Ann Arbor City Council OKs FY 2013 Budget

6 more firefighters, but only if federal, state grants are awarded

At its May 21, 2012 meeting, which adjourned around 1:30 a.m., the Ann Arbor city council approved the city’s fiscal year 2013 budget, for the period from July 1, 2012 through June 30, 2013. As required by the city charter, the budget had been proposed by city administrator Steve Powers a month earlier on April 16.


In the couple of weeks leading up to the May 21, 2012 meeting, councilmembers had their hands literally full with the FY 2013 budget. (Photo by the writer, taken on May 18.)

The amendments approved by the council included modifications that added a secretary position to the 15th District Court, increased human services funding by $46,899, added $78,000 to the Ann Arbor Housing Commission budget, and eliminated a contract with RecycleBank to administer a coupon program to encourage residents to recycle.

One resolution – which did not actually modify the budget – simply directed the city administrator to bring a future mid-year budget amendment to add up to six firefighters to the budget – if a federal grant and increased state fire protection allocations materialize.

Amendments that were brought forward, but that did not win council approval, included a proposal to leave money in various city funds, totaling $307,299, instead of transferring that amount to the public art fund. Also failing to win approval was an amendment that would give a specific interpretation to the city’s downtown development authority tax increment finance (TIF) capture ordinance – that would have benefited the city’s general fund by around $200,000. Both of those amendments were brought forward by Stephen Kunselman (Ward 3).

Another amendment that failed would have restored loose leaf collection service in the fall, as well as holiday tree pickup. And an amendment to fund additional police officers also did not succeed. Both of those amendments were proposed by Jane Lumm (Ward 2). Lumm was joined by Mike Anglin (Ward 5) in dissenting on the final budget vote.

The total expenditure budget for FY 2013 as proposed – across all funds, including utilities, solid waste and the like – came to $404,900,312 in revenues against $382,172,603 in expenses.

The originally proposed budget for the much smaller general fund – out of which the city pays for services like fire and police, planning, financial services, administration, parks and recreation – showed $79,193,112 in revenues against expenses totaling $78,869,750 for a planned surplus of $323,362. The following year, FY 2014, had been projected to be basically a break-even year.

The cumulative impact of the amendments approved by the council on Monday night increased expenditures to $79,070,842 against revenues of $79,193,112, for a surplus of $122,270. Below is a detailed list of proposed amendments and outcomes.

