Council Waives Privilege on Bond Memo

A memo prepared by Dykema Gossett, the city of Ann Arbor’s outside bond counsel, will now be made public as a result of city council action taken on March 17, 2014.

The council voted over dissent from Christopher Taylor (Ward 3) – who is himself an attorney – to waive attorney-client privilege on the document, dated August 9, 2012. The memo apparently provides an analysis of the implications for use of the Library Lane parking structure, based on the Build America Bonds used to finance its construction. Facilities financed by such bonds carry with them private-use limitations.

The Chronicle has not yet been provided with a copy of the memo.

Taylor made a bid to amend the resolution so that it directed the city attorney to write a memo that included the information in the bond counsel’s memo. That was subsequently modified to direct the bond counsel to rewrite the memo for public consumption. But the amendment failed. It got support only from Taylor, mayor John Hieftje, Sabra Briere (Ward 1) and Margie Teall (Ward 4).

The idea of giving direction to rewrite an existing memo had proven to be a successful strategy on a resolution passed earlier in the March 17 meeting. That original resolution would have waived privilege on a Feb. 25, 2014 city attorney memo that described how property assessment appeals work. Instead, the council amended that resolution to direct the city attorney to prepare a new memo for public consumption.

In broad strokes, the American Recovery and Reinvestment Act (ARRA) of 2009 – also known as the stimulus act – created the Build America Bonds program. BAB authorized state and local governments to issue taxable bonds to finance any capital expenditures for which they otherwise could issue tax-exempt governmental bonds. The bonds have a limitation related to how the facilities financed through such bonds can be used. Glossing over details, only up to 10% of a facility financed through BAB can be dedicated to private use.

Related to the private use question are monthly parking permits. All other things being equal, the Ann Arbor Downtown Development Authority – which manages Ann Arbor’s public parking system under an arrangement with the city – does not contract with businesses for monthly parking permits in public parking structures. Instead, the DDA contracts with individuals on a first-come-first-serve basis.

For the Library Lane structure, the DDA offered introductory pricing of its monthly permits to encourage the structure’s initial use. Construction was completed in the summer of 2012.

The nature of that introductory pricing scheme could prompt questions about whether some of those permits might properly count as “private use” of the structure. A $95 introductory rate (which reflects a $50 savings over most other structures) was offered to employees of “new to downtown businesses” and to permit holders in the Maynard or Liberty Square parking structures who were willing to transfer their permit to Library Lane. The pricing is good through August 2014.

Two years ago, Barracuda Networks was moving to downtown Ann Arbor, and therefore qualified as a “new to downtown” business. So its employees thus qualified for the discounted monthly parking permits.

In a July 13, 2012 email to Ward 2 councilmember Jane Lumm, DDA executive director Susan Pollay wrote in part:

I met with the two key individuals directing the Ann Arbor Barracuda office and told them point blank, that that there will be parking for Barracuda employees now when they move to downtown, and as they grow their employee ranks over the next few years.

To the extent that Barracuda employees (or employees of other downtown businesses) have privileged access or enjoy an economic advantage (like reduced rates), then it’s possible the private use test could be met for those spaces.

Four years ago, Wayne State University professor of law Noah Hall, writing on behalf of the Great Lakes Environmental Law Center (GLELC), sent the city of Ann Arbor a letter on the BAB private-use issue. [For more detail, see his letter: April 14, 2010 letter from Noah Hall] GLELC was a party to a lawsuit filed over the Library Lane parking structure, which eventually was settled.

The document for which the council voted to waive attorney-client privilege on March 17 appears to be one of the items denied in a response to a request made by The Chronicle under Michigan’s Freedom of Information Act. The item not provided to The Chronicle was a file attached to an email sent by CFO Tom Crawford on August 13, 2012 to councilmembers – named “BHO 1-# 1607254-v8-Ann_Arbor _ -_Memo_re_Permitted_Parking_Arrangements.docx” The request for that document was denied based on the statutory exemption allowed for items protected under attorney-client privilege.

The resolution waiving attorney-client privilege on the Dykema memo was put forward by the city council’s audit committee. Members of that committee are Sumi Kailasapathy (Ward 1), Jane Lumm (Ward 2), Sally Petersen (Ward 2), Stephen Kunselman (Ward 3), and Jack Eaton (Ward 4). [For additional background, see: "Column: Rocking Back on the Library Lot."]

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron.