DDA OKs Budget, Taps Reserve for $2M

Ann Arbor Downtown Development Authority board meeting (March 7, 2012): The main business item for the board at its monthly meeting was the approval of its budget for the coming fiscal year 2013, which starts on July 1, 2012. Across all funds, the FY 2013 DDA budget shows anticipated revenues of $22,097,956 against $24,101,692 in expenditures – for an excess of expenditures over revenues of $2,003,736.

The difference will be covered from the existing fund balance. The use of fund balance, in the current year and in the coming year, was planned as part of the construction of a new underground parking structure on South Fifth Avenue, and a new contract with the city of Ann Arbor, ratified in May of 2011. The contract, under which the DDA manages the city’s public parking system, pays the city of Ann Arbor 17% of gross revenues from the parking system.

At the end of FY 2013, the DDA expects to have a total fund balance of $4.38 million, or an amount equal to about 18.2% of expenses.

In its other main business item, the board authorized a budget of $100,000 for its Connecting William Street project, which it’s undertaking at the direction of the Ann Arbor city council. The council passed a resolution on April 4, 2011 that gave the DDA direction to explore alternative uses of city-owned parcels – currently used for surface parking – in a limited area of downtown. The area is bounded by Ashley, Division, Liberty and William streets.

Parcels included in the area are: the Kline’s lot (on Ashley, north of William), Palio’s lot (at Main & William), the ground floor of the Fourth & William parking structure, the old Y lot (Fifth & William), and the top of the Fifth Avenue underground parking garage, which is nearing completion.

Of the budgeted amount, $65,000 will come from a community challenge grant awarded recently as part of a larger $3 million grant awarded to Washtenaw County by the U.S. Dept. of Housing and Urban Development. The remaining $35,000 will be made up by DDA cash (no more than $20,000) and DDA in-kind contributions of staff time.

Toward the end of Wednesday’s meeting, the board also entertained some discussion about parking meter bags. The bags placed over on-street parking meters to designate the spots as unusable, so that streets are free of parked cars for construction projects or special events. The meter bag discussion came in the context of a request on behalf of FestiFools and conveyed by mayor John Hieftje, who sits on the DDA board. The request was to waive fees ordinarily associated with the meter bag placement for the April 1 FestiFools parade in downtown Ann Arbor.

One possible approach includes the creation of a parking meter puppet.

FY 2013 Budget

At its March 7 meeting, the board was asked to approve its fiscal year 2013 budget. Across all funds, the budget shows anticipated expenses revenues of $22,097,956 against $24,101,692 in expenditures – for an excess of expenditures over revenues of $2,003,736. The difference will be covered from the existing fund balance.

The shortfall was planned. It’s in the context of construction of a new underground parking structure on South Fifth Avenue, and a new contract with the city of Ann Arbor, ratified in May of 2011, under which the DDA manages the city’s public parking system. That contract pays the city of Ann Arbor 17% of gross revenues from the parking system, which are budgeted in FY 2103 at $18.1 million. The 17% translates to a ballpark figure of $3 million.

Factoring in coverage of this year’s (FY 2012) use of fund balance and FY 2013′s planned use of $2 million, the DDA will have a total fund balance of $4.38 million at the end of FY 2013, or an amount equal to about 18.2% of expenses. [.pdf of FY 2013 budget]

FY 2013 Budget: Deliberations

John Splitt reviewed the budget for the board, relying on the combined fund summary. [.pdf of FY 2013 DDA budget documents]

By way of background, the DDA’s accounting system includes four funds: the TIF (tax increment finance) fund, the housing fund, the parking fund and the parking maintenance fund. The TIF fund receives revenue from the taxes that are “captured” in the tax increment finance district defined in downtown Ann Arbor. The DDA receives taxes on the increment between the baseline value of property and the value of property after new construction. The DDA does not capture increases in value due to inflation. The housing fund receives revenue through transfers from the TIF fund.

