The Chronicle has not yet reviewed the memo, which deals with private-use tests as applied to the Library Lane underground parking structure. The private-use limitations stem from the fact that the structure was financed with Build America Bonds. For additional background, see: “Column: Rocking Back on the Library Lot.”

The Ann Arbor city council’s March 17, 2014 meeting features an agenda with one significant item held over from the March 3 meeting: a resolution that reserves a portion of the surface of the Library Lane underground parking structure in downtown Ann Arbor for an urban park that would remain publicly owned.

The sign on the door to the Ann Arbor city council chamber, installed in the summer of 2013, includes Braille.

But related to that item is a new resolution that directs the city administrator to move toward listing for sale the development rights for the top of the parking structure. The urban park designation was postponed from the March 3, 2014 meeting in part to synch up its timing with this resolution, which is being brought forward by Stephen Kunselman (Ward 3).

An additional related item is a resolution that would waive the attorney-client privilege on a document prepared by Dykema Gossett, the city’s outside bond counsel. The Build America Bonds used to finance construction of the Library Lane structure have private-use limitations on facilities constructed with financing from such bonds. The Dykema memo analyzes those limitations with respect to Library Lane.

That’s one of two separate resolutions on the waiver of attorney-client privilege. The other one, postponed from the council’s March 3 meeting, would waive privilege on a city attorney memo dated Feb. 25, 2014 on the topic of how appeals to property assessments work. The memo apparently helps explain “… the effect of a reduction of the assessment for one year by the Board of Review and/or the Michigan Tax Tribunal on the property tax assessment for the subsequent year.” The council’s agenda also includes an attachment of a report sent to the state tax commission, explaining how the city has complied with various deficiencies in documentation identified previously by the commission.

The council will be considering two items related to energy issues. First, the council will consider a resolution that directs the city’s energy commission and staff to convene a stakeholder work group, with the support of the city attorney’s office, to draft a commercial building energy benchmarking and disclosure ordinance. It’s an effort to help achieve goals in the city’s climate action plan.

The second energy-related item is a resolution that would direct the city administrator to hire an additional staff member for the city’s energy office, bringing the total back to two people, according to the resolution. The energy office staffer would “create and implement additional community energy efficiency, conservation, and renewable energy programs that further the Climate Action Plan’s adopted targets.”

After approving the purchase of 18 replacement vehicles on March 3 and several pieces of basic equipment at its Feb. 18 meeting, the council will be considering three resolutions that involve additional vehicles and equipment: two forklifts for the city’s materials recovery facility, a Chevrolet Impala for use by police detectives, and a lease for golf carts from Pifer Inc.

The 15th District Court, which is the responsibility of the city of Ann Arbor, is featured in two agenda items. The council will be asked to approve a $160,000 contract with the Washtenaw County sheriff’s office for weapons screening services for the 15th District Court, which is housed at the Justice Center – the police/courts building immediately adjoining city hall at the northeast corner of Huron and Fifth.

A second item related to the court is an introduction of Shryl Samborn as the new administrator of the 15th District Court. Samborn is currently deputy administrator. Current administrator Keith Zeisloft is retiring. His last day of work is March 28.

At its March 17 meeting, the council will also be asked to approve the temporary relocation of Precinct 1-7 from Pierpont Commons, 2101 Bonisteel, to Northwood Community Center (family housing). That relocation will be in effect for the May 6 vote on the transit millage and for the Aug. 5 primary elections.

Among the items attached to the March 17 agenda as reports or communications is one from the city administrator noting that for the April 5 Hash Bash event on the University of Michigan campus, all sidewalk occupancy permits and peddler’s licenses in the immediately surrounding area will be suspended. The possibility of such suspension – which the city administrator’s memo indicates is motivated by a desire to relieve congestion – is part of the terms and conditions of such licenses. They’ve been suspended for Hash Bash for at least the last six years, according to the memo.

Also among the attachments are the Ann Arbor Downtown Development Authority’s annual reports for 2004, 2005, 2006 and 2007. Those reports have been the subject of back-and-forth between Stephen Kunselman (Ward 3) and The Ann Arbor Observer over a report in The Observer’s December edition. A follow-up to an initial correction by The Observer is anticipated in the April edition – establishing that Kunselman’s contention had been correct: The DDA annual reports had not been filed with the governing body as required.

The consent agenda also includes approval of street closings for seven upcoming events: a soap box derby, SpringFest, Cinco de Mayo, Burns Park Run, Dexter-Ann Arbor Run, Washington Street Live and the Mayor’s Green Fair.

This report includes a more detailed preview of many of these agenda items. More details on other agenda items are available on the city’s online Legistar system. The meeting proceedings can be followed Monday evening live on Channel 16, streamed online by Community Television Network starting at 7 p.m.

The Chronicle will be filing live updates from city council chambers during the meeting, published in this article below the preview material. Click here to skip the preview section and go directly to the live updates. The meeting is scheduled to start at 7 p.m.

Top of Library Lane

The council’s March 17 meeting features three items related to the future development of the surface of the Library Lane underground parking structure in downtown Ann Arbor: (1) a resolution reserving part of the surface for a publicly owned urban park; (2) a resolution that moves toward hiring a brokerage service for selling development rights to the surface; and (3) a resolution that waives attorney-client privilege on a memo from the city’s outside bond counsel.

Top of Library Lane: Urban Park

A significant item was postponed from the council’s March 3, 2014 meeting: a resolution that reserves a portion of the surface of the Library Lane parking structure in downtown Ann Arbor for an urban park that would remain publicly owned.

Library Lane park proposal as presented to the city’s park advisory commission on Feb. 25.

The proposal was also presented to the city’s park advisory commission, the week before the March 3 council meeting. For a detailed report of the Feb. 25 PAC meeting, see Chronicle coverage: “Concerns Voiced over Urban Park Proposal.”

One of the central points of friction over how to proceed is the question of who will own the space on which the publicly accessible land – a park or plaza – is located.

The proposal put forward to PAC by Will Hathaway, of the Library Green Conservancy, and incorporated into the resolution to be considered by the council envisions a publicly-owned facility that is designated as a park in the city’s park planning documents. That would make it subject to a charter requirement on its sale – which would require a public referendum.

Councilmembers who are open to the possibility that the publicly accessible facility could be privately owned are concerned about the cost of maintenance. The city’s costs for maintaining Liberty Plaza – an urban park located northeast of the proposed Library Lane public park – are about $13,000 a year. That doesn’t include the amount that First Martin Corp. expends for trash removal and other upkeep of Liberty Plaza. [Urban park cost estimates]

Revisions to the resolution were undertaken since the council meeting on March 3. The now revised resolution – “version 3” in the city’s Legistar system – indicates that the area designated as a park would be 12,000 square feet, compared to 10,000 square feet in the original resolution. That square footage reflects the actual dimensions of the proposed boundaries, according to a staff memo. The revised resolution also eliminates an October 2014 deadline for making design recommendations to the council, and deletes any reference to PAC. [.pdf of revised resolution for March 17 council meeting]

The memo accompanying the revised resolution describes the changes as follows:

1. Square Footage and Boundaries. The first resolved clause is modified to reflect the information we received from City staff regarding the dimensions of the area. A site plan from staff showed the accurate square footage of the area to be designated as urban park as approximately 12,000 square feet.
2. Encouragement of Creative Public Programming. The second resolved clause text is now clearer that the various City government offices and the DDA are being asked to give thought to how they can encourage other groups to reserve the space on the Library Lane structure and put on creative public events.
3. Integration of Park Design with Adjacent Development. The third resolved clause is an acknowledgement that the two spaces should be designed to complement each other and that the City will play a leadership role in making that integration occur.
4. Activation of the Public Park through Integration with the Block. The fourth resolved clause acknowledges the necessity for the City to work with all the neighboring property owners on the Library Block in order to achieve the pedestrian connectivity that will result in vital, attractive public spaces. The text has been modified to clarify that reorientation need not entail major redevelopment.
5. Process for Creation of the Public Park and Development of the Remaining Library Lane Site. The resolved clauses that spelled out specific next steps have been removed from the resolution. The assumption now is that these respective City government bodies will move forward autonomously to accomplish these tasks.

An additional point of friction involves how much of the site would be left for development if the northwest corner of the site is devoted to a public plaza/park. Related to that issue is whether the existing northern border of the site – which currently features the sides and backs of buildings – can adequately support a public plaza/park. The fact that the site does not currently enjoy other surrounding buildings that face toward it is part of the reason advocates for a park are now asking that the Ann Arbor District Library, located to the south of the site, relocate its entrance from Fifth Avenue to the north side of its building.

In terms of the color-shaded map produced by city staff, the focus of controversy is the light orange area, which was designed to support “medium density building.” Based on staff responses to councilmember questions, the density imagined for that orange rectangle could be transferred to the planned high-density (red) portion of the site. The maximum height in the D1 zoning area is 180 feet, and the parking structure was designed to accommodate the structural load of an 18-story building.

City staff diagram illustrating the building possibilities for the top of the underground Library Lane parking structure.

Top of Library Lane: Brokerage Services

Related to the urban park item is a new resolution with the title: “Resolution to Direct City Administrator to List for Sale 319 South Fifth and to Retain Real Estate Brokerage Services.” That’s the address of the Library Lane underground parking structure.

The urban park designation was postponed from the March 3, 2014 meeting in part to synch up its timing with this resolution, which is being brought forward by Stephen Kunselman (Ward 3).

This approach would be similar to the path the city council took to sell the former Y lot. For that parcel, the council directed the city administrator to move toward hiring a real estate broker to test the market for development rights. The council took the initial step with that property, located on William between Fourth and Fifth avenues in downtown Ann Arbor, close to a year ago at its March 4, 2013 meeting.

The council gave final approval to the sale – to hotelier Dennis Dahlmann for $5.25 million – on Nov. 28, 2013. That sale is now set to close on April 2, according to city administrator Steve Powers, who responded on March 12 to an emailed query from The Chronicle.

A rider agreement – to ensure against non-development and to sketch out the amount of open space and density – was part of the approach the city took to the former Y lot deal with Dahlmann.

The issue of open space figures prominently in Kunselman’s resolution. A key “whereas” clause and three of the “resolved” clauses read as follows:

Whereas, Developing the public space at the same time the site is developed will provide for increased activity, safety, and security; limit nuisance behavior at this public space; provide potential funding for public space features and programming; and have a responsible private entity for ongoing maintenance and
…
Resolved, That City Council deems the highest and best use for the property located at 319 South Fifth (Library Lane) to be mixed-use consisting of commercial, residential, and public use.
Resolved, That the City will seek, as conditions for development rights at a minimum, public open space, private maintenance of the public space, and pedestrian access to the public space as features of any private development;
Resolved, That implementation of the conditions for development rights will be determined by City Council through selection of the purchase offer that best responds to mixed-use, density, integration with surrounding uses, and public space and through the City’s established site plan procedures and policies;

Also related to the council’s agenda item about hiring a brokerage service to sell development rights to the Library Lane surface, the Ann Arbor planning commission agenda for March 18, 2014 now includes a resolution giving advice to the council about how to handle that sale. The two resolved clauses are:

Resolved, that the City Planning Commission recommends to City Council that if the development rights over the “Library Lot” underground parking structure are sold, an RFQ/RFP process be utilized that conditions the sale of the property in order to obtain a long-term, ongoing and growing economic benefit for the residents of the city;

Resolved, that the City Planning Commission recommends to City Council that if the development rights over the “Library Lot” underground parking structure are sold, an RFP contain some or all of the following conditions:

• A building that generates foot traffic, provides a human scale at the ground floor and creates visual appeal and contains active uses on all first floor street frontage and open space;
• A requirement for an entry plaza or open space appropriately scaled and located to be properly activated by adjacent building uses and to be maintained by the developer;
• A “mixed use” development with a density at around 700% FAR that takes advantage of the investment in footings and the mid-block location with active uses that have a high level of transparency fronting the plaza and at least 60% of Fifth Avenue and Library Lane frontages, while encouraging large floor plate office or lodging as a primary use, residential as a secondary use, and incorporating a cultural venue.
• A requirement for the entry plaza or open space to incorporate generous landscaping;
• A requirement that discourages surface parking, limits vehicular access for service areas to be located in alleys where available and prohibits service areas from being located on Fifth Avenue
• To seek an iconic design for this site that is visible on all four sides and that creates an iconic addition to the skyline;
• A requirement for high quality construction; and
• A request for a third party environmental certification (e.g., LEED Gold or Platinum)

The resolution is being brought forward by planning commissioners Diane Giannola and Bonnie Bona. It’s similar in intent to the recommendation that the commission gave to council regarding the sale of the former Y lot.

Top of Library Lane: Bond Counsel

An item also related to the future development of the area above the Library Lane structure is a resolution that would waive the attorney-client privilege on a document prepared by Dykema Gossett, city’s outside bond counsel. The Build America Bonds used to finance construction of the Library Lane project have private-use limitations on facilities constructed with financing from such bonds. The Dykema memo apparently analyzes those limitations with respect to Library Lane.

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. And 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 might vote 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 Aug. 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.

However, members of the city council’s audit committee have placed a resolution on the council’s March 17 agenda to waive attorney-client privilege on the document in question. [For additional background, see: "Column: Rocking Back on the Library Lot."]

Tax Assessment

The outside bond counsel’s memo on the use of Build America Bonds is not the only item on the March 17 agenda involving the waiver of attorney-client privilege. The other one, postponed from the council’s March 3 meeting, would waive privilege on a city attorney memo dated Feb. 25, 2014 on the topic of how appeals to property assessments work.

The memo apparently helps explain “… the effect of a reduction of the assessment for one year by the Board of Review and/or the Michigan Tax Tribunal on the property tax assessment for the subsequent year.”

The memo may help explain how one section of Michigan’s General Property Tax Act is properly interpreted and applied:

211.30c Reduced amount as basis for calculating assessed value or taxable value in succeeding year; applicability of section.
Sec. 30c. (1) If a taxpayer has the assessed value or taxable value reduced on his or her property as a result of a protest to the board of review under section 30, the assessor shall use that reduced amount as the basis for calculating the assessment in the immediately succeeding year. However, the taxable value of that property in a tax year immediately succeeding a transfer of ownership of that property is that property’s state equalized valuation in the year following the transfer as calculated under this section.

In Chart 1 below, a homeowner purchased the property in 2006 for $227,000. It was assessed at market value of $281,600, or $140,800 state equalized value. On appeal to the board of review in 2007, the assessed value was reduced to $113,500. In 2008, the 2007 assessed value does not appear to have been used as the basis for calculating the assessment.

Chart 1: Taxable and assessed value for a Ward 4 property as evaluated by the city (reds) and the board of review on appeal (blues). The property changed hands in 2006. An appeal to the board of review was granted in 2007, but the city assessor appears not to have used the reduced amount in calculating the assessment in 2008.

Also related to the issue of tax assessment, the March 17 agenda includes an attachment of a report sent to the state tax commission by city assessor David Petrak, explaining how the city has complied with various deficiencies in documentation identified previously by the commission. Among the notes in the letter was an issue that’s become a routine point of council meeting public commentary for Ann Arbor resident Ed Vielmetti – the timely filing of meeting minutes by various boards and commissions. From Petrak’s report to the tax commission:

Concern #2: Board of Review prepared minutes were not filed with the local unit clerk
Response: On February 18th 2014 the Board of Review minutes were officially filed with and recorded by The City Clerk. Staff will insure all future minutes are similarly recorded in a timely fashion.

Energy

The council will be considering two items related to energy issues: (1) a resolution directing the drafting of an energy disclosure ordinance; and (2) a resolution calling for a staff position to be filled.

Energy: Resolution on Development of Energy Disclosure for Commercial Buildings

The council will consider a resolution that directs the city’s energy commission and staff to convene a stakeholder work group, with the support of the city attorney’s office, to draft a commercial building energy benchmarking and disclosure ordinance. Such an ordinance would require owners of commercial buildings to disclose data on energy consumption by their buildings. It’s an effort to help achieve goals in the city’s climate action plan, which was approved by the city council at its Dec. 17, 2012 meeting. Ann Arbor’s climate action plan calls for a reduction in greenhouse gas emissions of 8% by 2015, 25% by 2025, and 90% by 2050. Baseline for the reductions are 2000 levels.

The resolution on the council’s March 17 agenda originated with the city’s energy commission. The staff memo compares the idea of a disclosure requirement for energy usage by commercial buildings to a miles-per-gallon rating for vehicles or nutritional facts labeling for food products. According to the memo, awareness of energy consumption has been shown to encourage building owners to have energy audits done on their buildings. Those audits can then lead to energy efficiency upgrades that result in cost savings to the building owners and reduced emissions.

An estimate for the potential energy cost savings that would result from an energy benchmarking ordinance in Ann Arbor – prepared by the Institute for Market Transformation (IMT) – is between $2 million and $2.5 million, annually. According to the staff memo, similar ordinances in place in other cities typically employed a phased approach, often with municipal buildings as well as the largest private buildings (by square footage) complying in the initial year(s), and medium-sized and/or smaller buildings participating in later years.

The energy commission is recommending that an ordinance be developed with a phased approach, with the phases based on building categories and sizes. One possibility is to start with all qualifying municipal buildings in the first six months, commercial buildings over 100,000 square feet in 12 to 18 months, multifamily and commercial buildings over 50,000 square feet in 24 to 36 months, and all commercial buildings over 10,000 square feet in 36 to 48 months. The goal would be to have reported energy consumption information for 80% of the commercial square feet in the city within five years of adoption.

Energy: Resolution on Energy Office Staff

The second energy-related item on the March 17 council agenda is a resolution that would direct the city administrator to hire an additional staff member for the city’s energy office, bringing the total back to two people, according to the resolution.

The energy office staffer would “create and implement additional community energy efficiency, conservation, and renewable energy programs that further the Climate Action Plan’s adopted targets.” Among the specific efforts cited in the resolution are the city’s property assessed clean energy (PACE) program.

At its March 4, 2014 meeting, the city’s planning commission passed a resolution in support of the hiring. Planning commissioners were briefed on the issue by Wayne Appleyard, chair of the energy commission. Resolutions of support were also passed by the city’s energy and environmental commissions.

Wheels

After approving the purchase of 18 replacement vehicles on March 3 and several pieces of basic equipment at its Feb. 18 meeting, the council will be considering three resolutions that involve additional vehicles and equipment: two forklifts for the city’s materials recovery facility, a Chevrolet Impala for use by police detectives, and a lease for golf carts from Pifer Inc.

Wheels: Forklifts

The council will be asked to approve the purchase of two Clark C30 forklifts for use at the city’s materials recovery facility (MRF) for a total of $55,268.

