To Be Continued: Ann Arbor Council

The gathering of Ann Arbor city council members tonight – May 23 – counts not as a separate meeting, but rather as a continuation of the same meeting the council began on May 16. Because of issues that could remain unresolved, councilmembers are likely to recess tonight’s meeting as well, to be continued on Tuesday, May 31 – after the Memorial Day holiday.

This is a preview of the council’s continued meeting, which starts at 7 p.m. in council chambers at city hall. Topics that council might address include excess TIF (tax increment finance) capture in the Ann Arbor Downtown Development Authority district, a new parking contract with the DDA, and possible amendments to the FY 2012 budget. Factors that might play a role in council’s deliberations include alternative calculations of the excess TIF capture, and issues of control regarding components of the proposed parking contract – such as giving the DDA sole authority to set parking rates.

Council’s Continuation: Background

The council is using a strategy of recessing, then continuing the same meeting, in order to comply with a city charter requirement that the next year’s fiscal year budget be approved at the council’s second meeting in May, which this year fell on May 16. On that date, council chose not to approve the budget for FY 2012, which starts July 1.

The council’s reluctance to approve the city’s budget can be traced to uncertainty about the status of labor negotiations with the city’s police and firefighter unions, as well as uncertainty about the amount of public parking system revenue the city will receive in a new contract being negotiated with the Ann Arbor Downtown Development Authority. That contract was supposed to have been settled by Oct. 31, 2010.

But a scheduled vote by the two parties did not come until May 2, a day when the council and the DDA board met – separately – intending finally to conclude the contract. The DDA board, which met earlier that day prior to the council’s meeting, did not vote on the contract. That’s because board members were informed that morning by city of Ann Arbor financial staff about issues involving possible excess tax capture in the DDA’s TIF district. And the city council then struck the item from its May 2 agenda.

The issue of possible excess tax capture led the DDA to schedule a special meeting held last Friday, May 20, to resolve the return of any excess taxes, and to ratify its side of the new parking agreement with the city.

Readers who attend the council’s May 23 meeting in person, or watch the proceedings on CTN’s Channel 16 – on television or via CTN’s Channel 16 live Internet stream – might see the resolution of lingering issues regarding excess TIF capture in the DDA district, as well as still outstanding issues on the parking contract.

The council might also choose to engage in a series of amendments to the FY 2012 budget, but it’s possible that councilmembers won’t take a final vote on the budget itself. Instead, the council could recess the meeting a second time, to be continued on May 31. Sometime before May 31, the DDA would hold another special meeting, to vote on the city council’s version of the parking contract.

Excess TIF Capture: Will City Forgive $711,767?

At least two issues still linger with respect to the excess tax capture issue: (1) an assumption that the city of Ann Arbor would not insist that its $711,767 share of the $1,185,132 excess capture be returned; and (2) whether the conclusions on which the DDA based its calculations for the excess will be acceptable to the other taxing units, which are due – from the DDA’s view – to receive a total of $473,365. Those other taxing units are: the Ann Arbor District Library; Washtenaw County; and Washtenaw Community College.

At the continued meeting tonight (May 23), the city council is likely to add to its agenda some kind of resolution establishing that the city of Ann Arbor does not expect a return of the $711,767 in excess TIF that it is due. The rationale expressed at Friday’s DDA special board meeting for not making the $711,767 payment to the city was based on a total of $7.5 million in TIF funds already returned to the city since 2003.

For the city’s part, the financial interest in forgoing the $711,767 one-time payment might be coupled with the negative impact the payment would have on the DDA’s ability to offer a parking contract that provides for a regular annual transfer of 17% of gross parking revenues to the city. Next year, that annual transfer would amount to around $2.7 million, based on roughly $16 million in parking revenues.

At their meeting tonight, some councilmembers might argue that the city is simply owed the excess TIF capture, as well as the 17% in public parking system revenue – and that it’s up to the DDA to figure out how to make good on those obligations. One option that’s been mentioned by the city council’s negotiating team during parking contract talks between the city and the DDA is simply to dissolve the DDA.