The parking fund receives revenues from Ann Arbor’s public parking system, which the DDA manages under contract with the city. The contract, which was renewed in May 2011, calls for the city of Ann Arbor to receive 17% of gross parking revenues. The DDA contracts for day-to-day operations of the parking system with Republic Parking. The parking maintenance fund receives revenue through transfers from the parking fund.

Highlights of Splitt’s budget review included TIF income of $3,957,012. On the expense side, salaries and fringe benefits paid out of the TIF fund are basically split evenly, he explained, between the TIF and parking funds. That comes to roughly $152,000 for salaries and $95,000 for fringe benefits from each fund. [The DDA has four full-time employees– an executive director, a deputy director, a planning and research specialist, and a management assistant.]

Administrative expenses – $157,119 for the TIF fund and $90,292 for the parking fund – were described by Splitt as all the “office costs.” The professional services of $155,000 for the TIF fund and $85,500 for the parking fund will pay for architects, attorneys and consultants. Holiday lights and sidewalk repairs are budgeted for $130,000 of the TIF fund – it’s something the DDA does every year, Splitt noted. Another TIF fund line item is $508,000, which is an annual amount that the DDA pays toward the bond payments for the city of Ann Arbor’s new police/court building. The budget also includes $100,000 for the DDA’s energy grant program.

Another TIF fund line item for $200,000 – labeled “capital costs” – was described by Splitt as including sidewalk ramp installation for compliance with the Americans with Disabilities Act (ADA). Of the $3,081,896 in bond payments to be made out of the TIF fund, $2.25 million is for the new underground parking garage on South Fifth Avenue, due for completion sometime this spring.

For the housing fund, Splitt highlighted the two $400,000 line items (for a total of $800,000) that would be spent on Avalon Housing’s Near North project on North Main Street, and Village Green’s City Apartments project at First and Washington. In addition to support for the affordable housing units that are part of the City Apartments project, the DDA is financing the construction of the first two floors of the development, which will contain a public parking deck. The deck will be owned by the city of Ann Arbor.

Splitt said he didn’t know how likely it would be that those grants would need to be paid during the FY 2013 year, but it’s not impossible, he said, so the items are being included in the budget. [Neither project has begun construction, but the City Apartments project is poised to begin, with construction equipment on site.]

For the parking fund, the revenue estimate for FY 2013 is $18,104,916. That’s based on essentially flat growth but some additional usage, Splitt said – perhaps 1/4 or 1/3 usage of the new underground parking garage, set to open this spring. There will also be a parking rate increase set to take effect in September, he said, so the budget factors in 10 months worth of that rate increase. He characterized it as a “reasonable and conservative” estimate.

Out of parking revenue, it’s anticipated that the contract with Republic Parking will cost $6,298,423. The 17% of gross to be paid to the city of Ann Arbor is estimated to be $3,139,795. Also paid out of the parking fund is a $500,000 transfer to the parking maintenance fund and $590,060 to support alternative transportation in the form of the go!pass program.

A capital cost for the parking fund of $1,588,235 was described as a downpayment for parking at the First and Washington development. Bond payments from the parking fund total $3,613,759 across all the various parking structures, Splitt said. Of that amount, $700,000 is for the First and Washington structure. It’s not clear whether that amount will need to be paid in this budget year, he said.

For the parking maintenance fund, Splitt pointed to the $1,696,350 estimated expense, an amount derived from an estimate of the DDA’s parking structure engineering consultant, Carl Walker. The structures are in such outstanding condition, Splitt said, that it’s not anticipated that all the money would be spent, but it would be budgeted nonetheless.

Summarizing across all funds, Splitt said, the DDA is spending roughly $2 million more than its anticipated revenues. Estimated balances for each of the funds at the end of the year are: TIF – $2.9 million; housing – $0.3 million; parking – $0.735 million; and parking maintenance – $0.465 million. That leaves a total fund balance of $4.387 million at the end of FY 2013, Splitt concluded.

Russ Collins commented that FY 2013 is the “nadir” of the projected financial picture. He was alluding to the fact that the DDA anticipated tight budgets for a certain period, in the wake of the new parking garage construction and the new parking contract with the city of Ann Arbor, but after that the DDA would be in less of a financial crunch.

