Street Parking Space Removal Fee: Delayed Again

Developers who plan an Ann Arbor project that requires removal of an on-street metered public parking space may need to pay the Ann Arbor Downtown Development Authority $45,000 per space. But that’s still not decided after a second postponement of the question by the Ann Arbor city council. The payment would go to the Ann Arbor DDA, because the DDA manages the public parking system under a contract with the city.

The setting of that fee was postponed by the Ann Arbor city council at its Dec. 16, 2013 meeting after previously postponing at its Dec. 2 meeting.

The council will eventually be acting on a four-year-old recommendation approved by the Ann Arbor DDA in 2009:

Thus it is recommended that when developments lead to the removal of on-street parking meter spaces, a cost of $45,000/parking meter space (with annual CPI increases) be assessed and provided to the DDA to set aside in a special fund that will be used to construct future parking spaces or other means to meet the goals above. [.pdf of meeting minutes with complete text of March 4, 2009 DDA resolution]

The contract under which the DDA manages the public parking system for the city was revised to restructure the financial arrangement (which now pays the city 17% of the gross revenues), but also included a clause meant to prompt the city to act on the on-street space cost recommendation. From the May 2011 parking agreement:

The City shall work collaboratively with the DDA to develop and present for adoption by City Council a City policy regarding the permanent removal of on-street metered parking spaces. The purpose of this policy will be to identify whether a community benefit to the elimination of one or more metered parking spaces specific area(s) of the City exists, and the basis for such a determination. If no community benefit can be identified, it is understood and agreed by the parties that a replacement cost allocation methodology will need to be adopted concurrent with the approval of the City policy; which shall be used to make improvements to the public parking or transportation system.

Subject to administrative approval by the city, the DDA has sole authority to determine the addition or removal of meters, loading zones, or other curbside parking uses.

The $45,000 figure is based on an average construction cost to build a new parking space in a structure, either above ground or below ground – as estimated in 2009. It’s not clear what the specific impetus is to act on the issue now, other than the fact that action is simply long overdue. In 2011, the University of Michigan’s Institute for Social Research expansion was expected to result in the net removal of one on-street parking space. [For more background, see: "Column: Ann Arbor's Monroe (Street) Doctrine."]

The resolution is sponsored by Christopher Taylor (Ward 3). Taylor participated in recent meetings of a joint council and DDA board committee that negotiated a resolution to the question about how the DDA’s TIF (tax increment finance) revenue is regulated. In that context, Taylor had argued adamantly that any cap on the DDA’s TIF should be escalated by a construction industry CPI, or roughly 5%. Taylor’s reasoning was that the DDA’s mission is to undertake capital projects and therefore should have revenue that escalates in accordance with increases in the costs to undertake capital projects.

Based on Taylor’s reasoning on the TIF question, and the explicit 2009 recommendation by the DDA to increase the estimated $45,000 figure in that year by an inflationary index, the recommended amount now, four years later, would have be closer to $55,000, assuming a 5% figure for construction cost inflation.

The last two month’s minutes from the DDA’s committee meetings don’t reflect any discussion of the on-street parking space replacement cost. Nor has the issue been discussed at any recent DDA board meeting.

By way of additional background, the Ann Arbor DDA’s most recent financial records show that last year, on-street parking spaces generated $2,000 in gross revenue per space or $1,347 in net income per space annually. The contract with the city under which the DDA operates the public parking system stipulates that the city receives 17% of the gross parking revenues. So the city’s revenue associated with an on-street parking space corresponds to $340 annually.

The council had postponed the item from its Dec. 2, 2013 meeting. The rationale for postponing the item – offered by Taylor at that meeting – was that because it amounts to a fee, a public hearing should be held on the matter before the council votes. Only one speaker – Thomas Partridge – spoke at the Dec. 16 public hearing.

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]