DDA Board Grumbles: Budget, Streetlights

City-council approved budget adopted by board, but DDA awakens to possibility of altering budget later

Ann Arbor Downtown Development Authority board meeting (June 5, 2013): An oblique quip from a DDA board member during the June meeting signaled likely ongoing friction between the DDA and the Ann Arbor city council: “Too many people’ve been staying up too late on Mondays …” The comment came in the context of two different board votes – one on adopting the DDA’s upcoming fiscal year 2014 budget, and another on adjustments to its current year’s budget as the year comes to a close on June 30.

Left to right: DDA board member Keith Orr, mayor John Hieftje.

Left to right: DDA board member Keith Orr, mayor John Hieftje.

The DDA had actually already adopted its FY 2014 budget – back on Feb. 6, 2013. And although it’s been customary in the past years for the DDA to adopt its budget in advance of the city council’s approval, the state enabling statute for downtown development authorities provides a different sequence: “Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality.”

Considerable debate on the DDA’s budget had unfolded among city councilmembers at their May 20, 2013 meeting. And the council had ultimately decided on a 10-1 vote to approve a FY 2014 budget for the DDA that differed from the one the DDA had adopted in February. In addition to recognizing an additional $568,000 in tax increment finance revenue (TIF), the council’s action transferred an additional $300,000 from the DDA’s TIF fund to the DDA’s housing fund.

At their June 5 meeting, some DDA board members balked at the council’s action, citing the replacement of rusting-out light poles on Main Street as a more pressing need than reserving funds for undetermined future housing projects. But ultimately the board adopted the council’s approved budget on an 8-2 vote – with dissent from Sandi Smith and John Mouat. Absent from the meeting were Russ Collins and Nader Nassif.

At the June 5 meeting, the board concluded that a portion of the more than $516,000 cost for the Main Street light poles would need to come from the city’s general fund. Mayor John Hieftje indicated at the meeting that in the next month he expected the city council would be presented with a budget resolution authorizing the difference between the $516,000 total cost and the $268,000 that the DDA considers available in its council-approved budget.

Also approved by the DDA board were annual routine adjustments to its current year’s budget, which are undertaken to ensure that actual expenses and revenues are reflected accurately. The adjustments are made so that expenses do not exceed revenues in any of the funds. During those deliberations, back-and-forth between board treasurer Roger Hewitt and Newcombe Clark indicated a realization that the kind of budget amendment they were undertaking for FY 2013, at the end of the fiscal year, might be used to work around the budget levels authorized by the city council. It’s not completely clear if that strategy is possible.

But in response to Hewitt’s assurance that budget amendments could be enacted for any reason – as long as expenditures didn’t exceed revenues – Clark made his comment about people staying up too late on Monday nights. [The city council meets on Monday nights, and the council's deliberations on the DDA budget have gone long into the evening. If the DDA board can change its budget after adopting the council-approved version, then the council's deliberations would seem to be moot.]

The June meeting was Clark’s penultimate one, as his term expires at the end of July and he’s moving to Chicago to take a job there. The board’s July 3 meeting will also be board chair Leah Gunn’s last meeting, which will mark the end of over two decades of service on the DDA board, beginning in 1991.

The parking revenue and patrons report from the public parking system was one of the regular highlights of the meeting. The DDA manages Ann Arbor’s public parking system under a contract with the city. The parking report was complemented by a board resolution that awarded five additional monthly parking permits to The Varsity residential project, bringing its total to seven. The DDA can assign monthly permits to residential projects under the city’s contribution in lieu (CIL) program – which provides a mechanism for building housing without providing parking spaces onsite.

Local developer Peter Allen addressed the board during public commentary, reporting that his company had been one of three to submit bids in response to the city’s RFP (request for proposals) for brokerage services to sell the former Y lot at Fifth and William streets. He told the board he thinks the parcel is worth $5-7 million or more.

Budget Issues

The board handled two major budget issues and entertained discussion on others. The main issues were: (1) the adoption of the city-council approved FY 2014 budget, on which the council had voted at its May 20, 2013 meeting; and (2) adjustments to the FY 2013 budget, which is the current fiscal year now drawing to a close on June 30.

During deliberations at the May 20 meeting, the council had ultimately decided on a 10-1 vote to approve a FY 2014 budget for the DDA that differed from the one the DDA had adopted in February. Christopher Taylor (Ward 3) cast the sole vote of dissent. In addition to recognizing an additional $568,000 in tax increment finance (TIF) revenue, the council’s action transferred an additional $300,000 from the TIF fund to the DDA’s housing fund.

Budget Issues: FY 2014

By way of background, according the state’s enabling statute for downtown development authorities, a DDA is supposed to adopt its budget after the governing municipality approves it [emphasis added]:

125.1678 Budget; cost of handling and auditing funds. Sec. 28. (1) The director of the authority shall prepare and submit for the approval of the board a budget for the operation of the authority for the ensuing fiscal year. The budget shall be prepared in the manner and contain the information required of municipal departments. Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality. Funds of the municipality shall not be included in the budget of the authority except those funds authorized in this act or by the governing body of the municipality. (2) The governing body of the municipality may assess a reasonable pro rata share of the funds for the cost of handling and auditing the funds against the funds of the authority, other than those committed, which cost shall be paid annually by the board pursuant to an appropriate item in its budget

However, the Ann Arbor DDA board has typically adopted its budget before the city council approves the city’s fiscal year budget, of which the DDA’s budget is a component.

At the board’s June 5 meeting, Roger Hewitt led off the discussion on adopting the FY 2014 budget by noting that according to the state enabling legislation for DDAs, the city council approves the DDA’s budget, and then the DDA board formally adopts that budget. There were a couple of changes that the city council made compared to the budget that the DDA board had previously adopted in February, Hewitt said. So the board was being asked to consider a revised budget that reflected changes approved by city council. [.pdf of FY 2014 DDA budget adopted in February] [.pdf of revised FY 2014 DDA budget]

Income to the TIF fund was being revised in the budget based on new information from the assessor’s office – to a total of just over $4.5 million, Hewitt told the board. The council had also increased the amount of inter-fund transfers from the TIF fund to the housing fund from $100,000 to $400,000 – a $300,000 increase. The budget the board was being asked to consider, Hewitt said, showed capital costs would be increased from $300,000 to $568,000 – to replace the light poles on Main Street.