Sandi Smith sought some clarification of the arithmetic for the fund balances – the numbers included in the budget sheet show existing fund balances from June 30, 2011, but did not show the use of fund balance for the current fiscal year, FY 2012.

Newcombe Clark noted that there are conservative “hedges” built into the budget – the need to pay out $800,000 from the housing fund and the estimate of usage for the new parking deck. He wanted to know if the operations committee had thoughts about how to proceed if the scenarios underlying those hedges did not materialize in a year or so. Would the advice be to pursue additional projects or to let that accumulate to the fund balance? Splitt indicated that he felt it would be better to hold on to the reserves at this point, until the DDA is very comfortable with its reserve level.

Mayor John Hieftje asked if the forecasted TIF revenues included new projects that were anticipated being built within the DDA district, which would increase the amount of tax captured by the DDA. Joe Morehouse, deputy director of the DDA, explained that the DDA uses a standard 2% increase per year projection for forecasting. Once taxes begin to be captured after a project is complete, they’re added in to the total.

Hieftje said he felt it’s important to say that the use of fund balance that the DDA is making this year has been planned for a long time. Splitt concurred, saying that the money the DDA is using from its reserves is what it expected to use.

Outcome: The DDA board voted unanimously to approve its FY 2013 budget.

Downtown Parcel Planning Budget

The board was asked to establish a budget of $100,000 for its Connecting William Street project, which it’s undertaking at the direction of the Ann Arbor city council.

Downtown Parcel Planning: Background

The council passed a resolution on April 4, 2011 that gave the DDA direction to explore alternative uses of city-owned parcels – currently used for surface parking – in a limited area of downtown. The area is bounded by Ashley, Division, Liberty and William streets.

Parcels included in the area are: the Kline’s lot (on Ashley, north of William), Palio’s lot (Main & William), the ground floor of the Fourth & William parking structure, the old Y lot (Fifth & William), and the top of the South Fifth Avenue underground parking garage, which is nearing completion.

Of the budgeted amount, $65,000 will come from a community challenge grant awarded recently as part of a larger $3 million grant awarded to Washtenaw County by the U.S. Dept. of Housing and Urban Development. The remaining $35,000 will be made up by DDA cash (no more than $20,000) and DDA in-kind contributions of staff time.

The committee that has been shepherding the project along since the summer of 2011 recently released an online survey to solicit initial community feedback.

Downtown Parcel Planning: Deliberations

Joan Lowenstein reported on the Connecting William Street project, saying it’s pretty much on schedule. The survey has 1,500 responses so far. With the passage of the resolution, the project could move to its next phrase, to look at the land use and economics.

Newcombe Clark wanted to know if the $100,000 figure was matched to proposals from consultants. He was concerned that when the $100,000 figure is put out there, suddenly the cost of consulting becomes $100,000. Lowenstein indicated that the consultant had been selected already. [The consultant identified is SmithGroupJJR.] She noted that the DDA cash amount is “not to exceed” $20,000.

Amber Miller, planning and research specialist with the DDA, explained that the project budget was the same one used in the application that the DDA had made in coordination with Washtenaw County for a community challenge grant awarded by the U.S. Dept. of Housing and Urban Development.

Clark noted that the resolution the board was being asked to consider authorized negotiation of the consultant contract at the committee chair level:

RESOLVED, The DDA Partnerships/Economic Development Committee Chairs are authorized to negotiate and approve contracts relating to this project including a grant contract with the County and the selection of consultants as needed.

Clark wanted to know if the consulting contract had been signed – no, he was told. Clark offered a “friendly set of eyes” to look at the contract before it’s signed, which seemed amenable to Lowenstein and other board members.

Earlier in the meeting, during his report from the Downtown Citizens Advisory Council, Ray Detter said that the CAC always respects and supports careful community planning. So at the CAC meeting the previous evening, he reported that members had participated in the Connecting William Street survey. The CAC had been joined by Skyline High School students who were satisfying a course requirement – in connection with the survey, they’d made a plea for more stuff for young people in the downtown.

