At its May 2, 2012 meeting, the DDA board was presented with a draft policy on supporting “brownfield” projects – a policy prompted by discussions at the board’s partnerships committee over the last few months. [.pdf of draft DDA brownfield policy] The board was not expected to act on the policy, and did not vote.
The committee has been discussing a proposal by Dan Ketelaar for support of a proposed development at 618 S. Main, which received a positive recommendation from the Ann Arbor planning commission on Jan. 19, 2012. The 7-story building would include 190 units for 231 bedrooms, plus two levels of parking for 121 vehicles. Ketelaar has estimated that the tax on the increment between the current valuation of the property and the final built project would yield around $250,000 a year in TIF (tax increment finance) revenue to the DDA.
Ketelaar is asking that the DDA pledge 80% of its TIF capture money for six years – about $1.3 million – to support certain aspects of the project in connection with the state’s Community Revitalization Program. The CRP is the successor to the brownfield and historic preservation tax credit program. In order to approve the tax credit, the state would like to see a commensurate commitment from local units – and Ketelaar is proposing that it take the form of the DDA’s support.
At the April 11, 2012 DDA partnerships committee meeting, one of the points that resonated strongest with some board members in favor of supporting the 618 S. Main project was the ability of the contribution to leverage state money that would otherwise not be invested in Ann Arbor. The amount of money from the state that could be leveraged is in the range of $3 million.
Under Ketelaar’s proposal, taxes on the property would still need to be paid. In other words, the DDA would not simply waive its tax capture on the property. The 618 S. Main project would be reimbursed for a portion of those taxes it would normally owe. In the draft policy, that’s reflected in the following passage: “The DDA will not forgo its TIF capture from a project; the DDA may elect to provide a grant to a project utilizing its funds, or it may elect to provide all or some of its support using such in-kind elements as access to parking for contractors or construction staging.”
The maximum amount of a possible grant described in the draft policy is “calculated by estimating 25% of the total TIF captured by a project over ten years.” In the case of the 618 S. Main project, that amounts to .25*(10*$250,000) = $625,000. That’s about half what the 618 S. Main project is requesting.
The DDA board has heard about the proposal on several occasions – first at the full board meeting on Feb. 1, 2012, and at four subsequent DDA partnerships committee meetings. DDA board members are cautious about the precedent that such a pledge might set, and the appropriateness of the DDA’s role at this early stage in the project. (Ketelaar has not yet acquired the land.) At the March 28 partnerships committee meeting, DDA board member Newcombe Clark expressed concern that, depending on the precise role defined for the DDA’s participation, the DDA could effectively be artificially inflating land values.
This brief was filed from the DDA offices at 150 S. Fifth Ave., Suite 301, where the board meeting was held. A more detailed report of the meeting will follow: [link]