Ann Arbor Main Street rusted light pole

Ann Arbor Main Street rusted light pole. (Photo from April 2012 by city of Ann Arbor staff.)

Susan Pollay, executive director of the DDA, indicated that only $268,000 of those capital costs were intended by the DDA currently to be used for light poles on Main Street. She told the board that she was in conversation with city staff about how to come up with the difference between $268,000 and the estimated cost of doing the replacement for the poles – which is $516,000, including warranties and labor. She thought that a resolution would be presented to the city council within the next month asking for a city council approval to appropriate the remaining money from the city’s general fund. Approval for the project would be coming back to the DDA board in July, Pollay said.

Looking at the housing fund in more detail, Hewitt noted that the total $400,000 transfer into the housing fund showed up as income to that fund. Another change to the budget was to move a different $400,000 to support affordable housing in Village Green’s City Apartments project, which had originally been part of the previous year’s budget. That leaves the housing fund balance for fiscal year 2014 at about $382,000, Hewitt concluded.

By way of background, the politics of the housing fund transfer involve pending revisions to the city ordinance that regulates how the DDA’s TIF capture is calculated. The existing ordinance language, enacted in 1982, indicates a cap to TIF revenue, calibrated to the anticipated increase in tax valuation in the TIF plan, which is a foundational document for any DDA. Revenue above the cap is supposed to be returned to the taxing jurisdictions in the district, whose taxes the DDA captures. The DDA contends that it only became aware of the cap in 2011, when it was pointed out by the city treasurer.

The DDA eventually adopted the position that it could give the ordinance language an interpretation that did not require the return of any TIF dollars to the taxing jurisdictions. The DDA’s response to proposed changes to the language to prevent its non-cap interpretation of the ordinance was to raise the specter of a diminished ability of the DDA to support affordable housing. Councilmembers who were pushing to clarify the ordinance responded to the DDA’s political argument, based on affordable housing, with a political move of their own – the forced transfer of money from the DDA’s TIF fund to the housing fund.

Sandi Smith led off deliberations by saying she had a problem transferring $300,000 to the housing fund when the DDA had been working pretty hard to contribute to affordable housing, without a clear path for doing that. It’s been a struggle for the last eight years sitting on the partnerships committee trying to find solid projects and a method to invest in affordable housing downtown, she said. The transfer seems “arbitrary,” Smith said, when there are other very clear needs, giving the light poles as an example. Smith felt the DDA had been very good about putting money aside for housing, but she allowed that the DDA had cut back a couple of years in order to build the new Library Lane underground parking structure. But the board had now begun again to invest in housing and to put some money aside.

It’s challenging now, Smith said, to accept what the council had done by moving an arbitrary amount of money over into the housing fund – without a project that is specifically ready to go. She described it as unfortunate that the city had not approached the DDA partnerships committee beforehand to have a discussion with the chair of that committee or the chair of the DDA board, to ask: “Is this a useful thing for you to do?” She said it had been done in an arbitrary and off-the-cuff way at the 11th hour.

Smith asked what kind of flexibility the board had at this point. She did not see the transfer from TIF to the housing fund as a benefit to anything the DDA is doing as far as affordable housing goes. She did not feel it benefits the downtown in any way to move the money over to the housing fund in a “holding pattern,” waiting for the DDA to find a project to invest in. Hewitt told Smith that he did not necessarily disagree with her, but the state law is clear that the DDA’s budget must be approved by the city council. The DDA adopts its budget after the city council approves it. “The law is the law,” Hewitt concluded.

Newcombe Clark talks with DDA executive director Susan Pollay before the June 5 meeting.

Newcombe Clark talks with DDA executive director Susan Pollay before the June 5 meeting.

Newcombe Clark drew out the fact that in the council’s resolution passed on May 20, the housing fund transfer is explicitly required, but the council’s direction to spend money on the Main Street light poles is put in terms of a request. He concluded that one of the moves had been forced while the other had been merely requested.

Mayor John Hieftje, who voted with the 10-member majority in supporting the council’s resolution, told the board that these issues had been discussed at the council’s meeting. He had been unsuccessful in convincing other councilmembers that the amount of the housing fund transfer should not be as great, he said. His point at the council meeting had been to stress the importance of replacing the light poles on Main Street, he added. But he noted that the original resolution that had been put forward called for an even greater amount of $500,000 to be transferred to the housing fund, which would have made it unavailable to spend on light poles. What the council had approved had been a compromise. He described the number of light poles that had blown down as three or four. [City staff in the public services area responded to an e-mail query from The Chronicle about the exact number of light poles that had failed, by explaining that two had fallen while two more had been replaced when they were deemed on inspection to be in immediate need of replacement.]

Board chair Leah Gunn ventured that the city’s general fund will have to cover the balance of the expense for the light poles [$516,000 - $268,000 = $248,000]. Hieftje indicated that he was hopeful it would be possible, but he was not sure if that would have majority support on the city council: “I can’t predict that.” But he would be voting to support replacing light poles with general fund money, he said. Smith indicated that to her it was a priority to replace light poles. She characterized the housing fund transfer as “feel-good money,” because there’s pressure for affordable housing – without a commitment by the council to find a way to fund it. She indicated she would not support the budget change even though she knew it would pass. About the council’s fund transfer, she concluded: “It’s nonsensical to me.”

Clark floated the idea that light poles in front of Ashley Mews could be replaced with housing fund dollars. Pollay told Clark that the light poles in need of replacement are located on Main Street between Huron to the north and William on the south – so, no. [Ashley Mews is south of William.] Hieftje added that Craig Hupy, the city’s public services area administrator, had characterized the need to replace the light poles on Main Street as “urgent.” [The need is based on rusting of the poles, which apparently makes them susceptible to catastrophic failure.]

John Mouat indicated agreement with Smith – though he was not so much concerned about comparing replacement of light poles to investment in housing. He was more concerned about the process. He agreed with Smith’s characterization of the amounts as arbitrary. The DDA support of affordable housing needs to take place in the context of a process, he said. So he was not inclined to support the budget. John Lowenstein pointed out that this was for the fiscal year 2014 budget, and that meant that if there were no appropriate housing projects to spend the money on in that fiscal year, then the budget for next year would be amended based on experience rather than “random decisions.”

John Mouat

DDA board member John Mouat.