Outcome: The board voted unanimously to approve the Connecting William Street project budget.

Parking

Parking is common topic for every DDA board meeting, even if there is no board business requiring a vote on it.

Parking: Monthly Numbers

In Roger Hewitt’s absence, John Splitt gave commentary on monthly parking numbers. Comparing January 2012 to January 2011, Splitt noted that revenue-wise it was a good month this year – up 17% [$1,358,935 in January 2012 compared to January 2011 at $1,161,632]. Splitt attributed the change to a rate increase and outstanding weather. He hoped for the same kind of results for February.

Not discussed by the board was the performance of the parking system measured by the number of hourly patrons – it was also up compared to a year ago. In January 2011 the parking system had 169,653 hourly patrons, compared to 179,037 this year, an increase of about 5.5%. Systemwide there were about the same number of spaces available, 6,918 in January 2011 compared to 6,895 in January 2012. [.pdf of January 2012 monthly parking report]

Parking: Underground Garage Construction Update

Splitt said his report on the new underground parking garage would be much like it had been for the last two months, because it’s winter. Work is being done inside the deck on mechanical systems and lighting. Walls are being poured, he said, inside the structure. He expected that wall pours would be done at the end of March. They’re shooting to get South Fifth Avenue re-opened by the end of May, but hopefully it will be open before that, he said.

Newcombe Clark asked if there might be staging potential for the art fair (July 18-21) on top of the deck? Splitt said that if work stays on schedule, the surface work might be complete by the time of the art fairs. He also indicated that the garage might be opened in phases, with the first couple of levels opened before the lower levels.

During his report from the Downtown Citizens Advisory Council, Ray Detter said he’d visited the lower floors of the new underground parking garage under construction, and it could only be described as “awesome.”

Communications, Committee Reports

The board’s meeting included the usual range of reports from its standing committees and the Downtown Citizens Advisory Council.

Comm/Comm: FestiFools – Parking Meter Puppet?

At the end of the meeting, during the time for other DDA business, mayor John Hieftje told the board that FestiFools is facing a dilemma. [Festifools is an annual street festival in downtown Ann Arbor – this year held on Sunday, April 1 – involving very large puppets. The event has expanded to include FoolMoon, a procession of luminaries, which takes place this year on Friday, March 30. Workshops to create luminaries are being held every Sunday in March from 10 a.m. to 5 p.m. at the Workantile (118 S. Main Street).]

Hieftje described the event as an innovative, quirky and fun project and they were hoping that the DDA could waive a $1,000 parking meter bag fee associated with closing streets.

Susan Pollay, executive director of the DDA, was asked for clarification of the meter bag fees. [The fee per meter was raised from $15 to $20 effective Feb. 1, 2012.] She explained that the parking rate increases authorized in January 2012 also made other changes to meter bag fees. Now, what’s required is a reimbursement of actual costs incurred (from Republic Parking) to place the meter bags on Sundays and holidays. After the meeting, Pollay told The Chronicle that Republic Parking’s labor contract with its workers requires a minimum call-out time of four hours.

From the set of parking policy changes authorized by the DDA board in January 2012, for February implementation:

Meter bag requests for Sundays and Holidays will incur a fee for meter bag installation fee of $160 for up to 100 bags and $320 for more than 100 bags.

What’s different this year compared to last year, Pollay told Hieftje, is the reimbursement of actual costs on Sundays and holidays – FestiFools falls on a Sunday. Hieftje asked that one of the DDA board committees talk about waiving the fee.

Keith Orr commented that often when the DDA does nice things, it doesn’t get recognition for that. He suggested that the Sunday actual cost fee be waived in exchange for FestiFools creating a parking meter puppet, or a meter-bag puppet.

