The version to be considered by the council on Nov. 18 would set a cap on TIF (tax increment financing) revenue for the Ann Arbor Downtown Development Authority that would not apply at all until FY 2017. It would result in roughly $6.1 million of TIF revenue to the DDA that year, with an estimated return of $300,000 total to the other taxing jurisdictions. The city’s portion of that would be about $180,000, distributed proportionally across all its funds that get income from a captured levy, including the general fund.

It will also include a requirement that the DDA transfer $300,000 of its TIF revenue each year to its housing fund, in support of affordable housing. The definition of  ”affordable” housing would be a unit that targets someone with 50% of the area median income. That requirement was added during the Nov. 7 deliberations.

And the version to be considered by the council on Nov. 18 will also include a limit of three terms for board members. That requirement was added as an amendment during council deliberations on Nov. 7.

The first version of the DDA ordinance revision – which was tabled by the council – had been under consideration by the council since Feb. 19, 2013. The second version was the result of recommendations by a committee of DDA board members and city councilmembers that has met four times since Aug. 26, most recently on Oct. 30.

The first version, which was in front of the council for final approval, would have clarified the existing language of the ordinance regulating the DDA’s TIF capture in a way that would disallow the DDA’s preferred interpretation of a restriction in the ordinance. The restriction on TIF revenue that’s already expressed in the ordinance is defined by reference to the amount of growth in taxable value in the DDA district that’s anticipated in the DDA’s TIF plan – a foundational document of the DDA. When those restrictions are applied to the DDA’s TIF revenue, then the amount of TIF received by the DDA would be roughly $4 million in FY 2015. By way of comparison, in the current fiscal year (FY 2014), under its preferred interpretation, the DDA looks to capture approximately $4.5 million of the taxes levied by other jurisdictions.

Under the first version revision, that roughly $0.5 million difference would be proportionally divided among the taxing jurisdictions, which together levy about 27.5 mills of taxes in the DDA district. Proportionally, that translates to: city of Ann Arbor (60%), Washtenaw County (21%), Washtenaw Community College (13%), and Ann Arbor District Library (6%). So out of a $500,000 return to other taxing jurisdictions, the city of Ann Arbor would receive $300,000. That $300,000 would be distributed proportionally to the funds generating Ann Arbor’s levy. For example, part of Ann Arbor’s levy is a transportation tax that is passed through to the Ann Arbor Area Transportation Authority. So of the $300,000 that would be returned to the city, about $40,000 of it would be passed through to the AAATA.

However, the total amount that would be returned on the first version revision is projected to rise each year from that roughly $0.5 million, to somewhere in the neighborhood of $2 million in FY 2017, based on taxes from projects in the downtown that are under construction and already in the approval process.

That contrasts with the second version, proposed by the committee, which sets a cap on DDA TIF revenue that would not apply at all until FY 2017. And that version results in roughly $6.1 million of TIF revenue to the DDA that year, with an estimated return of $300,000 total to the other taxing jurisdictions. The city’s portion of that would be roughly $180,000, distributed proportionally across all its funds that get income from a captured levy, including the general fund.

Another major difference between the first version and the committee-recommended version of the Chapter 7 ordinance change was that the first version includes revisions to governance of the DDA, which the committee-recommended version omitted. However, during the council’s Nov. 7 meeting, a limit of three four-year terms was added to the committee’s version.

The joint committee of DDA board members and councilmembers was established at the council’s July 1, 2013 meeting – after the first version achieved initial approval at the council’s April 1, 2013 meeting. Representing the council on the joint committee are Stephen Kunselman (Ward 3), Christopher Taylor (Ward 3), Jane Lumm (Ward 2) and Sally Petersen (Ward 2). Representing the DDA are Sandi Smith, Roger Hewitt, Bob Guenzel and Joan Lowenstein.

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow.

(Left) Ward 3 city councilmember Stephen Kunselman. (Right) DDA board member Bob Guenzel.

Now two and a half years later, a solid working relationship between the two entities has evolved – unmarred by political machinations, based instead on a clearly understood shared past, and consensus interpretation of relevant statutes and local laws governing tax increment finance capture.

That has led to a joint working session between the entities scheduled for Sept. 9, 2013. The session will offer an opportunity for members of the organizations to exchange appreciation and praise for the positive turn the relationship has taken over the last 30 months.

Heh. That’s a joke, as is the headline – the only accurate part of the preceding two paragraphs is the fact that a Sept. 9 working session is scheduled.

And it’s fair to say that the working session between the two groups would probably not be taking place unless it were contractually obligated – under an agreement ratified in May of 2011. The DDA operates the city’s parking system under that contract. In addition to the convening of a joint working session every fall, the contract stipulates that 17% of the gross parking revenues are to be paid to the city.

Parking money is just one of the two revenue categories over which the city and the DDA have been bickering. The other is the DDA’s tax increment finance capture (TIF), which is regulated by Chapter 7 of the city code. With an initial approval of changes to Chapter 7 already approved by the council on April 1, 2013, a joint DDA-city council committee was tasked on July 1, 2013 with making a recommendation on Chapter 7 changes to the council.

Aug. 26, 2013 meeting of the DDA-council committee, held in the basement of city hall.

Representing the council on the joint committee are Stephen Kunselman (Ward 3), Christopher Taylor (Ward 3), Jane Lumm (Ward 2) and Sally Petersen (Ward 2). Representing the DDA are Sandi Smith, Roger Hewitt, Bob Guenzel and Joan Lowenstein.

Despite being tasked by council on July 1 to begin meeting immediately, the committee did not meet until eight weeks later, on Aug. 26 – after the Aug. 6 city council primaries. Here’s the political calculus: If Kunselman had lost the Ward 3 Democratic primary to Julie Grand, the balance of votes on the council might have shifted to clarifying Chapter 7 in the DDA’s favor.

Grand ran a campaign that was generally supportive of the DDA. But Kunselman has led the council’s effort to clarify Chapter 7 in a way that favors the city as well as the other taxing jurisdictions whose taxes are captured by the DDA. However, Kunselman prevailed – as did Ward 4 challenger Jack Eaton, who campaigned in part on the idea of limiting the DDA’s TIF capture through clarification of Chapter 7.

Because the committee waited until after the Aug. 6 primary to meet, the DDA members had a clearer idea on Aug. 26 about who they’d be dealing with in the near future. The outcome of the Aug. 6 primary meant that Kunselman brought a certain amount of confidence to the committee meeting on Aug. 26. At one point he stated: “… I don’t really have a lot of trust out in my neighborhoods about what the DDA does downtown, ok? And that’s how I have been able to galvanize my base, so to speak, to stay here and to keep this effort alive, so that we can get this ordinance changed … Some of that money, yes, should be returned to the taxing authorities.”

Now the only question mark on the committee is the independent Lumm, who faces a challenge from Democrat Kirk Westphal in the November election. Lumm has made it clear she supports a Chapter 7 revision that respects the interests of the other taxing jurisdictions. But Lumm’s re-election is not a foregone conclusion.

That’s why the opening gambit from the DDA’s side at the Aug. 26 meeting was to delay further, even though the council is scheduled to take a final vote on the Chapter 7 revisions at its Sept. 16 meeting. A future council that included Westphal, mayor John Hieftje, Chuck Warpehoski (Ward 5), Margie Teall (Ward 4), Christopher Taylor (Ward 3) and Sabra Briere (Ward 1) might have six votes that potentially could support the current approach to TIF calculations. But among those six, I think even Westphal, Warpehoski and Briere are capable of independent and rational thought on the question of TIF capture.

The delaying tactic on Aug. 26 emerges in a fairly obvious way if you read through the meeting transcript. [.pdf of 40-page transcript]. DDA members were more inclined to want to talk about general arguments for the existence of a DDA, professing uncertainty about why they’d even been invited to the table. Kunselman, Lumm and Petersen made it clear they were there to talk about clarifying the TIF calculations, not more general themes. It wasn’t clear whose interests Taylor was upholding, but he aligned himself policy-wise – as well as socio-linguistically – more with other DDA board members than with his city council colleagues.

The Aug. 26 meeting was highlighted by a number of misstatements or incomplete statements of historical fact – some serious enough that I worry about the ability of some of those at the table that day to effectuate good public policy.

Still, I think the meeting offered a glimmer of hope – from a guy whose history with the city of Ann Arbor is approaching an anniversary. On Sept. 15, city administrator Steve Powers will have been on the job exactly two years.

Powers, I think, offers a contrast with the previous city administrator Roger Fraser. On April 16, 2010 Fraser barred me from a meeting of a “working group” of councilmembers and DDA board members. Shielded from public view, the group was sorting out the terms of a new parking agreement. Powers, on the other hand, toward the end of the Aug. 26, 2013 committee meeting, had this to say: “If the committee is done commenting, you should provide for public comment, as it’s a public meeting.”

This column includes a brief outline of some factual points worth remembering – because they were misstated or incompletely stated at the Aug. 26 meeting. But first, a point about words. 

Word Usage: Who’s the Attorney?

Even if you haven’t studied it in school, you probably have an awareness of how vocabulary choices can establish credentials, or let other people know that you are one of their kind.

For example, if I say by way of introduction to an urban hipster on a fixed-gear bicycle, “Is that a 44/16 you’re pushing?” that can be translated as follows:

Hey, I would like to make small talk about bicycles, and I know that 44/16 is a gear ratio, so tell me the answer to my question, before I size you up as just a poser who rides a fixie for the hip and groovy look, but doesn’t even know the first thing about gear combinations.

So early on during the Aug. 26 committee meeting, Ward 3 councilmember Christopher Taylor held forth as follows:

Taylor: … I think the ordinance as currently constituted is not clear to the novice 1-L looking at it, and [I] wouldn’t mind an ordinance that was.

What the 1-L?! If you remember the movie “The Paper Chase,” or if you can deduce it from your knowledge of Taylor’s background as an attorney, you might have a shot at understanding the reference – to a “first-year law student.” It seems to be a naming pattern unique to law schools. For example, first-year medical students are not 1-Ms. First-year journalism students are not 1-Js. In any case, Taylor’s reference was not universally and immediately understood by all the other non-lawyers in the room.

I think Taylor is bright enough to know that “1-L” is parlance peculiar to a specific social class. So why use a term that he could reasonably expect would not immediately be accessible to everyone in the room? One reason could be that Taylor was not the only lawyer at the table: Joan Lowenstein and Bob Guenzel – members of the DDA board – are also attorneys. So Taylor’s reference to 1-L could be translated as:

Hello, Joan and Bob, I see you lawyers over there, so let us note that we are the lawyers here –  we are us and they are them – and once again, lest anyone forget: We are the lawyers.

Earlier in the meeting, Lowenstein had tried to put Kunselman in his place with respect to his legal understanding of the contractual nature of the parking agreement between the city and the DDA:

Kunselman: … we can get rid of the parking agreement and take it back.
Taylor: Yes, it’s an agreement but …
Kunselman: … yet we can take it back. [laugh]
Taylor: It’s an agreement between two entities …
Lowenstein: … it’s a contract. Anyway, we won’t educate you about contract law, but go ahead.

A pertinent point about that parking contract, not mentioned by any of the three lawyers present, is the opportunity for terminating it, even when there’s been no breach. Everyone present at the committee meeting with knowledge of the contract was eager to state that the contract runs through the end of the DDA’s charter, in 2033. But apparently forgotten, even by the lawyers present, was the clause that allows either the DDA or the city to terminate the contract in year 11, with one year’s notice:

Each of the City and DDA may terminate this Agreement without cause, on June 30, [2022] and on the eleven (11) year anniversary thereafter, provided that written notice of termination is provided no less than three hundred and sixty five (365) days in advance of said termination.

Myth of Transparency

The transcript of the Aug. 26 meeting reflects a sharp exchange between Kunselman and Taylor on the question of whether the negotiations leading up to ratification of the May 2011 parking agreement were open and transparent. Taylor was adamant that the agreement on the parking contract had been reached in an open way and had not been passed in the “dark of the night.” Kunselman contended that the public conversation took place only after the decisions had been made out of public view.

For some grounding in actual fact, it’s worth noting that after a council-DDA “mutually-beneficial” committee was re-established on May 17, 2010, the conversations between the two bodies on the parking agreement moved at least in part into the public realm. I attended most of those meetings.

Before that, however, the conversation between the city council and the DDA was shielded from public view. Here’s a timeline overview. The April 16, 2010 date is worth noting.

• Jan. 20, 2009: City council passes a resolution asking the DDA to begin discussions of renegotiating the parking agreement between the city and the DDA in a mutually beneficial way.
• March 4, 2009: DDA board establishes a “mutually beneficial” committee to begin discussions of the parking agreement between the city and the DDA. On the committee: Roger Hewitt, Gary Boren, Jennifer S. Hall, and Rene Greff. The DDA’s resolution establishing their committee calls on the city council to form its own committee.
• May 20, 2009: During the mid-year DDA retreat, mayor John Hieftje states publicly that city councilmembers object to the membership of Jennifer S. Hall and Rene Greff on the DDA’s “mutually beneficial” committee.
• June 3, 2009: DDA board chair Jennifer S. Hall removes herself from DDA’s “mutually beneficial” committee, replacing herself with Russ Collins.
• June 15, 2009: Mayor John Hieftje nominates councilmembers Margie Teall (Ward 4), Leigh Greden (Ward 3) and Carsten Hohnke (Ward 5) to serve on the city council’s “mutually beneficial” committee, and they’re confirmed at the city council’s July 20 meeting.
• July 1, 2009: DDA board chair Jennifer S. Hall appoints Sandi Smith to replace outgoing DDA board member Rene Greff (whose position on the board is filled with Newcombe Clark) on the DDA’s “mutually beneficial” committee. Smith is also a city councilmember, representing Ward 1.
• August 2009: Leigh Greden is defeated in the Democratic primary by Stephen Kunselman.
• August-December 2009: Sandi Smith, the chair of the DDA’s “mutually beneficial” committee, reports at each monthly DDA board meeting that there is nothing new to report.
• Dec. 5, 2009: Dissolution of the DDA is included in an “everything is on the table” list for discussion at the city council’s budget retreat.
• January-April 2010: Roger Hewitt reports at monthly DDA board meetings that only informal discussions are taking place.
• April 16, 2010: The Ann Arbor Chronicle is barred from attending a meeting of a “working group” of city councilmembers and DDA board members.
• April 21, 2010: At a DDA partnerships committee meeting, Newcombe Clark gets assurance that a 7-day notice would be given before the full board would be asked to consider a $2 million transfer payment to the city.
• April 28, 2010: At a DDA operations committee meeting, a “term sheet” produced by the “working group” of the city council and DDA is unveiled. It’s intended to become the basis for an eventual new parking agreement. A key feature of the “term sheet” is that the DDA will assume responsibility for enforcement of parking meters. That responsibility was not ultimately included in the final agreement.

Myth of the Debt Clause Interpretation

The transcript of the Aug. 26, 2013 meeting reflects a claim that the DDA as an institution took on bonding debt, based on a particular interpretation of the Chapter 7 “debt override” clause. That interpretation is that as long as the DDA has debt obligations, it does not owe a return of any excess to the other taxing jurisdictions.

Hewitt: So I just want to be clear that you want to remove that ["debt-override"] clause completely?
Kunselman: Yes, which has already been done in the first reading.
Hewitt: But understanding that we have engaged in a huge amount of indebtedness based on that.