Gunn noted that the DDA’s partnerships committee would be meeting with representatives of the housing community later in June to find out what affordable housing projects are in the pipeline. But the DDA’s commitment to affordable housing is clear, and the light poles are an emergency, Gunn concluded. During her report out from the partnerships committee, Sandi Smith had noted that the June meeting would include representatives of the affordable housing community so that the DDA board can be as informed as possible about the joint city and county goals, and how the DDA can align its work plan to best help the process. That meeting will take place two hours later than it usually does – which puts the time at 11 a.m. on June 12.

Given that the meeting with representatives of the housing community was pending, and that the city council was going to be considering possible action on funding light poles, Hieftje ventured that the DDA board had the option of postponing the vote on the budget until its next meeting, in July. Bob Guenzel responded to Hieftje by pointing out it was not actually an option because the board needed to adopt the budget before the fiscal year started. Guenzel then stated, “But I assume we can amend the budget along the way if we decide to do that in July, and that can be done.” This comment set the stage for discussion later in the meeting – about the DDA’s ability to change its budget later in the year without city council approval.

Keith Orr agreed with Mouat’s point about the process. It struck him as odd that some councilmembers said they were looking for a more autonomous DDA [an allusion to comments by Jane Lumm (Ward 2)], but at the same time the council is also giving very specific direction about how to spend the money.

Outcome: The DDA board approved the fiscal year 2014 working budget on an 8-2 vote. Dissenting were Sandi Smith and John Mouat.

Budget Issues: FY 2013

The board was also asked to consider amendments to its current year’s budget to reflect the actual revenues and expenses through the year – mainly to avoid the possible circumstance that has arisen in the past in which expenses might exceed revenues in a particular fund, which is a violation of state law. Hewitt noted that the board had already undertaken a midyear budget adjustment – to reflect some of the costs of the Library Lane parking garage construction. Changes considered at the June 5 meeting included items related to the Zingerman’s brownfield grant, pushing a $400,000 payment for Village Green’s affordable housing units to the next fiscal year, adding in grants to the Ann Arbor Housing Commission for Baker Commons improvements.

Hewitt noted that the maintenance fund for the parking system was getting down to its lowest level. The DDA has been using maintenance funds, Hewitt said, to pay for the new Library Lane parking structure. But for the next year’s budget there is a transfer of $4.4 million back into the parking maintenance fund, he reported.

Then came Clark’s inquiry about the possibilities for amending the budget generally, given that the board was amending that year’s budget to adjust it for variances near the end of the fiscal year. Clark questioned what the requirement was for amending the budget: Was the DDA required to amend its budget twice a year? Hewitt indicated that it was only necessary once, but the DDA had amended the budget previously this year – because a huge amount of construction costs had come in that were not reflected in the budget for this year. So a midyear revision was done to give a clearer idea of where the DDA would be at the end of the year.

Clark asked if the requirement was only that expenses be updated that were above budget, or if adjustments to revenue were also required to be made. Hewitt indicated that both kinds of revisions were supposed to be made – for revenues and expenses. The important thing is that the expenses can’t be above what were budgeted. Clark then made clear why he was asking question: Does it need to go back to the city council for approval? he asked. The answer Hewitt gave Clark was no. The council approves the DDA’s budget for the upcoming fiscal year, Hewitt said. But the council does not need to approve the DDA’s final budget, which reflects the DDA’s actual expenses and revenues, Hewitt contended.

Clark inquired whether there was some threshold for a reason the DDA might change its budget. Does the state of Michigan care why the DDA might change its budget? Clark asked. Not that he was aware of, Hewitt said: “It’s up to us.” The important thing is that the DDA can’t have negative fund balances, Hewitt said, stressing that the DDA can’t spend more money than it has budgeted for. Clark’s summary of what he’d drawn out: “Too many people’ve been staying up too late on Mondays, then.” The allusion was to the fact that city council had debated issues of DDA budget control at its Monday meetings, long into the night.  If the DDA retains the ability to amend its budget later, that would allow the board to work around the council-approved budget parameters.

Outcome: The DDA approved the adjustments to its FY 2013 budget.

Budget Issues: Police Funding

At its June 3, 2013 meeting, the city council had voted 8-2 to encourage the DDA to consider allocating $270,000 to fund three police officers for the downtown area. During her communications time, board chair Leah Gunn reported the council vote, which had been approved two days earlier. Gunn told the board that she was referring the request to the board’s operations committee. She indicated that the board needed to talk to the chief of police and other community members in order to weigh the council’s request.

Budget Issues: DDA Ordinance Revisions

During communications time, Roger Hewitt noted there had been quite a lot of discussion about modifying the ordinance regulating how the tax increment finance (TIF) capture for the DDA is defined. The issue had been postponed until September, he noted. [That vote by the city council postponing final consideration until Sept. 3 came on May 6, 2013.] The previous day, he and Bob Guenzel along with Susan Pollay had some informal discussions of the ordinance along with some councilmembers, Hewitt reported. [The proposed ordinance revision would clarify the existing language in Chapter 7 of the city code, originally enacted in 1982, so that the DDA's preferred interpretation – which does not cap the DDA's TIF revenue – would not be possible.]

Budget Issues: Third Quarter Update

The third-quarter financial report was also delivered by Roger Hewitt. He noted that the $1.28 million increase in parking revenue was due to the loan that the DDA had received for parking equipment from Republic Parking. Accounting rules required the DDA to show that money as revenue, with interest to be deducted as expenses. He noted that utility costs have been higher than anticipated, as were bank charges. The increased bank charges, he said, were attributed to the increased use of credit cards by parking customers. Fees charged for those credit card transactions continue to go up, he said. Hewitt also highlighted that the $400,000 payment to Village Green to support affordable housing in the City Apartments project would not take place this fiscal year. That would be pushed to the following year.

Parking for The Varsity

The DDA board was asked to consider assigning monthly parking permits to The Varsity, a residential high-rise building at 425 E. Washington St. in downtown Ann Arbor. The request was for five additional monthly parking permits in the public parking system, bringing The Varsity’s total to seven.

The right to purchase monthly parking permits – under the city’s “contribution in lieu” program – is administered by the DDA.

The DDA had previously approved two permits for The Varsity, which is a 13-story, 173-unit, 178,380-square-foot apartment building for approximately 418 people. Construction is nearing completion.

