. He suggested banding together with SPARK – the area’s economic development agency – and other organizations and figuring out what niche the DDA might fill in that world. …  he didn’t think it was as simple as growing the TIF or just economic development. It had to do with vibrancy and attracting young people and making Ann Arbor the best place it can be – a cool downtown, he said.

DDA’s Development Role: Coda – Big Dogs, Small Dogs … Funky Dogs

Commenting on some of the political issues involved with development in Ann Arbor, Russ Collins cited a marketing phrase used by the nonprofit Think Local First: “Keep Ann Arbor Funky.” He suggested that typically it was meant indicate that Ann Arbor was unique, creative, new and eccentric. But he noted that it also carried with it the meaning of being “just a little dysfunctional.” Sandi Smith chimed in that a third, additional meaning could be “It’s perfect the way it is.”

Although it did not occupy much of the discussion, the impact that the University of Michigan plays in the community did make mention. John Mouat reminded his colleagues that the DDA was a “little dog” compared to the city, which is a “medium dog.” The “big dog,” he said, is the university. Joan Lowenstein acknowledged that UM needs to be involved in the process, citing the previous participation of people like Doug Kelbaugh and Robert Beckley, both former deans of UM’s Taubman College of Architecture and Urban Planning.

The Parking Enforcement Part of The Contract

At the retreat, there seemed to be little enthusiasm to pursue a role for the DDA in parking enforcement. At the most recent MBC meeting, fresh statistics had been made available on the revenue generated by parking tickets. From Chronicle coverage of the Sept. 13 meeting:

The five-year trend for monthly tickets issued is decidedly downward. Almost five years ago, 11,000 tickets were issued in a month, but in the last year around 6,000 tickets have been issued per month. In the most recent month for which data was available at the meeting, January 2010, only 4,647 tickets were issued. Fewer tickets means less revenue: In FY 2006 around $2.1 million was collected in parking ticket revenue, but in FY 2010 that fell to around $1.1 million. Commented Russ Collins: “It’s hard to see the business case for the DDA taking this over.” However, Sue McCormick indicated that the lower numbers are due in part to lower staffing levels for community standards officers, who write parking tickets. The city currently has two community standards vacancies, she said.

And at Wednesday’s retreat, Collins’ skepticism about the business case for the DDA was shared by others. Leah Gunn talked about a vision of Ann Arbor with no parking tickets. Joan Lowenstein and Roger Hewitt seemed persuaded that advances in parking technology – sensors embedded in pavement and the like – would mean that parking policies would be driven by that technology.

Keith Orr, whose biography includes a chapter as a computer programmer, cautioned that assuming technology is the answer is often a mistake – it changes the nature of work, but it doesn’t eliminate the work. Orr, however, noted that from his perspective [not sitting on the DDA's MBC], there appeared to be little movement during the MBC talks on the part of the city towards embracing the idea of the DDA taking a role in enforcement.

Collins advised that it was not a matter of movement, but rather that they’d learned that for the DDA to be involved in enforcement of parking regulations, it would be “very complicated.” In that case, said Orr, it did not make sense to continue “butting our heads against the wall.” There seemed to be more excitement, said Orr, about being a development authority than being a parking authority.

Newcombe Clark cautioned that if the DDA walked away from trying to take a role in the enforcement of parking because it’s complicated, then he wanted them to understand that developing real estate was much “deeper and murkier” and complicated than the enforcement of parking regulations.

At Wednesday’s retreat, John Hieftje expressed the same view that he’d expressed at a July 6, 2010 city council working session [Hieftje, as mayor, serves on the DDA board as provided in the enabling state legislation]:

Mayor  John Hieftje expressed concern that they were starting to talk about two different enforcement entities operating in the downtown area. He said that based on conversations with the deputy police chief, he thought it would be much easier to train the current community standards officers who do parking enforcement to implement enforcement in the specific ways that the DDA had in mind – to make them “ambassadors” for the downtown. He said that it made sense to invest in training the people we already have.

Based on the declining number of citations and the declining number of tickets issue, there seemed to be little enthusiasm in the room for the DDA to take over enforcement of parking regulations.

Board member John Splitt asked Susan Pollay, the DDA’s executive director, if there was any benefit to formalizing some kind of customer-service arrangement with respect to parking enforcement and other code violations between the city and the DDA. Pollay indicated that when the city retains all authority, they are at the center of all the contracts.

As an example, Pollay cited the arrangement the Ann Arbor Transportation Authority has with the Ann Arbor police department for a patrol officer to monitor the Blake Transit Center downtown. The officer can be pulled off that duty by the city for a number of different reasons, Pollay said.

Pollay stressed that it’s not just a matter of having a friendlier person enforce the parking but rather a matter of having an overall parking strategy. As an example, she noted that when the DDA first moved its offices to the 303 Detroit St. Market Place building in Kerrytown, they heard from fellow tenants that one of the “perks” was free parking at the nearby Farmers Market. Pollay said that apparently there’d been complaints from people who’d received tickets and that there were issues with finding spaces for Farmers Market vendors to park. The outcome was that parking was not enforced in the area, she said – no one was managing the parking enforcement strategy. She concluded that it was not about having “a nicer person” hand out the tickets.

Hewitt indicated agreement with the idea that the DDA would not pursue a role in parking enforcement. Instead, the city’s community standards officers would be trained to implement a customer-friendlier approach, and to be the eyes and ears on the street. Still, Hewitt expressed skepticism about Hieftje’s idea that city staff can be retrained to get the same result – if someone is not reporting directly to you, you don’t get  the same level of customer service, said Hewitt.

