Council: DDA Can Decide Own Tax Capture
At its April 2, 2012 meeting, the Ann Arbor city council declined to pass a resolution that would have asked city staff to verify the compliance of the Ann Arbor Downtown Development Authority with the city’s ordinance that governs how the DDA’s tax capture works. In declining to pass the resolution, the council gave its implicit approval to the DDA’s interpretation of the ordinance, which the DDA currently claims does not, in fact, limit its tax capture.
That’s a reversal of both the DDA and the city’s position from last May, when city financial staff pointed out the implications of the city ordinance. The result was a computation of excess TIF capture of over $1 million. The city of Ann Arbor waived its share, which amounted to $712,000, but the other taxing authorities in the district (Ann Arbor District Library, Washtenaw Community College and Washtenaw County) received a total of $473,000 in reimbursement for last year and previous years. The DDA’s current legal position, adopted subsequently, is that the money it returned to the other taxing authorities in its district had not been necessary, but it has not pressed for return of that money.
For this year and into the future, the interpretation of the ordinance and the method of calculation will have an impact of several hundred thousand dollars a year in the amount of taxes the DDA could rightfully capture from other taxing authorities in its district. [See “Column: Tax Capture Is a Varsity Sport”]
In relevant part, the ordinance passage reads: “If the captured assessed valuation derived from new construction, and increase in value of property newly constructed or existing property improved subsequent thereto, grows at a rate faster than that anticipated in the tax increment plan, at least 50% of such additional amounts shall be divided among the taxing units in relation to their proportion of the current tax levies. If the captured assessed valuation derived from new construction grows at a rate of over twice that anticipated in the plan, all of such excess amounts over twice that anticipated shall be divided among the taxing units. Only after approval of the governmental units may these restrictions be removed.” [.pdf of Ann Arbor city ordinance establishing the DDA]
With the failure of the council’s April 2 resolution, it appears the DDA will have discretion to interpret the TIF ordinance as it prefers. The DDA claims that the ordinance language is not a limit on TIF capture, but rather an explanation of how any money would be divided amongst the district’s taxing authorities, after the DDA’s own obligations are met.
The resolution was brought forward by Stephen Kunselman (Ward 3). It received support only from Sabra Briere (Ward 1), Jane Lumm (Ward 2) and Mike Anglin (Ward 5).
By way of general background, a tax increment finance (TIF) district is a mechanism for “capturing” certain property taxes to be used in a specific geographic district – taxes that would otherwise be received by the entity with the authority to levy the taxes. So in the DDA’s TIF district, the DDA doesn’t levy taxes directly. Rather, a portion of the property taxes that would otherwise be collected by taxing units (like the library, community college and the county) is instead used by the Ann Arbor DDA for improvements within a specific geographic district, covering about 66 city blocks downtown.
For additional background specific to the current situation, see “Council Preview: Marijuana, Art, TIF.”
This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]