The project needs to provide a total of 76 parking spaces. That parking is required in order to qualify under the city’s zoning code for the additional floor area that the project contains, beyond a basic 400% floor area ratio (FAR). If the parking is not provided onsite, a developer can meet a parking requirement by making an upfront payment of $55,000 per space or by purchasing monthly permits in the public parking system for an extra 20% of the current rate for such permits – with a commitment of 15 years.

The Varsity’s developer had originally planned to meet part of the 76-space requirement with two spaces that were assigned to a car-sharing service. That arrangement fell through. And the developer lost a space due to physical constraints related to ADA (Americans with Disabilities Act) compliance. Car-sharing spaces can count as four spaces apiece for satisfying parking requirements.

That led to the request for an additional five spaces, for a total of seven for The Varsity.

The Varsity is the second project to use the parking CIL. On Oct. 3, 2012, the DDA board voted to approve the purchase of up to 42 monthly permits by the 624 Church St. project, another residential development.

Parking for The Varsity: Public Commentary

Brad Moore introduced himself during public commentary time as the associate architect on The Varsity. He noted that the project had previously requested some spaces but had not requested enough of them – so they were now back to ask for a few more. He told the board that he was available to answer questions when the item was reached on the agenda.

Parking for The Varsity: Board Deliberations

When the item was reached on the agenda, Roger Hewitt asked Moore to come to the podium to answer questions. After reciting the history of the requests, Hewitt asked Moore what happened to the two physical spaces that were intended to be used for the car-sharing service. Moore explained that the deal with Zipcar had fallen through because Zipcar had wanted the spaces to be available to the general public – whereas The Varsity wanted the cars to be available just to residents of The Varsity.

What Hewitt wanted to know is what happened to the two physical spaces that prevented The Varsity from including them in its current count of parking spaces. Moore explained that the spaces are located on an adjacent property that is under the same ownership. However, because those two spaces are not a part of the project’s site plan, Moore indicated there was a problem in counting those spaces to satisfy the parking requirement. Newcombe Clark expressed some puzzlement that the spaces themselves could not count as one space apiece for the parking requirement, yet those same spots had been intended to count as four spaces apiece under the Zipcar arrangement.

Hewitt ventured that it might be possible to create some kind of an easement in perpetuity that would allow for the inclusion of those two spaces has part of the parking requirement tally for the project. John Splitt questioned whether the developer for The Varsity was even interested in pursuing such an easement. John Mouat expressed some skepticism about the idea of pursuing an easement, saying it seemed like an encumbrance on the adjoining property. Joan Lowenstein added that pursuing an easement could take several months.

Hewitt allowed that there was somewhat of a timing issue, and indicated that he would have preferred for The Varsity to have approached the DDA sooner. Still, Hewitt indicated that he would support allocating the permits. Sandi Smith added that the permits under the CIL program are purchased at a premium cost of an extra 20%. She characterized the permits as no different from any other permits. Clark questioned Smith’s characterization – venturing that the permits being granted to The Varsity would allow jumping to the front of the monthly permit line, or else would require reducing the amount of hourly parking available in the structure where the permits were being granted.

Hewitt responded to Clark by indicating his understanding was that The Varsity would need to have the permits in hand in order to receive its certificate of occupancy. Hewitt indicated that either The Varsity monthly permit requests would jump to the front of the monthly permit waitlist, if there were a list, or that the amount of hourly parking would decrease. He indicated that the waitlist turned over relatively quickly these days – but he noted that it depends on the structure. Given the small number of spaces and the hold-up it would mean for the development of a large building, Clark indicated that he would support the allocation of the spaces. However, he wanted to see the operations committee address the policy issue sooner rather than later.

Hewitt said that the operations committee is very focused on the issue of trying to rationalize needs within the system. He characterized the CIL program as stemming from an ordinance passed by the city council – saying it was not a DDA policy. However, the DDA has veto power if there are no spaces available in the system, and the DDA has the right to decide in which structure the spaces are allocated, Hewitt said. In this respect, the DDA is responding to a city ordinance, he said.

Clark asked if the developer would care if the parking permits were assigned to a structure further away from the building under construction. Moore replied that he figured the developer would prefer that the permits not be assigned to the most remote location. Clark ventured that if he were on the waitlist and he kept getting bumped for something like this, “I’d be frustrated.” Approaching the issue in a piecemeal fashion was not advisable, given the amount of construction that’s taking place downtown, Clark felt. Hewitt told Clark he agreed with him completely. He contended that demand in the public parking system is increasing at a significant rate and the DDA is trying to catch up with a very dynamic and changing system. But he agreed that the DDA needs a rational system for making the decision on permits.

Keith Orr indicated his agreement on the need for a policy so that decisions are not seemingly random. He indicated that he would be the “gadfly vote” and would vote against the allocation of permits to The Varsity just as a reminder that there needs to be a policy in place.

Outcome: The DDA board voted to allocate a total of seven monthly parking permits to The Varsity, over dissent from Keith Orr.

Routine Parking Reports

Delivering the parking report as usual was Roger Hewitt. The monthly parking report for March 2013 was up first. For that month, and he described overall revenues as up 7% compared to March 2012, although the number of hourly patrons was down by about 2%. He called 7% roughly the equivalent of the rate increase over the previous year. That translated to a flat performance on the revenue side. However, he offered some mitigating factors – one less business day, worse weather than last year, and the timing of the university’s spring break. And that accounted for the flat performance in revenue, he contended.

March was the last month of the third quarter. So Hewitt gave an update for the third quarter. For that three-month period, the number of hourly patrons was roughly flat, but revenue was up about 11%, which was above the level of the rate increases, he said. For the quarter, Hewitt characterized the parking system as having continued strong demand and good revenue growth. That was a trend that has persisted for about two years, he said.

Hewitt then reviewed the nine-month period year-to-date. Overall revenues are up 12%, though the number of hourly patrons is down a little bit, he noted. From that he concluded that people who are visiting downtown are staying longer. Revenue growth is above the level of the parking rate increases. The new Library Lane underground parking garage is showing stronger performance than had been anticipated – so it is almost to the point of starting a waitlist for monthly parking permits, Hewitt said. That’s good news and bad news, he said. It shows strong demand, but it is filling up faster in the DDA ever anticipated. And that forces the DDA to face problems down the road sooner than the DDA thought it would. John Mouat ventured that instead of “problems” they might be “opportunities.” Hewitt also indicated that downtown looks strong based on his own personal business. [Hewitt owns the Red Hawk restaurant on South State Street, and the revive + replenish grocery and cafe at Zaragon Place on East University.]