  • Increase District Court budget by $76,193 to add a secretary position. Outcome: Approved on a 10-1 vote, with Jane Lumm (Ward 2) dissenting. The amendment was put forward by Christopher Taylor (Ward 3).
    The increased expenditure did not identify a source of funds other than to tap the general fund. Rationale for the added position was that it restored a job that had been eliminated when it was uncertain whether Gov. Rick Snyder would appoint a replacement for judge Julie Creal, who resigned in 2011. Joe Burke was eventually appointed on Feb. 15, 2012 to replace her. The argument for adding the position was essentially that Burke needs the support staff.
  • Policy Direction: Upon receipt of additional funding for fire protection from the federal or state government, make a future mid-year budget amendment to hire up to six additional firefighters for a total of 88 firefighters. Outcome: Approved on a unanimous vote. The amendment was put forward by Margie Teall (Ward 4).
    The funding for additional firefighters would potentially be a combination of a federal grant – for which the city has applied through a FEMA program called Staffing for Adequate Fire & Emergency Response grants (SAFER) – and possible increases in the state of Michigan’s fire protection allocation to municipalities that are home to state-owned institutions like the University of Michigan. The number of 88 had been identified by fire chief Chuck Hubbard as ideal at a working session conducted on March 12, 2012.
  • Define DDA TIF capture on an interpretation of Chapter 7 that’s different from that of the Ann Arbor Downtown Development Authority, add $199,360 to general fund, and add two firefighter positions. Outcome: Rejected on a 3-8 vote. The amendment was put forward by Stephen Kunselman (Ward 3). It got support only from Kunselman, Jane Lumm (Ward 2) and Mike Anglin (Ward 5).
    The interpretation of Chapter 7 was controversial since it was first identified last year by city financial staff as having an impact on the amount of tax increment finance (TIF) capture to which the Ann Arbor DDA is entitled in its downtown district. For more detail see: “Column: Let’s Take Time on Ann Arbor Budget.” The interpretation of the ordinance and method of calculation of the TIF capture proposed by Kunselman would have had a substantial impact on the city’s revenue, as well as that of other taxing authorities in the DDA district, including the Ann Arbor District Library.
  • Increase human services allocation by $46,899. Outcome: Approved on a unanimous vote. The amendment was brought forward by Jane Lumm (Ward 2) and Sandi Smith (Ward 1).
    Last year for FY 2012, the council amended the proposed budget to increase human service funding by $85,600, to bring the total allocation to nonprofits providing human services to $1,244,629. Compared to the originally proposed FY 2012 human services amount, this year’s FY 2013 amount is about $39,000 greater. But that reflects a $46,899 decrease from the level to which the council amended the budget last year.
  • Decrease mayor/council travel budget by $6,500. Outcome: Rejected on a 2-9 vote. The amendment was brought forward by Sabra Briere (Ward 1), and won support only from Briere and Jane Lumm (Ward 2).
    The amount of $6,500 appears to arise out of an allocation of $550 for each of 10 councilmembers and $1,000 for the mayor. Two years ago on March 1, 2010, as the council was giving direction to then-city administrator Roger Fraser, a proposal was made to direct Fraser to eliminate travel for the mayor and councilmembers. The council decided on that occasion to preserve mayor John Hieftje’s allocation of $1,000.
  • Eliminate RecycleBank funding, with virtually no impact this year to the solid waste budget. Outcome: Approved on a 8-3 vote. The amendment was brought forward by Sabra Briere (Ward 1), Carsten Hohnke (Ward 5), Stephen Kunselman (Ward 3), and Jane Lumm (Ward 2). It was opposed by Tony Derezinski (Ward 2), Margie Teall (Ward 4) and Christopher Taylor (Ward 3).
    RecycleBank administers a coupon-based reward program that is intended to increase rates of curbside recycling in the city. At its Sept. 19, 2011 meeting, the city council voted to retain the contract it had signed the previous year with RecycleBank. Leading up to that vote, there had been some interest on the council in canceling the contract entirely – because it was not clear that the impact of the coupon-based incentives was commensurate with the financial benefit to the city. But the council settled on a contract revision that was favorable to the city. The cost of continuing the contract this year would be $103,500. The cost of canceling is $107,200 – $90,000 in an equipment purchase settlement in accordance with terms of the contract and $17,200 for 60 days of contractual notice. Savings will be realized in subsequent years.
  • Eliminate $307,299 in transfers to public art. Outcome: Rejected on a 2-9 vote. The amendment was brought forward by Stephen Kunselman (Ward 3) and Jane Lumm (Ward 2). It got support only from its two sponsors.