Lowenstein summarized that the MBC would continue to work on clarifying the parking agreement – without including the idea of the DDA taking on enforcement of parking regulations.

The Contractual Part of the Contract

Among the items that need to be cleaned up in the parking agreement are topics like the actual amount of money the DDA will pay in rent for the city-owned parking facilities. All the specific points that need to be addressed were summarized in a one-page document, which DDA executive director Susan Pollay distributed at the retreat [.pdf file of the one-page document].

Among them:

By contract the DDA is to provide the City with $1 Million/year in “rent” for an exact number of parking spaces in the City Hall lot, Farmers Market lot, 4th & Catherine lot, Palio lot and 1st & William parking lot. Yet the City eliminated the City Hall lot and approved a change to the Farmers Market lot that would reduce the number of spaces. Should the “rent” be determined by some other means than parking lot spaces?

Referencing the list of suggested edits to the parking agreement, Newcombe Clark stated, “To be blunt, these are all mostly molestations of the current contract.” He continued, “These are symptoms of a problem.” Turning to the attorneys in the room, Clark asked: “How do you stop people from violating a contract?” Russ Collins and Gary Boren seemed to suggest it was a matter of asserting the fact of the contract: “We say we have a contract!”

By way of historical background, the DDA has not done that. DDA executive director Susan Pollay related at a July 2010 MBC meeting how the DDA had handled an apparent violation of the parking agreement by the city, when the city decided to install parking meters outside the DDA district. From Chronicle coverage of that meeting:

In early 2009, when the city staff elected to pursue a strategy of installing parking meters in residential areas outside the DDA district, that was not consistent with the contractual language of the city-DDA parking agreement, Pollay said. Revenues from the parking meters in “the city’s parking system” are, per the contract, supposed to be received by the DDA. Given that the city was looking for ways to make up revenue shortfalls for the FY 2010 budget at the time, Pollay said that the DDA weighed whether or not to “make a stink.” Instead of challenging the city’s move based on the contract, Pollay said, they’d expressed their skepticism that the additional meters would actually generate the kind of revenue that the city was hoping for.

Responding to Pollay’s description at that same meeting, Carsten Hohnke, who serves on the city’s MBC, characterized the lapse as “institutional amnesia.” From The Chronicle’s coverage of that meeting:

Hohnke alluded to some of Pollay’s previous remarks about topics that the current agreement already addressed but that had not been treated by the city as contractual obligations. Those had been instances of “institutional amnesia,” he said. The new agreement needs to reinforce what was covered in the original 2002 agreement as a contract, he said – the parking system.

With respect to the idea of a contract between the city and the DDA, Boren said at Wednesday’s retreat: “I don’t think there’s a sense of mutuality.” Various board members suggested that it was a matter of a cultural difference between the DDA and the city.

DDA board chair Joan Lowenstein ventured that such a cultural difference would not be solved during the retreat.

At the DDA’s May 5, 2010 meeting, when the board authorized a $2 million payment to the city beyond what the current parking agreement required, Lowenstein had expressed frustration at the view of the DDA as separate from the city:

Lowenstein said she found it distressing to hear the kind of “us and them” discussion. It’s not us and the city but rather it’s all the city.

The idea that “it’s all the city” has been attested during the MBC summer negotiations. At Wednesday’s retreat, Boren recalled an exchange with Christopher Taylor – who serves on the city council’s MBC – at one of the early MBC meetings. In that exchange, Boren had stated the need to get something for the $2 million the DDA had voted to allocate to the city. [Both Taylor and Boren are attorneys.] Taylor’s response, reported by Boren at the retreat, was to ask Boren: “Is there an element of corporatism here?”

That, said Boren, seemed to be an unwitting acknowledgment on Taylor’s part about how the city’s representatives see the DDA: “I don’t believe they understand that we’re an independent entity. It’s a function of the people here and who the mayor – appropriately – appoints.” Continued Boren,”It has to do with who they think we are and who we think we are.”

The assumption on the DDA’s part that the DDA is a separate corporation [as specified in the state enabling legislation for DDAs] with whom the city can negotiate a binding contract has been made explicit during the MBC summer talks. From The Chronicle’s report on the talks as they had unfolded through late July ["City-DDA Parking Talks Gain Tempo"]:

[Roger] Hewitt weighed in on the contractual aspect of the agreement by saying that if the view of the city was that the DDA was merely an arm of the city, as opposed to an entity that could enter into contracts with the city, then the committees were wasting their time.

At Wednesday’s retreat, Newcombe Clark stated that he did not care if the city wanted to simply take the money from the DDA, but that his concern was that the DDA – by extending additional payments to the city beyond what’s required by the existing contract – was effectively trying to create a contract with no financial consideration. Otherwise put, in order to make a contract legal and binding, there needs to be some “consideration,” something of some value, that one party offers to the other in exchange for money.

Clark’s attempts to find ways to establish consideration have received relatively little traction with the board: (i) purchasing land; (ii) funding downtown police patrols; (iii) sunsetting the DDA’s obligations in the Village Green City Apartments development at First & Washington; (iv) waiving the DDA bond fees it must pay when bonding using the city’s full faith and credit.

Based on remarks by Roger Hewitt at Wednesday’s retreat, any needed consideration might be achieved by extending the length of the contract.