A request made by The Chronicle under the Freedom of Information Act, returned by the city last week, indicates that the city’s financial staff appears to maintain a current analysis of what the impact would be of dissolving the DDA – though the FOIA response did not include the analysis itself. Back in December 2009, the city’s chief financial officer, Tom Crawford, told the city council at a budget retreat that dissolving the DDA would result in a net positive to the city’s general fund of $700,000 per year.

It’s an open question whether the city council, at its May 23 session, will scrutinize the assumptions on which the DDA excess TIF calculations are based. At the council’s May 2 meeting, Crawford had indicated that the city’s initial calculations of the excess were based on the DDA TIF plan’s “realistic” revenue projections. [.pdf of table showing DDA's calculations in detail]

But the calculations presented at the DDA’s special meeting on Friday were based on an “optimistic” scenario. According to The Chronicle’s math, that’s a difference that works in favor of the DDA’s budget by a little over $100,000. Another assumption – that the excess should be calculated year-to-year, not cumulatively – could have a substantially greater impact. Based on The Chronicle’s math – which is not yet independently confirmed – it could amount to at least $1 million more than the $1,185,132 that the DDA has calculated should be returned to all taxing authorities.

Parking Contract

Lingering issues on the parking agreement include: (1) attachment by the DDA board of a fund-balance underwriting contingency to its approval of the parking contract – which includes a transfer of 17% of gross parking system revenues to the city; and (2) the city council’s willingness to accept a key non-financial component of the new parking contract – giving the DDA sole authority to set parking rates.

To address the first issue, the city council is likely to consider some kind of resolution that provides an assurance to the DDA that the city will underwrite its fund balances, if those balances drop to unacceptable levels due to a parking contract that transfers 17% of gross parking revenues to the city.

The second issue could result in a tight vote on the parking contract itself. At Friday’s special meeting of the DDA board, a nod was made to a concern of some councilmembers about giving the DDA sole authority to set parking rates. Currently, the DDA proposes parking rate changes, which are enacted if the council does not veto them within 60 days. That nod came in the form of an amendment that now includes the city council as an entity with which the DDA must consult before enacting any rate changes. [The contract also requires the DDA to follow a public engagement process similar to the city council's public hearings, before enacting any rate changes.]

That change might not satisfy those on the council who’ve previously indicated some opposition to granting the DDA increased control: Sabra Briere (Ward 1), Stephen Rapundalo (Ward 2), Stephen Kunselman (Ward 3), Marcia Higgins (Ward 4) and Mike Anglin (Ward 5). All five are up for re-election this year. The contract could thus pass on a 6-5 vote. Of course, any of the remaining councilmembers might also vote against that provision of the contract.

In case the city council amends the contract to retain control of rate changes, the DDA board would be able to consider and possibly adopt that revised contract at a special meeting it will likely convene this week anyway –  in order to ratify the city council’s solution to the fund balance underwriting contingency.

FY 2012 Budget

The council might entertain amendments to the proposed FY 2012 budget, but choose not to give it final approval, waiting instead for the continuation of the meeting on May 31.

If the council does decide to entertain budget amendments, they’re likely to include the following: (1) use of $90,000 in general fund reserves to add to the parks allocation; (2) use of $85,600 in general fund reserves to add to human services funding; (3) use of a nominal amount of general fund reserves to cover the cost of an additional primary election (as proposed, the FY 2012 budget anticipated primaries in only two of the city’s five wards); and (4) elimination of a proposed fee for three-times-weekly trash pickup in the downtown area.

Tracking the Council Meeting

Options for tracking the actions of the Ann Arbor city council include attending the meeting in person at city council chambers, 301 E. Huron, or watching the proceedings on CTN’s Channel 16, (on television or on CTN’s Channel 16 live Internet stream).

Somewhat more timely than The Chronicle’s comprehensive meeting reports are briefs filed in the Civic News Ticker. Readers who are eager to find out the outcome of city council votes can track the news there.

Update: 7:30 p.m. May 23, 2011. None of the issues the council was expected to resolve on Monday’s meeting were addressed. Instead, at the very start of the meeting, the council voted to recess, with the meeting to be continued on May 31.