    The amendment stipulated that the transfers from various city funds into the public art fund would not take place, “notwithstanding city code” – a reference to the city’s Percent for Art ordinance. The Percent for Art ordinance requires that 1% of all capital improvement projects, up to a cap of $250,000 per capital project, be set aside for public art. The amendment would have prevented the transfer of $60,649 out of the drinking water fund, $22,400 out of the stormwater fund, $101,750 out of the sewer fund, and $122,500 out of the street millage fund. The council had re-debated its public art ordinance most recently at its May 7, 2012 meeting, in the context of a sculpture for the Justice Center lobby, which was ultimately approved.
  • Increase Ann Arbor Housing Commission budget by $78,000 to offset cost of allocating retiree healthcare costs. Outcome: Approved on a unanimous vote. The amendment was brought forward by Sandi Smith (Ward 1) and Margie Teall (Ward 4).
    The resolution did not identify a source of revenue other than the general fund surplus to pay for the increase. However, the resolution made clear that the increase was for one year only, to give the AAHC time to find additional revenue. The increase to AAHC is intended to offset the additional costs to AAHC from the new method of allocating retiree health costs to different departments – based on where the liability is accruing. For the city’s general fund departments, this resulted in decreased costs this year totaling around $1 million. But for some organizations within the city, like AAHC, it resulted in increased costs. For detail on retiree cost allocation methodology, see The Chronicle’s coverage of a Feb. 13, 2012 working session.
  • Count golf course support as parks support. Outcome: Approved with dissent only from Stephen Kunselman (Ward 3). The amendment was brought forward by Carsten Hohnke (Ward 5).
    The background to the amendment is a 2006 administrative policy approved by the council in connection with the parks maintenance and capital improvements millage. Among other things, under the 2006 administrative policy, general fund support for parks will decrease only in concert with the rest of the general fund budget. The council has revised the 2006 administrative policy twice previously. On May 17, 2010, the city council revised the 2006 administrative policy to eliminate the natural area preservation program’s automatic 3% increase, and reset NAP funding to levels proportionate with other programs. And on May 16, 2011 the council revised the 2006 administrative policy to allow non-millage funds to count as general fund support for the parks, for purposes of the policy that require general fund support. The parks maintenance and capital improvements millage will likely be put on the ballot for renewal in the Nov. 6, 2012 general election.
    The result of the other budget amendments that the council passed on the evening of May 21 would have triggered a need to adjust parks funding upwards by $49,000. The budget amendment on golf support did not change the 2006 administrative policy. Rather, it stipulated that the $272,220 included in the FY 2013 budget proposal as a transfer to the golf courses covered the adjustment (the $49,000) that would have been required to meet the 2006 policy.
  • Restore non-containerized fall leaf collection and holiday tree pickup, through a one-time use of $383,000 and recurring use of $275,280 money from the solid waste fund. Outcome: Rejected on a 3-8 vote. The amendment was brought forward by Jane Lumm (Ward 2). Joining her in support were only Tony Derezinski (Ward 2) and Mike Anglin (Ward 5).
    The one-time use of funds would be for purchasing two sweeper/pusher vehicles. The amendment also called for recurring use of $275,280 to pay for labor/equipment costs. Of that amount, $25,204 would have gone to fund the curbside pickup of holiday trees. The amendment called for a range of different savings within the solid waste fund that might have been used to fund the recurring costs, including savings from the elimination of the RecycleBank contract.
  • Add up to 10 sworn police officers – five to be funded through a federal Community Oriented Policing Services (COPS) grant and five to be funded through reductions in other departments. Outcome: Rejected with support only from Jane Lumm (Ward 2) and Stephen Kunselman (Ward 3). The amendment was brought forward by Lumm.
    The five positions to be added through the COPS grant would have been added only if the grant were awarded. The other five positions would have been funded from non-specific cuts to other city general fund departments: mayor and council ($8,957); 15th District Court ($94,617); public services ($192,265); and human resources ($35,939). The amendment also called for higher cost recovery for officers for which the Ann Arbor Transportation Authority (AATA) contracts.

