Starting this past weekend, the city-owned 87-space surface parking lot at Fifth and William streets in downtown Ann Arbor – known as the former Y lot – was closed. And it might sit unused for a year or longer.
For the parcel to remain in use as part of the city’s public parking system, the pending purchaser of the property, Dennis Dahlmann, would need to reach an agreement on a leasing arrangement with the Ann Arbor Downtown Development Authority. The DDA manages the city’s public parking system under a contract with the city.
Eventually, Dahlmann intends to build a mixed-used development on the parcel, but wants to provide surface parking while the project is in the planning stages. A site plan could easily take a year to design, and to obtain necessary approvals from the planning commission and city council. The city council approved the sale of the land to Dahlmann last year at its Nov. 18, 2013 meeting.
Ben Dahlmann, senior vice president with Dahlmann Properties, attended the March 26, 2014 meeting of the DDA’s operations committee to present a revision to the leasing proposal that Dahlmann had made in January. The original proposal had been for the DDA to lease the property back from Dahlmann for $150,000 a year.
The revised proposal would be for Dahlmann and the DDA to split the net income (after expenses) from the parking lot for the next two years. Dahlmann ballparked that number at around $180,000, which would translate to a $90,000 share for Dahlmann – less than the $160,000 per year that Dahlmann figured he’d owe in property taxes.
The final sale of the property by the city to Dahlmann – at a purchase price of $5.25 million – is scheduled for April 2. No agreement on Dahlmann’s offer to lease property to the DDA was reached at the March 26 meeting. But the committee will be taking up the issue again at its April meeting.
On March 26, DDA board members received Dahlmann’s new proposal with the same lack of enthusiasm they’d shown at their Jan. 29 committee meeting, when they discussed the original pitch of a $150,000 annual lease. In January, board members expressed concern that by leasing the property back from Dahlmann, the DDA would be providing an incentive not to develop the property. Dahlmann did not attend that January committee meeting. At the March 26 meeting, however, Ben Dahlmann pointed out that the rider agreement to the sales contract requires a certificate of occupancy by January 2018 for the new building on that site. [.pdf of rider agreement]
If Dahlmann does not develop the property, the city has the right to purchase the property back for $4.2 million, the asking price for the property. And that would translate to a $1 million loss for Dahlmann: “That, coupled with the $160,000 of annual taxes, is more than enough incentive for us to develop a project that I think we all will be proud of,” Dahlmann said.
At the March 26 meeting, members of the operations committee focused on their concern that the DDA would still lose money on the deal. They feared that by continuing to operate the former Y lot as a parking lot, the DDA would be decreasing parking activity at other facilities, where the DDA would receive 100% of the net income, not just 50% of it. They also wondered if Dahlmann would be willing to help pay for the cost of repairs to the lot that are currently needed. Further, they felt that there was adequate parking inventory in the immediate vicinity of the surface lot – roughly 1,700 spaces at the nearby Fourth & William and Library Lane structures, as well as 160 on-street metered spaces within a two-block radius.
Dahlmann countered by pointing out that a planned renovation to the Fourth & William parking structure – which could start in August 2014 – could have a negative impact on parking activity at that structure. He also noted that many people prefer surface parking to parking in a structure, and that it would be a convenience to the public that the DDA would be offering.
Dahlmann could not operate a parking facility himself, even if he charged nothing for people to park – without obtaining a special exception use from the city planning commission. Planning manager Wendy Rampson responded to an emailed query from The Chronicle with this explanation: “If there is a principal use of parking on the site – whether paid parking or free – it would require special exception use from the planning commission, unless it was owned or operated by an entity exempt from the zoning ordinance (e.g., the DDA).”
The DDA operations committee will take up the issue again at its April meeting, which is scheduled for April 30. In the meantime, the lot will not be available for parking. Based on committee discussion, it’s at least a possibility that some kind of agreement with Dahlmann might be reached, at which point motorists would again be able to park on the lot.
Motorists looking for parking in downtown Ann Arbor have already been given inconsistent messages about the former Y lot, as the DDA first announced that the lot would be closed around March 15. The DDA subsequently placed signs at the lot indicating that it would be closed on March 29.
Fifth & William Lot in Context
One of the concerns expressed by DDA committee members at their March 26 meeting was that patrons who might continue to park at the former Y lot would otherwise park at other nearby facilities in the system – where there is sufficient capacity, and where the DDA would receive 100% of the revenue from their parking fees.
The Chronicle reviewed historical revenue data for parking facilities in the Fourth Avenue and Fifth Avenue area. Based on that review, there is some merit to the idea that when a facility closes, the result is increased parking use at neighboring facilities. [See Chart 1 below.] For several years, The Chronicle has used data provided by the DDA to track revenue by facility and to calculate revenue-per-space statistics.