Also during his discussion of revisions to the current year’s budget, Hewitt had noted that parking revenues were higher than budgeted – attributable mostly to better-than-expected revenues from the Library Lane structure. Typically a new structure won’t generate a lot of revenue in the first couple of years, he said, because people take a while to find the structure and to change their habits. But people are changing their habits at a much more rapid pace than the DDA had anticipated, Hewitt said.

Mayor John Hieftje picked up on an earlier comment that Hewitt had made – that it might be necessary to create a waitlist for monthly parking permits for the Library Lane structure. Hewitt responded to Hieftje, saying that the challenge in coming up with a policy on that issue is that the DDA does not ask people on their way into a parking structure who they are and why they are here. Trying to balance monthly demands and hourly demands between workers and guests is not a simple thing. Clark ventured that nothing the DDA does is simple.

The following charts were generated by The Chronicle with data provided in regular monthly parking reports.

Ann Arbor public parking system total revenue

Ann Arbor public parking system total revenue.

Ann Arbor public parking system hourly patrons

Ann Arbor public parking system hourly patrons.

Ann Arbor public parking system surface lots

Ann Arbor public parking system surface lots.

Ann Arbor public parking system structures

Ann Arbor public parking system structures.

Ann Arbor public parking system total revenue by facility

Ann Arbor public parking system total revenue by facility.

Ann Arbor public parking system. Number of hourly patrons by facility.

Ann Arbor public parking system. Number of hourly patrons by facility for selected facilities.

Communications, Committee Reports

The June 5 meeting included the usual range of reports from the board’s standing committees and the downtown citizens advisory council, as well as public commentary.

Comm/Comm: Economic Development Task Force

During her communications time, board chair Leah Gunn notified the rest of the board that the city council had passed a resolution establishing an economic development task force. [That action had come at the council's May 20, 2013 meeting. The task force, which includes membership from the city and Ann Arbor SPARK, as well as the Ann Arbor DDA, will consist of up to nine members. Three of the members will come from the Ann Arbor DDA board.] Gunn indicated that she was appointing board members John Mouat and Bob Guenzel, as well as executive director of the DDA Susan Pollay, to represent the DDA on the task force. [The city will be represented by city administrator Steve Powers, and city councilmembers Sally Peterson and Marcia Higgins.]

Reporting out from the partnerships committee, Joan Lowenstein said that Paul Krutko, CEO of Ann Arbor SPARK, had spoken to the committee. One thing he had stressed is the fact that “place making” matters. He’d said it’s important to “create place.” The idea is that nowadays people figure out a place they want to live and then find a job there, instead of the other way around, she said. There are a lot of businesses that SPARK talks to who want to locate downtown, but the right kind of space is not available for them, Krutko had also told the group, according to Lowenstein. And corporate leaders often raise the issue of the availability of hotel and meeting space in downtown Ann Arbor. He’d said it is a real obstacle, because other communities have the ability to host large conferences, and can then attract people who become aware of the community through their attendance at the conference.

Lowenstein cited Greenville, South Carolina, as an example of a city that has a lot of hotel and conference space downtown. A big automotive conference is hosted there, which was attended recently by six people from the University of Michigan, who spoke at the conference. It was in South Carolina, not here – where the auto industry is, Lowenstein said. Ann Arbor SPARK sees a lot of opportunity to partner with the DDA, Lowenstein said – on the topic of benchmarking against comparative communities and working to understand how places like Greenville are doing a better job than what Ann Arbor is doing, and to see what Ann Arbor can do better.

Ann Arbor SPARK has also made themselves available for RFP (request for proposals) processes like the one for the former Y property, so that SPARK can help look for appropriate businesses to locate there. Lowenstein characterized the partnerships committee session with Ann Arbor SPARK as beneficial. Sandi Smith pointed out that four councilmembers had been present at the partnerships committee meeting [Sabra Briere, Sally Petersen, Marcia Higgins, and Jane Lumm]. She described the councilmembers as engaged in the whole discussion, saying it was a very powerful meeting.

Comm/Comm: Sale of Former Y Lot

By way of background, on March 4, 2013 the city council had authorized the city administrator to issue an RFP (request for proposals) for brokerage services to sell the former Y property located at Fifth and William. It’s currently owned by the city, which it had purchased for $3.5 million. On Oct 15, 2012 the council had voted to allocate the net proceeds of the sale of the Y site to the city’s affordable housing trust fund.

During public commentary at the end of the DDA’s June 5 meeting, local developer Peter Allen reported that the bids for the RFP for brokerage services had been opened last Friday. There had been three bidders, he said: Jim Chaconas of Colliers International; Tim Guest with CB Richard Ellis Inc.; and Allen himself with his company, Peter Allen & Associates. The timetable is to interview in late June or early July, Allen said. A recommendation was supposed to go to the city council around Aug. 1, he continued.

Allen reported that he heard interest from boutique hotels and from grocery stores. Certainly ground-level retail is in demand, he said. He thought that a mix of uses would be very consistent with the connecting William Street (CWS) project – a recent planning effort that had been led by the DDA. From a market standpoint, he felt that the CWS recommendations are very solid, thorough and achievable. One of the implications for the DDA board to think about, he said, was the fact that the proceeds from the sale go to the city’s affordable housing trust fund. He felt that the market value of the parcel could be in the neighborhood of $5-$7 million, or more depending on how it is configured. The idea of adding air rights on top of the new Blake Transit Center is very feasible, Allen said. The topic of possibly updating the CWS study in the context of possible proceeds would be a suitable topic for a future meeting of the DDA, he said.

Comm/Comm: A2D2 Zoning Review

Ray Detter reported out from the previous evening’s meeting of the downtown area citizens advisory council. He noted that the DCAC had supported the passage of the A2D2 zoning and the downtown design guidelines two years ago. He recited a description of how the design guidelines provide a mandatory process, but only voluntary compliance with recommendations of the design review board.

