Several revisions to Chapter 7, a city ordinance governing the Ann Arbor Downtown Development Authority (DDA), have received an initial approval by the city council. One of the revisions could result in roughly $559,000 in additional annual revenue for the city of Ann Arbor – compared to what it would receive under the DDA’s current interpretation of the ordinance.
The 7-3 vote came at the council’s April 1, 2013 meeting. In order to be enacted, the changes will need to receive approval from the council at a subsequent meeting, following a public hearing.
The revisions considered by the council fell roughly into two categories: (1) those involving board composition and policies; and (2) calculation of tax increment finance (TIF) capture in the DDA district.
In the first category, the revisions to Chapter 7 that were given initial approval by the council included: a new prohibition against non-mayoral elected officials serving on the DDA board except by agreement with the other taxing jurisdictions; term limits on DDA board members; and a new requirement that the DDA submit its annual report to the city in early January.
An amendment to the ordinance changes offered by Jane Lumm (Ward 2) was accepted as friendly. It was meant to assure a focus on the DDA’s support of housing. It stipulated that if tax increment financing is used as the financing method for an approved authority project, the project must meet one of the DDA’s adopted plan goals. Among those plan goals is support of housing. Lumm’s change provides the ability of the DDA to make investments in properties not just in the district, but also in neighborhoods near the district.
More significantly, the council gave initial approval to proposed revisions to Chapter 7 that would clarify how the DDA’s TIF tax capture is calculated. The “increment” in a tax increment finance district refers to the difference between the initial value of a property and the value of a property after development. The Ann Arbor DDA captures the taxes – just on that initial increment – of some other taxing authorities in the district. Those are the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. For FY 2013, the DDA will capture roughly $3.9 million in taxes.
The proposed ordinance revision would clarify existing ordinance language, which includes a paragraph that appears to limit the amount of TIF that can be captured. The limit is defined relative to the projections for the valuation of the increment in the TIF plan, which is a foundational document for the DDA. The result of the clarification to the Chapter 7 language would mean about $363,000 less TIF revenue for the DDA in FY 2014 – compared to the $3.933 million shown in the DDA’s adopted budget for that year. For FY 2015, the gap between the DDA’s budget and the projected TIF revenue – using the proposed clarifying change to Chapter 7 – is just $74,000.
However, the total increment in the district on which TIF is computed would show significant growth. And under the proposed clarification of Chapter 7, that growth would result in a return of TIF money to other taxing jurisdictions – that would otherwise be captured by the DDA – totaling $931,000 each year for FY 2014-15. The city of Ann Arbor’s share of that would be roughly $559,000, of which $335,000 would go into the general fund. The city’s general fund includes the transit millage, so about $69,000 of that would be passed through to the Ann Arbor Transportation Authority.
The amount of TIF capture that’s returned to the other taxing jurisdictions is tied to growth in the valuation by the Chapter 7 language. Under Chapter 7, if the actual rate of growth outpaces the growth rate that’s anticipated in the TIF plan, then at least half the excess amount is supposed to be redistributed to the other taxing authorities in the DDA district. In 2011, the DDA for the first time returned excess TIF capture to other authorities, when the existence of the Chapter 7 language was reportedly first noticed. At that time, the DDA made repayments of TIF monies to other authorities of around $400,000, which covered what was owed going back to 2003. When the DDA calculated the amounts owed in 2011, the city of Ann Arbor waived its roughly $700,000 share.
In 2011, the DDA used a year-to-year interpretation of the Chapter 7 language instead of computing rate of growth against the base year in a cumulative fashion. That is a point that the Chapter 7 revisions would clarify. At the two previous meetings when the council had considered but postponed voting on the ordinance amendments, that specific point had not been addressed. But the substitute ordinance revision offered on April 1 clarified the current language in favor of the cumulative methodology. Previously, the council had postponed voting at its March 18, 2013 and March 4, 2013 meetings.
The figures below come from the city of Ann Arbor’s financial services staff. Labels are The Chronicle’s.
MOST RECENT PROJECTIONS FOR TIF CAPTURE (in millions) FY 13 FY 14 FY 15 ========================== 3.957 3.933 3.756 DDA Adopted Budget TIF Revenue 3.957 4.501 4.613 Projected TIF, DDA View 3.957 3.570 3.682 Projected TIF, Clarified Ch. 7 .568 .857 Budgeted vs Projected, DDA View (.363) (.074) Budgeted vs Projected, Clarified Ch. 7 ========================== ADDITIONAL REVENUE FROM CLARIFIED CH. 7 FY 13 FY 14 FY 15 ========================== .335 .335 City General Fund .223 .223 City Non-General Fund .559 .559 Total City .372 .372 Total AADL, WCC, WC .931 .931 Total
These projections do not include the capture that would result in future years from completion of City Apartments, 624 Church, 618 S. Main, or 413 E. Huron (assuming that it is approved).
The initial approval was supported by Stephen Kunselman (Ward 3), Sumi Kailasapathy (Ward 1), Sally Petersen (Ward 2), Jane Lumm (Ward 2), Mike Anglin (Ward 5), Marcia Higgins (Ward 4) and Sabra Briere (Ward 1). Voting against it were mayor John Hieftje, Margie Teall (Ward 4) and Chuck Warpehoski (Ward 5). Christopher Taylor (Ward 3) was absent.
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]