But a recent review by The Chronicle of the data provided by the DDA on the Fifth & William surface lot (the former Y lot) showed it’s been inconsistent with respect to the number of spaces available at the lot. In several instances, the number of spaces was reported at 141.
In fact, the lot offers 87-88 spaces. But in the DDA’s analysis of Dahlmann’s original proposal, the number of spaces is recorded as 141 for fiscal year 2012 and 87 for fiscal year 2013. The 54-space difference was portrayed in the DDA’s analysis as the result of spaces used by the Ann Arbor Area Transportation Authority for staging of materials during the construction of the new Blake Transit Center (BTC). The BTC is sited just to the north of the lot. [.pdf of DDA financial analysis of Dahlmann's proposal]
However, in other DDA records, the number of spaces allotted initially for the BTC construction – which broke ground in November 2012 – is shown as 11. Toward the end of the construction, starting in November 2013, the AAATA was given permission to park two temporary trailers on the west side of the lot – when the old transit building was demolished. Those two trailers took up at least another eight spaces in the parking lot. For purposes of this analysis, The Chronicle has adjusted the number of spaces in the data based on 87 spaces at full capacity, 11 spaces lost during initial construction, and another 8 spaces lost during the final construction period.
In Chart 1 below, no adjustments have been made for parking rate increases, so the overall upward trend is at least in part due to increases in those rates.
Highlights from Chart 1 below include the two highest-performing facilities in the public parking system (in terms of revenue per space), both of which are surface lots: the Brown Block in red (bounded by Huron, First, Washington and Ashley) and the Kline Lot in blue (on Ashley, north of William). The Library Lane underground facility off of South Fifth is represented in black. It was previously just a surface lot, until construction started on the underground facility. The gap reflects the construction period for the underground structure. On the left side of the gap, the black line represents Library Lane as just a surface lot. On the right side of the gap, it has re-opened as an underground structure. The former Y lot surface parking is shown in purple.
The circled numbers in the chart correspond to the following descriptive observations:
- From October 2008 through September 2009, the library lot surface parking facility (black) clearly outperformed the former Y lot surface parking lot (purple), but did not approach the performance of the Brown Block or the Kline Lot. During that period, the revenue per space generated by the Library Lane surface parking facility was roughly the same as in the Maynard structure, which is located one block east of the Library Lane lot.
- When the Library Lane surface parking lot closed, to begin construction of the underground structure, starting in October 2009, the revenue per space generated in the former Y lot (purple) – located just across the street – dramatically increased. Performance at the former Y lot approached that of the two highest-performing facilities.
- When South Fifth Avenue was closed down during a later phase of the Library Lane construction project, in August 2010, revenue per space dropped for the former Y lot – and stayed roughly flat for the next two years. During that period, revenue per space roughly mirrored the performance of the Maynard structure.
- When the new Library Lane structure opened in the summer of 2012, revenues per space started to decline at the former Y lot.
- The downward trend at the former Y lot continued when the Blake Transit Center started construction in November 2012.
- Likely unrelated to any issues in the Fourth and Fifth Avenue area of downtown is the increase in the difference between the Brown Block surface lot’s performance compared to the Kline Lot. In the first two years of data shown in Chart 1, the Brown Block performed 7-9% better than the Kline Lot, as measured by revenue per space. In the last year, however, that gap had grown to 27%.
Fourth & William Structure
One of the arguments that Ben Dahlmann made at the March 26 DDA operations committee meeting was that upcoming renovations to the southeast elevator tower of the Fourth & William parking structure could have a negative impact on parking activity at that facility. It’s just across the street from the former Y lot. He reasoned that the former Y lot, if it continued to be used as a surface parking lot under a lease arrangement, could serve as a kind of “overflow parking.”
The background to Dahlmann’s point began at the DDA board’s Jan. 8, 2014 meeting, when it authorized up to $40,000 for Carl Walker Inc. to develop architectural renderings for renovations to the southwest stair tower and elevators.
The Fourth & William parking structure, at 994 spaces, is one of the largest in Ann Arbor’s parking system – but has elevators that are more than 30 years old. [A recent trip from the ground floor to floor 7 was timed by The Chronicle at 45 seconds. The comparable trip at the newer Washington & Fourth parking structure took about 17 seconds.]
Also at the March 26 operations committee meeting, Mike Ortlieb, of Carl Walker Inc., presented two possible timelines, based on either a two-phase or three-phase approach to the construction. The basic cost was estimated at $2.45 million. Pursuing the three-phase approach would cost an additional $150,000. The two-phase approach would last about a year – from August 2014 through July 2015. The three-phase approach would take five months longer – through about December 2015. In both scenarios, the goal is to keep the parking structure open for business.
The operations committee will take up the Fourth & William renovation again at its April meeting.
March 26, 2014 Operations Committee Deliberations
When the DDA operations committee reached the former Y lot on its March 26 agenda, board members and Ben Dahlmann began with basic introductions. DDA members at the meeting included Roger Hewitt, Keith Orr, John Splitt, John Mouat, Joan Lowenstein and Bob Guenzel.
Dahlmann complimented a large clock that stands in the corner of the DDA boardroom, which is actually designed for outdoor use and looks more or less like a lamp post, but with a large clock face at the top. He quipped that it might be a hint that he should be brief.
Dahlmann first updated board members on the status of the sale: Closing is scheduled for April 2. There had been some delays, he explained, due in part to the need to conduct an environmental study. There are portions of the old YMCA building that are still underground on the parcel. He reminded the board that Dahlmann had agreed to pay $5.25 million for the property – which was about $1 million above the asking price. Alluding to the rider to the sales agreement, Dahlmann noted: “We have three years and nine months to develop it. And if we don’t do that, the city has the option to buy back for $1 million less than what we paid for it. That, coupled with the $160,000 of annual taxes, is more than enough incentive for us to develop a project that I think we all will be proud of.”
Dahlmann told the board it was his understanding that roughly 30,000 cars parked on the former Y lot on an annual basis. He described the surface lot as having a nice central location, and ventured that above-ground parking was more convenient. That convenience, he said, would be a true benefit to the citizens of Ann Arbor and to those who work and dine and shop in the area.
Dahlmann also pointed out that keeping the former Y lot open would help with issues associated with the Fourth and William elevator renovation. It could be an “overflow lot,” he suggested. Based on the information he had, it was his understanding that the former Y lot generates about $250,000 of revenue annually, and that there are roughly $70,000 worth of expenses. Dahlmann’s proposal was to take that $180,000 of net profit and split it between the DDA and Dahlmann. “That is it in a nutshell,” he concluded, and thanked the committee for listening.
Roger Hewitt said that when the DDA first installed equipment to create a surface parking lot at that location, the Library Lane parking structure was not in existence. The surface lot parking equipment had been installed at the request of the Ann Arbor city council, Hewitt said. And since then, the DDA had built and opened the Library Lane underground parking structure.
Hewitt asked Republic Parking manager Art Low: In that immediate neighborhood, how many parking spaces are there without that YMCA lot? Low broke down the parking inventory into two categories: on-street metered parking and off-street parking.
There are about 161 metered spaces within a two-block radius of the old Y lot, Low reported. He said that the numbers he was going to present on usage were not hard numbers, but were pretty accurate. Between 8 a.m. and 6 p.m. those meters are about 70- 75% occupied. Between noon and 6 p.m. they are about 80% occupied. So there’s still a pretty good flow in terms of availability and turnover, he concluded. Low said there was a good turnover in the on-street part of the system.
Within a two-block radius there are just over 2,100 off-street parking spots, Low said. The Fourth & William parking structure is generally about 75% occupied between 10 a.m. and 9 p.m. From Wednesday through Saturday that picks up, he said, to be a lot higher. The Library Lane structure has hit a good threshold at about 72% occupied, he said, noting that Library Lane is not as busy at nighttime as it is during the daytime. The Library Lane underground garage is more of a daytime garage, Low said. You have to keep in mind too, Low continued, that the Library Lane facility also has 33 surface parking spaces. There are also 12 on-street spots on the Library Lane the mid-block cut-through between Fifth and Division.
A little farther to the north, the Fourth & Washington garage has high occupancy levels, but is still at something like an 85% threshold, Low said. The South Ashley lot Kline lot is also very busy and is about 85-87% occupied, Low said. The numbers he was giving, Low reiterated, were general numbers through the day, but he felt they were pretty accurate. There are 87 spaces in the old Y lot, Low said – without considering spaces that had been taken up by the Blake Transit Center construction. Through the last eight months, Low said they’ve only had a portion of those 87 spots available. Through “natural progression,” Low felt, people have found other places to park.
Looking at the dollars-and-cents issue, Hewitt said, if the lot were now operated at its original size of 87 spaces, it would probably be full – because it is a surface lot. But people would be parking there, drawing from other facilities where they are already paying the DDA for parking. It seemed to him that although the DDA would make money on the former Y lot, the DDA would then lose money on surrounding facilities. He asked Low if that would be a fair statement. Yes, Low replied. Low allowed that this kind of debate goes on quite a bit. The system overall is getting more and more full – but in that specific area, the system has a lot of parking availability. There are other areas in the system that could use more parking – but that is a different discussion, Low said.
Hewitt also ventured that the porous asphalt surface at the Y lot might need some repair. Low responded by indicating that Republic Parking would be inspecting the surface more closely in the next few days and make a determination. He said there were definitely some repairs that need to be done – including some curb stops that have been smashed over the winter. And there are certain issues with the surface itself that need to be addressed, but he could not offer a view on the cost at this point.
DDA executive director Susan Pollay then reviewed some of the logistical considerations. The sale closing is set for April 2. She asked Dahlmann what he was looking for in terms of a timeline for the lease. Dahlmann said he was thinking two years. Pollay asked Dahlmann if his proposal to the board included paying for repairs – as the owner of the lot. Dahlmann told Pollay that he had walked past the lot on his way to the meeting and that there were definitely some issues with the surface of the pavement in some areas and there’s still a fair amount of construction debris, he said. He wondered what kind of responsibility the AAATA’s contractor has for putting a lot back into the same condition it was when construction started. Pollay said that no conditions were set, because the lot was already starting to deteriorate.
Dahlmann asked if the AAATA was responsible for repairing any of the damage. Pollay responded: “Nothing specific, no.” If the ownership were not changing, Pollay explained, the DDA itself would be taking on the repairs to the lot.
Dahlmann ventured that from his observations walking around the pavement, although there were issues, they didn’t seem problematical. “We would be open to figuring that out, for sure,” he said. Pollay asked if Dahlmann was proposing that he first fix the lot and then the DDA would operate the repaired lot for Dahlmann. He said he was not sure – because he was not sure what was included in the $70,000 worth of expenditures. “What we’re saying basically here is, look, here is the gross profit and here’s the expenses – let’s split the net profit 50-50.” That would come nowhere near to even covering the taxes on the property, he ventured.
Keith Orr said he looked at the issue in two ways. First, whatever would be split should be the net profit. All expenses would come out first before anything was split. The other concern Orr had was that if it’s a 50-50 split, then the DDA would still be “competing with itself” with its other facilities. At other facilities, the DDA would be receiving 100% of the revenue. That would mean trading a spot where they were getting 100% of revenue for one where they were only getting 50%.
Hewitt said he first wanted an estimate of what it would take to repair the lot sufficiently to operate the lot for two years. He also did not feel that the lot should be looked at in isolation – because there’s so much parking capacity on either side of the lot. He wanted to factor in the revenues from the Library Lane structure and the Fourth & William parking structure. The DDA would need to consider what the profitability is of all of its parking facilities, Hewitt said.
Dahlmann asked if the DDA knew how often the lots in the vicinity were 100% full. Republic Parking manager Art Low told Dahlmann that information was absolutely available, but he did not have it off the top of his head. When the peaks are reached, it tends to be Wednesday through Saturday or the evening hours, Low offered. DDA deputy director Joe Morehouse said he did not think that 100% capacity had been reached since New Year’s Day – adding that it did not happen all that frequently.
Morehouse pointed out how the Library Lane doesn’t have the evening traffic that Fourth & William does. Hewitt said that the DDA had a fiduciary responsibility that if it entered into an agreement, it would not be one that risked taking a loss. He ventured that it would be kind of a complex deal to put together. So Hewitt wanted first to get some idea of the cost that it would take to make the lot operational for two years. Hewitt wanted Morehouse and Low to put something together that made financial sense.
Dahlmann ventured that it might not be a large factor, but he felt that convenience would be a factor. He felt that the data probably suggest that when the former Y lot is fully operational, people would prefer to park there. As a consumer, he said, he would not eat dinner on Main Street if he knew that he was going to have to park on an upper floor in a parking structure. There has to be some value in that, he said, although he did not know how much.
Pollay stated her understanding that the DDA was supposed to provide the property “free and clear” at the closing of the sale. She said that meant that the parking equipment would be taken off the lot – but she would ask Republic Parking how easy it would be to reinstall it. She did not think it would be that difficult.
Republic would be told that equipment can be removed, but it might be the case that it needed to be reinstalled. That was the direction that Pollay had received from the city, she said. Hewitt added that “it’s the city’s choice on that.” Pollay said that even though the DDA was operating the lot, it was officially city property. That’s why she needed to be respectful of the direction that she was receiving from the city, Pollay said. She understood her direction from the city to be a clean, unencumbered provision of the lot.
Dahlmann countered that if the purchaser feels it’s fine to leave the equipment there, that should mean something. Pollay said she would follow up with the city and let everyone know what direction she received.
The DDA operations committee is expected to take up the issue of possibly leasing the former Y lot again at its April 30 meeting. It’s not currently an agenda item for the DDA board’s April 2, 2014 meeting.
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