Detter characterized the city council’s May 13, 2013 vote on the 413 E. Huron project as a 6-5 approval. But he said that the council’s opposition to the design, mass and scale of the building had been unanimous. The six members who voted for the project, Detter said, feared a possible lawsuit over a denial. From that episode, Detter concluded that there was something lacking in the city’s D1 zoning definition. [D1 is the city's zoning district that allows for the highest density development.] Detter highlighted other areas zoned D1 in the city that he felt warranted further review – including sites to the east of Sloan Plaza, and the former YMCA site at William between Fourth and Fifth avenues.

He characterized the problem as conflicts between the D1 zoning category and the nearby residential neighborhoods. He allowed that there had been a lot of public input throughout the earlier A2D2 process, but he said that the city needs to do a better job now at correcting areas where D1 zoning needs improvement. Detter then alluded to the city council’s resolution, approved on April 1, 2013, that directed the planning commission to conduct a review of D1 zoning.

The recommendations resulting from that review should not be left up to the planning commission’s ordinance revision’s committee, he said. He contended that a lot of people did not believe that floor area ratio (FAR) premiums should be provided for “things we don’t want as a community – student housing, for one thing.” [Currently, the D1 zoning category allows for 400% FAR by right, with additional by-right FAR provided for residential use.] Some people say that a moratorium is needed while the community makes up its mind about these things, Detter said. “We don’t want 413 [East Huron] to happen again,” Detter concluded.

He allowed that the council’s resolution directing the review set Oct. 1 as a deadline. But Detter contended that no real schedule had been set for getting it done.

Comm/Comm: July 3 Meeting Date

During communications time, board chair Leah Gunn raised the question of the board’s regular monthly meeting date in July – which this year falls on July 3. She offered the choice of changing the date or keeping it as it is: “What is your pleasure?” John Mouat indicated that he would not be able to attend. With no further comment from the board, by apparent mutual assent the established meeting date of July 3 remained unaltered.

During communications time Gunn also pointed out that no regular meeting was scheduled for the month of August, which is the board’s custom.

Comm/Comm: A2 Downtown Blooms Day

Nancy Stone, who handles communications for the public services area of the city of Ann Arbor, addressed the board during public commentary time to thank the DDA for its annual support of A2 Downtown Blooms Day. She highlighted the contrast between now and 25 years ago, when the annual volunteer date was called Downtown Cleanup Day. Whereas 25 years ago people were using brooms to sweep up litter, today it’s a festival of planting flowers and beautifying the city, she said. In addition to the DDA she thanked the merchant associations and Pizza House, which provided pizzas for the volunteers. She showed the board a video that had been created by 2|42 Kids Care Club assisting with the event last month.

Comm/Comm: Stipends for Street Performers?

During communications time toward the start of the meeting, mayor John Hieftje, who also sits on the DDA board, told other board members that he wanted to share an idea he had also discussed briefly at the downtown marketing task force the previous day. He described being at the farmers market a few weeks ago, when it was a beautiful sunny day, and he had gone over to Sculpture Plaza where a group of University of Michigan students were playing an interesting array of instruments – an accordion, an upright bass, and a saxophone. It was very nice music, he continued, and they were drawing a crowd. He characterized it as very pleasant.

Hieftje recalled a few summers ago being in Montreal and seeing some street performers. In talking to them afterwards, he said, they revealed that they had received a stipend for performing. So he wanted to see the DDA board explore the idea, which might amount to a few hundred dollars per occasion, to sponsor some “spontaneous” street performances – though he allowed they would not be exactly “spontaneous.” He ventured that such a program might cost $2,000 a year. That kind of thing might make it more interesting to be downtown, he said.

Present: Newcombe Clark, Bob Guenzel, Roger Hewitt, John Hieftje, John Splitt, Sandi Smith, Leah Gunn, Keith Orr, Joan Lowenstein, John Mouat.

Absent: Nader Nassif, Russ Collins.

Next board meeting: Noon on Wednesday, July 3, 2013, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date.]

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  1. June 8, 2013 at 4:56 pm | permalink

    I will repeat my question from an earlier comment: what is the Ann Arbor housing fund and how is it administered (and by whom)? I have not been able to get an answer to this.

    My understanding of the history of the Ann Arbor Affordable Housing Trust Fund was that it originally was established to receive money from sales of city property and in lieu (of affordable housing) payments by developers. At that time, the fund was mostly administered by the citizen-led Housing Policy board, in coordination with our city Community Development department. Since then, we have eliminated that department and that committee and joined the Urban County. But these funds are intended for use within Ann Arbor and not suitable for distribution by the UC.

    I asked Jennifer Hall this question some months ago and she informed me that it was the Housing and Human Services Advisory Board. (She is, of course, staff for the Housing Commission and indicated that she had little knowledge relating to my question.) But looking at the HHSAB agendas and minutes, this does not seem to be their activity, nor do they appear to have staff support for such a technical and intense activity (distributing housing funds).

    It does seem to me that if both the council and the DDA keep throwing money toward this fund, it would be helpful to know who will be making the decisions on how it is spent, in what context, and using what guidelines.

  2. June 8, 2013 at 7:32 pm | permalink

    Re: #1
    (And Dave can correct me if I get this wrong)
    The confusion Vivienne (and others) may be experiencing is due to conflated terms and similar names.
    The Affordable Housing Trust Fund, [link] part of the City’s budget, was, as Vivienne explained, the depository of the proceeds of public land sales – in varying percentages, and at various times. It also received – at one time or another – direct allocations from the City’s general fund reserve. And – perhaps not so obviously – when the PUD standards for housing didn’t generate a sufficient number of affordable units (10% of 30 units is only 3) the Council approved requiring a payment in lieu – and that payment went to the Affordable Housing Trust Fund. The purpose of this fund might be to help leverage dollars for new housing units – but it has also been used to cover maintenance costs for existing housing, the bond for the purchase of the Old Y, operating expenses, supportive housing training … The City’s goal for these dollars tends to be to maintain or build new housing for those residents at or below 30% of median income [link], with an emphasis on family housing and supportive housing. HUD categorizes this as ‘extremely low income’ and, the most recent information I have, indicates an annual income level below $25,200 for a family of four.

    The Housing and Human Services Board must approve all expenditures above $25,000 from the Affordable Housing Trust Fund before the request can go to Council – by Council resolution.