Sandi Smith weighed in on the importance of not doing something retroactively – it needs to be addressed now. She allowed that FestiFools is a great event. But she noted that there are more and more events downtown, and she noted that the DDA would get similar requests from other organizations. She pointed out that there’s a community events fund, which the city of Ann Arbor administers. It sounds simple and like a no-brainer to waive the fee for FestiFools, she said, but she had concerns about making a judgment for one event and not another.

Newcombe Clark followed up on Smith’s point by noting that the board heard a lot of “You’re not doing enough!” but this would create another opportunity for people to say, “Why not me?” He weighed in against waiving the fee in the absence of a policy.

Leah Gunn made a formal motion, which she would subsequently withdraw, that the DDA waive the $320 Sunday fee in exchange for a puppet in the parade. Hieftje said he supported that motion, but would like to go further than just the $320 and to waive all the meter bag fees, saying that the event is still really just getting started. He said the issue had come up quickly and caught FestiFools by surprise.

Clark suggested that it would be a better approach for now to have Pollay handle it within her discretion as executive director. John Mouat also indicated he was concerned about any approach that sets precedent for piecemeal solutions. Gunn was amenable to having Pollay handle the issue and withdrew her motion. Russ Collins weighed in supporting that approach, saying he would have suggested simply amending Gunn’s motion to provide direction to Pollay to handle the issue administratively.

Comm/Comm: LED Lights

Ted Williams and Jaspreet Sawhney of Falcon Innovations Inc. both attended the March 7 meeting, although it was Williams who gave a presentation to the board during public commentary.

The pair had previously paid the board a visit back on July 6, 2011 to introduce board members to their company’s LED lighting technology, which is sold under the brand name BLUECOLT. Williams showed them an LED light bar, which he described as revolutionizing lighting for many different applications. He showed the board slides of interior lighting applications, and illuminated exterior signs including some for Domino’s Pizza and the University of Michigan block M (at Glick Field House).

The main idea that Williams wanted to get across to the board regarded potential applications to lighting in parking structures. In most typical parking structure lighting applications, Williams explained, the light is up in the rafters and bounces around, which wastes energy – because the light is trapped there, and it’s not near the surface that needs to be lit.

Another issue specific to parking structures, Williams explained, is that typically large chunks of light are spaced out every 30 feet or so – that can cause alternating dark spots and glare for drivers. The concept that Williams showed the board would use light bars mounted under the beams of the parking structure, which would use “little bits of light spread out evenly.”

Williams told the board he’d be attending the third in the series of sustainability forums to be held at the downtown location of the Ann Arbor District Library, starting at 7 p.m. on March 8. The forum will cover Ann Arbor’s climate action plan, climate impacts, renewable and alternative energy, energy efficiency and conservation.

After Williams’ presentation, board member Newcombe Clark asked Williams if he’d been in touch with DDA executive director Susan Pollay. Williams indicated that he’d been in touch, partly as a result of the previous visit to the board.

Mayor John Hieftje wanted to know if the LED lights manufactured by Falcon could be dimmed – yes, he was told.

Comm/Comm: 1320 S. University

During his report from the Downtown Citizens Advisory Council, Ray Detter said he was pleased that the planning department and the planning commission had recommended denial [on Feb. 7, 2012] of the owner’s request to rezone the property at 1320 S. University from D2 to D1. However, he continued, he was disappointed that the owners of the property have nevertheless submitted a proposal to the city council that the property be rezoned. Detter described that upcoming vote [probably in April] as a test for the city council.

Comm/Comm: DishFish

Joel Verdun addressed the board during public commentary at the conclusion of the meeting, pitching DishFish, which he described as a fundraising coupon and community currency. The free coupons cost businesses no money, he said, and the coupons go back into circulation. He said he’d like to work with the DDA’s economic development and partnership committee to put the DDA logo on the coupons.

Present: Nader Nassif, Newcombe Clark, Bob Guenzel, John Hieftje, John Splitt, Sandi Smith, Leah Gunn, Russ Collins, Keith Orr, Joan Lowenstein, John Mouat.

Absent: Roger Hewitt.

Next board meeting: Noon on Wednesday, April 4, 2012, at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]

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