The last bonds for which the DDA accepted the debt service obligations were approved by the city council in February 2009. Later in the meeting, Hewitt returned to the implicit point – that historically, the debt clause had always been given the interpretation the DDA is currently giving it. That interpretation is that if the DDA had debt, then no excess TIF revenue needed to be returned to the other taxing jurisdictions:

Hewitt: Just to move things forward, I think, one of the big issues is that debt clause. The DDA and previous councils have operated under the assumption that the debt clause meant that there would be no refund because there was debt. That’s certainly how the DDA has viewed that. And the discussions with previous councils, that’s clearly how previous councils have viewed that. Now if you want to change, if you want to clarify that so that it does not apply, then I would like to hear from council that that is what you would like to do, because that would be a first step towards clarifying the ordinance.

And Taylor lent his support to the idea that the debt clause had consciously been given a specific interpretation over the years [emphasis added]:

Taylor: … Yes there is a debt override, and yes, there is a confusing way of creating a refund mechanism. The DDA has made pledges with respect to debt such that the refund mechanism has not frequently been triggered.

As a matter of historical fact, however, to the extent that the DDA or the city council has ever expressed a position on the “debt clause,” that implicit position has been that the clause does not excuse the DDA from returning excess TIF capture to the other taxing jurisdictions. In more detail, the DDA’s narrative in the spring of 2011 – when the Chapter 7 issue arose – was that the DDA had been unaware of the implications of Chapter 7 on its TIF revenue. However, once alerted to Chapter 7 by the city treasurer at that time, the DDA took 18 days to study the question before concluding that the return of excess TIF was owed to other taxing authorities – dating back to previous years, not just 2011.

Only when challenged on the methodology of its calculations, which made a difference on the order of $1 million per year, did the DDA reverse its position – by citing the “debt clause” of Chapter 7. The clause is most naturally read as a requirement that debt obligations be satisfied before non-debt obligations – like administrative staff salaries. The DDA’s preferred interpretation – that the clause lifts a stated restriction on TIF revenue already expressed in the ordinance – just isn’t plausible.

The fact that the DDA did not cite the debt clause in the spring of 2011 – when it made repayments of excess TIF covering that year and prior years – indicates that the DDA did not then, or in years before that, think the debt clause had an available interpretation under which the excess TIF return obligation could be excused.

The timeline, which undercuts the implications of statements made by Hewitt and Taylor at the Aug. 26 committee meeting, is as follows:

• 2011-April-28: City of Ann Arbor chief financial officer Tom Crawford steps in as interim city administrator in the wake of Roger Fraser’s departure.
• 2011-April-29: City financial staff notice the implications for TIF capture that are written into the city’s 1982 ordinance, which established the DDA. The timing of the discovery was reported by mayor John Hieftje at the DDA board’s May 2 meeting. In summary strokes, the ordinance provides that if the rate of growth in taxable value is more than what was anticipated in the TIF plan, then the DDA would capture only half of the increment on that additional value.
• 2011-May-02 (noon): The Ann Arbor DDA board was expected to ratify its side of the contract with the city of Ann Arbor under which it would continue management of the city’s parking system. Instead, it was announced that the board would be tabling the vote on the parking contract pending a closer review of the excess TIF capture issue.
• 2011-May-02 (7 p.m.): Ann Arbor city council strikes the city-DDA parking contract approval from its agenda.
• 2011-May-16: Ann Arbor city council begins its second meeting in May, at which it must approve the FY 2012 budget. The council does not vote on the budget, but recesses the meeting until May 23.
• 2011-May-20: At a special meeting, the Ann Arbor DDA board approves a parking contract with the city of Ann Arbor that provides 17% of gross parking revenue to the city of Ann Arbor. The approved contract includes a provision that the city of Ann Arbor will backstop the DDA’s financial position if the DDA’s fund balance falls below $1 million.
• 2011-May-20: At the same meeting, the Ann Arbor DDA board votes to affirm the excess TIF calculations raised at the May 2 meeting. The DDA calculates that a total of $1,185,132 should be returned to taxing authorities that levy property taxes in the downtown district. The city of Ann Arbor’s share of that is $711,767, with the remaining money owed to the Ann Arbor District Library, Washtenaw County and Washtenaw Community College. The method of calculation is “year-to-year” not cumulative, and is based on the “optimistic” projections in the DDA’s TIF plan.
• 2011-May-23: City council convenes the continuation of its May 16 meeting, but immediately recesses, likely in order to prevent any discussion of a proposal from Stephen Kunselman (Ward 3) to return responsibility for the public parking system from the DDA to the city of Ann Arbor’s public services area.
• 2011-May-25: “Mutually beneficial” committees from the city council and the DDA board meet and finalize language on fund balance underwriting and required consultation with the city council on rate changes in the proposed parking agreement.
• 2011-May-31: Ann Arbor city council votes to waive the $711,767 in excess TIF capture that the DDA calculated it owed to the city of Ann Arbor.
• 2011-May-31: At the same meeting, the Ann Arbor city council ratifies the city-DDA parking contract, which provides 17% of gross parking revenue to the city of Ann Arbor. The approved contract includes a provision that the city will backstop the DDA’s financial position if the DDA’s combined fund balance falls below $1 million.
• 2011-July-27: At a special meeting, the DDA convenes in closed session and emerges to approve a resolution that reverses its previous position on excess TIF capture. Now the DDA contends that the local ordinance doesn’t actually place a limit on its TIF capture.
• 2011-August-15: Ann Arbor District Library board holds a closed session as part of its regular meeting to review the written legal opinion of its legal counsel with respect to the excess TIF capture. AADL board director Josie Parker indicates that the AADL will ask its legal counsel, Hooper Hathaway, to prepare a response to the DDA’s new position on the interpretation of the ordinance.
• 2011-November-02: Ann Arbor DDA holds a closed session to review the written opinion of its legal counsel on the issue of excess TIF capture.
• 2011-December-07: Ann Arbor DDA holds a closed session to review the written opinion of its legal counsel on the issue of excess TIF capture.
• 2012-Mar-19: Ann Arbor District Library director Josie Parker tells The Chronicle that AADL is not pressing the matter of the excess TIF, but is open to a conversation with the DDA.
• 2012-Mar-19: Stephen Kunselman (Ward 3) announces he’ll be bringing forward a resolution to address the issue of excess TIF capture. Kunselman has not consulted with AADL on the issue.
• 2012-Mar-21: During a budget update at the Washtenaw County board of commissioners meeting, the $348,000 received by Washtenaw County from the DDA in TIF reimbursement is presented as one of several factors contributing to the better-than-expected financial condition for the county.

Myth of the Opt Out: Other Taxing Jurisdictions

The DDA captures some of the taxes of other jurisdictions  – the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. The current state enabling legislation for DDAs includes an opt-out provision for other taxing jurisdictions. So there’s a widespread misunderstanding that back in the early 1980s when the Ann Arbor DDA was established, other jurisdictions had an opportunity to opt out.

However, as The Chronicle has previously reported, that provision in the state statute was added after the Ann Arbor DDA was established. And when the Ann Arbor DDA was renewed in 2003, none of the opt-out conditions were triggered. So there has never been an opportunity for other taxing jurisdictions to opt out.

The Aug. 26 committee meeting revealed a lack of command of these historical facts by Taylor, when he ventured that the other taxing jurisdictions had “signed up for it” – that is, not chosen to opt out of the Ann Arbor DDA’s tax capture. [emphasis added]:

Kunselman: I don’t feel good just because I can take someone else’s money, and keep it.
Taylor: I guess: They signed up for it.
Kunselman: Well, the library didn’t. They would like some of their money back.
Taylor: And they haven’t come to us to say that they ..
Kunselman: … they wrote us a letter. They wrote [mayor John] Hieftje a letter.
Taylor: In 2000-what?
Kunselman: What, two years ago? [It was January 2012 when the letter was written.]

Coda

I’ve been told by one public official that it’s not their job to give a correct recitation of history – because that’s The Chronicle’s job. If you’d like to watch the city council and the DDA board make a small bit of history tonight, you can watch live proceedings on Channel 16, streamed online by Community Television Network.

The council-DDA work session will immediately follow a special meeting the council is convening at 7 p.m. to hold a closed session under the Michigan Open Meetings Act – to discuss labor negotiation strategy.

The Chronicle could not survive without regular voluntary subscriptions to support our coverage of public bodies like the Ann Arbor Downtown Development Authority and the Ann Arbor city council. Click this link for details: Subscribe to The Chronicle. And if you’re already supporting us, please encourage your friends, neighbors and colleagues to help support The Chronicle, too!

The council will be represented by Christopher Taylor (Ward 3), Sally Petersen (Ward 2),  Stephen Kunselman (Ward 3) and Jane Lumm (Ward 2). Lumm’s name was added to the mix during the council’s meeting.

The current source of friction between the DDA and the city concerns the interpretation of Chapter 7 of the city code, which regulates the DDA’s tax increment finance (TIF) capture. The DDA has chosen to interpret the Chapter 7 language in a way that does not recognize the cap on TIF revenues that is set forth in Chapter 7. That led to a proposal by some councilmembers earlier this year to revise the ordinance so that the DDA’s alternate interpretation is clearly ruled out. The council gave the ordinance change initial approval on April 1, 2013. But later, on May 6, 2013, the council chose to postpone the vote until Sept. 3, the council’s first meeting that month.

In the memo accompanying the council’s July 1 resolution, the group – which was described as a “mutually beneficial” committee – is tasked with coming up with a recommendation for Chapter 7 revised language with a deadline of Sept. 2. During the meeting, the name of the committee was changed from “mutually beneficial” to simply a “joint DDA-council committee.”

The phrase “mutually beneficial” in connection with the sorting out of issues between the city of Ann Arbor and the Ann Arbor DDA was first mooted in a Jan. 20, 2009 resolution. The main issue at that time was the contract under which the DDA administers the city’s public parking system. Subsequently, committees for both organizations were appointed, but they did not achieve any results. The following year, new “mutually beneficial” committees were appointed and those committees met over the course of several months, culminating in a new parking agreement ratified in May 2011. The council formally disbanded its “mutually beneficial” committee at the end of 2011.

Responding to an emailed query from The Chronicle, current DDA board chair Leah Gunn indicated she would wait until the council passed its resolution before making public the names of the DDA board counterparts.

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]

Ann Arbor DDA TIF revenue projections. The vertical line indicates the year when the clarified calculations would be implemented. The red line is the amount of TIF revenue assumed by the DDA in its FY 2014 and FY 2015 budgets, and in its 10-year planning document. The blue line is the estimated TIF revenue under the proposed clarified ordinance calculations. The yellow line is the estimated TIF revenue the DDA would receive if the DDA continued to interpret the city’s ordinance in its own way. (Numbers from the city of Ann Arbor and DDA. Chart by The Chronicle.)

Several revisions to Chapter 7, a city ordinance governing DDA, had received an initial approval from the city council at its April 1, 2013 meeting. If the revisions are given final approval, the result would be roughly $490,000 in additional annual revenue for the city of Ann Arbor – compared to what the city would receive under the DDA’s current interpretation of the ordinance.

After voting around 3 a.m. to postpone the item at its April 15, 2013 meeting, the council voted again on May 6 to postpone final consideration.

The ordinance revisions postponed by the council fell roughly into two categories: (1) those involving board composition and policies; and (2) calculation of tax increment finance (TIF) capture in the DDA district.

In the first category, the revisions to Chapter 7 that had received initial approval by the council included: a new prohibition against non-mayoral elected officials serving on the DDA board except by agreement with the other taxing jurisdictions; term limits on DDA board members; and a new requirement that the DDA submit its annual report to the city in early January.

More significantly, the revisions to Chapter 7 that would clarify how the DDA’s TIF tax capture is calculated. While the interpretation of the language is disputed, it’s mostly acknowledged that the ordinance language doesn’t provide explicit and clear enough guidance on the calculations.

The “increment” in a tax increment finance district refers to the difference between the initial value of a property and the value of a property after development. The Ann Arbor DDA captures the taxes – just on that initial increment – of some other taxing authorities in the district. Those are the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. For FY 2013, the DDA will capture roughly $3.9 million in taxes.

The ordinance revisions would clarify existing ordinance language, which includes a paragraph that appears to limit the amount of TIF that can be captured. The limit is defined relative to the projections for the valuation of the increment in the TIF plan, which is a foundational document for the DDA. The result of the clarification to the Chapter 7 language would mean about $360,000 less TIF revenue for the DDA in FY 2014 – compared to the $3.933 million shown in the DDA’s adopted budget for that year. But for FY 2015, the gap between the DDA’s budget and the projected TIF revenue – using the proposed clarifying change to Chapter 7 – is just $74,000.

However, an amendment to the ordinance changes – accepted as “friendly” at the council’s April 15 meeting – would apply the clarified calculations starting in FY 2015. That would result in minimal impact on TIF revenue to the DDA – compared with the DDA’s own recently adopted FY 2014-15 budgets and its 10-year planning document.

However, the total increment in the district on which TIF is computed has shown significant growth. And under the proposed clarification of Chapter 7, that growth would result in a return of TIF money to other taxing jurisdictions (which would otherwise be captured by the DDA) totaling around $900,000 each year from FY 2015 through the next 10 years. The city of Ann Arbor’s share of that would be roughly $490,000.

These projections do not include the tax capture that would result in future years from completion of major downtown projects like City Apartments, 624 Church, 618 S. Main, or 413 E. Huron (assuming that it is approved).

The amount of TIF capture that’s returned to the other taxing jurisdictions is tied to growth in the valuation by the existing Chapter 7 language. Under Chapter 7, if the actual rate of growth outpaces the growth rate that’s anticipated in the TIF plan, then at least half the excess amount is supposed to be redistributed to the other taxing authorities in the DDA district.

In 2011, the DDA for the first time returned excess TIF capture to other authorities, when the existence of the Chapter 7 language was reportedly first noticed. At that time, the DDA made repayments of TIF monies to other authorities of around $400,000, which covered what was owed going back to 2003. When the DDA calculated the amounts owed in 2011, the city of Ann Arbor waived its roughly $700,000 share.

In 2011, the DDA used a year-to-year interpretation of the Chapter 7 language instead of computing rate of growth against the base year in a cumulative fashion. That is a point that the Chapter 7 revisions would clarify.

Before giving initial approval on April 1, 2013 – but then postponing the ordinance amendments on April 15 – the council had previously postponed voting at its March 18, 2013 and March 4, 2013 meetings.

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]

Mayor John Hieftje at the April 15 Ann Arbor city council meeting. (Photos by the writer.)

Conversation amongst audience members at the meeting – as well as subsequently in the community – described the effort as a “citizens filibuster.” The result of all the commentary: Two significant items on the agenda were postponed until the council’s May 6 meeting.

One of those items was the site plan approval for 413 E. Huron. Postponement of a decision on that project was lumped in with the general motion to postpone all remaining action items on the agenda until May 6. It was not necessarily expected that the council would postpone the 413 E. Huron site plan that evening, even if it was hoped by opponents that councilmembers would put off the decision – for a third time.

But there was a reasonable expectation that another significant item would be postponed – the council’s final action on a proposed revision to the city ordinance governing the Ann Arbor Downtown Development Authority. It was during the often acrimonious debate on that decision that the council ultimately opted to postpone all of its remaining action items until May 6.

The acrimony stemmed in part from the fact that the stated intention of Stephen Kunselman (Ward 3) at the start of the meeting was to postpone a final decision – and that was the expected outcome. The fact that this expected outcome was called into question heightened the tension in an already emotional debate. The tension was heightened by the fact that deviation from the anticipated postponement was made possible mainly by the absence of two councilmembers – Marcia Higgins (Ward 4) and Sumi Kailasapathy (Ward 1).

By the time the council reached the DDA ordinance on its agenda, the hour was approaching 2 a.m. And by then Higgins and Kailasapathy had needed to leave the council meeting. Both of them had supported the ordinance changes in the 7-3 vote taken at the council’s April 1, 2013 meeting. But for the final reading on April 15, neither of them were at the table when the debate on the DDA ordinance began.

Kailasapathy described herself to The Chronicle as on the verge of physical exhaustion when she left – having had little sleep over the several days leading up to the meeting. She earns her livelihood as a certified public accountant, and tax season is a time of peak workload.

So apparently recognizing that the absence of Kailasapathy and Higgins would mean defeat for the ordinance change – if it were voted up or down, instead of being postponed – mayor John Hieftje led an effort to force an up-or-down vote on the issue. And councilmembers who were willing to put off the issue were not unified in their view about the parliamentary procedure to use to achieve that delay. So the council voted on two different options – postponing until a date certain (June 17) or tabling the issue. Sabra Briere (Ward 1) provided a crucial vote against postponement, but voted in favor of tabling.

Kunselman argued for the postponement by pointing out that because the sequence of the roll-call vote that evening allowed him to vote last, he could simply assess how the tally stood, and vote accordingly with the prevailing side. That would give him the right to bring back the vote for reconsideration at the council’s subsequent meeting. But Kunselman’s argument was not persuasive to a six-vote majority.

Without a six-vote majority in favor of either tabling or postponing, the council was left to deliberate on the actual ordinance amendments. As some attempted amendments failed – clearly due to the dynamic that had resulted from the absence of two councilmembers – Chuck Warpehoski (Ward 5) eventually proposed adjourning the meeting until the following Monday, when the meeting could continue. However, after a brief recess it was decided that the council would simply postpone all remaining voting items until its May 6 meeting, and put an end to the April 15 meeting.

After approving the motion to postpone the action items, councilmembers ticked through the remaining “housekeeping” items on the agenda, which largely included various reports and communications. Of those, one highlight worth noting was the nomination by Hieftje of Eric Mahler to replace David Nacht on the board of the Ann Arbor Transportation Authority.

The public commentary at the April 15 meeting exceeds The Chronicle’s capacity to report in its customary way. Still, some accounting of the meeting is important for the archives.

This report provides: (1) a summary of votes taken; and (2) a summary of actions that will now appear on the May 6 agenda as a result of the April 15 postponement. In addition, this report begins with details of the deliberations on the proposed DDA ordinance revisions.

DDA Ordinance Revisions

During the April 15 meeting, the council undertook some amendments to the proposed ordinance revisions governing the Ann Arbor Downtown Development Authority. [.pdf of DDA ordinance as it will appear on the council's May 6, 2013 agenda] Background is presented first, followed by details of the deliberations.

DDA Ordinance Revisions: Background

Several revisions to Chapter 7, a city ordinance governing the Ann Arbor DDA, had received an initial approval by the city council at its April 1, 2013 meeting. The revisions would result in roughly $500,000 in additional annual revenue for the city of Ann Arbor – compared to what it would receive under the DDA’s current interpretation of the ordinance.

The revisions ultimately postponed by the council on April 15 fell roughly into two categories: (1) those involving board composition and policies; and (2) calculation of tax increment finance (TIF) capture in the DDA district.

In the first category, the revisions to Chapter 7 that have received initial approval by the council included: a new prohibition against non-mayoral elected officials serving on the DDA board except by agreement with the other taxing jurisdictions; term limits on DDA board members; and a new requirement that the DDA submit its annual report to the city in early January.

More significantly, the changes include revisions to Chapter 7 that would clarify how the DDA’s TIF tax capture is calculated. While the interpretation of the language is disputed, it’s generally acknowledged that the ordinance language doesn’t provide explicit and clear guidance on the calculations.

The “increment” in a tax increment finance district refers to the difference between the initial value of a property and the value of a property after development. The Ann Arbor DDA captures the taxes – just on that initial increment – of some other taxing authorities in the district. Those are the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. For FY 2013, the DDA will capture roughly $3.9 million in taxes.

The ordinance revisions clarify existing ordinance language, which includes a paragraph that appears to limit the amount of TIF that can be captured. The limit is defined relative to projections for the valuation of the increment in the TIF plan, which is a foundational document for the DDA. The result of the clarification to the Chapter 7 language would mean in the neighborhood of $300,000 less TIF revenue for the DDA in FY 2014 – compared to the $3.933 million shown in the DDA’s adopted budget for that year. For FY 2015, the gap between the DDA’s budget and the projected TIF revenue – using the proposed clarifying change to Chapter 7 – would be around $70,000 according to one projection.

However, the total increment in the district on which TIF is computed has shown significant growth. And under the proposed clarification of Chapter 7, that growth would result in a return of TIF money to other taxing jurisdictions (that would otherwise be captured by the DDA) totaling $931,000 each year for FY 2014-15. The city of Ann Arbor’s share of that would be roughly $500,000, of which about $300,000 would go into the general fund. The city’s general fund includes the transit millage, so about $60,000 of that would be passed through to the Ann Arbor Transportation Authority.

The amount of TIF capture that’s returned to the other taxing jurisdictions is tied to growth in the valuation by the Chapter 7 language. Under Chapter 7, if the actual rate of growth outpaces the growth rate that’s anticipated in the TIF plan, then at least half the excess amount is supposed to be redistributed to the other taxing authorities in the DDA district. In 2011, the DDA for the first time returned excess TIF capture to other authorities, when the existence of the Chapter 7 language was reportedly first noticed. At that time, the DDA made repayments of TIF monies to other authorities of around $400,000, which covered what was owed going back to 2003. When the DDA calculated the amounts owed in 2011, the city of Ann Arbor waived its roughly $700,000 share.

In 2011, the DDA used a year-to-year interpretation of the Chapter 7 language instead of computing rate of growth against the base year in a cumulative fashion. That is a point that the Chapter 7 revisions would clarify.

Before giving initial approval on April 1, but postponing its vote on April 15, the council had previously postponed voting at its March 18, 2013 and March 4, 2013 meetings.

DDA Ordinance Revisions: Financial Impact

Some of the discussion has focused on what the impact of the ordinance clarifications would be on the DDA’s finances. Chart 1 below summarizes the impact. As amended at the April 15, 2013 meeting, the impact of the clarification would not be felt until FY 2015. From FY 2015 forward, the difference between the revenue planned for by the DDA (red) and that provided by the calculations made explicit in the ordinance revisions (blue) is minimal. What’s at stake is the TIF revenue level for which the DDA has not been planning – shown by the yellow line. That level of revenue has resulted from recent new construction in the downtown area.

Chart 1: Impact on DDA finances compared to DDA 10-year planning document. Data from city and DDA sources, chart by The Chronicle.

[.pdf of DDA 10-year planning document]

DDA Ordinance Revisions: Initial Communications

During the initial slot on the agenda set aside for communications from councilmembers, Stephen Kunselman (Ward 3) indicated he would be asking his colleagues for postponement of the vote regarding changes to the DDA ordinance. His remarks came about an hour into the meeting. He said the reason he was asking for the postponement was that after the council’s initial approval of the ordinance changes on April 1, there had been a lot of misrepresentation about what the changes meant.

There had also been political intimidation, Kunselman said, and “outright character assassination” of those councilmembers who had been trying to work hard to bring clarity to the DDA TIF calculation process. “I’ve always intended that the DDA budget be maintained whole,” he said, so that the DDA could still meet existing obligations. During the deliberations on that initial vote, he pointed out, the threat had been heard that the DDA board might rescind its resolution that granted $8 million to the city of Ann Arbor – paid in installments of roughly a half million dollars each year – for the new police courts building/Justice Center.

There had also been reports in the press, Kunselman stated, that DDA board treasurer Roger Hewitt had indicated there would be no “sacred cows” when it came to the DDA’s reevaluation of its budget. Kunselman said he had interpreted Hewitt’s remarks as a threat. Kunselman then implicitly introduced the issue of a possible conflict of interest on the part of Chuck Warpehoski (Ward 5), whose wife Nancy Shore is director of the Ann Arbor Transportation Authority’s getDowntown program.

Because the DDA funds the getDowntown program, the last thing Kunselman would want to have on his hands, he contended, was cutting that program – when a council colleague’s spouse could lose her job. And he knew that would happen if funding from the DDA to the getDowntown program were cut off – because he had spoken with Michael Ford, CEO of the Ann Arbor Transportation Authority, about that. According to Kunselman, Ford had assured him that if the DDA funding were to be cut, then Shore’s position would have to be cut as well. That had never been Kunselman’s intent, he said.

By way of background, The Chronicle had previously inquired about the getDowntown program budget and its funding sources. Based on information provided by AATA to The Chronicle, it appears that the federal funding component of the getDowntown budget exceeds the salary and benefits paid to Shore. [.pdf of 5-year getDowntown budget numbers] Based on Kunselman’s remarks, The Chronicle emailed Ford during the April 15 meeting and received a reply:

I recall the question being the funding for the program [federal] CMAQ funding which supports elements of the program and funding for employee positions – I don’t recall the specific question of just DDA funding impacting employee positions.

AATA director of communications Mary Stasiak had previously told The Chronicle in a phone interview that the existence of Shore’s position was not contingent on the existence of getDowntown’s go!pass program – which is where the bulk of the roughly $600,000 worth of funding from the DDA goes. And she’d explicitly said that Shore’s position was not contingent on the DDA’s funding of the getDowntown program.

From left: Councilmembers Christopher Taylor (Ward 3) and Stephen Kunselman (Ward 3).

Kunselman said he had also heard a lot of talk about a desire for collaboration. “I am willing to try to collaborate,” he stated. And that is why he wanted the postponement, he said. He wanted a chance to reach out to the DDA’s treasurer and to the mayor to find out if there’s something that could be done to address the TIF capture methodology. On Jan. 27, 2012 – over a year ago – Kunselman continued, mayor John Hieftje had received from the executive director the Ann Arbor District Library, Josie Parker, a letter that as far as Kunselman knew had never received a written response from Hieftje.

Kunselman read aloud the closing paragraph from the letter: “Based on the city’s recognition that its own ordinance requires excess TIF to be distributed to the taxing authorities, the library fully expects that it will continue to receive TIF refunds in the future. From this point forward, however, the library would ask for consultation with the city so that a calculation method can be agreed upon before any refund checks are issued.”

The purpose of this exercise, Kunselman said, was to bring some responsibility back. So he would be asking for a postponement when the council reached that item on the agenda, he concluded.

Five and a half hours later the council reached the DDA ordinance on its agenda.

DDA Ordinance Revisions: Deliberations – Postponement

Kunselman led off discussion by re-iterating his desire to see the second and final vote on the question postponed. He asked that the postponement be until the council’s second meeting in June, which falls on June 17. Kunselman indicated that he had already spoken with DDA board treasurer Roger Hewitt about meeting and discussing with him some of the issues that had been raised by the DDA and the community. “I hope that you can indulge… the fact that we are looking for a postponement,” he said. Kunselman’s motion to postpone was seconded by Sally Petersen (Ward 2).

Margie Teall (Ward 4) indicated that she would not be supporting a postponement that evening – because she did not support the ordinance revision as it was brought forward. She appreciated that Kunselman would like time to work on the question, and to start in a more collaborative manner. But she felt that the current draft before the council needed to be voted down. She pointed out that around 50 people had appeared before the council that evening to speak.

Teall allowed that there was concern and confusion about the nature of the TIF calculation, which she allowed probably does need to be examined, to clarify it. She felt that it would best be addressed, however, by the city administrator, the chief financial officer, and the DDA staff working together to bring recommendations forward to the council. She had an alternative resolution prepared, which she indicated she was prepared to pass around. But she would not support a postponement because she wanted the question to be voted on that night.

Sally Petersen (Ward 2) indicated she would support the postponement. She liked the spirit of collaboration that Kunselman was bringing forward in connection with the postponement. The council had heard a lot about the value that the DDA offers to the downtown area, she said, and about the DDA’s contribution to the support of affordable housing. She did not feel that any of that was in question in connection with the changes to the ordinance.

In the short term, Petersen allowed that there was “a little bit of a hit” to the DDA. But in the long term, she said, there would be an uptick in the DDA’s fund balance as a result of the ordinance amendments. She noted that there have been a lot of spreadsheets floating around in the last several weeks, and lots of versions of the DDA’s 10-year planning document that she has seen. The postponement would give everyone a chance to really take a look at the numbers, and what it means to the bottom line for the DDA. She was not convinced that there was a uniform understanding across the council of the impact of the ordinance changes on the DDA’s budget planning. That really needs to be clearly understood, she stressed. So for that reason she supported the postponement.

Jane Lumm (Ward 2) indicated that she would support the postponement as well. She thanked the city’s chief financial officer Tom Crawford, who had provided some very helpful spreadsheets, she said. She described one of the pages that had been provided as particularly helpful – which lays out the impacts on the DDA’s revenues over the next 10 years. She felt there had been a lot of confusion about the actual financial impact of the ordinance changes on the DDA. The community, she felt, needed some time to absorb the same information the city council had been provided. She felt the added time would be helpful in that regard.

Mayor John Hieftje indicated he would not support the postponement. “I think this was bad legislation from the day it was proposed,” he stated. He reiterated his view that he thinks that the ordinance amendments represent a threat to the city’s general fund. He claimed that he could show that over and over again. The work that the DDA does is very vital, he said. He added that “we have caught the DDA with this at exactly the wrong time,” and contended that the DDA had anticipated an increase in TIF revenue.

The DDA had spent down its fund balances for the largest projects if it had ever undertaken, Hieftje continued, and he did not know why the council would continue down the road with something that could be harmful to the city’s general fund and to the city’s ability to put police officers on the street. He also contended that light posts on Main Street were falling over when the wind blows, and that the project to replace those light posts might be delayed if these ordinance amendments were undertaken. “It’s almost as if we’re trying to punish the DDA for excellence …, ” he contended.

Margie Teall (Ward 4). In the background is Marcia Higgins (Ward 4).

Teall expressed her view that she did not think that clarity of the ordinance language could be achieved within the timeframe of the postponement. CFO Crawford took the podium to respond to Teall’s questions. When the council’s audit committee had met, Teall said, committee members had discussed the TIF calculations. As Crawford stood at the podium, she told him that at the audit committee meeting he had expressed the view that there needed to be an overhaul, or a look at the TIF calculations.

Teall asked Crawford if there was any confusion about how the TIF is to be calculated. Crawford allowed that he did not actually remember the specific conversation to which Teall had alluded – because there had been so many conversations on the topic. He did feel that the existing ordinance language is not clear. He expressed the view that the DDA has the ability and the right to interpret the ordinance language. The fact that there are so many questions about it is something that staff and the DDA are trying to work through, he said. “I’m not sure what I can say to help.” Crawford alluded to the last spreadsheet that Lumm had mentioned, saying he felt it addressed some of the areas that had previously been confusing.

Crawford noted that there is an interest in trying to understand the impact to the DDA. But he stressed that it’s important to understand the basis from which that impact is measured. Is the impact measured against the DDA’s assumed 10-year planning document, or is it measured against the new projections that the city has now? Crawford indicated that he’d attempted to flesh all that out in the last spreadsheet, which was as close as it comes to achieving clarity, he said, based on the questions that staff had been hearing.

Teall asked Crawford if he thought it would help if there were more clarity in the language. Crawford hoped that regardless of what the council’s decision is, at some point some clarity in the language can be achieved. Teall indicated that she didn’t think if the question came back to the council in June that clarity would exist.

Chuck Warpehoski (Ward 5) asked Kunselman directly if Kunselman’s intention was to bring the ordinance back in substantially the same form, or if he imagined through the collaborative process that there would be significant revisions to the proposed ordinance. Kunselman indicated that he was open to significant revisions – whatever it took to make sure that clarity is achieved. Kunselman felt that everyone was trying to reach clarity, which he said had been his original intent from “the get-go.”

Kunselman found it interesting that there is now interest in clarity from those who had opposed the effort initially, and who had called it bad legislation. He’d been working with the city staff to provide clarity to the language on the TIF calculation. “Are there other ways of doing it? I’m sure there are. Am I open to them? I very much am so.”

If the collaborative effort – among Hieftje and the DDA board treasurer and the city staff – results in significant revisions to the ordinance language, then those would come back at the second meeting in June, Kunselman said. But if that can’t be achieved by the second meeting in June, then the intent would be to postpone again, he said. He wanted to get the clarity that’s necessary so that everyone can understand the TIF calculations. And he allowed that could result in a need to restart the ordinance amendment process by introducing the revisions at first reading.

If the result was a first reading at the second meeting in June, Warpehoski wondered what the advantage would be of doing that. Warpehoski’s implication seemed to be that the council could vote down the ordinance revisions that night and start from scratch with a new first reading at the second meeting in June – if sufficient clarity had been achieved at that point.

Kunselman responded by saying that it was possible that the proposed amendments as they currently stood already did a pretty good job of achieving the kind of clarity that was sought. Kunselman pointed out that of all the speakers during the public hearing, no one had actually talked about the language of the TIF calculation and the council’s effort to keep the DDA’s budget whole. “It’s like nobody actually read the draft language” that was given initial approval by the council, Kunselman said. For all we know, Kunselman ventured, that could be the clearest language available.

Sabra Briere (Ward 1) asked Kunselman if he would consider a tabling instead of a postponement until a date certain. “It’s not that I don’t want this brought back up off the table,” she contended. She noted that she and Kunselman had talked about the need to achieve some clarity on the financial issues. She was not certain that clarity had yet been achieved. She had talked with city staff about some ideas to make her more secure in the clarity of the language. She did not feel she could even discuss it effectively that night.

From left: Sumi Kailasapathy (Ward 1), Sabra Briere (Ward 1) and Sally Petersen (Ward 2). Kailasapathy had to leave the meeting before it concluded.

Briere ventured that it might not be useful to tie things to a tight timeline – saying that it might require six months. She told Kunselman she did not think that he would necessarily need six months, but that’s the maximum time for which an issue can be tabled, she pointed out. She wanted to see that the collaborative effort was not tied to a rigid timeline – especially during the month of May [when the council is focused on approving the budget for the next fiscal year]. She did not figure that people would have a lot of flexibility during the month of May. Kunselman told her that he was not interested in tabling for six months.

At that point Kunselman laid out the parliamentary options, in an effort to encourage his colleagues to postpone the question, as he had asked. He pointed out that he could simply vote with the affirmative side and bring the question back for reconsideration at the next meeting. He noted that the council was, at that point in the evening, missing a couple of councilmembers who would be likely to be supportive of the postponement. Kunselman characterized the choices as “playing games” or just postponing. He confirmed with city clerk Jackie Beaudry that Kunselman was last in the roll-call sequence that night. [The roll call starts with a different councilmember each meeting, rotating around the table.] “All’s I’m asking for is a postponement until the second meeting in June,” Kunselman concluded.

Mike Anglin (Ward 5) indicated that in the brief conversations he’d had with members of the DDA board, they were willing to engage in further discussion. And that was exactly what Kunselman had been intending, Anglin said. He pointed out that the initial vote of the council on the question had been 7-3 in favor of having the matter go forward for discussion. He felt that postponing is exactly what the council should be doing. It was never a proposal that was meant to hurt the DDA, he said. Everyone at the table at the previous meeting had praised the work of the DDA, but they wanted further clarifications.

Christopher Taylor (Ward 3) noted that he hadn’t attended the previous council meeting. So he contented he was not fully apprised of what was said, or how it was said. But he ventured that, “If an earnest and polite conversation was intended, then that is what would have been requested.” He was happy that the council was moving in that direction. He allowed that Kunselman had raised a proper procedural point about voting last and being able to vote in the affirmative, putting Kunselman in a position to bring back the vote for reconsideration at the next meeting.

Still, Taylor felt that tabling was a more proper thing to do in this context. He agreed with Briere that the effort would require a conversation that would extend beyond the council’s second meeting in June. He felt the conversation should move the end result far away from the one that’s in the current resolution.

Taylor allowed that the resolution in front of the council would not be the “death knell of the DDA.” But he claimed it would “do harm and violence to the long-term plans of what I think has been demonstrated here to be a organization that is not broken and not in need of fixing.” He called the DDA an excellent steward of the downtown and the city’s collective resources. “They’re a credit to us all, and they do great work,” he said. On the postponement, he felt that a tabling would be best.

Warpehoski noted that Kunselman had expressed a desire not to play games. He hoped that what comes back in June would be significantly different from what is currently proposed and a fresh start can be achieved. He did not feel that arguing about tabling versus postponement was a good thing to be doing at 2 a.m. So Warpehoski supported a postponement to a date certain, to just keep it moving. He hoped that a different proposal would come back with language that did a better job with the governance and financing aspects. And if it did not, Warpehoski indicated he would be ready with amendments to try to put forward his vision.

DDA Ordinance Revisions: Postponement – Politics

Hieftje weighed in again: “Frankly, and since we’re being frank, I think that this started out with a very large political component.” So Hieftje wanted to postpone the question out beyond the council primary election date. [This year, the primary will be held on Aug. 6.] That would remove some of the political component, Hieftje contended. That way, good policy to be made without individual councilmember’s political goals being included, he said.

Hieftje felt that a postponement leaves an organization hanging that has been a very strong partner to the city. The last 10 or 12 years had been the worst in history since the last Great Depression, Hieftje said. Many cities across the state and across the nation had raised taxes to cope with it, he said, but the city of Ann Arbor has a millage rate that today is slightly less than it was back in the year 2000. When the city went to the DDA and wanted to renegotiate the parking agreement, the DDA did not have to do that, Hieftje said.

The DDA is a freestanding organization, he said, quickly adding that he had always maintained that the DDA is an “arm of the city.”

The DDA had “stepped up to the table” and renegotiated the contract under which the DDA manages the public parking system, Hieftje said. Now there is over $3 million a year that comes back to the city under terms of the parking contract, he noted. When the city was told by the Washtenaw County government that the city needed to move the 15th District Court out of the county courthouse, the DDA was there, and had granted the city $508,000 a year.

Hieftje did not want to keep the DDA “on the hook and hanging.” He thinks the process should have started out with a conversation with the DDA. “How come we didn’t want to do that to begin with?” Hieftje characterized the proposed ordinance revision as a “command-and-control” approach that he wanted to get off the table. Hieftje said he wanted to go back and have a sober conversation with the DDA.