    The DDA’s Housing Fund is a different kettle of fish. The DDA has, as one goal, the encouragement of new residential units in the downtown – more people living downtown makes downtown more lively. Although their focus has been on affordability and diversity, they have provided funds for that bottom 30% income level, they also have had a focus on the 30% – 60% of median income – the ‘work force’ housing. This range of income is between $25,250 and $50,520 for a family of four – or $17,700 – $35,400 for a single person.

    The Council does not approve the DDAs Housing Fund expenditures.

    These two different funds may be used for similar projects and programs or different ones. The significant difference between the two funds is that the Affordable Housing Trust Fund can be used for operating expenses; the DDA’s Housing Fund is limited – by DDA policy – to capital improvements or new construction support.

    The budget process this year added $100,000 from the general fund reserves to the AHTF. The DDA’s budget recently added $400,000 ($100,000 planned, and $300,000 encouraged by Council) to the Housing Fund.

  3. By Mark Koroi
    June 8, 2013 at 11:36 pm | permalink

    “Ray Detter reported out of the previous evening’s meeting of the downtown area citizens advisory council……”

    Has anybody at City Hall told the CAC that they have not properly constituted since the last seats expired in October of 2012?

    I am flabbergasted that this pubic body continues to convene to transact business without a quorum or any current legal members.

    I and a second person approached Ray Detter at a City Council meeting a month ago to ask him if he read the A2Politico.com article about the expiration of all CAC seats in recent years without re-appointment and he responded that he had not but he still considered himself the chairman until the City Council voted to re-appoint him (he apparently assumes that City Council will do so).

    I have spoken during Public Commentary period about this matter several times.

    Does someone need to file a circuit court “quo warranto” action to prevent persons from sitting as a public body when their seats expired long ago? Is anyone making sure that their minutes are being generated in compliance with the Open Meetings Act?

    The City of Ann Arbor may, under the enabling legislation authorizing the creation of the DDA signed into law by then-Governor William Milliken (Public Act 197 of 1975), elect to opt out of having a citizens advisory council. Perhaps that is an advisable course of action since the CAC in Ann Arbor has not been operating in apparent conformance with applicable strictures.

    “Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality.”

    Thank you for pointing this out. It is something that needs to be stressed to both the DDA and City Council as non-compliance could lead to adverse consequences to the DDA in the event someone challenges this issue in the circuit court.

    I applaud the recent efforts of Sumi Kailasapathy and Steve Kunselman to effectuate needed reforms at the DDA and hope that the public “pipes in” in support of the proposed amending ordinance awaiting consideration.

  4. June 9, 2013 at 8:14 am | permalink

    Thank you for this partial explanation, Sabra. I was actually aware of the DDA’s housing fund as a separate entity and may have conflated it somewhat in my question about the AAAHTF.

    As to the DDA’s fund, this seems to be operating as an ad-hoc granting source on a non-strategic basis. That is, it is distributed to providers on their request rather than as part of any overall plan. An exception, perhaps, was their notorious support of the Near North project. That $500,000 commitment some distance out of the DDA district appeared to be a strategic move intended to get affordable housing demands out of the downtown district. By making that commitment, the DDA facilitated that project, which has resulted in the degradation of a portion of that neighborhood, and the loss of affordable housing rather than its increased supply.

    One of the reasons that a large group of Dawn Farm clients turned out to speak in opposition to changes in the DDA funding mechanism is that the DDA housing fund has supported that organization with ad-hoc grants on request. This has been referred to as “flexibility”. As I understand, Susan Pollay is on the Dawn Farm board and this is indeed a worthwhile service organization. (I have made a small donation to it myself.) But is this the way housing funds should be allocated? It flies in the face of recent efforts to regularize and even rigidify distribution of housing and human service funds. (The Urban County, combining city and county housing efforts, and the Coordinated Funding model [link] for all grant vehicles, including the United Way and Ann Arbor Area Foundation.) If this one-stop, fully coordinated and strategic approach is appropriate, why do we then assign the DDA, which is supposed to be about “downtown revitalization”, the only means of “flexibility” in this regard? If tax dollars are to be used for affordable housing, shouldn’t they be directed via an expert group under the direction of the City Council or other elected body?

    Recently, discussions at the DDA have mentioned returning to the idea of in-lieu payments by developers rather than having them include affordable housing in their projects. Indeed, it has been suggested that such payments entitle developers to a premium (increased FAR), without actually providing the downtown affordable housing that such provisions were intended to encourage.

  5. June 9, 2013 at 11:57 am | permalink

    The article notes ” If the DDA retains the ability to amend its budget later, that would allow the board to work around the council-approved budget parameters.”

    I am willing to give he DDA Board points for its persistence in believing that its authority is superior to that of the City Council.

    The DDA was created by City ordinance under authority of State statute. The members of the DDA are appointed by the Mayor, subject to approval by the Council. The City ordinance puts limits on the rate by which the DDA TIF can grow. The DDA, acting as if it has supremacy over the Council, refused to accept the City’s interpretation of the TIF growth limits in the City ordinance.

    The State statute requires the Council to approve the DDA budget before the DDA Board adopts that budget. Now, the DDA Board is looking for ways to circumvent the supervision of the City Council over the DDA budget.

    It is as if the DDA Board is unaware that they are under scrutiny. Many in the community question the need for any DDA. Yet, the DDA Board acts as if its will should be unquestioned.

    When Council member Stephen Kunselman proposed term limits for DDA Board members, some questioned his motives. Others questioned the need to limit service on that Board. This persistent defiance of Council indicates an intrenched bureaucracy that has become arrogant in exercise of its responsibilities. Term limits on DDA Board service are long overdue.

  6. By Mark Koroi
    June 9, 2013 at 3:21 pm | permalink

    “….an intrenched bureaucracy that has become arrogant in the exercise of its responsibilities.Term limits on DDA Board sevice are long overdue.”


    How many years has Leah Gunn served on the DDA – seems like over twenty? Gunn’s key allies on City Council include Mr. Eaton’s electoral opponent Marcia Higgins.

    I have heard complaints by downtown busineses that the DDA favors certain business over others.

    The DDA is ruled by a fiefdom of elitist political insiders rather than representing a broad cross-section of the Ann Arbor community. Gunn and Joan Lowenstein, for example, have donated many thousands and thousands of dollars to local political campaigns during their long years in local politics. The same goes for the CAC.

    The DDA nedes to be aggressively taken on by City Council members like Sumi Kailasapathy and Mr. Kunselman.

  7. By Steve Bean
    June 9, 2013 at 3:27 pm | permalink

    @4: Good point about the in-lieu payments, Vivienne. It results in an appearance of something other than a clear and consistent policy.

    Governments have the power to set policy to require development that meets community desires and standards. I question whether public financing is necessary at all in order to accomplish that. As Vivienne has highlighted, a lack of policy has backfired and fallen short of goals, it seems, at least in those recent examples. I’m sure someone can point to other examples to the contrary, but the question remains. In any case, the payment in lieu option (hard to call it a policy) undermines the overall (purported) goal.

  8. June 9, 2013 at 3:48 pm | permalink

    Re: “How many years has Leah Gunn served on the DDA – seems like over twenty?”

    From the article: “The board’s July 3 meeting will also be board chair Leah Gunn’s last meeting, which will mark the end of over two decades of service on the DDA board, beginning in 1991.”

  9. By Steve Bean
    June 9, 2013 at 4:20 pm | permalink

    @5: I agree with a couple of exceptions, Jack. First, I wouldn’t call the DDA (board) a bureaucracy. Second, please don’t focus on term limits as a means to address concerns about the DDA, but rather look at the full picture and explore options to address the array of issues that citizens have pointed out.

    Re the economic development task force:
    “There are a lot of businesses that SPARK talks to who want to locate downtown, but the right kind of space is not available for them, Krutko had also told the group, according to Lowenstein. And corporate leaders often raise the issue of the availability of hotel and meeting space in downtown Ann Arbor. He’d said it is a real obstacle, because other communities have the ability to host large conferences, and can then attract people who become aware of the community through their attendance at the conference.”

    If businesses are already wanting to locate downtown, is there really a need for a downtown conference center to serve the purpose of bringing business people to the community (by which Krutko apparently means just the downtown)? In other words, what’s the real problem that he’s looking to solve? Is it possible that we don’t actually have a problem?

    Re Downtown Blooms Day:
    I’m not sure if this event originally came about from it (I’ve been wondering for years), but when I suggested to council member Kathy Edgren back in the late ’80s that the city organize a spring cleanup day I had a different event in mind, primarily that it be citywide and that it not put kids to work cleaning up after us adults. The kids in the video look like they had fun though. Thanks to them and the adults who participated and coordinated it, including Nancy.

  10. By Mark Koroi
    June 9, 2013 at 9:30 pm | permalink

    @Vivienne Armentrout:

    “As I understand, Susan Pollay is on the Dawn Farm Board….”

    Wow! The executive director of the DDA also sits on the board of an organization which has received substantial funding from the DDA.

    It looks to me like a possible conflict of interest.

    I spoke at City Council public commentary last month in support of the Kailasapathy/Kunselman-sponsored proposed ordinance amending the DDA’s operation and this is yet another example why more oversight is needed. Removing the Mayor from the DDA Board and imposing term limitations are definitely a step in the right direction, but additional strictures to avoid conflict of interest situations may also be necessary. I witnessed Joan Lowenstein, Leah Gunn and a third DDA Board member speak in opposition to the aforeaid proposed DDA amending ordinance – but I was not impressed.

    The DDA Board needs as much supervision as possible to ensure prompt accountability.

    I have been impressed with both your and Steve Bean’s working knowledge of these issues. The Fifth Ward seems to have the most knowledgeable residents. It seems that, seven months into his first term, Chuck Warpehoski has proven himself to be a mild disappointment as a City Council representative for the Fifth Ward – especially during the 413 E. Huron voting and his notorious “pit of my stomach” comment that described his disgust with that project but he was going to vote fot it anyway due to risk of liability exposure the City Of Ann Arbor purportedly had. If you had been elected, then I am sure that that project would have been rejected. Chuck has often – but not always – taken the side of the “Mayor’s Club” or “Council Party”.

    I appreciate the informed commentary of both you and Steve Bean on these important issues.

  11. By Mary Morgan
    June 9, 2013 at 10:52 pm | permalink

    The list of current Dawn Farm board members is long, but it doesn’t include Susan Pollay: [link]

    However, she has served on the Dawn Farm board in the past. Her name appears on the list of board members most recently in the 2008-2009 annual report: [link]

    If you’re active in this community and serve on nonprofit boards, potential conflicts of interest will inevitably arise. If I were a DDA board member, my main concern would be that relationships like this are fully disclosed whenever an item comes before the board for consideration.

  12. June 9, 2013 at 11:00 pm | permalink

    Re (10) Thanks, Mark, on behalf of the “feisty ferment” of the Fifth, I’ll accept your praise for our ward. But give Chuck a break. It is a tremendous shock to assume an elected position and discover all the complexities and demands – and then to welcome a new member of the family too (a son recently joined them). I was disappointed in his decision about 413, but I also understand that each council member must (ideally) come to these decisions based on the best information he/she has.

    One thing I’ve come to appreciate about Chuck is his willingness to involve himself in some small daily details that affect individuals or small areas. Council are often asked to serve as intercessors with City bureaucracy, and he does that. He has responded to a couple of inquiries of my own.

    And I think we can still claim Steve Bean too.

  13. June 9, 2013 at 11:02 pm | permalink

    Re (11) Sorry, that information was based on a (recent) private communication with Susan Pollay. She must have been referring to past service on that board.

  14. By Steve Bean
    June 10, 2013 at 8:17 am | permalink

    I haven’t been in the 5th for more than 2 years. 4th Ward now.

    Re DCAC:
    “Ray Detter reported out from the previous evening’s meeting of the downtown area citizens advisory council. He noted that the DCAC had supported the passage of the A2D2 zoning and the downtown design guidelines two years ago.”

    The rest of that section sounds more like Detter’s personal commentary, but who’s to say for sure? It’s similar to his input at meetings I’ve attended and seen reported on here. Board chairs have given him that apparent privilege for years, it seems. I suspect that there’s an unspoken understanding among board members about this situation, wherein they (believe they) can distinguish between DCAC input and Detter input. Regardless, (and assuming that I’m not totally misinterpreting the situation) it’s something I’m sure Leah can remedy as the current chair.

    In the meantime, maybe the Chronicle can reconsider the term “reported out from” and apply it more judiciously in future coverage.