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  1. By Leah Gunn
    May 22, 2012 at 7:06 am | permalink

    The DDA captures only 37.5% of the overall TIF, because it takes ONLY the initial year increase. After that the increase in value goes back to the other jurisdictions, which now receive 62.5%. (As another example, the Scio DDA captures 50% in perpetuity.) The SEV value of the downtown has increased about $300 million ($600 million market rate) since the inception of the DDA in 1982. So the other jurisdictions have benefitted from this capture policy and from this increase in value. The DDA has proven to be not only a good steward of the downtown, but also has been beneficial to the county, the library and the community college. (The DDA no longer collects school taxes as a result of Proposal A.)

  2. May 22, 2012 at 10:14 am | permalink


    I don’t think anyone is confused about the specific features of DDA TIF capture, so I think that’s completely off point. Also off point is the question of whether the DDA benefits other juridictions through its use of TIF capture and the investments the DDA makes with that money. I’m happy to stipulate that the DDA’s use of TIF has immensely benefited not just downtown, but the city of Ann Arbor and every other municipality in Washtenaw County, not just those from which the DDA captures taxes. I’m happy to stipulate that not “just for the sake of argument,” but because I actually believe that, and will fight anyone who says different.

    The sole question here, however, is what the correct interpretation is of Chapter 7 of the city code and how much TIF is legally available to the DDA. Some historical facts:

    1. May 2011: The Ann Arbor city attorney’s office and financial staff analyzed Chapter 7 as requiring return of TIF money by the DDA to other jurisdictions.
    2. May 2011: The DDA’s own legal counsel, Jerry Lax, analyzed Chapter 7 as requiring return of TIF money by the DDA to other jurisdictions.
    3. June 2011: The DDA was confident enough in the accuracy of its legal counsel’s opinion that it wrote checks totaling over $400K to other jurisdictions.
    4. June 2011: The Chronicle published an analysis showing that the method used for the DDA’s calculations is likely wrong. The key difference is that when the calculations are done in a common-sense (cumulative) way, the outcome is that the amount to be returned to other jurisdictions would have been substantially greater last year. More importantly, that analysis showed that the proper method of calculation results in a recurring disbursement, not just rare one-time disbursements, to other taxing authorities.
    5. July 2011: The DDA reverses its legal position, rendering the method of calculation moot. The DDA contends that Chapter 7 doesn’t actually require the DDA to return money to other jurisdictions.

    Those historical facts lead me to venture that nobody, not even the DDA, actually believes the interpretation of Chapter 7 that the DDA is now giving it. I think it’s fair to conclude that the DDA was driven to re-analyze the interpretation of the language of the Chapter 7 law by a desire to achieve a specific financial outcome for the DDA. The DDA is simply laying a bet that a lawsuit won’t be filed. And it’s probably a good bet. One issue that bears sorting out first is the question of legal standing: Who would be able to file such a lawsuit? Any Ann Arbor taxpayer? Only a taxpayer in the DDA district? Only another governmental body?

    Last night, councilmembers raised the specter of the DDA’s possible inability to meet its financial obligations – if Chapter 7 were to be interpreted as Kunselman advocated. One way to ground that possibility in reality is to look at the most recent version of the DDA’s 10-year plan.

    DDA board member Roger Hewitt told the city council during the budget presentation this spring that it’s a document that is updated quarterly. But when I asked DDA staff recently for the most recent copy of the 10-year plan here’s the answer I got: The most recent version of the 10-year plan is from last year – May 2011.

    So I think it’s reasonable to ask, that for its next meeting on June 6, the DDA board be presented with an updated 10-year plan. I also think it’s reasonable for the board to be presented with an alternate version of the 10-year plan that is based on the Chapter 7 interpretation in Kunselman’s resolution. I believe this would demonstrate clearly that the Ann Arbor DDA could comfortably meet all of its current financial obligations, even under the the DDA’s dis-preferred interpretation of Chapter 7. If I’m wrong about that, the 10-year plans would clearly show it.

    So show me, how about?

  3. By Tom
    May 22, 2012 at 10:20 am | permalink

    What was the SEV value increase for properties NOT inside the DDA boundary since 1982? Did property inside the DDA boundary increase in value at a higher rate than property outside the boundary? That would be the relevant metric here.

    With notable financing foreclosures like Ashley Terrace, and the crash of 2008, how much property tax is actually and currently being collected by other jurisdictions because the property value exceeds the “initial increase?” What is the actual benefit to these jurisdictions that is being realized (when and if it is properly shared with these jurisdictions)?

    Several recent construction projects inside the DDA boundary were built after tearing down an existing building or buildings and in some cases, displacing businesses out of the DDA boundary. During the construction period of 1-2 years, I’m told the property tax rate drops from that collected on the previously existing buildings, to that of a vacant lot and of course, any personal property taxes collected on the businesses are lost as well. (Not to mention jobs and amenities for residents. See article in today’s edition about the relocation of Delux Drapery as an example.) Is this temporary loss of revenue to all jurisdictions being factored in to the figures for later tax captures? Is the “initial increase” in value of the new construction based on the previous building’s tax rate or on the property’s value as a vacant lot during construction?

  4. By Steve Bean
    May 22, 2012 at 8:40 pm | permalink

    I’ve lived in Ann Arbor since 1982. I might try to take credit for those SEV increases (since we’re making baseless claims) except I don’t want to fight Dave.