The forklifts to be purchased would replace two that are currently being rented at a cost of $12,000 a year. The city is calculating that the purchase cost will be covered by savings in rental costs in 2.3 years.

Wheels: Detective

On the council’s March 17 agenda is the approval of the purchase of a police detective vehicle – a Chevrolet Impala – from Berger Chevrolet in Oakland County for $26,750. The car will replace a vehicle that in the next year will have reached an 80,000-mile limit specified in the city’s labor contract.

Wheels: Golf Carts

The council will be asked to approve an amendment to a two-year golf cart lease with Pifer Inc. The agreement would increase the original number of 65 leased carts by 34 carts, for a total of 99 carts. The city leases golf carts from Pifer for the Huron Hills and Leslie Park golf courses.

The lease amendment would be for two years, for an amount not to exceed $50,340 over the length of the lease amendment term. Funding for FY 2014 would come from the parks and recreation services general fund and would be in the proposed budget for FY 2015, according to a staff memo. In FY 2013, the city generated about $225,000 in revenue from golf cart rentals.

The council’s resolution also will approve the sale of 32 city-owned golf carts to Pifer for $50,340. The city’s park advisory commission recommended the action on golf carts at its Feb. 25, 2014 meeting.

15th District Court

The 15th District Court, which is the responsibility of the city of Ann Arbor, is featured in two agenda items.

15th District Court: Weapons Screening

The council will be asked to approve a $160,000 contract with the Washtenaw County sheriff’s office for weapons screening services for the 15th District Court, which is housed at the Justice Center – the police/courts facility immediately adjoining the Larcom city hall building at the northeast corner of Huron and Fifth.

The total amount of the contract reflects an amount of $26.24 per hour per court security officer. According to the staff memo accompanying the resolution, it’s estimated that three officers would be assigned on a given day with hours staggered to match the ebb and flow of court business through a typical day.

15th District Court: New Administrator

A second item related to the 15th District Court is an introduction of Shryl Samborn as the new administrator. Samborn is currently deputy administrator. Current administrator Keith Zeisloft is retiring after 12 years of service at the court. His last day of work for the court is March 28.

Samborn has worked in public service since 1998, starting with the Washtenaw County Clerk/Register of Deeds moving then to the 15th District Court in 2002. She began her work in the 15th District Court as secretary to judge Julie Creal, moving to be secretary for court administrator Keith Zeisloft in 2004. She became deputy court administrator in 2007. Her undergraduate degree is from Eastern Michigan University. She’ll be enrolling in the fall of 2014 as a graduate student in Michigan State University’s school of criminal justice judicial administration masters program.

Election Polling Places

At its March 17 meeting, the council will also be asked to approve the temporary relocation of Precinct 1-7 from the University of Michigan’s Pierpont Commons, 2101 Bonisteel, to Northwood Community Center (family housing), which is the location for Precinct 2-1. That relocation will be in effect for the May 6 vote on the transit millage and for the Aug. 5 primary elections.

The relocation is needed because Pierpont Commons will be unavailable due to renovations being undertaken by the University of Michigan to that facility.

The council’s resolution is needed only on the relocation for Aug. 5 – when the two precincts will operate separately but at the same Northwood Community Center location. The city election commission has the authority to consolidate the two locations – which it did for the May 6 election at its Feb. 26 meeting.

Map of Precincts 1-7 and 2-1.

Attachments

The online agenda for March 17 includes myriad reports and communications as attachments.

Attachments: Hash Bash

Among the items attached to the agenda as reports or communications is one from the city administrator noting that for the April 5, 2014 Hash Bash event on the University of Michigan campus, all the sidewalk occupancy permits and peddler’s licenses in the immediately surrounding area will be suspended.

The possibility of such suspension – which the city administrator’s memo indicates is motivated by a desire to relieve congestion – is part of the terms and conditions of such licenses. They’ve been suspended for Hash Bash for at least the last six years, according to the memo. Hash Bash is a gathering that focuses on reform of marijuana laws.

Map of area where peddler and sidewalk occupancy permits have been suspended for the April 5, 2014 Hash Bash.

Attachments: DDA Annual Reports

Also among the attachments are the Ann Arbor Downtown Development Authority’s annual reports for 2004, 2005, 2006 and 2007. Those reports have been the subject of back-and-forth between Stephen Kunselman (Ward 3) and The Ann Arbor Observer over a report in The Observer’s December edition. A follow-up to an initial correction by The Observer is anticipated in the April edition – establishing that Kunselman’s contention had been correct: Before 2011, the reports had not been filed with the governing body as required under state statute.

Street Closings

The March 17 agenda features a number of street closings for upcoming events. They appear on the consent agenda, which includes a group of items voted on “all in one go.” So unless a councilmember pulls out a consent agenda item for separate consideration, these items won’t be mentioned explicitly at the meeting.

• Saturday, March 29, 2014: Sixth Annual Box Cart Race/Soap Box Derby. The event is sponsored by Phi Delta Theta Fraternity and Ann Arbor Active Against ALS to honor the legacy of their fraternity brother, Lou Gehrig, and to raise money for ALS research. All proceeds from the event will be donated to ALS research. Streets to be closed: South University from Oxford to Walnut; Linden from South University to Geddes.
  

  Map of street closings for Sixth Annual Soap Box Derby.

• Thursday, April 10, 2014: SpringFest. The sponsor, the University of Michigan-MUSIC Matters organization, is presenting a day of festivities to be capped off with a MUSIC Matters concert. The festivities will feature an assortment of student groups from the innovation, arts, sustainability, music and social justice communities on campus. Speakers will begin the program at 1 p.m. with live music featuring students and other local Ann Arbor talent to begin at 2:30 p.m. Streets to be closed: North University Street between Thayer and Fletcher Streets.
  

  Map of street closings for SpringFest.

• Sunday, May 4, 2014: Burns Park Run. Streets to be closed: Several streets in the Burns Park neighborhood.
  

  Map of street closures associated with the Burns Park Run.

• Monday, May 5, 2014: Ann Arbor Cinco de Mayo Party. The event is sponsored by Tios Restaurant to celebrate Cinco de Mayo. Streets to be closed: Liberty Street between Thompson and Division.
  

  Map of street closures associated with Cinco de Mayo.

• Saturday, June 1, 2014: Live on Washington. This is a youth-curated outdoor arts festival, featuring performances on a stage as well as more “interactive street art” like break dancing, puppetry, and mural art. It’s sponsored by the Neutral Zone. Streets to be closed: Washington Street between Fifth Avenue and Division.
  

  Map of street closures associated with Live on Washington.

• Sunday, June 1, 2014: Dexter-Ann Arbor Run. The Dexter-Ann Arbor race is sponsored by the Ann Arbor Track Club. Streets to be closed: Several downtown streets and surface parking lots.
  

  Map of downtown street closings for Dexter-Ann Arbor Run.

• Friday, June 14, 2014: Mayor’s Green Fair.
  

  Map of street closings for Mayor’s Green Fair.

4:18 p.m. City staff responses to councilmember questions on the March 17 agenda items are now available: [responses to March 17, 2014 agenda questions]

4:58 p.m. Eight people are signed up for public commentary reserved time, all of them except one at least in part to talk about the surface of the underground Library Lane parking structure. Those signed up to talk about the future of the surface are Will Hathaway, Thomas Partridge (among other topics), Barbara Bach, Eric Lipson, Peter Allen, Ingrid Ault and Alan Haber. Signed up to talk about synagogue vigils at Beth Israel Congregation is Henry Herskovitz.

6:58 p.m. Councilmembers are starting to arrive. Jack Eaton (Ward 4) and Jane Lumm (Ward 2) are here. City attorney Stephen Postema and assistant city attorneys Abigail Elias and Mary Fales are here. The Hathaways have arrived, as has Peter Allen.

6:59 p.m. AADL director Josie Parker has arrived. Mayor John Hieftje is now here.

7:03 p.m. City administrator Steve Powers has made appropriate sartorial choices for St. Patrick’s Day: green tie and green shirt. Margie Teall (Ward 4) has a green jacket. Sumi Kailasapathy (Ward 1) is wearing a green sari. Eaton is wearing a green tie.

7:09 p.m. Call to order, moment of silence, pledge of allegiance. And we’re off.

7:10 p.m. Roll call of council. All councilmembers are present and correct except for Sally Petersen (Ward 2), who is spending her husband’s 50th birthday with him.

7:11 p.m. Approval of agenda.

7:11 p.m. Outcome: The council has voted to approve the agenda.

7:11 p.m. Public comment on the urban forestry management plan will be accepted through March 28, 2014. Curbside composting will be resuming at the end of March. Meetings on the Arbor rail station will be starting.

7:13 p.m. Shryl L. Samborn: New 15th District Court administrator. Samborn is currently deputy court administrator. Keith Zeisloft is retiring from the court administrator position, with his last day to be on March 28. Samborn has been deputy administrator since 2007 and has worked for the court since 2002. [For more background, see 15th District Court: New Administrator above.]

7:15 p.m. Keith Zeisloft is making the introduction in judge Libby Hines’ place. He says that on March 28, Samborn is going to be sworn in as the new court administrator. He calls her his good friend. She’s “very capable,” he says. “Council, this is Shryl. Shryl, this is council!”

7:15 p.m. Public commentary. This portion of the meeting offers 10 three-minute slots that can be reserved in advance. Preference is given to speakers who want to address the council on an agenda item. [Public commentary general time, with no sign-up required in advance, is offered at the end of the meeting.]

Eight people are signed up for public commentary reserved time, all of them except one at least in part to talk about the surface of the underground Library Lane parking structure. Those signed up to talk about the future of the surface are Will Hathaway, Thomas Partridge (among other topics), Barbara Bach, Eric Lipson, Peter Allen, Ingrid Ault and Alan Haber. Signed up to talk about synagogue vigils at Beth Israel Congregation is Henry Herskovitz. Added to the list was Rita Mitchell.

7:18 p.m. Will Hathaway is speaking on behalf of the Library Green Conservancy. He calls the resolution a modest proposal and a compromise. His group has met with many people, including urban planning professionals, he says. He calls it the next step in the public process. He says some concerns that have been expressed have been addressed in the revisions that have been made to the resolution. He contrasts an approach where a developer is in charge of the design and building of the public open space, compared to one where the community is in charge. He says the action tonight won’t flip a switch to create a park. This resolution encourages the park advisory commission to continue its effort, he says.

7:22 p.m. Thomas Partridge introduces himself as a recent candidate for the Michigan legislature and the city council. He’s calling the council’s attention to the situation in Ukraine. He calls it a valiant struggle for an independent democracy. He calls the planned urban park in a poor location, saying it’s polluted and congested with traffic. He raises the specter of a driver losing control of their vehicle and crashing into the open space.

7:25 p.m. Barbara Bach says that once the boundaries for a park have been defined, the planning can begin. She’s looking forward to the Ann Arbor District Library’s participation in the planning for the space. She describes a possible puppet stage among other possibilities. PAC’s planning process can begin after the boundaries are defined, she says. She asks the council to vote yes on the urban park resolution.

7:31 p.m. Former planning commissioner Eric Lipson says he’s a member of the Library Green Conservancy. He’s reviewing some of the history of the planning process, which dates back to the early 1990s. When he served on the city planning commission, the community engaged in the Calthorpe planning process. The outcome of that process was a designation of the entire Library Lot as a community gathering space, he says. Later, PAC came up with a recommendation for the area, he says. There have been concerns about panhandlers, he says. This park won’t cure or exacerbate that problem, he says. “This is the place. It’s about time we acted.” As far as “eyes on the park” go, Earthen Jar and Jerusalem Garden might serve that function, he ventures.

7:32 p.m. Peter Allen is educating councilmembers about the virtues of leasing versus selling. He tells them that they should not be selling land, but rather using very long-term leases. He says the Library Lot is worth more than the former Y lot.

7:35 p.m. Ingrid Ault introduces herself as the chair of PAC. She reiterates that PAC had some concerns with the first resolution and the revisions to the resolution don’t address them. PAC is opposed to moving forward with the development of a park until it’s clear how it will be paid for without jeopardizing the maintenance of the city’s other 157 parks. She draws an analogy to buying a wedding dress before even going out on a date. She says the resolution will place unnecessary restrictions on the process.

7:38 p.m. Alan Haber says he wants to speak on Stephen Kunselman’s resolution to sell the property. He says that the space should be designated as a park so that we can see what kind of financial support might grow up from the Ann Arbor Community Foundation and other sources. That seems like a no-brainer, Haber says, but quips, “I’m getting old, I’ve got problems.” He says that there’s been no opportunity to develop a commons in Ann Arbor, to let the public see how that central area can be developed as a community space. There’s no need to sell the land, he says. He says he has a list of five people in Ann Arbor who could finance a park.

7:41 p.m. Henry Herskovitz says the regular demonstrations outside Beth Israel have been criticized. But he’s addressing various points of that criticism made by Reverend James Rhodenheiser, Rector, St. Clare of Assisi Episcopal Church last year.

7:44 p.m. Rita Mitchell speaks in favor of the urban park resolution. She thanks the councilmembers who sponsored the resolution. She’s addressing the concerns about cost of maintenance. She says that concern doesn’t recognize the potential for private-public partnerships. A public gathering space will draw people to local businesses, she says. Residents of new 14-story buildings will also benefit from having access to open space. It will be their version of a backyard, she says. The city already owns the property, so there’s no acquisition costs, she says. She describes an underground parking structure in Boston with a park on top that has the slogan: Park below, Park above.

7:45 p.m. Communications from council. This is the first opportunity on the agenda for councilmembers to share matters they deem important.

7:46 p.m. Sabra Briere (Ward 1) says she’s going to bring forward a nomination for reappointments to the environmental commission: David Stead, Susan Hutton, and Kirk Westphal.

7:47 p.m. Mike Anglin (Ward 5) is reading aloud a letter from a constituent in favor of the urban park resolution. The letter is apparently from Mary Hathaway.

7:50 p.m. Communications from the mayor. Mayor John Hieftje is reading aloud several nominations to boards and commissions. They’ll be voted on at a future meeting.

7:50 p.m. Approval of council minutes. Outcome: The council has voted to approve the minutes of its previous meeting.

7:50 p.m. Consent agenda. This is a group of items that are deemed to be routine and are voted on “all in one go.” Contracts for less than $100,000 can be placed on the consent agenda. This meeting’s consent agenda includes:

• CA-1 Lease golf carts from Pifer Inc., authorize sale of 32 carts ($50,336) [For more background, see Wheels: Golf Carts above.]
• CA-2 Purchase police detective vehicle from Berger Chevrolet ($26,750) [For more background, see Wheels: Detective above.]
• CA-3 Accept minutes of board of insurance administration minutes for Feb. 27, 2014
• CA-4 Street Closing: Burns Park Run [For more background, see Street Closings above.]
• CA-5 Street Closing: Cinco de Mayo at Tios
• CA-6 Street Closing: Box Car Derby
• CA-7 Street Closing: Mayor’s Green Fair
• CA-8 Street Closing: Live on Washington
• CA-9 Street Closing: Dexter-Ann Arbor Run
• CA-10 Street Closing: Spring Fest
• CA-11 Temporary polling place change: Precinct 1-7 to Northwood Community Center (Family Housing) [For more background, see Election Polling Places above.]

7:51 p.m. Councilmembers can opt to select out any items for separate consideration. Jane Lumm (Ward 2) wants to pull out the item on the board of insurance minutes.

7:52 p.m. CA-3 Accept minutes of board of insurance administration minutes for Feb. 27, 2014. Lumm says that they’re looking at separating out the approvals by amount.

7:53 p.m. Outcome: The consent agenda is now approved.

7:53 p.m. DC-1 Designating an urban public park location on the Library Lot site. This resolution was postponed from the council’s March 3 meeting. It would reserve a specific 12,000-square-foot portion of the top of the Library Lane parking structure as a public urban park. [For more background, see Top of Library Lane: Urban Public Park above.]

7:54 p.m. Jack Eaton (Ward 4) says that the “whereas” clauses go on for three pages. That reflects the long history of the issue. Our community has always given great support for parks, he notes. He points out that the parks millage was passed, but the library millage failed.

7:56 p.m. Eaton supports Hieftje’s idea of a string of parks that extend from Liberty Plaza to a greenway. He says this is a great place to start. The resolution doesn’t do a lot, he says. It draws some boundaries and sends the issue back to the park advisory commission (PAC). He imagines that PAC might return with basic options and ballpark cost estimates. He says that this resolution will refer the issue back to PAC for further consideration. He also says that having a new park will not affect homelessness. What we need to do is establish a day shelter and downtown foot patrols, he says.

7:58 p.m. Eaton says that a park designed with active uses is the key. During the development of the resolution, he’s met with various people and groups, including the library board. At some point the concerns amount to just not wanting a park downtown, he says. The sale of the eastern portion will require eight votes, he says. There won’t be eight votes without this resolution, he says. Having a private owner repudiates the whole idea of a public space, he says.

7:59 p.m. Sumi Kailasapathy (Ward 1) picks up where Eaton left off. For those who want a park, she notes, there are two visions: (1) a developer buys the land and it’s a privately held park for public use; or (2) a commons that is publicly held.

8:01 p.m. Kailasapathy says that you can’t attend a Democratic Party meeting without hearing people complain about Citizens United. She wonders if a private owner will allow anti-war demonstrations. Democracy can only survive when there are checks and balances on capitalism. A public space must be publicly owned, she says, not a private developer allowing us to use his space on his terms. On paper it seems like a free lunch, she says. But in effect it’s not going to be a public space.

8:03 p.m. Jane Lumm (Ward 2) thanks Eaton for his leadership. She says the Connecting William Street study recommended 5,000 square feet. This resolution recommends 12,000 square feet, which she compares to about the same size as Liberty Plaza. There’s been consistent support for public space on this site of about this size, she says. She says there’s an overwhelming consensus that this should be public space. The best way to do that is through city control, she says.

8:04 p.m. Lumm doesn’t agree that if you support an urban park here, then you’re against development. “That’s nonsense,” she says.

8:06 p.m. Lumm hopes everyone will support this resolution. Mike Anglin (Ward 5) says that if 100 spoke, there would be 100 different opinions. We solve problems in our town, we don’t just create them, he says. It’s our time to say: This will be our future, this is what we want our town to be. He’s thanking Haber and Hathaway. He’s also thanking mayor John Hieftje, who had attended a picnic on top of the parking structure.

8:08 p.m. Anglin is now talking about the problem of homelessness. “We don’t want a dead zone in our town,” he says. There is a dead zone around city hall at night, he says. The library is one of the best in the state, he says. The library’s leadership will take us to a future we can be proud of, he says. He notes that the new bus station has been constructed downtown. The addition of a park will bring more families downtown, he says. He ventures that dances could be held.

8:10 p.m. Anglin says the city is blessed that people are willing to come forward to help. Anglin reiterates Eaton’s point about there being four votes on the current council that would block any sale of land without the stipulation that there will be a publicly-owned park.

8:13 p.m. Hieftje is now inviting Josie Parker, AADL director, to address the council. She thanks those who have made positive comments about the quality of the library. There’s a lot of fiction in the library, she quips, but it’s not a fiction that it takes a lot of effort to manage a public space. She calls the library building a park within walls. It’s not about a label, but rather behavior, she says. Teenagers or a lot of crying babies can tip the balance in a public space.

8:15 p.m. Some of the most obnoxious behavior at the public library, she says, is by people who are well-housed and well off. She’s reading aloud a library board resolution passed tonight, urging the city council to reject the council resolution on establishing an urban park on top of the Library Lane parking structure. [The resolution was passed by the AADL board on a 6-1 vote, over dissent from Nancy Kaplan.]

8:18 p.m. Hieftje is now saying that there’s always been a plan for a park or public space or whatever you want to call it. He’s saying it could be privately owned and owned by the city, but maintained by the developer. There could be a development agreement stipulating that there would be political rallies there, just as in a public park. There are two ways to go, he says: developer-owned or city-owned.

8:19 p.m. Jim Chaconas, of Colliers International, is now being invited to the podium.

8:20 p.m. Hieftje asks what the impact of the real estate value would be if the frontage on the South Fifth Avenue were removed. Chaconas says it would be negative. You’d lose a couple million dollars of value, he says.

8:21 p.m. Eaton asks Chaconas to estimate the value of land: $6-7 million. Chaconas says that a park would be an asset to the building.

8:23 p.m. Kunselman says he doesn’t necessarily agree that the northwest portion needs to be retail. He’s describing the possibility of a building over that portion that would not block off access.

8:24 p.m. Kunselman and Chaconas are talking about how things have changed. Chaconas used to be in the beer business so he knows about restaurants, he says. He’s talking about creating a new “mid-town.” He calls Kunselman’s cantilevering idea a good one.

8:27 p.m. Lumm is now talking to Chaconas. She wants to know why it’s more difficult to build a building without constructing something on the northwest corner. The ability to go “street-to-street” had increased the Y lot deal by around $1 million, Chaconas says.

8:30 p.m. Chuck Warpehoski (Ward 5) is now asking Chaconas how eyes-on-the-site can be achieved with only development on the high-density portion of the site. Chaconas is comparing relative square footage costs for retail, office and residential.

8:32 p.m. Kunselman weighs in for his cantilevered building, by saying that now, when it rains at Sonic Lunch, everybody runs. [Sonic Lunch is a weekly summer concert series held in Liberty Plaza and sponsored by the Bank of Ann Arbor.]

8:32 p.m. Chaconas says deed restrictions can be put in.

8:34 p.m. Anglin says he’s not interested in this kind of discussion right now. Anglin says he wants to focus on what the public is paying for and what the public wants. If the public says they want it, they’ll support it. Downtown can’t be just restaurants and Disney style entertainment.

8:35 p.m. Chaconas says a lot of Google, PRIME Research and Barracuda employees are living in the new student high rises.

8:38 p.m. Sabra Briere (Ward 1) now proposes an amendment to the first “resolved clause.” It describes a public space, publicly owned, of at least 6,500 square feet, with the northern boundary to be determined at a future time.

8:39 p.m. Briere doesn’t like the idea of putting a box around the park and telling PAC to fill the box.

8:40 p.m. Her approach gives PAC room to be creative, she says. And it gives the city administrator flexibility in talking to prospective purchasers. The value of the land is not just a financial value, but a community value, she says.

8:41 p.m. Briere says she has a personal desire to see a park, but she doesn’t see a park as an entertainment venue. She’d love to see a play park, a place with water for kids to splash in or a place for kids to climb.

8:43 p.m. We’re now discussing Briere’s amendment. Anglin asks about the indefiniteness of her proposal. Briere explains that this would be determined by PAC.

8:44 p.m. Anglin says he hopes that people understand that what’s happening is an effort at compromise. A lot of compromises have been made already, he says. Teall says she appreciates the effort at compromise, but says she won’t support the amendment or the resolution as a whole.

8:46 p.m. Hieftje says he has a question for Briere. The background to his question includes the DTE property down by the Huron River. Hieftje says that he thinks that land should be owned by DTE with the ability of the city to use the land. Hieftje says he’s reluctant to make this parcel a publicly-owned parcel. He wants to know if that part of the resolution is important to Briere. She replies that it’s important to those who proposed the resolution.

8:48 p.m. Briere expresses skepticism that privately-owned spaces can be truly public without making people feel like intruders. She stresses that it will not be a very big space that will serve well as a gathering space, or a commons or a place for parades.

8:50 p.m. Christopher Taylor (Ward 3) says he’ll support the amendment because it will improve the resolution. But he says that the resolution is flawed and continues to have flaws. He’ll address those when the resolution is voted on.

8:53 p.m. Chuck Warpehoski (Ward 5) is asking whether the requirement for a vote on the sale of parkland would apply to the air rights cantilevered over the top of a public park. Based on remarks from planning manager Wendy Rampson and assistant city attorney Mary Fales, the transaction would be more complex than a fee simple arrangement. Rampson indicates that a condominium agreement would be a suitable kind of arrangement.

8:54 p.m. Kunselman ventures that Tally Hall is an example of a condominium arrangement.

8:56 p.m. Anglin is now talking to Rampson about condominium arrangements. He’s making sure that the parcel could, in fact, be a park.

8:59 p.m. Fales says if there’s development over the parking structure, then you would have ownership of the parking structure. The development would be one unit of the condo, she says, and the parking structure and the park would be another unit of the condo. Kunselman is explaining that there could be common areas in a condo arrangement, jointly owned, and gives Tally Hall as an example.

9:00 p.m. Kunselman says he doesn’t want it to be called a park, saying that the council was getting caught up in vocabulary. He wants to call it public space with no limitation on politics or music.

9:03 p.m. Lumm is skeptical that the maintenance costs would be all that great. The estimate per square foot for maintenance of an urban park is $1.20-$1.50, she says, which would be about $15,000 for this space. Kunselman appreciates the effort to compromise. He says we can get what everybody wants. He wants the full frontage of Fifth Avenue for public open space, which is why he wants the cantilevered portion. He points out that part of the point of the Library Lane mid-block cut-through was to be able to close it off for events. “Size is important,” he says. The three-side requirement is described by Kunselman as “bunk,” giving Sculpture Plaza as a counter example, he says.

9:05 p.m. Kunselman says the council would get flak for not doing it right, but he says, “It’s going to be really horrible if we don’t do anything at all.”

9:06 p.m. Kunselman floats the idea of postponing. He ventures that it would be an advantage to have Petersen at the table [she's absent]. Eaton wants to know if Kunselman would want to postpone the urban park resolution as well as the listing for sale. Kunselman’s answer: Yes.

9:08 p.m. Warpehoski says he’ll support the amendment. It’s important to get the northern boundary right, he says.

9:11 p.m. Lumm says that obviously she is in favor of declaring 12,000 square feet of open space. But she’s not sure if Briere would support the resolution if the amendment passes. She says she’s trying to count noses. Warpehoski says he wants to see the part about the parks and recreation open space (PROS) plan struck from the resolution, noting that the council doesn’t have the ability to unilaterally place a parcel in the PROS plan. With that part stricken and with the current amendment, he’d support the resolution.

9:12 p.m. Briere says she’ll remove the final sentence about establishing the space as a part of the PROS plan. Lumm, as the seconder of the amendment, agrees to accept that as “friendly.” Teall says she’s still concerned about the role of the Ann Arbor District Library.

9:13 p.m. Briere responds to Teall by saying that she doesn’t anticipate anyone at the library dealing with maintenance or programming of the space. She would never want to burden the library.

9:15 p.m. Teall says her concern is not that the library is being told to do anything. But the burden of having space next to the library that is unprogrammed will fall on the library regardless, she says.

9:18 p.m. Eaton is addressing the idea that a park would create a safety problem that does not already exist. When he sat down with the library board, they told him about someone who discovered a couple having sex in the underground parking structure stairwell. The idea that having a park will create a new problem is silly, Eaton says. Hieftje quips that in light of the problem Eaton described, perhaps a new downtown hotel was needed.

9:19 p.m. Kunselman says that there’s politics involved, and fear mongering by the library board about the problems that could result from having a public park.

9:19 p.m. Teall says there’s not fear mongering but rather people who know their business [library board] and who know it well.

9:25 p.m. Hieftje highlights the vocabulary of the “resolved clause” that Briere wants to amend: “urban public park.” Briere is now talking about what she meant. She means it to be interchangeable. Hieftje says the resolution has some promise, but he’s reluctant to give up the whole Fifth Avenue frontage. It’s important for the building to feel like it has an entrance onto Fifth, he says.

9:25 p.m. Outcome: The amendment passes with dissent from Kunselman, Teall, and Anglin.

9:25 p.m. Taylor now says he’ll vote against the resolution. The boundaries should be decided at the same time the rest of the location is designed. That would be critical to the success of the public space. He also gives significance to the library board’s resolution. PAC and the library board are against pre-answering the question, he says. If you have any sense of respect for those bodies, in his view there’s only one vote on this, and that’s no.

9:27 p.m. Taylor calls Kunselman’s description of the library board as “fear mongering” is a “shocking insult for which an apology is due.” The library board was weighing in in good faith based on knowledge and expertise, he says.

9:29 p.m. Lumm says it’s not collegial to suggest that adding 6,500 square feet to a public space shows disrespect to the library. The concerns Lumm heard were about the process, she said. So many experts have looked at this and analyzed this, Lumm says.

9:30 p.m. Lumm says if we don’t act now, we’ll likely see cars parked there years from now. Lumm is describing Centennial Park in Atlanta, which she visited when she attended a Final Four game years ago.

9:35 p.m. Warpehoski says the safety concerns had been described as “silly,” so he wants AADL director Josie Parker to come to the podium. He recalls her remark to him a year ago: “We’re all alone down there.” Parker says she doesn’t want to leave tonight appearing silly. The concerns about safety are not silly because the events that the library deals with are real. It’s important to consider what is reality now around that space, she says. She says the Ann Arbor police are called to the downtown library location every third day, and to Liberty Plaza every second day. There have been five heroin overdoses in the last three years, she says. It’s not about making a problem worse, she says, it’s just about acknowledging reality. Most of the issues are “drunk and disorderly.” Right now it’s almost every day, she says. “This is your downtown public library.” They have $250,000 in security costs – just for the downtown location.

9:36 p.m. Parker says, “I have to walk back down there from here, and I’m already worried about it.” You have heroin in your community and no one wants to talk about it. Heroin is being used in the public library, she says, and she doesn’t like talking about it in public.

9:38 p.m. Parker says, “We manage it, and you don’t know about it, and that makes it successful.”

9:40 p.m. Lumm asks if the DDA is aware of the situation. She recalls the council resolution asking the DDA to consider funding three downtown beat cops. The DDA had decided not to do that. Parker says that it’s not about policing, but rather about order, maintenance and management. When a patron is so drunk they don’t wake up or can’t walk out, that’s when the police are called, Parker says. She can’t speak for the DDA.

9:43 p.m. Warpehoski thanks Parker. He says when he brings his kids to the downtown location, he still feels like it’s a safe space. It’s not just about an added 5,000 square feet. Having a safe library is important and having a safe space outside the library is also important, he says.

9:46 p.m. Warpehoski says that at the last council meeting, he tried to make a joke and it came off as hurtful and he’d apologized. He now says that he thinks the dismissive comments about the library board merit an apology. Kunselman responds: “I will not be apologizing.”

9:50 p.m. Kunselman says he finds it insulting that the library board passed a resolution telling the council not to pass the resolution. He repeats his contention that the library board was fear mongering. He’d called out the library board, he says, and “That’s what I did – that’s what I do.” He adds: “That’s what I get elected for, to stand up …” for the people who will be using the public space, and let them enjoy their cigarette. [That's a pointed reference to Warpehoski's in-the-works ordinance to regulate outdoor smoking in some areas of public parks.]

9:51 p.m. Briere says that she won’t try to control bad behavior. [The reference is presumably dual – bad behavior in public spaces and bad behavior at the council table.]

9:52 p.m. Briere reviews the content of the resolution. She says that a cooperative spirit at the council table sometimes requires not getting upset when you don’t like what you hear from the other side.

9:54 p.m. Parks and recreation manager Colin Smith is called to the podium to comment. Teall asks him if he has any ideas about programming for the public space. He pauses before answering. He talks about the process that the staff would go through.

9:55 p.m. Teall wants to strike the part of the resolution that makes a request of community services and parks staff.

9:57 p.m. Smith returns to the podium at Eaton’s request. Eaton asks about cost.

10:00 p.m. Hieftje says he has a basic problem with the resolution. He describes Liberty Plaza as a shadow that hangs over the issue of parks. He says that he thinks the problems associated with Liberty Plaza will migrate to the new space. He wonders why the effort described in the resolution to ask staff to program the Library Lane space in the interim could not be directed to Liberty Plaza.

10:01 p.m. Eaton says that Liberty Plaza is believed by many in the homeless community to be a place where they can gather and not be rousted. The responsibility of having a day shelter has been implicitly placed on the library and that’s not right, he says.

10:02 p.m. Eaton says if there’s a heroin epidemic in town, we probably need some more police officers. He says we need to add park space downtown as we add residents and we also need to address the social consequences of increased density.

10:07 p.m. Briere says the council is going off on a tangent. Requesting that parks staff work to program active uses might result in one event in a year. She describes a possibility of an event where the city’s fire trucks and other heavy equipment were driven to the top of the parking structure and kids were allowed to climb all over them. She ventures that the cost would not be that great. But she allows that the language of the resolution talks about “encouraging” and that is not very specific. It takes time to develop a new program, she says.

10:09 p.m. Hieftje wants to move toward voting on Teall’s amendment. Teall says she likes the sentiment, but doesn’t think it’s fair to staff. Warpehoski says that he doesn’t think staff will be trying to put on a book fair, but rather will work to set policies on use for the space.

10:11 p.m. Warpehoski says he’ll support Teall’s amendment to give staff maximum flexibility.

10:11 p.m. Outcome: Teall’s amendment fails with support only from Teall, Warpehoski, Taylor, Briere and Hieftje.

10:12 p.m. Anglin says that everyone agrees that this should continue to be a process.

10:16 p.m. Taylor says that we entrust our parks to PAC. Commissioners were unequivocal about their opposition to this resolution, he says. The library board had also communicated its opposition to the resolution. That’s how boards should communicate with each other, he says. The council has no problem asking the state legislature to vote on matters affecting the city. So it’s proper for the library board to convey its view to the council, he says. Taylor will vote against it.

10:20 p.m. Kunselman says the resolution has brought out a lot of feeling in the community. Kunselman says that he’d met with members of the library board last Friday and that they had not given him a heads up that they’d be passing a resolution on this. Kunselman says everyone has to come together to get something out of this. He floats the idea that he might bring forth a resolution calling on the library to move its building on top of the parking structure. “Most of the people we think of as having bad behavior also ride the bus,” he notes. He talks about taking a first step. If the resolution on the broker also passes, then a purchaser will have some idea of what to expect. “I didn’t pour the water for this effort, but I’m helping to carry it,” Kunselman says.

10:21 p.m. Kailasapathy calls the resolution a baby step. She says she feels developers rule supreme. She doesn’t want to leave the future of the public space to a developer. She’s voting for it.

10:24 p.m. Warpehoski says he’ll vote for it. He rejects the idea that it’s the first step in the process. He recounts several other steps: PAC’s recommendation, Connecting William Street, the design of the parking structure itself. He can celebrate this step because it provides flexibility. It’s important that First Amendment rights be protected on that space. He points out that the Occupy Wall Street movement started in a privately owned public space.

10:27 p.m. Teall says it looks like it’s going to pass. She says that it’s been discussed many times. She’s concerned about moving forward at this pace at this point without a partner who will work and understand what the public would like to see there. She’s also concerned about programming the space. The cost also worries her, she says.

10:30 p.m. Briere now weighs in. She appreciates comments by Warpehoski and Teall. Everyone is working toward the same goal, she says. The question is what to do first. If the city is not clear about its expectations, the city can’t negotiate effectively, she says. It sets a minimum and a maximum. She doesn’t care as much as she should, she says, about the difference between public space, park and plaza. The resolution has been opened up a little bit more to give it flexibility for PAC, she says. A prospective developer should be talking with PAC and the council and trying to figure out the best way to work out how much land is available for public use so they can offer the best possible deal.

10:34 p.m. Briere says she’ll vote yes on this resolution, but is not sure if she’ll vote yes on the brokerage services issue. Teall points out that heroin use should not be equated with homelessness. Hieftje is now defending the city’s record on efforts to work on homelessness. He says that downtown does need more policing. He says if the three new police positions in the initial budget requests for FY 2015 are deployed in downtown, then that would have a positive impact. Hieftje rejects the idea that voting against this resolution means you’re against parks. He recounts his own efforts to expand the park system. He says he’ll vote against this resolution.

10:35 p.m. Hieftje said he’d hoped that the resolution could have been revised to the point where it won the support of PAC and the library board.

10:36 p.m. Hieftje says he’s concerned about the city’s ability to maintain this new space along with a new greenway.

10:38 p.m. Outcome: The council has voted to approve the amended resolution on reserving an area for a public urban park on top of the Library Lane underground parking structure. Dissenting on the 7-3 vote were Hieftje, Taylor and Teall. Petersen is absent.

10:39 p.m. Recess. We’re now in recess.

10:53 p.m. We’re back.

10:57 p.m. The council is going to deal with its closed session now instead of later.

10:57 p.m. Eaton declares that he’s supposed to disclose that he has a potential conflict of interest in the matter to be discussed in closed session. It’s the Yu v. City of Ann Arbor case. Eaton explains that he had accepted a nominal sum from an attorney in the Yu v. City of Ann Arbor case to create an attorney-client privileged relationship. That relationship ended before Eaton took office, he explains.

11:04 p.m. Closed session.

11:04 p.m. The council has emerged from closed session.

11:05 p.m. Briere says, “We’ve got the whole meeting in front of us!”

11:05 p.m. DC-2 Waive attorney-client privilege for Feb. 25, 2014 city attorney memo on property assessment. This item was postponed from the council’s March 3, 2014 meeting. It would waive privilege on a Feb. 25, 2014 memo from the city attorney explaining aspects of how tax assessment and appeals work. [For more background, see Tax Assessment above.]

11:06 p.m. Eaton explains that while campaigning he’d received questions on this issue. He reports that the city attorney, Stephen Postema, doesn’t have a problem with it. Briere has a question for Postema.

11:06 p.m. Briere says that in the past, the council has provided direction to craft an opinion that’s suitable for a public audience. Postema says that would be best practice. Briere asks Eaton if that would be all right with him. Eaton says that he sees no reason or purpose to it. There’s no risk to the city. Briere says her concern is for coherence.

11:11 p.m. Taylor agrees with Eaton’s concern about educating the public is appropriate. He says that directing the city attorney to provide a memo for public consumption would alter the nature of the advice the council would receive – if the city attorney had in the back of his mind that it might have privilege waived.

11:14 p.m. Anglin has some questions about what information will be attached.

11:14 p.m. Lumm doesn’t care how it’s done but wants to see the information provided to the public.

11:15 p.m. Eaton says he doesn’t see any purpose to it. He ventures that the outside bond counsel will not be going through the cosmetic procedure that the council is going through. He’ll opposed Taylor’s amendment.

11:17 p.m. Kunselman will support Taylor’s amendment. If there’s any information that’s different in the revised memo, the council can just come back and waive the privilege. If that makes the city staff comfortable, he’s willing to go along with that. Lumm reiterates her concern that the important thing is to get the information out, but understands Eaton’s point.

11:17 p.m. Outcome: The council has voted to direct the city attorney to prepare an advice memo for public consumption.

11:18 p.m. DC-3 Charitable gaming license for Pearls & Ivy Foundation Inc. Passage of the resolution will allow the Pearls & Ivy Foundation Inc. to hold a poker event at the Heidelberg, located at 215 N. Main Street.

11:18 p.m. Outcome: The council has voted to approve the charitable gaming license.

11:18 p.m. DC-4 Direct development of a commercial building energy benchmarking and disclosure ordinance. The resolution would direct the city’s energy commission and staff to convene a stakeholder work group, with the support of the city attorney’s office, to draft a commercial building energy benchmarking and disclosure ordinance. It’s an effort to help achieve goals in the city’s climate action plan. [For more background, see Energy: Resolution on Development of Energy Disclosure for Commercial Buildings above.]

11:18 p.m. Hieftje says the motivation is explained very well in the memo accompanying the resolution.

11:20 p.m. When companies were forced to report how much pollution was being put into the air and water, they started reducing how much pollution they produced, Hieftje says. He draws an analogy to this resolution.

11:23 p.m. Briere recalls the city’s sustainability guidelines. She says she likes looking at her monthly utility bills and comparing her energy use to her neighbors’. She likes the firm date and the fact that it’s a direction to the energy commission.

11:25 p.m. Lumm is reading aloud a prepared statement of opposition based on the amount of staff time it might require. She is concerned that those who would be impacted had not been contacted. She says that the premise is that building owners are not already aware of their energy costs. She can’t tell if she’d ultimately vote to support to support a resolution if it were developed.

11:26 p.m. Anglin says it’s a good way to proceed, but ventures that the private sector is well aware of its energy use. Anglin is more concerned about the fact that the city needs four more foresters. He ventures that someone would need to be hired to do this – which is the next resolution.

11:27 p.m. Hieftje says that the city, as municipal entity, makes up a small portion of the energy use in the city. So other sectors have to be engaged, he says.

11:30 p.m. Kunselman says he thinks that other model ordinances can be used. He doesn’t think it will be that time-consuming. He indicates he won’t necessarily support a hire of energy staff to accomplish this. Taylor says that it will be a benefit to the public. Lumm is reiterating the points she’s already made by reading aloud the staff responses to councilmember questions about agenda items.

11:32 p.m. Outcome: The council has voted to direct development of an energy disclosure ordinance on a 7-3 vote. Dissenting were Lumm, Eaton and Anglin.

11:32 p.m. DC-5 Recommend filling energy office staff position. The resolution would direct the city administrator to hire an additional staff member for the city’s energy office, bringing the total back to two people, according to the resolution. [For more background, see Energy: Resolution on Energy Office Staff above.]

11:34 p.m. Briere is offering an amendment that directs the city administrator to develop a plan for realizing the goals of the climate action plan, but not direct a staff hire. Briere says that she feels it’s inappropriate to determine staffing issues. The council is a policy-making body and the level of staffing to effectuate that policy is the city administrator’s responsibility, she says.

11:35 p.m. Lumm wants city administrator Steve Powers’ reaction to the amended resolution.

11:38 p.m. Powers says he doesn’t know if this effort will require an additional staff member. That will depend on the result of the report that this resolution directs. Lumm wants to know if an additional staff member will be required. Powers reiterates that this depends on the finding.

11:40 p.m. Kunselman ventures that the FY 2015 budget will not include the FTE that the original resolution called for. Powers says that it still might. Kunselman says that the council could then remove it from the budget. Powers allows that’s right.

11:44 p.m. Lumm is not comfortable with this because it seems like a commitment to more spending. She doesn’t like the idea of handling this kind of thing outside the ordinary budget process. She’s not comfortable with the lack of clarity, so she’s not comfortable. Warpehoski says he wants the city administrator’s report so that he can make that decision based on what’s in it.

11:45 p.m. Warpehoski weighs in for it.

11:46 p.m. Outcome: The council has voted 6-4 to direct the city administrator to present a plan to realize the goals of the sustainability plan. Dissenting were Kailasapathy, Lumm, Eaton and Anglin.

11:46 p.m. DC-6 Waive attorney-client privilege on Aug. 9, 2012 memo from the outside bond counsel. This resolution would waive attorney-client privilege on a document prepared by Dykema Gossett, city’s outside bond counsel. The Build America Bonds used to finance construction of the Library Lane project have private-use limitations on facilities constructed with financing from such bonds. The Dykema memo apparently analyzes those limitations with respect to Library Lane.[For more background, see Top of Library Lane: Bound Counsel above.]

11:48 p.m. Kunselman is giving background on the memo. It came back up when the audit committee reviewed the DDA audit. It would help answer some questions the public have, he says. He doesn’t think the city administrator, or the city attorney or the chief financial officer has a problem waiving privilege on the document.

11:51 p.m. Taylor makes a similar amendment to the previous one on attorney-client privilege. He doesn’t want subsequent attorney-client privileged information to have uncertainty about whether privilege would eventually be waived.

11:52 p.m. Briere doesn’t want the city attorney to rewrite the bond counsel’s advice memo. Assistant city attorney Abigail Elias says she thinks it would be appropriate to ask the city attorney to ask the outside bond counsel to prepare a memorandum.

11:57 p.m. The amendment is to direct the city attorney to ask outside bond counsel to prepare a memo that has the same information as the original memo.

11:57 p.m. Kailasapathy says she doesn’t see the point in having the document rewritten.

11:58 p.m. Kunselman says that the memo didn’t include some issue he wanted to be addressed. So if it’s going to be rewritten, there are things that he’d like to have included in the re-written memo.

12:01 a.m. Eaton says it’s a fiction that rewriting an opinion protects the city’s interests. An attorney whose advice changes based on whether that advice is made public is not an attorney you’d want to hire, he says. Taylor calls the gratuitous waiver of privilege unprofessional and doesn’t want the council to get a reputation for being unprofessional.

12:03 a.m. Lumm says it’s about transparency. She doesn’t see a legal reason not to make it public. Asking the bond counsel to rewrite something for no good reason.

12:03 a.m. Outcome: The amendment fails 4-6, with support only from Hieftje, Briere, Taylor and Teall.

12:06 a.m. Briere says that she voted for the amendment because she thinks the city attorney should be routinely directed to rewrite memos. She felt that the memo in question should never have been considered privileged in the first place.

12:06 a.m. Outcome: The council has voted to waive attorney-client privilege on the 2012 outside bond counsel memo, over dissent from Taylor, who does not insist on a roll-call vote.

12:06 a.m. DC-7 Banfield Bar & Grill liquor license: Withdraw objection and renew license. At its March 3, 2014 meeting the council voted to recommend withdrawal of Banfield Bar & Grill’s liquor license. That had been based on non-payment of taxes. No one appeared on Banfield’s behalf at a hearing on the matter. The taxes were subsequently paid. So this resolution withdraws the recommendation that the license not be renewed and instead recommends that it be renewed.

12:06 a.m. Outcome: The council has voted to recommend the renewal of Banfield’s liquor license.

12:07 a.m. Recess. We’re in recess.

12:17 a.m. We’re back.

12:17 a.m. DC-8 Direct city administrator to list surface of Library Lane parking structure for sale; retain real estate brokerage services. This resolution would direct the city administrator to obtain real estate brokerage services for the sale of right to develop the city-owned property on top of the Library Lane parking structure. [For more background, see Top of Library Lane: Brokerage Services above.]

12:20 a.m. Kunselman reviews the item. He points out that this is not a sale of the property. We’ve done a lot of talking and we’ve got a lot of ideas, he says, but we don’t have any money. He hopes for everyone’s support.

12:21 a.m. Briere is interested in finding a civic use of the property. So she wasn’t sure that “highest and best use” should be the criterion.

12:23 a.m. Kailasapathy says highest is not necessarily best use. Hieftje responds by saying that “highest and best use” is a real estate term. It’s a term of art that means that we want to get a good return for the taxpayers.

12:25 a.m. Kunselman says he’s willing to strike the phrase “highest and best use.” That appears to be accepted on a friendly basis.

12:28 a.m. Warpehoski says that the highest price is not the most important thing. “Let’s give this a try,” he says.

12:30 a.m. Lumm says she’s comfortable supporting this, given the passage of the urban park resolution.

12:31 a.m. Lumm says she’s seen the planning commission’s resolution and she thinks it might be too prescriptive. Now is a good time to move forward, she says. [.pdf of planning commission's resolution]

12:39 a.m. Eaton says he’s supporting this resolution because he sees it as direction to the city administrator to explore what’s possible. Taylor says he’ll be supporting this, because he’s excited about what we might find out. He’s excited about seeing this area of the city activated. He says that the level of detail that Dennis Dahlmann had provided for the Y lot would also be expected, if not more, for this parcel. Warpehoski and Lumm get some clarity about the previous resolution. Hieftje calls 415 W. Washington a piece of city-owned blight. He wants to use this resolution tonight as a template for other properties like 415 W. Washington.

12:41 a.m. Outcome: The council has voted 8-1 to direct the city administrator to list the Library Lot property for sale. Dissenting was Kailasapathy. Petersen was absent from the start of the meeting. Teall departed late in the meeting.

12:41 a.m. DS-1 Approve changes to bylaws of the Ann Arbor city planning commission. This item has been on the council’s agenda since last fall and repeatedly postponed as the planning commission considered additional changes to its bylaws. Three changes have been approved by the planning commission: (1) a change to the requirements on request for accommodations for people with a disability – from a day to two days in advance; (2) an outright prohibition against city councilmembers addressing the planning commission; and (3) a clarification that people can speak only once during a public hearing, even if that hearing is continued at a subsequent meeting. The planning commission adopted (2) and (3) at its Feb. 20, 2014 meeting, having previously adopted (1) last summer at its July 16, 2013. Tonight the only change in front of the council is (1), because the city attorney’s office “has suggested the wording of one of the amendments should be clarified before moving forward,” according to a city staff memo.

12:42 a.m. Briere gives the background. Eaton asks what would happen if the council waited until the other bylaws changes were approved. Briere says it wouldn’t be a problem.

12:42 a.m. Outcome: The council has voted to approve the changes to the planning commission bylaws.

12:42 a.m. DS-2 Approve a contract with the Washtenaw County sheriff’s office for weapons screening services in the Ann Arbor Justice Center for the 15th Judicial District Court ($160,000). The total amount of the contract reflects an amount of $26.24 per hour per court security officer. [For more background, see 15th District Court: Weapons Screening above.]

12:43 a.m. Outcome: The council has voted to approve the weapons screening contract.

12:44 a.m. DS-3 Accept easement for stormwater drainage facilities at 3500 Fox Hunt Drive. This is a standard easement.

12:44 a.m. Outcome: The council has voted to accept the easement for stormwater facilities.

12:45 a.m. DS-4 Purchase of two Forklifts ($55,268) This resolution will authorized the purchase of two Clark C30 forklifts for use at the city’s materials recovery facility (MRF) for a total of $55,268. [For more background, see Wheels: Forklifts above.]

12:46 a.m. Outcome: The council has voted to approve the purchase of two forklifts.

12:50 a.m. Public commentary. There’s no requirement to sign up in advance for this slot for public commentary.

12:54 a.m. Kai Petainen is addressing the council. He’s talking about Ann Arbor SPARK. He’s reading aloud from a dissatisfied participant in SPARK’s boot camp. Their marketing costs are increasing by 100%. He says that SPARK has just lost the pre-seed fund. He says he wants SPARK’s investment to go to local businesses.

Ed Vielmetti notes that the council is getting decade-old reports from the DDA attached to tonight’s agenda. He’s making a request that the city make its FOIA log a part of the city’s data catalog, making it not just a public document, but a published document.

12:56 a.m. Alan Haber expresses his total dissatisfaction with the passage of the resolution on the listing of the Library Lot for sale. He pounds the podium. None of the mayoral candidates on the council should be mayor, he says, because they should be people who speak for the people.

12:56 a.m. Adjournment. We are now adjourned. That’s all from the hard benches.

A sign on the door to the Ann Arbor city council chambers gives instructions for post-meeting clean-up.

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Screenshot of Legistar – the city of Ann Arbor’s online agenda management system. Image links to the March 17, 2014 meeting agenda.

But related to that item is a new resolution that directs the city administrator to move toward listing for sale the development rights for the top of the parking structure. The urban park designation was postponed from the March 3, 2014 meeting in part to sync up its timing with this resolution, which is being brought forward by Stephen Kunselman (Ward 3).

An additional related item is a resolution that would waive the attorney-client privilege on a document prepared by Dykema Gossett, the city’s outside bond counsel. The Build America Bonds used to finance construction of the Library Lane structure have private-use limitations on facilities constructed with financing from such bonds. The Dykema memo analyzes those limitations with respect to Library Lane.

That’s one of two separate resolutions on the waiver of attorney-client privilege. The other one, postponed from the council’s March 3 meeting, would waive privilege on a city attorney memo dated Feb. 25, 2014 on the topic of how appeals to property assessments work. The memo apparently helps explain “… the effect of a reduction of the assessment for one year by the Board of Review and/or the Michigan Tax Tribunal on the property tax assessment for the subsequent year.” The council’s agenda also includes an attachment of a report sent to the state tax commission, explaining how the city has complied with various deficiencies in documentation identified previously by the commission.

The council will be considering two items related to energy issues. First, the council will consider a resolution that directs the city’s energy commission and staff to convene a stakeholder work group, with the support of the city attorney’s office, to draft a commercial building energy benchmarking and disclosure ordinance. It’s an effort to help achieve goals in the city’s climate action plan.

The second energy-related item is a resolution that would direct the city administrator to hire an additional staff member for the city’s energy office, bringing the total back to two people, according to the resolution. The energy office staffer would “create and implement additional community energy efficiency, conservation, and renewable energy programs that further the Climate Action Plan’s adopted targets.”

After approving the purchase of 18 replacement vehicles on March 3 and several pieces of basic equipment at its Feb. 18 meeting, the council will be considering three resolutions that involve additional vehicles and equipment: two forklifts for the city’s materials recovery facility, a Chevrolet Impala for use by police detectives, and a lease for golf carts from Pifer Inc.

The 15th District Court, which is the responsibility of the city of Ann Arbor, is featured in two agenda items. The council will be asked to approve a $160,000 contract with the Washtenaw County sheriff’s office for weapons screening services for the 15th District Court, which is housed at the Justice Center – the police/courts building immediately adjoining city hall.

A second item related to the court is an introduction of Shryl Samborn as the new administrator of the 15th District Court. Samborn is currently deputy administrator. Current administrator Keith Zeisloft is retiring. His last day of work is March 28.

At its March 17 meeting, the council will also be asked to approve the temporary relocation of Precinct 1-7 from Pierpont Commons, 2101 Bonisteel, to Northwood Community Center (family housing). That relocation will be in effect for the May 6 vote on the transit millage and for the Aug. 5 primary elections.

Among the items attached to the March 17 agenda as reports or communications is one from the city administrator noting that for the April 5 Hash Bash event on the University of Michigan campus, all sidewalk occupancy permits and peddler’s licenses in the immediately surrounding area will be suspended. The possibility of such suspension – which the city administrator’s memo indicates is motivated by a desire to relieve congestion – is part of the terms and conditions of such licenses. They’ve been suspended for Hash Bash for at least the last six years, according to the memo.

Also among the attachments are the Ann Arbor Downtown Development Authority’s annual reports for 2004, 2005, 2006 and 2007. Those reports have been the subject of back-and-forth between Stephen Kunselman (Ward 3) and The Ann Arbor Observer over a report in The Observer’s December edition. A follow-up to an initial correction by The Observer is anticipated in the April edition – establishing that Kunselman’s contention had been correct: The DDA annual reports had not been filed with the governing body as required.

The consent agenda also includes approval of street closings for seven upcoming events: a soap box derby, SpringFest, Cinco de Mayo, Burns Park Run, Dexter-Ann Arbor Run, Washington Street Live and the Mayor’s Green Fair.

This report includes a more detailed preview of many of these agenda items. More details on other agenda items are available on the city’s online Legistar system. The meeting proceedings can be followed Monday evening live on Channel 16, streamed online by Community Television Network starting at 7 p.m.

Top of Library Lane

The council’s March 17 meeting features three items related to the future development of the surface of the Library Lane underground parking structure in downtown Ann Arbor: (1) a resolution reserving part of the surface for a publicly owned urban park; (2) a resolution that moves toward hiring a brokerage service for selling development rights to the surface; and (3) a resolution that waives attorney-client privilege on a memo from the city’s outside bond counsel.

Top of Library Lane: Urban Park

A significant item was postponed from the council’s March 3, 2014 meeting: a resolution that reserves a portion of the surface of the Library Lane parking structure in downtown Ann Arbor for an urban park that would remain publicly owned.

Library Lane park proposal as presented to PAC on Feb. 25.

The proposal was also presented to the city’s park advisory commission, the week before the March 3 council meeting. For a detailed report of the PAC meeting of Feb. 25, 2014, see Chronicle coverage: “Concerns Voiced over Urban Park Proposal.”

One of the central points of friction over how to proceed is the question of who will own the space on which the publicly accessible space – a park or plaza – is placed.

The proposal put forward to PAC by Will Hathaway, of the Library Green Conservancy, and incorporated into the resolution to be considered by the council envisions a publicly-owned facility that is designated as a park in the city’s park planning documents. That would make it subject to a charter requirement on its sale – which would require a public referendum.

Councilmembers who are open to the possibility that the publicly accessible facility could be privately owned are concerned about the cost of maintenance. The city’s costs for maintaining Library Liberty Plaza – an urban park located northeast of the proposed Library Lane public park – are about $13,000 a year. That doesn’t include the amount that First Martin Corp. expends for trash removal and other upkeep of Liberty Plaza. [Urban park cost estimates]

Revisions to the resolution were undertaken since the council meeting on March 3. The now revised resolution – “version 3” in the city’s Legistar system – indicates that the area designated as a park would be 12,000 square feet, compared to 10,000 square feet in the original resolution. That square footage reflects the actual dimensions of the proposed boundaries, according to a staff memo. The revised resolution also eliminates an October 2014 deadline for making design recommendations to the council, and deletes any reference to PAC. [.pdf of revised resolution for March 17 council meeting]

The memo accompanying the revised resolution describes the changes as follows:

1. Square Footage and Boundaries. The first resolved clause is modified to reflect the information we received from City staff regarding the dimensions of the area. A site plan from staff showed the accurate square footage of the area to be designated as urban park as approximately 12,000 square feet.
2. Encouragement of Creative Public Programming. The second resolved clause text is now clearer that the various City government offices and the DDA are being asked to give thought to how they can encourage other groups to reserve the space on the Library Lane structure and put on creative public events.
3. Integration of Park Design with Adjacent Development. The third resolved clause is an acknowledgement that the two spaces should be designed to complement each other and that the City will play a leadership role in making that integration occur.
4. Activation of the Public Park through Integration with the Block. The fourth resolved clause acknowledges the necessity for the City to work with all the neighboring property owners on the Library Block in order to achieve the pedestrian connectivity that will result in vital, attractive public spaces. The text has been modified to clarify that reorientation need not entail major redevelopment.
5. Process for Creation of the Public Park and Development of the Remaining Library Lane Site. The resolved clauses that spelled out specific next steps have been removed from the resolution. The assumption now is that these respective City government bodies will move forward autonomously to accomplish these tasks.

An additional point of friction involves how much of the site would be left for development if the northwest corner of the site is devoted to a public plaza/park. Related to that issue is whether the existing northern border of the site – which currently features the sides and backs of buildings – can adequately support a public plaza/park. The fact that the site does not currently enjoy other surrounding buildings that turn toward it is part of the reason advocates for a park are now asking that the Ann Arbor District Library, located to the south of the site, relocate its entrance from Fifth Avenue to the north side of its building.

In terms of the color-shaded map produced by city staff, the focus of controversy is the light orange area, which was designed to support “medium density building.” Based on staff responses to councilmember questions, the density imagined for that orange rectangle could be transferred to the planned high-density (red) portion of the site. The maximum height in the D1 zoning area is 180 feet, and the parking structure was designed to accommodate the structural load of an 18-story building.

City staff diagram illustrating the building possibilities for the top of the underground Library Lane parking structure.

Top of Library Lane: Brokerage Services

Related to the urban park item is a new resolution with the title: “Resolution to Direct City Administrator to List for Sale 319 South Fifth and to Retain Real Estate Brokerage Services.” That’s the address of the Library Lane underground parking structure. As of noon Friday, the online agenda item had only a title, but no content.

The urban park designation was postponed from the March 3, 2014 meeting in part to synch up its timing with this resolution, which is being brought forward by Stephen Kunselman (Ward 3).

This approach would be similar to the path the city council took to sell the former Y lot. For that parcel, the council directed the city administrator to move toward hiring a real estate broker to test the market for development rights . The council took the initial step with that property, located on William between Fourth and Fifth avenues in downtown Ann Arbor, close to a year ago at its March 4, 2013 meeting. The council gave final approval to the sale – to hotelier Dennis Dahlmann for $5.25 million – on Nov. 28, 2013. That sale is now set to close on April 2, according to city administrator Steve Powers, who responded on March 12 to an emailed query from The Chronicle.

A rider agreement – to ensure against non-development and to sketch out the amount of open space and density – was part of the approach the city took to the former Y lot deal with Dahlmann.

Top of Library Lane: Bond Counsel

An item also related to the future development of the area above the Library Lane structure is a resolution that would waive the attorney-client privilege on a document prepared by Dykema Gossett, city’s outside bond counsel. The Build America Bonds used to finance construction of the Library Lane project have private-use limitations on facilities constructed with financing from such bonds. The Dykema memo apparently analyzes those limitations with respect to Library Lane.

In broad strokes, the American Recovery and Reinvestment Act (ARRA) of 2009 – also known as the stimulus act – created the Build America Bond 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.

All other things being equal, the Ann Arbor DDA does not contract with businesses for monthly permits. 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. And 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 might vote 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.

However, members of the city council’s audit committee have placed a resolution on the council’s March 17 agenda to waive attorney-client privilege on the document in question. [For additional background, see: "Column: Rocking Back on the Library Lot."]

Tax Assessment

The outside bond counsel’s memo on the use of Build America Bonds is not the only item on the March 17 agenda involving the waiver of attorney-client privilege. The other one, postponed from the council’s March 3 meeting, would waive privilege on a city attorney memo dated Feb. 25, 2014 on the topic of how appeals to property assessments work.

The memo apparently helps explain “… the effect of a reduction of the assessment for one year by the Board of Review and/or the Michigan Tax Tribunal on the property tax assessment for the subsequent year.”

The memo may help explain how one section of Michigan’s General Property Tax Act is properly interpreted and applied:

211.30c Reduced amount as basis for calculating assessed value or taxable value in succeeding year; applicability of section. Sec. 30c. (1) If a taxpayer has the assessed value or taxable value reduced on his or her property as a result of a protest to the board of review under section 30, the assessor shall use that reduced amount as the basis for calculating the assessment in the immediately succeeding year. However, the taxable value of that property in a tax year immediately succeeding a transfer of ownership of that property is that property’s state equalized valuation in the year following the transfer as calculated under this section.

In Chart 1 below, a homeowner purchased the property in 2006 for $227,000. It was assessed at market value of $281,600, or $140,800 state equalized value. On appeal to the board of review in 2007, the assessed value was reduced to $113,500. In 2008, the 2007 assessed value does not appear to have been used as the basis for calculating the assessment.

Chart 1: Taxable and assessed value for a Ward 4 property as evaluated by the city (reds) and the board of review on appeal (blues). The property changed hands in 2006. An appeal to the board of review was granted in 2007, but the city assessor appears not to have used the reduced amount in calculating the assessment in 2008.

Also related to the issue of tax assessment, the March 17 agenda includes an attachment of a report sent to the state tax commission by city assessor David Petrak, explaining how the city has complied with various deficiencies in documentation identified previously by the commission. Among the notes in the letter was an issue that’s become a routine point of public commentary for Ann Arbor resident Ed Vielmetti – the timely filing of meeting minutes by various boards and commissions. From Petrak’s report to the tax commission:

Concern #2: Board of Review prepared minutes were not filed with the local unit clerk
Response: On February 18th 2014 the Board of Review minutes were officially filed with and recorded by The City Clerk. Staff will insure all future minutes are similarly recorded in a timely fashion.

Energy

The council will be considering two items related to energy issues: (1) a resolution directing the drafting of an ordinance; and (2) a resolution calling for a staff position to be filled.

Energy: Resolution on Development of Energy Disclosure for Commercial Buildings

The council will consider a resolution that directs the city’s energy commission and staff to convene a stakeholder work group, with the support of the city attorney’s office, to draft a commercial building energy benchmarking and disclosure ordinance. Such an ordinance would require owners of commercial buildings to disclose data on energy consumption by their buildings. It’s an effort to help achieve goals in the city’s climate action plan, which was approved by the city council at its Dec. 17, 2012 meeting. Ann Arbor’s climate action plan calls for a reduction in greenhouse gas emissions of 8% by 2015, 25% by 2025, and 90% by 2050. Baseline for the reductions are 2000 levels.

The resolution on the council’s March 17 agenda originated with the city’s energy commission. The staff memo compares the idea of a disclosure requirement for energy usage by commercial buildings to a miles-per-gallon rating for vehicles or nutritional facts labeling for food products. According to the memo, awareness of energy consumption has been shown to encourage building owners to have energy audits done on their buildings. Those audits can then lead to energy efficiency upgrades that result in cost savings to the building owners and reduced emissions.

An estimate for the potential energy cost savings that would result from an energy benchmarking ordinance in Ann Arbor – prepared by the Institute for Market Transformation (IMT) – is between $2 million and $2.5 million, annually. According to the staff memo, similar ordinances in place in other cities typically employed a phased approach, often with municipal buildings as well as the largest private buildings (by square footage) complying in the initial year(s), and medium-sized and/or smaller buildings participating in later years.

The energy commission is recommending that an ordinance be developed with a phased approach, with the phases based on building categories and sizes. One possibility is to start with all qualifying municipal buildings in the first six months, commercial buildings over 100,000 square feet in 12 to 18 months, multifamily and commercial buildings over 50,000 square feet in 24 to 36 months, and all commercial buildings over 10,000 square feet in 36 to 48 months. The goal would be to have reported energy consumption information for 80% of the commercial square feet in the city within five years of adoption.

Energy: Resolution on Energy Office Staff

The second energy-related item on the March 17 city council agenda is a resolution that would direct the city administrator to hire an additional staff member for the city’s energy office, bringing the total back to two people, according to the resolution.

The energy office staffer would “create and implement additional community energy efficiency, conservation, and renewable energy programs that further the Climate Action Plan’s adopted targets.” Among the specific efforts cited in the resolution are the city’s property assessed clean energy (PACE) program.

At its March 4, 2014 meeting, the city’s planning commission passed a resolution in support of the hiring. Planning commissioners were briefed on the issue by Wayne Appleyard, chair of the energy commission. Resolutions of support were also passed by the city’s energy and environmental commissions.

Wheels

After approving the purchase of 18 replacement vehicles on March 3 and several pieces of basic equipment at its Feb. 18 meeting, the council will be considering three resolutions that involve additional vehicles and equipment: two forklifts for the city’s materials recovery facility, a Chevrolet Impala for use by police detectives, and a lease for golf carts from Pifer Inc.

Wheels: Forklifts

The council will be asked to approve the purchase of two Clark C30 forklifts for use at the city’s materials recovery facility (MRF) for a total of $55,268.

The forklifts to be purchased would replace two that are currently being rented at a cost of $12,000 a year. The city is calculating that the purchase cost will be covered by savings in rental costs in 2.3 years.

Wheels: Detective

On the council’s March 17 agenda is the approval of the purchase of a police detective vehicle – a Chevrolet Impala – from Berger Chevrolet in Oakland County for $26,750. The car will replace a vehicle that in the next year will have reached an 80,000-mile limit specified in the city’s labor contract.

Wheels: Golf Carts

The council will be asked to approve an amendment to a two-year golf cart lease with Pifer Inc. The agreement would increase the original number of 65 leased carts by 34 carts, for a total of 99 carts. The city leases golf carts from Pifer for the Huron Hills and Leslie Park golf courses.

The lease amendment would be for two years, for an amount not to exceed $50,340 over the length of the lease amendment term. Funding for FY 2014 would come from the parks and recreation services general fund and would be in the proposed budget for FY 2015, according to a staff memo. In FY 2013, the city generated about $225,000 in revenue from golf cart rentals.

The council’s resolution also will approve the sale of 32 city-owned golf carts to Pifer for $50,340. The city’s park advisory commission recommended the action on golf carts at its Feb. 25, 2014 meeting.

15th District Court

The 15th District Court, which is the responsibility of the city of Ann Arbor, is featured in two agenda items.

The council will be asked to approve a $160,000 contract with the Washtenaw County sheriff’s office for weapons screening services for the 15th District Court, which is housed at the Justice Center – the police/courts facility immediately adjoining the Larcom city hall building at the corner of Huron and Fifth.

The total amount of the contract reflects an amount of $26.24 per hour per court security officer. According to the staff memo accompanying the resolution, it’s estimated that three officers would be assigned on a given day with hours staggered to match the ebb and flow of court business through a typical day.

A second item related to the 15th District Court is an introduction of Shryl Samborn as the new administrator. Samborn is currently deputy administrator. Current administrator Keith Zeisloft is retiring. His last day of work for the court is March 28.

Election Polling Places

At its March 17 meeting, the council will also be asked to approve the temporary relocation of Precinct 1-7 from Pierpont Commons, 2101 Bonisteel, to Northwood Community Center (family housing), which is the location for Precinct 2-1. That relocation will be in effect for the May 6 vote on the transit millage and for the Aug. 5 primary elections.

The relocation is needed because Pierpont Commons will be unavailable due to renovations being undertaken by the University of Michigan to that facility.

The council’s resolution is needed only on the relocation for Aug. 5 – when the two precincts will operate separately but at the same Northwood Community Center location. The city election commission has the authority to consolidate the two locations – which it did for the May 6 election at its Feb. 26 meeting.

Map of Precincts 1-7 and 2-1.

Attachments

The online agenda for March 17 includes myriad reports and communications as attachments.

Attachments: Hash Bash

Among the items attached to the agenda as reports or communications is one from the city administrator noting that for the April 5, 2014 Hash Bash event on the University of Michigan campus, all the sidewalk occupancy permits and peddler’s licenses in the immediately surrounding area will be suspended.

The possibility of such suspension – which the city administrator’s memo indicates is motivated by a desire to relieve congestion – is part of the terms and conditions of such licenses. They’ve been suspended for Hash Bash for at least the last six years, according to the memo. Hash Bash is a gathering that focuses on reform of marijuana laws.

Map of area where peddler and sidewalk occupancy permits have been suspended for the April 5, 2014 Hash Bash.

Attachments: DDA Annual Reports

Also among the attachments are the Ann Arbor Downtown Development Authority’s annual reports for 2004, 2005, 2006 and 2007. Those reports have been the subject of back-and-forth between Stephen Kunselman (Ward 3) and The Ann Arbor Observer over a report in The Observer’s December edition. A follow-up to an initial correction by The Observer is anticipated in the April edition – establishing that Kunselman’s contention had been correct: Before 2011, the reports had not been filed with the governing body as required under state statute.

Street Closings

The March 17 agenda features a number of street closings for upcoming events. They appear on the consent agenda, which includes a group of items voted on “all in one go.” So unless a councilmember pulls out a consent agenda item for separate consideration, these items won’t be mentioned explicitly at the meeting.

• Saturday, March 29, 2014: Sixth Annual Box Cart Race/Soap Box Derby. The event is sponsored by Phi Delta Theta Fraternity and Ann Arbor Active Against ALS to honor the legacy of their fraternity brother, Lou Gehrig, and to raise money for ALS research. All proceeds from the event will be donated to ALS research. Streets to be closed: South University from Oxford to Walnut; Linden from South University to Geddes.
  

  Map of street closings for Sixth Annual Soap Box Derby.

• Thursday, April 10, 2014: SpringFest. The sponsor, the University of Michigan-MUSIC Matters organization, is presenting a day of festivities to be capped off with a MUSIC Matters concert. The festivities will feature an assortment of student groups from the innovation, arts, sustainability, music and social justice communities on campus. Speakers will begin the program at 1 p.m. with live music featuring students and other local Ann Arbor talent to begin at 2:30 p.m. Streets to be closed: North University Street between Thayer and Fletcher Streets.
  

  Map of street closings for SpringFest.

• Sunday, May 4, 2014: Burns Park Run. Streets to be closed: Several streets in the Burns Park neighborhood.
  

  Map of street closures associated with the Burns Park Run.

• Tuesday, May 6, 2014: Ann Arbor Cinco de Mayo Party. The event is sponsored by Tios Restaurant to celebrate Cinco de Mayo. Streets to be closed: Liberty Street between Thompson and Division.
  

  Map of street closures associated with Cinco de Mayo.

• Saturday, June 1, 2014: Live on Washington. This is a youth-curated outdoor arts festival, featuring performances on a stage as well as more “interactive street art” like break dancing, puppetry, and mural art. It’s sponsored by the Neutral Zone. Streets to be closed: Washington Street between Fifth Avenue and Division.
  

  Map of street closures associated with Live on Washington.

• Sunday, June 1, 2014: Dexter-Ann Arbor Run. The Dexter-Ann Arbor race is sponsored by the Ann Arbor Track Club. Streets to be closed: Several downtown streets and surface parking lots.
  

  Map of downtown street closings for Dexter-Ann Arbor Run.

• Friday, June 14, 2013: Mayor’s Green Fair.
  

  Map of street closings for Mayor’s Green Fair.

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From left: Washtenaw County commissioner Conan Smith, Meredith Shanle of Municipal Financial Consultants Inc., and bond attorney John Axe, Shanle’s father. (Photos by the writer.)

The bonding is made possible by Michigan’s Public Act 329 of 2012, which the state legislature passed in October of 2012. [.pdf of Public Act 329] The law enables municipalities to issue bonds to cover unfunded accrued pension and retiree healthcare liabilities, but has a sunset of Dec. 31, 2014. The county faces a $30 million contribution toward these obligations in 2014, and is looking for ways to manage that obligation.

The most recent estimates put the county’s maximum retirement obligations at $340.8 million. New actuarial reports are due in June, however, and estimates could change. The board was presented with calculations for borrowing $344 million at an assumed average interest rate of 4%. The county would pay $239 million in interest over the life of the 25-year bond, for a total of $583 million in combined interest and principal.

John Axe of Axe & Ecklund, a Grosse Pointe Farms attorney who has served as the county’s bond counsel for decades, helped craft the state legislation that permits this type of bonding. He was on hand at the working session to describe the proposal and answer questions. “If you don’t issue the bonds,” Axe said, “you’re going to have horrible budget problems.”

County administrator Verna McDaniel has advocated for this move, in part to make long-term budgeting easier by having predictable bond payments. She raised the proposal publicly for the first time at the board’s April 17, 2013 meeting. However, Axe told commissioners that he’d been asked by the county administration to start looking into this possibility in November of 2012. He also met earlier this year with the board in closed session, when labor negotiations were discussed.

During the May 2 working session, several commissioners referred to the fact that the new 10-year labor deals approved earlier this year had been key to moving forward with this bond proposal. Allusions to that connection have been made at previous board meetings, but not directly stated. The crucial point was closing the defined benefit plan to employees hired after Jan. 1, 2014. Unless the defined benefit plans were closed, the county would not have been allowed by law to proceed with this type of bonding.

Also a factor are the new accounting standards of GASB 68, which require that unfunded liabilities be included in an organization’s financial statements for fiscal years beginning after June 15, 2014.

Some commissioners expressed concern that the bonding process, now that it’s public, is being rushed. “If I’m borrowing $350 million, I think we should take our time to ask appropriate questions,” said commissioner Ronnie Peterson. “That’s a lot of money.” He felt it was important to see updated actuarial estimates, but noted that based on the board’s discussion, “it’s like we’ve already made up our minds.”

Dan Smith lobbied to explore more options, rather than just one proposal, and raised the possibility of putting this issue before voters. “What we’re really trying to do is to manage our cash flow,” he noted. Smith also expressed skepticism about projections that the bond proposal would result in more than $100 million in savings for the county over 25 years, compared to the amount that the county would pay for its retiree obligations without bonding.

But Conan Smith argued that the board “set the course” when it approved those labor contracts and voted to close the defined benefit plans earlier this year. He acknowledged concerns about the timing, “but in part it has to move so fast because this board closed the plan, and we’re looking at a $30 million payment in 2014 if we don’t do something. So it was a choice we made willfully and with full knowledge and now we’re designing a fiscal strategy to minimize the severity of the impact on our budget.”

That specific budget impact was not discussed publicly when the board voted on the new labor contracts.

Axe also urged the board to act quickly, saying that the proposal is interest-rate sensitive. The proposal assumes that the county would borrow at an average annual interest rate of 4%, then invest the bond proceeds to earn an average rate of return of 6.5% over the 25-year period.

The proposal calls for the board to take an initial vote at its next meeting, on May 15, followed by final approval to issue a “notice of intent” on June 5. The board would also need to approve a state-mandated comprehensive financial plan in July, setting the amount of the bond issue. The county would then submit an application to the state Dept. of Treasury, which must approve the bond issue.

Some commissioners hope to get more input from experts – faculty at the University of Michigan business school, for example, or the county treasurer – who don’t stand to benefit from this bond issue. Because of these concerns, the county is expected to hire a third-party consultant, Public Financial Management Inc., to review the proposal.

In response to a question from Dan Smith, Axe told the board his firm would earn $485,000 in fees from this bond issue, at his standard rate. The county is also using Municipal Financial Consultants Inc. (MFCI) as the financial consultant on this proposal. Axe & Ecklund provides a 15% discount on its fees if the county hires MFCI as the financial consultant. MFCI president Meredith Shanle attended the May 2 working session. Though it was not mentioned at the meeting, Shanle is Axe’s daughter.

Board chair Yousef Rabhi stressed the importance of community engagement, and outlined plans for getting input – including a public presentation and possibly extra meetings. “Regardless of the decision that we make,” he said, “it’s important that the community is involved in that process.”

Public Commentary

At the start of the May 2 session, three people addressed the board. Wes Prater began by telling commissioners and staff that it was good to see everyone again. [Prater, a Democrat, previously served on the board for 10 years but was defeated by Republican Alicia Ping in November of 2012, following a redistricting that pitted both incumbents against each other in the general election.]

Prater reminded commissioners that when he served on the board, he had raised concerns about the county’s long-term liabilities. He pointed out that at the end of 2011, the county – including the road commission – had long-term liabilities for all types of debt totaling $430 million, up from $379 million in 2007. He urged commissioners to look closely at this increase so that they could determine why it had occurred, and figure out how to take care of it.

Former Washtenaw County commissioner Wes Prater, left, talks with corporation counsel Curtis Hedger at the May 2 working session.

He also asked if the county had responded to a letter sent out at the beginning of 2013 from the state treasurer’s office to each local unit of government, asking for a long-term deficit elimination plan. He said the plan must get approval from the governing board, and must be submitted to the state treasurer as part of the annual audit.

Later in the meeting, Kelly Belknap – the county’s finance director – replied that the plan is only required for local governments that have fund deficits. She said none of the county funds have a deficit, so there’s no requirement to submit a deficit elimination plan to the state.

Doug Gross, a certified financial planner from Saline, cautioned commissioners to think carefully about what business they’re in. The business is to provide services to taxpayers, he said. The county isn’t in the investment business, he said, and it takes a risk in borrowing money to fund an obligation that they should have been paying for all along.

It’s a risk to borrow the money and just hope for a higher rate of return, Gross said. There’s certainly a shot at achieving a higher rate of return, he added, given the low-interest rate environment. But the focus should really be on what can be done to lower employee benefits in the future. Are the benefits comparable to what the general public and taxpayers are getting? He thought the county’s benefits were likely way beyond what others are receiving. People are retiring in their 50s with lifetime pensions and that’s not sustainable, he said. And healthcare is no longer a retirement benefit for almost anyone in society, he added.

Gross suggested the county look at its labor contracts, and over time to stop offering the defined benefit plan. He realized there was an obligation to existing employees, but it doesn’t have to keep accruing.

In responding to Gross, commissioner Yousef Rabhi pointed out that the county reached new 10-year labor contracts earlier this year. [The new contracts were approved by the board on March 20, 2013, prior to the state's right-to-work law taking effect.] Those contracts close the current pension and retirement healthcare benefits for people hired after Jan. 1, 2014. Rabhi noted that the county wouldn’t be allowed to pursue the kind of bonds it’s seeking without closing those retirement defined-benefit plans, “so with the 10-year contract, that’s a step that we took – to cap the growing long-term liability.”

It wouldn’t make sense to borrow money if the plans weren’t capped, Rabhi said, because you wouldn’t know what your total liabilities were. “I don’t think that any of us would be at this stage of the road if we hadn’t gone through the 10-year contract process.” He praised the labor unions for making sacrifices. “What we’re trying here is something that isn’t necessarily being tried in a lot of different places. It’s been tried in a few places, and I think it’s worked relatively well,” he said. “But we are, in the tradition of Washtenaw County, leading the way in terms of how we can make some of these changes.” Rolland Sizemore Jr. replied to Rabhi, saying he’d like to know what places have tried this approach successfully.

At the end of the meeting, after commissioners had clarified that the pension and retirement health care plans will be closed, Gross pointed out that any new employees hired through 2013 will still be eligible for those benefits – so the county hasn’t actually closed those plans yet.

Gross also wondered whether the bond would be tax-exempt or taxable. If it’s taxable, interest rates will be higher, he noted, so the spread between what the county pays and what it hopes to earn off investments will be narrower. He didn’t think it would be viable as a taxable bond. [The proposed bond issue would be taxable.]

Thomas Partridge urged the board not to take on such high debt, but rather to put their efforts into funding affordable housing.

Bond Proposal: Public Process

Yousef Rabhi, the board’s chair, reported that he and vice chair Alicia Ping had been working to make sure this process is as open to the public as possible. Between this meeting and the May 15 vote, he wanted to make himself, Ping and Felicia Brabec – who chairs the board’s ways & means committee chair – available to the media. They were thinking of scheduling a press conference or informal discussion, he said. A lot of information has been released already to the public, Rabhi said, but Ping has also suggested that the administration develop a brochure about this bond proposal that would be distributed to libraries and other public places to ensure that the public is well informed about the process.

Washtenaw County commissioners Yousef Rabhi (D-District 8) and Alicia Ping (R-District 3). They serve as board chair and vice chair, respectively.

He also wants to schedule a public presentation sometime between May 15 and the final vote on June 5, so that the public can come and hear more details about the proposal and get their questions answered. In addition, there will be a formal public hearing at the board’s June 5 meeting. He said it’s an open process, and these outreach measures are a way to ensure that in a more formal way. “There’s an overwhelming sense on this board that we want to engage the public in this process,” he said. “Regardless of the decision that we make, it’s important that the community is involved in that process.”

Rabhi also noted that the county board meetings include opportunity for public commentary, and he encouraged the public to speak during that time.

Ping, the board’s vice chair, noted that the board has had a lot of conversations “touching around what we’re going to do.” Starting with this working session, she said, and in the next few meetings, “we’ll really be able to dive in” and get all questions answered.

Rolland Sizemore Jr. expressed concern about the process. Some commissioners have told him this process has to be completed by July, he said, and that the proposal might have to get initial approval and final approval on the same night. “That is going to be a major problem with me,” he said. [Typically, an initial vote is taken at the ways & means committee – on which all board members serve – followed by a final vote at the regular board meeting two weeks later. For most of the year, the ways & means committee and regular board meetings are held every two weeks, in back-to-back sessions on the same night. During the summer, those meetings are held only once a month.]

Noting that not everyone has a computer, Sizemore encouraged the public to call the county administration office at 734-222-6852 and ask questions.

Ronnie Peterson criticized the speed of the process, noting that one of the public forums was planned to happen after the board’s initial vote on May 15. “If I’m borrowing $350 million, I think we should take our time to ask appropriate questions. That’s a lot of money.”

Bond Proposal: Financial Analysis

Meredith Shanle of MFCI reviewed the documents she had provided to commissioners, showing how the bond proposal would cover the existing obligations for the Washtenaw County Employees’ Retirement System (WCERS) and Voluntary Employees Beneficiary Association (VEBA) – the defined benefit pension and retiree healthcare plans. The information included charts that compared existing debt obligations with the proposed bond payment schedule, as well as an analysis on the bonding’s impact on future borrowing. [.pdf of MFCI overview memo to commissioners] [.pdf of comparative charts on covering VEBA and WCERS obligations] [.pdf of MFCI memo regarding impact on future borrowing] [.pdf of MFCI debt load analysis]

Actuarial reports are being completed – likely available in June – to show the county’s updated obligations for VEBA and WCERS as of Dec. 31, 2012. The most recent actuarial report showed valuations at the end of 2011, when the county had $101.27 million in unfunded liabilities for its defined benefit pension (WCERS), and $148.46 million in unfunded liabilities for its retiree healthcare (VEBA).

However, those figures were based on assumptions that haven’t been updated since 1999. According to draft minutes of a April 16, 2013 special joint meeting of the WCERS and VEBA boards, county finance director Kelly Belknap asked for an expedited “experience review” to be completed by the actuarial Buck Consultants by June 25, 2013. Her request was approved by the boards at that special meeting. The review will focus on investment returns, mortality, wage inflation and core demographics since 2009, with a more in-depth study scheduled for a later time. According to minutes from a Feb. 7, 2013 VEBA meeting, this kind of study is typically conducted every three to five years, in order to inform actuarial valuations.

Until new actuarial reports are completed, MFCI has estimated that the maximum obligation is $340.8 million – $210.5 million for VEBA, and $130.3 million for WCERS. Calling this a “worst case assumption,” MFCI is recommending that the county board authorize a notice of intent to issue up to $345 million in bonds to fully fund both VEBA and WCERS.

Borrowing that amount at an assumed average interest rate of 4%, the county would pay $239 million in interest over the life of the 25-year bond, for a total of $583 million in combined interest and principal.

The annual payments would vary, beginning at $18.558 million in 2014 for interest only. Subsequent years would include both interest and principal payments: $14.110 million in 2015, $15.170 million in 2016, and $16.278 million in 2017. Payments increase incrementally in subsequent years, and starting in 2024 the county would be paying about $26.2 million annually. [.pdf of comparative charts on covering VEBA and WCERS obligations]

MFCI’s analysis assumes that the county would earn an average rate of return from the bond proceeds of 6.5% over the 25-year period of the bond. Proceeds from the bond, held in an intermediate trust, could be used to call the bonds after nine years, if some future event eliminates the WCERS and VEBA liabilities.

The MFCI analysis also states that the county would pay up to $112 million more to cover its VEBA and WCERS obligations if it doesn’t bond, based on the county’s current 27-year estimated debt payment schedule for those two funds. John Axe, the bond attorney used by the county, noted that the annual estimated contributions that the county will be required to make in the next few years – if it doesn’t bond – are considerably higher than the bond payments it would be making if it does bond. [.pdf of charts showing retiree fund payments without bonding]

The reason that most entities don’t want to close their defined benefit plans is that they don’t want to have to start making those annual contributions, Axe said. But Washtenaw County has done the “responsible thing,” he added, and closed its defined benefit plans. The bond proposal would cover the obligations “in an orderly way,” Axe said, by spreading out the debt over 25 years with a fixed-rate obligation, which is estimated to be about 4% on average. If the estimates are different when it comes time to issue the bonds, Axe said, then the proposal would need to be re-evaluated.

“If you don’t issue the bonds,” Axe added, “you’re going to have horrible budget problems.”

Another aspect of the MFCI analysis looked at how the proposed bond would impact the county’s debt limit and ability to bond for other purposes. Assuming that the county bonds for the entire $345 million, its overall debt would total $445.88 million – or 32% of what it is legally allowed to issue. The MFCI memo states:

We do not believe that the issuance of debt at that level will have any negative effect on the County’s ability to maintain its current credit rating or to issue future debt since the County would have in excess of $975,000,000 in additional room to issue debt in the future. Moreover, because the County is issuing this debt for the purpose of funding a debt which it currently owes, we believe the action will be welcomed by both Moody’s and Standard & Poor’s.

Bond Proposal: How It Would Work

John Axe of Axe & Ecklund, the bond counsel hired by the county, began his presentation by referring to a memorandum he had sent earlier to commissioners that outlined the process. [.pdf of Axe's process memo]

Axe said the process now being pursued by the county actually began in 2008. At that time, the bond proposal would have covered about half of the amount that’s now proposed, he said, and would have covered only VEBA, the retiree healthcare plan. The idea would have been to issue certificates of participation (COPs), a different type of financing than the bond issue that’s now being proposed.

But the county ultimately didn’t move ahead at that time, because of the economic meltdown that occurred about a month before the COPs would have been issued, Axe said. At that time, Washtenaw County was following the lead of Oakland County, he said, which had issued COPs a year earlier. It wasn’t the best type of borrowing situation, he noted, and bonds would have been preferred.

Axe reported that his firm had prepared legislation in 2006 to allow bonding for these retiree obligations. The legislation was supported by many units of local government statewide – including Washtenaw County – and was passed by the state legislature, but had been vetoed by then-Gov. Jennifer Granholm. Because of that, there was no other alternative except for COPs, he said.

In 2008, the proposal considered by Washtenaw County was to close the retiree healthcare plan at that time, and issue COPs to fully fund the liabilities of that plan for the employees that were covered by it. “What we’re doing today involves exactly the same thing,” Axe said, “except we’re now proposing a bond issue because the Michigan legislature finally approved essentially the same legislation that was proposed back in 2006.”

The legislation passed in 2012 permits this kind of bonding, Axe explained, to fully fund the pension and retiree healthcare plans – but only if those plans have been closed to new employees. “You have done that,” he said.

Andy LaBarre (D-District 7), chair of the Washtenaw County board’s working sessions.

Axe said his firm had been asked by the Washtenaw County administration to start working on this proposal in November of 2012. His firm prepared a memorandum on it that was given to commissioners at a working session in February. [There was no working session on this issue in February. It's likely that Axe was instead referring to a closed session that was held during the board's Feb. 20, 2013 meeting to discuss labor negotiations. Axe attended that meeting and participated in the closed session, which was not open to the public.]

Since February, Axe said, his firm and the financial consultant hired by the county have been working hard on this proposal. [This was not mentioned at the meeting, but the financial consultant – Municipal Financial Consultants Inc. (MFCI) – is closely tied with Axe. MFCI's president, Meredith Shanle, who also attended the May 2 working session, is Axe's daughter. And Axe & Ecklund provides a 15% discount on its fees if the county also hires MFCI as the financial consultant on a bond proposal.]

Axe then reviewed the legal steps that are required in this bonding process. He noted that this is a new process, and no one has ever issued these kinds of bonds – because they haven’t previously been permitted until the new law was signed in October of 2012. As of now, no unit of government has received approval from the state department of treasury – that approval is one of the requirements needed to issue these bonds, he noted.

Local units of government can only issue bonds if they’re “qualified,” Axe explained. To get qualified, a certified financial report must be submitted to the state annually, showing a balanced budget. This has been the case since 1982, he said. Before that, the only way to issue bonds was to get prior approval from the state. Axe said he helped draft the legislation passed in 1982 to allow for the qualifying process, noting that Washtenaw County has been qualified every year since then.

But for this new type of bond issue in Michigan, the qualifying process doesn’t apply, Axe said. Instead, each bond issue must be approved by the state department of treasury, after completing a series of steps. [.pdf of Axe memo outlining bonding process] [.pdf of bonding timeline]

Axe then outlined the required steps in this process:

• A notice of intent to issue bonds. This standard notice must be published in a “newspaper of general circulation within the county.” It lets residents know that they have 45 days during which they can circulate petitions to require a vote of the people before any bonds are issued. The notice must include a maximum amount of the bond issue, a maximum interest rate, and a maximum term for the bonds. To do this, the board needs updated actuarial information – but those reports won’t be ready until June, Axe said. So the maximum amounts at this point are estimated by the county’s financial consultant (MCFI) and assume a worst-case scenario. Axe said it’s likely that the bond issuance will be lower than estimated. Expected dates of board votes: initial approval on May 15, 2013, with final approval on June 5, 2013. Assuming board approval, a notice of intent would be published soon after the June 5 vote. Axe’s memo indicates the notice would be published in the Sunday, June 9 printed edition of AnnArbor.com.
• Approval of the bond resolution and “continuing disclosure” resolution. Even though the final amount of the bond won’t be determined, the board will be asked to set a maximum amount for the bond. The continuing disclosure resolution is standard for all bond issues over $1 million, and indicates that the county will provide updated financial information annually during the term of the bond. Expected dates of board votes: initial approval on May 15, 2013, with final approval on June 5, 2013.
• Meeting with credit rating agencies, request for bond ratings. The county currently holds an AA+ rating from Standard & Poor’s and an AA1 rating from Moody’s. The timeline distributed by Axe indicates that these meetings would be held in Chicago, but he did not address this item during his remarks. Expected meeting dates: June 12-13, 2013, with a request for bond ratings made on June 15.
• Actuarial reports approved by VEBA and WCERS boards. There are separate boards for the Washtenaw County Employees’ Retirement System (WCERS) and Voluntary Employees Beneficiary Association (VEBA). Members of these boards are appointed by the county board of commissioners. Both VEBA and WCERS boards will receive updated actuarial reports, as of Dec. 31, 2012, which they will then approve. The information in these reports will indicate the size of the county’s unfunded pension and retiree health care liabilities, and thus determine the amount of the bond issuance. Expected date of approval: June 25, 2013.
• Setting of the final amount of the bond issue and approval of the comprehensive financial plan. After the actuarial reports are received, the amount of the bond issue will be set to cover the unfunded liabilities. This amount will be part of a “comprehensive financial plan” that’s required by state law (Public Act 34). It will include a financial analysis of current and future liabilities, an estimated debt service schedule, and a description of the new retiree health care plan. It will also include a comparison of the county’s obligations with and without a bond issue. [.pdf of comprehensive financial plan components] Expected date of board approval: July 10, 2013.
• Receipt of credit rating. One of the requirements for these bonds is that at least one credit-rating agency give the bonds a minimum double-A rating. The best rating possible is triple-A. Expected date of rating: July 24, 2013.
• Expiration of 45-day notice of intent. This bond proposal assumes that petitions won’t be filed for a voter referendum. It also assumes that the notice of intent will be published on June 9. End date of 45-day notice: July 25, 2013.
• Application to state for approval to issue bonds. The application to the Michigan Dept. of Treasury must include several components, including documentation of the requirements listed above. [.pdf of bond application requirements] Expected application date: July 26, 2013.
• Approval from the Michigan Dept. of Treasury. Axe expects it will take about two months to receive approval from the state, which might require additional information. Expected date of approval: Sept. 26, 2013.
• Actions related to bond sale. Assuming that approval is received by the end of September, a notice of sale for the bonds would be published on Oct. 2, 2013, with the bond sale occurring on Oct. 16. Expected date of bond delivery to the county: Oct. 31, 2013.

Axe stressed that until the actuarial reports are completed, the amount of the liabilities – and therefore the amount of the bond issue – can’t be determined. The current estimate of a $345 million maximum amount is a big number, he acknowledged. “It’s on purpose a big number,” he said, “because we don’t want to have to go back and put a new notice [of intent] in the paper later.”

He also noted that this plan couldn’t have been brought forward until the county board approved closing of the current pension and retiree healthcare plans, which was done as part of the new 10-year labor contracts that the board approved in March.

There has been only one other government entity so far to apply to the state for this type of bond issue, Axe said. Saginaw County applied in February. [.pdf of Saginaw County comprehensive financial plan related to its pension bond issue]

The state has not yet approved that application. Axe said he knows there are other governmental units that are in the process of applying, but no one else has submitted an application yet. He also noted that the more entities that apply, the slower the process will likely be. State government has downsized, he said, so there are fewer people to handle these requests.

Board Deliberations

The board’s discussion covered a wide range of issues related to the bond proposal, including many clarificational questions. This report presents a summary of the discussion, organized thematically – with the recognition that there is considerable overlap among these issues. Topics included the timing of the proposal, risks, investment-related issues, bond types, fees, credit ratings, a possible voter referendum, alternative options, and the need to seek additional advice and input.

Board Deliberations: Timing

Ronnie Peterson asked why the board was being asked to take an initial vote on the bond resolution prior to receiving the updated actuarial reports. John Axe replied that it’s simply to publish the notice of intent as early as possible, to start the 45-day clock for the possible voter referendum. If the board waits until its July 10 meeting to vote on the notice of intent, Axe said, then other applications to the state will likely be submitted ahead of Washtenaw County, thus delaying the process.

Commissioner Ronnie Peterson (D-District 6).

Peterson said he was disturbed that so much of the board action took place prior to public input. He wondered why the board couldn’t wait until the actuarial reports are seen. Axe explained that even though the board will be asked to approve the bond resolution – initially on May 15, with a final vote on June 5 – it won’t take effect until the rest of the process is completed. If the board doesn’t approve the comprehensive financial plan on July 10, for example, then “we stop,” Axe said.

Peterson again wondered why the board is rushing, noting that the state legislation doesn’t sunset until Dec. 31, 2014.

“Remember this – this is interest-rate sensitive,” Axe said. “The interest rates today are at good levels. No one can tell you for certain what the interest rates are going to be. We don’t think they’re going to go up, but we don’t know.” All of the assumptions are based on interest rates today, he added. If interest rates go way up, he’d likely advise the county to wait before issuing the bond. “We don’t want to sit around and wait the extra 45 days if we don’t have to,” Axe said.

Peterson didn’t appear to be persuaded. “In our conversation, it’s like we’ve already made up our minds,” he said. It seems like the board should have more information. There are three crucial documents – the actuarial reports for VEBA and WCERS, and the comprehensive financial plan showing how the bonds will be retired – that the board and the public won’t have before commissioners vote on the initial authorization for this bond proposal, Peterson said.

The board has another year and a half to work with this bond program, Peterson noted, so he hoped they would take more time to consider the impact of this proposed indebtedness.

Kent Martinez-Kratz asked what would happen if the county waited until after 2014 to make the bond issue. Axe replied that for the current type of bond, the law sunsets on Dec. 31, 2014, so the county wouldn’t have that option. It would be possible to issue certificates of participation (COPs), like Oakland County did in 2007. Martinez-Kratz alluded to a discussion that the board had with a representative of Oakland County on this issue. [This apparently occurred during a closed session – as there has not been a public presentation by any Oakland County official.]

Yousef Rabhi asked a series of clarificational questions about the proposed timeline. He noted that when the actuarial reports are provided in June and the information is not what the board expected, “we can pull the ‘off switch’ then.” Axe replied that the board isn’t committed to do anything until the comprehensive financial plan is approved, which can’t possibly occur until July at the earliest. And the county can’t issue the bonds until receiving state approval. The June 5 board vote simply authorizes the notice of intent and sets a maximum possible bond amount, Axe said.

Rabhi indicated that he’d be open to having an additional meeting in July, given the feedback he’s heard from other commissioners about having only one meeting, on July 10, to give both initial and final approval of the comprehensive financial plan.

Alicia Ping pointed out that the only reason the initial and final approval would be scheduled on July 10 is because the board traditionally only has one meeting in July. “I don’t think the intent here is to push anything through,” she said.

Board Deliberations: Interest Rates, Investments

Dan Smith asked Axe to elaborate on why this bond issue is time sensitive, regarding interest rates. Axe replied that no one can know the future. All of the financial analysis is based on current interest rates. The only reason to vote early is to “get the 45-day notice of intent out of the way,” Axe said. His advice is that unless there’s some good reason for waiting, the board should proceed.

D. Smith wondered why the county should be concerned about the interest rate, given the nature of this bond issue. It’s a bond issue unlike any other, he noted. It’s not for a capital project. Rather, in this case the proceeds will be directly invested back into the market.

It matters, Axe replied, because all of the financial analysis is done based on prevailing interest rates. The analysis is very conservative, and a 45-day wait probably won’t matter, he said. But unless there’s some reason, he wouldn’t advise waiting. All of the steps are interrelated, he added.

The analysis is based on paying an estimated average 4% interest rate for the bond over 25 years, Axe said, with the expectation of investing the proceeds of the bond sale and getting a 6.5% average rate of return on that investment over that period. The proceeds won’t be invested exclusively in other municipal bonds, Axe said. Proceeds will be held in an intermediate trust and managed by investment advisors hired by the county, with an estimated worst-case return of 6.5%.

Interest rates on the bond aren’t likely to go down much lower, Axe said – right now, they’re in the range of rates last seen in the 1930s. Axe added that this approach – borrowing at 4% and investing to get a 6.5% return – is an element of the plan, but it’s not the only element.

Commissioner Dan Smith (R-District 2).

D. Smith drew an analogy to taking out a mortgage on a house at 4%. So 100% of his house would be leveraged, and he owes the entire amount of his house. “I should take that money and go invest it in the stock market, because the stock market is going like gangbusters right now, and I could make 6-7% difference on that.” Axe replied that he wasn’t suggesting this is the same thing as Smith had described. The interest differential is only one aspect, Axe said. “I think you ought to hear the complete plan.”

Felicia Brabec asked about the investment strategy – hiring another company to invest the bond proceeds, and assuming that there would be rate of return higher than the interest on the bond payments. If there was a surplus from the investments, can that surplus be used to pay down the debt at a higher rate without a penalty?

Yes, Axe replied. The 25-year bonds would be callable in nine years – meaning that the bonds could be paid off fully or partially at that time, if the county decided to do that. The county could also choose to re-fund those bonds, if interest rates are lower in nine years.

Axe responded to a written question asking if the county is essentially gambling on market performance. The answer, he said, is that all investments – including those made currently by VEBA and WCERS financial advisors – are made by professional advisors. The estimated rate of return is calculated over a long period and is based on past experience, he said. The county is using an estimated rate of return that’s substantially below the current actuarial estimate, as well as below what the county has actually been getting from its VEBA and WCERS investments, he noted.

The most important thing is that you hire good people to make the investments, Axe said. Oakland County, for example, is in much better shape now than before they issued their bond, he said.

Andy LaBarre asked about a hypothetical situation in which the investments made “are bad from the start. Even the best investment management can lead us astray,” he said. “Are we really being as prudent as possible, and are we incurring any risks that we normally wouldn’t through any sort of investment?”

Axe replied that “you already owe the money” and are already relying on the market to provide returns for VEBA and WCERS funds. The board’s main responsibility is to hire the best possible investment managers. The county would want to do that anyway, he said, regardless of the bond proposal – because there is already a huge amount of money that’s currently being invested. “I wouldn’t be here if I didn’t think this process would work,” he said.

Board Deliberations: “Saving” Money

In response to a written question, Axe explained how the county will be saving money with this proposal. First, he said, the county has closed its VEBA and WCERS plans. That means the county now will know what its obligations are for employees who are currently in the plan. [Employees hired through Dec. 31, 2013 will still be eligible for these plans. And the obligations are based on actuarial estimates – for example, estimating how long retirees would be expected to live, on average.]

This bond will be paid off over 25 years, Axe said. In contrast, the county’s estimated actuarial liability has been calculated over a period of 27 years – so the county is actually shortening the period of its pension and retiree healthcare obligations.

When the bond proceeds are invested by the trustees – the managers of the intermediate trusts for VEBA and WCERS – the estimated average return is 6.5% He noted that the county’s current actuarial estimates call for 7.75% and 7.5% returns for VEBA and WCERS, respectively. So the estimated percentage return for the investments of the bond proceeds is more conservative than current actuarial estimates.

Conan Smith pointed out that the 7.75% is a policy target. The actual 10-year trailing return is 6.75%, he said.

Axe noted that the county already owes the money for its unfunded pension and retiree healthcare liabilities. “You’re not borrowing more than you already owe.” Instead of owing it to everyone who’s entitled to receive the benefits in the future, he said, “you’re going to owe it to the bond holders. That’s the only difference.”

C. Smith pointed to the MFCI estimate that the county would save $112 million because of the bond issue. When the bond is paid off in 2039 and if the estimate is accurate, he said, “we’re sitting on $100 million. What could we do with that money?” He wanted to know if the excess funds were restricted in any way.

Axe replied that the money would be coming to the county over a long period of time, and most of it would be seen in the early years of the bond schedule. If there was money left in the intermediate trust after VEBA and WCERS obligations were fully met, then that money could be returned to the county for other purposes, Axe said.

C. Smith observed that if the earnings from the bond are saved and invested, after the retiree obligations are met, that money would become general operating funds that a future board of commissioners can allocate in any way.

In light of the estimated $100 million-plus in savings, Ronnie Peterson wondered if the county is borrowing too much money. He felt the county would be better served by breaking close to even on this bond issue. He said he wasn’t troubled that there would be savings, but he was troubled by the large amount.

Dan Smith asked if the $112 million “savings” was largely due to “playing the spread” between the average 4% interest rate paid on the bond and the anticipated 6.5% earned from investing the bond proceeds. Yes, Axe said, that’s a large part of it. The restructuring also allows the county to avoid paying a “huge” amount upfront, he added. The county has closed its defined benefit plans, so it must make contributions to VEBA and WCERS, Axe said. “This is simply one of the ways that you can do it.”

After identifying a typo in MFCI’s report that resulted in a $10 million under-reporting of the total VEBA/WCERS estimated obligations, D. Smith addressed the issue of estimated contributions. He pointed out that MFCI had used a conservative estimate of the county’s total contributions – without bonding – which made the option of bonding appear more favorable. He said his understanding is that without bonding, contributions to VEBA and WCERS will spike in the next few years. [Estimates provided by MFCI call for roughly $30 million annual contributions for the next five years, without bonding.] But after that there could be a tapering off, he said. That’s why he’s interested in seeing the new actuarial projection, which might provide a different scenario.

Board Deliberations: Bond Types

Responding to a written question from the board, Axe explained the difference between a bond issue that’s authorized by the county board, and bonds based on approval by voters.

Bonds issued based on approval of the county board are called general obligation limited tax bonds. The word “limited” is critical, he said. It means that the only money that can be used to pay those bonds is money that comes into the county already – through taxes, state funding or other means. “You cannot levy any extra tax above the amount of tax that you can levy for operating purposes.” He noted that the county currently levies the maximum rate that it can. [That millage rate for 2013 will be set by the board by June. The 2012 county general operating millage rate was 4.5493 mills.]

Commissioner Rolland Sizemore Jr. (D-District 5).

In contrast, if the county gets voter approval for a bond issue, that gives the county the power to levy an extra tax in any amount – and there’s no limit to the rate or amount, Axe said. [At this point Conan Smith raised his arms in a gesture of enthusiasm, which elicited laughs from other commissioners.]

Axe then fielded another written question: What’s the chance of defaulting on a limited tax bond issue, compared to an unlimited tax bond issue? Washtenaw County has always been very careful about its bond issues and has paid everything on time, Axe said. The county has substantial reserves and is very conservative in its approach. “You don’t go out and issue a lot of bonds for wild purposes,” he said. The county always has a plan for allocating specific funds to make bond payments over many years. Axe said he’s been doing bond issues for Washtenaw County for decades, and in that time the county has never had any difficulty making bond payments.

Dan Smith followed up on the question about the default risk. He noted that Axe’s written response to this question had indicated that there’s no difference in default risk between limited and unlimited tax bonds. Axe replied that this is the judgment of the credit rating agencies. Washtenaw County bonds sell almost at the triple-A level, he said, because people are satisfied with the county’s history. The county is much more stable than other counties because of its demographics, Axe added. Specifically, the University of Michigan and other colleges and universities are located here, and the county has been on a growth path, although that growth has slowed in recent years.

D. Smith replied that there are still considerable differences in the way that limited and unlimited tax bonds are funded. It’s highly improbable, he said, but the county could go bankrupt in 15 years – how would that affect the situation? Axe replied that the county could go bankrupt regardless of whether these bonds are issued. If the county failed to make its obligations, it would go under emergency management.

Meredith Shanle of MFCI clarified that in general, there is a large difference between limited and unlimited tax bonds. But in the specific case of Washtenaw County, those types of bonds are basically the same, she said. With unlimited tax bonds, the county could keep raising the millage rate to cover those bond payments, she noted.

D. Smith observed that in the case of General Motors, no one thought that GM would ever default on its bonds, but it did. So it’s not reasonable to say that a default could never, ever happen – even in Washtenaw County, he said.

Responding to a question about whether the county would have a harder time issuing a limited tax bond if voters turned down an unlimited tax bond, Axe said no. That’s because the county has excellent credit rating, he said, and any action by voters wouldn’t have any bearing on that credit rating.

Regarding a voter-approved bond, Axe noted that the ballot question can’t be put forward until there’s an election, and the next time the county could do that would be at the November general election. He also pointed out that the county doesn’t plan to levy any additional tax as part of this bond proposal.

Axe was also asked about the experience of other government entities. He noted that Detroit had issued pension obligation certificates of participation (COPs), but failed to close its defined benefit plan. That meant that the liabilities were open-ended. In addition, when the city made an estimate of its unfunded pension liability, the estimate undershot the actual amount by $300 million, he said. “Even if everything had worked out brilliantly, they were still not going to be fully funded,” Axe said. “That was a catastrophe.”

Axe also responded to a written question about the Water Street project in Ypsilanti. The city of Ypsilanti had been working with a developer who was interested in redeveloping an area near downtown. The developer had told the city that the city needed to buy the property, remediate it, and put in public services, then the developer would put in housing there. The city agreed and issued a roughly $13 million bond to cover its costs. But remediation cost more than expected, Axe said, and worse than that, the developer backed out. Now, those bonds have been re-funded with a $15.74 million issue, he said. Axe indicated that it was a different situation than what the county is facing.

Board Deliberations: Risks

Felicia Brabec asked about possible pitfalls. She noted that Axe had mentioned the fact that Detroit hadn’t closed its defined benefit plan. That was one possible problem, but Washtenaw County had addressed it already, she noted. What other things should the board be concerned about?

So far, Axe replied, he hadn’t seen anything in the county’s approach that was inappropriate. He stressed that he’s had a lot of experience with this issue, dating back to his work on the state legislation in 2006. “You’ve done what you need to do,” he said, adding that he had confidence in the board that they would pick a strong investment manager and monitor the performance closely.

Brabec also wondered what the board could learn from Detroit’s experience, including the fact that Detroit’s defined benefit plan had been underfunded by $300 million. Underestimating the liabilities is one of her biggest concerns, she said. Axe replied that the board should pay very close attention to the actuaries. He noted that the actuaries are also making a projection. “They’re telling you how many people [they] think are going to live, and how long.” In the case of Detroit, he said, the actuarial reports were “terrible.” That’s how the city ended up with a $300 million underfunding.

Commissioner Conan Smith (D-District 9).

Conan Smith told his board colleagues that the bond itself “is not the thing that should scare anyone.” The bond is the most stable, predictable part of the entire formula, he said. The county will borrow a certain amount of money at a set interest rate, and with set payments over a certain period.

Rather, the “calculus of risk” for the county, C. Smith said, is on the return on investment from the bond proceeds, and whether that return will be sufficient to make the county’s actuarially-required contributions. Also unknown is what those contributions will actually be. If cancer is cured and people suddenly live 15-20 years longer, he noted, that will affect the actuarial projections dramatically, “and we will not have prepared for that with this bond.” But those extra costs would be incurred even if the county didn’t bond, he added. The bond is “a good, smart, stabilizing plan,” C. Smith said, and it ensures as much predictability in the budget as possible.

There are a lot of things out of the board’s control, he noted, including the market and how long people will live. “We’ll have to deal with those variables one way or the other.”

The other risk-tolerance question can be seen using Dan Smith’s house analogy, C. Smith said. If he could mortgage his house and get $200,000 in cash at 3%, then invest it in the market and earn 6%, “why wouldn’t I do that?” The question is how much risk are you willing to tolerate? he said. The board can look at the entire earnings history of the VEBA and WCERS funds, and use that as a fairly reliable measure of return on investment. “It’s just a question of how much confidence we as a board have in those figures.”

The board needs to assess if the bonding lessens the risk somewhat, C. Smith added. “My own personal assessment is that it lessens our risk.” The actuarial projections might change and the market might shift up or down, he said. But at the very least the bonding provides a foundation that the county can work from, to deal with the volatility between the bond payments and the market return, rather than the volatility for the VEBA and WCERS funds as a whole.

Dan Smith referred to communications from Axe that characterized the bond as “fully funding” the county’s VEBA and WCERS systems. He noted that it would really only be fully funded at the moment that the bonds are issued, “because everything in the future is dependent on the actuarial reports.” It’s possible that the bonds will overshoot or undershoot the actual amount needed. “Five years into this, we could be back in the same position,” D. Smith said.

Axe replied that there’s no guarantee about what will happen in the future. It’s not allowed under the law to borrow more than the fully funded amount, he said. That amount might change if people live longer. At least for future hires, the county is protected because the defined benefit plan is closed, Axe noted. But if people who are currently covered by the plan live an extra 10 years beyond the actuarial projections, “it will mess up the actuarial reports something fierce, there’s no doubt,” Axe said.

Axe added that all actuarial reports are based on history, but people are living longer than they used to live. He noted that when the federal Social Security system was set up in 1935, it was based on people beginning to collect benefits when they were 65. But the life expectancy at the time was 63.

D. Smith observed that it appears people have forgotten about recent history, and what dismal years there have been in the economy, especially in Michigan. To make long-term assumptions, using the past as a predictor of the future, is a scary approach, he said. In 2000 or 2001, no one except doomsday extremists would have predicted a housing market bubble. Basing the future on the past “is a little dicey,” D. Smith said.

Board Deliberations: Advice from Others

Rolland Sizemore Jr. wanted to get input from experts at the University of Michigan and Eastern Michigan University business schools. It bothered him that the county would be paying a third-party advisor to look into this proposal. “We’ll be paying out a ton of money to get the bonding, and we’re going to pay out a ton of money to figure out if it’s right.” He also asked for the opinion of the county treasurer, Catherine McClary, as well as the county’s current actuaries for the VEBA and WCERS funds, and the local state senator and representatives. [The state senator representing the Ann Arbor area is Rebekah Warren, who is married to county commissioner Conan Smith. The state representative for the district covering Ann Arbor is Jeff Irwin, a former Washtenaw County commissioner.]

Washtenaw County treasurer Catherine McClary talks with county commissioner Dan Smith after the May 2 working session.

Sizemore was concerned that the board seems to be pushing this through, without time to get outside advice.

Yousef Rabhi responded, saying he felt those concerns are valid. As a reaction to some concerns he’d heard from other commissioners, Rabhi said a third-party firm that’s not affiliated with Axe & Ecklund could be hired to review the process. That firm would be paid by the county. “We certainly don’t have to do that,” Rabhi said. But he’d recommended it, because he’s heard from others that another set of eyes is needed.

[That third-party firm is Public Financial Management Inc., with offices in Ann Arbor. Both PFM and Axe & Ecklund are part of the county's bond and financial consultants pool. For this project, PFM has not yet provided an estimate of their fees, which will be based on the number of hours needed to review the bond proposal. (.pdf of PFM's general consultant proposal, including the firm's fee structure)]

Rabhi agreed with Sizemore that the county is lucky to have others in the community who are qualified to look at this, and it would be great to have their input. He offered to work with Sizemore and the administration to find out the best way to engage these people.

Sizemore said that in his experience, when a consultant is hired, that consultant can be swayed to present the kind of response that the client wants. That wouldn’t be the case with a university expert, he said.

Dan Smith wanted to see a study that “paints the absolute worst-case scenario.” Looking at the markets today, predictions are “all over the place.” At this point, the board is getting only one opinion, he noted.

Board Deliberations: Axe & Ecklund, MFCI

Ronnie Peterson asked about the financial obligations that the county would have toward Axe & Ecklund. Axe replied that there are no financial obligations if the bond proposal doesn’t go through.

Axe also responded to written questions related to his firm. He was asked how the board can be assured that his advice is sound, when he stands to benefit from this proposal. Axe said that this question could be asked any time his firm gives advice on a bond issue. He noted that “we’re the lawyers, we’re not the financial advisors.” [The financial advisor used in this and many other county bond deals, MFCI, is led by Axe's daughter, Meredith Shanle.]

Axe said that if there’s any indication of a problem with a bond issue, “we would naturally bring it to your attention.” The firm has represented Washtenaw County on 131 bond issues since 1973. Since 1981, that amount has totaled $668 million. There’s never been a problem or legal challenge, he said. As bond counsel, his firm has the legal responsibility to defend the bonds for the life of the bonds. Over the years, he said, his firm has issued a lot of legal opinions on behalf of Washtenaw County.

Andy LaBarre asked if it was correct to say that as bond counsel, “you’re on the hook for 25 years?” Yes, Axe replied. “Absolutely.” He added that he valued the county’s business, and it’s his firm’s responsibility to point out any problems. Axe also noted that his firm is not being paid any extra to work on this particular bond issue. “We’re being paid the regular rate that’s already established in the contract we have.” [.pdf of Axe & Ecklund professional services contract with Washtenaw County]

Axe did not discuss details of his fees during the working session. Responding to a request from The Chronicle, the county administration provided that information. For bonds less than $500,000, the firm is paid $5,000. For amounts higher than that, the firm is paid a combination of flat rate and percentage of the bond issue. For amounts over $2 million, the flat rate is $12,500 plus .0025% (one quarter of 1%) of the amount in excess of $2 million. Additional fees and expenses may also be incurred, according to the fee schedule. [.pdf of Axe & Ecklund fee schedule]

The fees for this bond issue fall under Axe & Ecklund’s fee schedule for capital improvement bonds, because the state legislature amended the capital improvement bond statute to permit governmental entities to bond for their unfunded actuarial accrued liabilities (UAAL). In addition, Axe & Ecklund’s bond counsel fees are reduced by 15% when the county also hires MFCI as a financial consultant.

In response to a direct question from Dan Smith, Axe replied that his firm’s fee for this bond issue would be about $485,000.

Board Deliberations: Voter Referendum

Dan Smith noted that Axe, as bond counsel, didn’t see any reason to take this issue to the voters. However, as an elected official, Smith said, increasing the taxpayers’ debt load by about $700 per person sounds like a really good reason to ask them for their opinion, “whether we have to or not.” Smith said he understands that the county isn’t required to get voter approval.

Responding to a follow-up question from Andy LaBarre, Meredith Shanle of MFCI clarified that from an historical perspective, if the proposed bond issue takes place, the debt load would be 410% (about four times) higher than the debt that the county carried 30 years ago. During the same period, the county’s taxable value increased 445%.

Andy LaBarre, right, talks with former county commissioner Wes Prater.

Alicia Ping ventured that the county would not be increasing the debt load but simply recognizing it. When Shanle confirmed this assessment, Ping stated that the county is actually reducing its future liability with this approach.

Ping said she initially agreed with Dan Smith about taking this to the voters. Then she was informed that if the county did that, certain commissioners – like Conan Smith, she noted – could advocate to increase the millage rate and use the extra money for other purposes. So she felt that by not going to the voters, the board would be limiting its power to further tax the county’s residents. Shanle said that was correct.

Ronnie Peterson pointed out that the voters could be asked whether this approach – the one being proposed by Axe – is acceptable, capped at a certain amount to cover the VEBA and WCERS liabilities. That is, a voter referendum would not need to be only for an unlimited tax bond. A referendum could be put before voters for the exact proposal that’s now being considered by the board. “That’s not an open-ended bonding proposal,” Peterson said. “I don’t want the public to be mislead by the answer to that last question.”

Axe said that Peterson was correct, and noted that there is no proposal now to levy an additional tax. The proposal, however, “would certainly free up a huge amount of money to use for other projects,” Axe added.

That’s not the question, Peterson replied. The question, he said, is whether voters could have a choice to make this decision – to retire the debt obligation for VEBA and WCERS. And the answer is that they can.

Dan Smith said he wasn’t currently proposing that the proposal be put to voters, but rather he was exploring the board’s options. If commissioners did decide to put a question on the ballot, they’d likely ask voters to levy considerably less than the current proposal, he said. The amount of a new levy plus the bond proceeds would equal the amount required to retire the debt, he said.

In this approach, voters would be asked to approve levying a millage to cover a smaller bond issue, and the county would continue to contribute a portion of the retiree obligations from its general fund. “That keeps those general fund dollars from being directed toward something else,” D. Smith said.

Axe explained that if there’s a voter referendum for a general bond issue, then voters have given the board the power, over the life of the bond, to levy an unlimited tax in any year to pay the debt service due on that bond issue. The current proposal was made, without a recommendation for voter approval, because it’s well within the county’s ability to pay these bonds without levying a tax, Axe said.

On the other hand, if you put a specific millage on the ballot to pay for the bond, Axe said, that’s a different approach and one that wasn’t considered by his firm.

D. Smith reiterated that in the approach he described, the county wouldn’t issue bonds in an amount to cover the entire VEBA and WCERS liability. The bond issue would only be in an amount to manage the county’s current “cash flow crunch,” and the board would be getting the voters’ approval to do that.

Ping gave an analogy of having a $10 budget, and using $2 of that each year to pay back the bonds. If the board decides to do other projects and can afford to only pay back $1, would it be possible to levy a new millage to pay back the additional dollar? Axe replied that this would be possible if the voters approved the bond issue. Ping then stated that under this scenario, the board could spent $9 – knowing that there was a $2 debt obligation – and levy a tax for that additional $1. Axe replied that if the voters approved a bond issue, the board would have the flexibility to do that for the next 25 years.

Ping clarified that if voters don’t approve the bond issue, the board would always be required to make the $2 bond payment from existing funds, without an extra tax. “You got it,” Axe replied.

Yousef Rabhi continued Ping’s analogy, saying that right now, out of a $10 budget the county has a liability of $1.75 for its retiree obligations. Next year that amount could be $2, and $2.10 the following year. But by borrowing to cover those liabilities with a limited tax bond, the variations in those payments will be minimal. It’s money that the county would have spent out of its general fund anyway, he said. “But instead of paying off those liabilities, we’re paying off the bond,” Rabhi said.

With a voter-approved unlimited tax bond, the amount that’s borrowed could be covered in full or in part by an additional millage, Rabhi said. So if the general fund is only paying $1 and the millage is covering the other $1, then an extra $1 has been freed up from the general fund for other uses, he said. That approach would “actually expand the realm of revenue to pay off the bond.” So the potential would be there for taxpayers to end up paying more, he concluded.

At this point, Conan Smith observed that commissioners were blending two different things. “The only person in this room who is at all interested in an unlimited tax bond is me,” he joked. No one is proposing putting an unlimited tax bond on the ballot, he said. Rather, he said, Dan Smith and Ronnie Peterson are asking whether the board would voluntarily put the general obligation bond up for voter approval.

D. Smith and Peterson indicated that this was a correct assessment of their views.

Board Deliberations: Credit Rating

Andy LaBarre asked if the proposed savings anticipated with this bond issue – savings estimated by MFCI to be more than $100 million – would positively affect the county’s general credit rating, possibly getting it to a triple-A status.

Meredith Shanle of MFCI said rating agencies have indicated generally that they’d lower credit ratings if government entities don’t address their pension and retiree healthcare obligations. As far as increasing the county’s credit rating, she said the bond proposal might have a positive impact but that’s difficult to say. It certainly wouldn’t hurt the county, she said. “It will help you.”

From left: Washtenaw County prosecuting attorney Brian Mackie talks with county commissioner Ronnie Peterson.

Conan Smith noted that the county doesn’t have control over the process of moving its credit from a double-A to a triple-A rating. Over the last six months, there have been a number of bonds issued in Michigan – by Oakland County, for example – that have received a triple-A rating. What have those entities done that Washtenaw County could do to get a triple-A rating for this bond issue? he asked. C. Smith also noted that when Axe spoke to the board several months ago, he had indicated that the maximum difference between a double-A and triple-A rating, in terms of the interest rate that could be secured, was one-sixteenth of a percent.

Shanle replied that she could look into specific examples, but in general rating agencies want an entity to be conservative. In the case of Oakland County, she said, they operate on a three-year budget planning cycle. They’ve made cuts in their budgets – rating agencies like that, she said. Agencies also look at the fund balance as a percentage of expenditures, she noted.

C. Smith said his line of questioning was aimed at budgetary policy. The county administrator, Verna McDaniel, came to the board with a scan of the county’s financial situation, he said. She had proposed increasing the county’s fund balance up to 20% of total expenditures. He said he was skeptical of that move, because it takes away hard dollars from the county’s ability to spend that money on programs and services.

If the county is able to win triple-A rating, C. Smith said, and the interest rate that the county pays on its bond issue drops by one-sixteenth of a percent because of that, then it would take an “awfully big” bond offering to make it a worthwhile investment – one that could result in adding $4 million a year to the fund balance. “Well now, we have an awfully big bond offering,” he said, which might allow for moves like that to make fiscal sense. It would stabilize the long-term prospects of the organization, he said, and allow for more cash-on-hand to spend on programs and services. “This is why I’m keenly interested in that calculation,” he said, and keenly interested in what the county can do quickly to improve its credit rating.

He noted that on May 1, the board authorized McDaniel to develop a four-year budget process, and he hoped that would help the credit rating. He asked Shanle to run an analysis on the interest-rate differential if the county secures a higher credit rating. He also asked for other recommendations for things the county can do over the next several months to increase their chances of a better rating.

Board Deliberations: Unfunded Liabilities

Ronnie Peterson criticized the fact that the board hadn’t been paying sufficient attention to the unfunded pension and retiree healthcare liabilities over the years.

Conan Smith responded to that complaint, saying that the county didn’t deliberately underfund the system. The county has always made its actuarial contributions to the retirement system. There were two contributing factors to the current situation, he said. The most impactful, he said, was that the county re-opened WCERS after it had been closed in the 1990s. “It was a closed plan. We opened it back up. We brought a lot of employees in, and now they’re ready to retire,” he said. “There’s been no time to develop a fund sizable enough to cover those liabilities.” [The decision to re-open WCERS was a board decision.]

The second factor was that in 2008 and 2009, the county lost a lot of money because of the market crash, he said. “It’s only 2013 – we haven’t had enough time to recoup those funds in the market.” It’s not the irresponsibility of government that has led to this point, C. Smith continued. “I want to make that absolutely clear – we have always been fiscally responsible.”

Board Deliberations: Other Options?

Ronnie Peterson asked if Axe and Shanle had looked at other options, such as transferring WCERS to the Municipal Employees’ Retirement System (MERS). Only a small subset of county employees are currently enrolled in MERS. Peterson wondered if it would be possible to do the transfer, and if it would change the county’s contribution for retiree obligations.

Conan Smith said he found Peterson’s suggestion really creative, but added that his gut feeling is there won’t be any savings from it. “We’re not going to be allowed to balance our costs on other people’s incoming employees.” He guessed the costs would remain about the same.

Diane Heidt, the county’s human resources and labor relations director, told the board that the new 10-year collective bargaining agreements specifically call for existing employees to use WCERS as the defined benefit plan. The only thing that the county could explore would be to use MERS for new hires starting in 2014, she said.

She also noted that any changes would require the county to re-open those labor agreements, which would “trigger all of the other issues that we’ve talked about.” [The new contracts, approved by the board on March 20, aimed to protect unions before Michigan’s right-to-work law took effect on March 28, and to cut legacy costs for the county. All but one of the new agreements run for more than 10 years, through Dec. 31, 2023. If the contracts are re-opened before that time, then the right-to-work law would take effect for county employees.]

Dan Smith noted that the board hasn’t been presented with other options, “and we’ve been put under incredible pressure to do this now.” He didn’t put a lot of stock in the argument about interest-rate sensitivity – saying he thought the county would end up borrowing at about the same interest rate that they would get from investing the bond proceeds. He’d like to investigate other options, rather than proceeding “headstrong” down this path. Given the law’s sunset date of Dec. 31, 2014, the board has about another year to look at this, he said.

“This truly is a restructuring of our debt,” D. Smith said. “What we’re really trying to do is to manage our cash flow.” The main concern is how to deal with the roughly $30 million annual contribution that the county would need to make to VEBA and WCERS, if the county didn’t bond. He equated it to refinancing into a 10-year interest-only mortgage. For the first 10 years, the payments are substantially less, but those payments increase when you start paying principal as well as interest.

Conan Smith said it’s important to remember that the board “set the course” when it approved those contracts and closed the define benefit plans earlier this year. He acknowledged concerns about the timing, “but in part it has to move so fast because this board closed the plan, and we’re looking at a $30 million payment in 2014, if we don’t do something.” He continued:

So it was a choice we made willfully and with full knowledge and now we’re designing a fiscal strategy to minimize the severity of the impact on our budget. That’s why we need to move fast, and I think we should move fast. I don’t want to see us taking that full amount out of the 2014 general fund. So let’s find some other way to do it. That’s critically important.”

Public Commentary, Part II

At the end of the meeting, Wes Prater spoke again and cautioned commissioners about the “visions of sugar plums” they were seeing from projected savings. He noted they were operating in a global economy, pointing to the ongoing financial crisis in Greece. All of the assumptions could change “with the line of a pencil,” Prater said. He indicated that the board was moving too fast, with not enough scrutiny and too many unanswered questions. Structural changes need to be made, he said, and the county needs to tighten its belt. He said he planned to be part of the process to help do that.

Doug Gross also spoke a second time, noting that to satisfy current employees, the county is discriminating against younger people, who won’t have access to the defined benefit plan. At a certain point, those new employees will want a better plan and the board might reverse itself and decide to re-open the defined benefit plan again. That’s what happened in 2008, when the board re-opened WCERS and pulled a lot of employees into the plan – when it had previously been closed in the 1990s. “You’re basically laying the groundwork to do the exact same thing all over again,” Gross said. The county needs a sustainable plan it can actually afford.

Thomas Partridge criticized the working session for being an unbalanced, single-issue meeting, even though the residents face multiple other issues, like homelessness, affordable housing, public transportation and health care.

Responding to the public commentary, Andy LaBarre – who chairs the board’s working sessions – said that the purpose of this meeting had been to discuss a single issue, and to have a policy discussion about the bond proposal. At this point, he said, this proposal is a possibility, not a certainty. “The die has not been cast.”

Present: Alicia Ping, Felicia Brabec, Andy LaBarre, Kent Martinez-Kratz, Ronnie Peterson, Yousef Rabhi, Rolland Sizemore Jr., Conan Smith, Dan Smith.

Next regular board meeting: Wednesday, May 15, 2013 at 6:30 p.m. at the county administration building, 220 N. Main St. in Ann Arbor. The ways & means committee meets first, followed immediately by the regular board meeting. [Check Chronicle event listings to confirm date.] (Though the agenda states that the regular board meeting begins at 6:45 p.m., it usually starts much later – times vary depending on what’s on the agenda.) Public commentary is held at the beginning of each meeting, and no advance sign-up is required.

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