Jane Lumm (Ward 2) then responded to Hieftje’s remarks:

I wasn’t going to go here but you sort of forced this issue, Mr. Mayor. Councilmember Kunselman has raised these issues for as long as I’ve been around. And you all know that. To suggest that they are simply politically motivated as you did at the last meeting, Mr. Mayor, does no credit to you or your role. You tried that with me once as well, and I think you would be better served to simply argue the merits of your position rather than attempt to personally discredit those who may occasionally disagree with you. I think it’s unfortunate that the rhetoric has risen to such an uncivil level, with personal insults and accusations. And frankly it appears that if any councilmember who has a view that may be different from the status quo, then it is either ‘politically motivated’ or ‘ill-informed.’ Perhaps there may be a different view, a different sense of priorities. I wish we could recognize and honor that reality in a much more civil manner on the council and as a community.

Lumm also pointed out that there were two councilmembers absent because they had to go to work in a few hours – so it was understandable why they needed to leave the meeting earlier. Lumm thought the council owed it to Marcia Higgins (Ward 4) and Sumi Kailasapathy (Ward 1) to give them an opportunity to vote on this.

On the question of postponement versus tabling, Lumm didn’t support tabling. “That’s basically shelving it,” she said. She pointed to the stack of written materials in front of her, saying that half of the notebooks were Q&As the council has received back from the staff. “We have flogged this thing,” Lumm said. And there has been a lot of interaction with the DDA. Lumm said, “We all know that this is not the catastrophic neutering of the DDA that is being portrayed.”

Lumm called herself a staunch supporter of the DDA – but she stressed that what she supported was an independent DDA. The ordinance change would help clarify the question about the TIF refund, Lumm said. It clearly needs to be clarified. So she didn’t understand the logic behind tabling it. Lumm appreciated that the postponement had been proposed for the second meeting in June and she thought that was fair, and so she would be supporting it.

Kunselman noted that the council had received the city administrator’s budget presentation that evening. So the council would be adopting the city budget with the DDA’s budget as a component unit of that budget – without changing it. No one is talking about changing the DDA budget for fiscal year 2014, Kunselman said. The reason he wanted to try to pursue action by the second meeting in June is that it’s the end of the fiscal year and the tax bills start going out. It’s his hope that as the tax bills go out, there would be new language about the TIF capture methodology. But he stressed that the city council would not be amending the DDA budget, regardless of what the ordinance revisions might be. The intent has never been to cut the DDA’s budget or to put the DDA in a position where the DDA has to cut programs. Kunselman pointed out that what’s at stake are new additional tax dollars.

Kunselman agreed with Lumm that the “scare talk” that Hieftje had used was not well-founded. Kunselman was willing to put some of the other things aside – an apparent allusion to the governance issues in the ordinance – in order to focus on the TIF capture methodology.

Kunselman addressed Hieftje directly, telling him that the Ann Arbor District Library had sent a letter to Hieftje, but Kunselman had not heard that Hieftje ever responded to it. Kunselman said he’d been criticized because he was standing up and trying to help out the library – which has a budget of roughly $12 million compared to the DDA’s budget of over $20 million. Who cares about the library? he asked, adding that he did. The library is an institution of our community, he said, but he thought the library’s thoughts on the issue are being squashed.

The idea that the city and the DDA don’t care what the library thinks and that the TIF capture will be calculated in accordance with whatever is best in the judgment of the DDA and the mayor shows arrogance, Kunselman said.

Kunselman observed the late hour and pled for a postponement. “It’s not about playing politics,” he stated, but “we can make it that way, if you want to keep talking about it that way.” Kunselman noted that he’d explicitly asked for collaboration. Kunselman contended that the interest in collaboration now on the part of opponents of the ordinance revisions would not have been shown, if the council hadn’t actually voted for the ordinance changes at first reading. The reason it had reached this point, Kunselman said, is that Hieftje had not addressed the issue for over a year: “And now you’re complaining about the fact we got a first reading?”

Kunselman returned to the parliamentary point about being in a position to assess the vote tally and vote with the prevailing side, giving him the opportunity to bring back the question for reconsideration at the next council meeting: “I’m the last vote. If you want to play the game, we can do that. … Or we can be kind and considerate at two o’clock in the morning and just please vote unanimously, and we’ll postpone it until the second meeting in June.”

Kunselman continued by saying that he would not push for a vote up or down at the second meeting in June, if there was not sufficient clarity in the language. “And you have my word that if we don’t have the language, … [I won’t] force a vote up or down in order to score political points. That’s not my intent. That’s exactly why I didn’t want to force the vote tonight.” He didn’t want to force the vote before the filing deadline for council candidates, he said, because the potential existed to create candidates based on that vote. [The filing deadline for the primary election is May 14.]

Kunselman said he did not want political intimidation – because that doesn’t yield good public policy. This is about public policy, not about scoring points, he said. “If you want to make it that way, then that seems how you want it to be. I’m sitting here taking the heat, taking the character assassination … I’m not going to back down just because you don’t want to be nice.”

DDA Ordinance Revisions: Postponement – Calling the Question

Warpehoski appeared to attempt to strike balance by noting that there are both public policy and political issues at play. “Let’s be honest about that,” he said, “It’s being played on all sides.”

Chuck Warpehoski (Ward 5).

Warpehoski believed that Kunselman had serious policy issues that he was pursuing honestly. But Kunselman had also had been quoted in the media as saying that it was 100% political and that councilmembers were all politicians and that people who supported his opponents need to understand that there are consequences for their actions.

But Warpehoski also noted that it was 2 a.m. He then “called the question” – a parliamentary move that is intended to end debate. Warpehoski pointed out that it was not a debatable motion and required a super-majority to pass. As some councilmembers sought clarification about the effect of Warpehoski’s motion, he said: “I’m saying let’s shut up and vote on … postponement.”

Outcome: The vote on calling the question was deemed to have failed, with Hieftje and Taylor voting against it. Higgins and Kailasapathy were absent.

The motion was deemed to have failed because it did not have eight votes, which is the number typically associated with a “super-majority” of the council. However, the council rules make a motion to call the question contingent on a 3/4 majority of those present, not of those members serving:

A motion to call the previous question (call for cloture) immediately ends all discussion and shall be out of order until all members have had an opportunity to speak twice to the question on the floor, and shall require a concurring vote of 3/4 of the members present.

On a vote of 7-2, Warpehoski’s motion to call to the question should have succeeded, and the council should have voted on the postponement at that point.

DDA Ordinance Revisions: Postponement – More Deliberations

Discussion continued on the postponement of the question until June 17. Hieftje asked if the council would consider postponement until Sept. 30. Between tabling and a postponement until Sept. 30, Hieftje indicated he supported postponement until Sept. 30. He noted that the conversations between the city and the DDA about the new parking contract had taken a year.

Speaking to Kunselman, Hieftje began: “If you really want to have a conversation, if it’s genuine this time, if you want to actually collaborate with the DDA… ” then Hieftje felt that Sept. 30 was a date that would be appropriate. Kunselman responding by reiterating his desire to have clarity before the tax bills go out. The money will get dispersed, he said, and if the DDA receives it, then the city may never get it back. So the purpose is to try to get it done.

“We’re talking some very simple language from everything I understand,” Kunselman said. Given the two months he was asking for, Kunselman ventured that it would be possible to work something out. “You have my word: If we don’t have it worked out by the end of June, I will not request or force a vote on a second reading.”

Briere admitted that Kunselman’s idea about what happens at the beginning of the fiscal year and disbursement of taxes left her confused. She asked for some explanation of what exactly happens with the summer taxes. Crawford indicated that taxes are levied and collected – which means the treasurer collects all the money and settles with the county to make sure that everything is correct, and then the funds are distributed to the various entities. He confirmed for Briere that it’s the FY 2014 taxes that are being collected. The fiscal year begins July 1.

Some back-and-forth between Crawford and Briere established that the city’s role in dispersing TIF money to the DDA would stay the same, regardless of any ordinance change. An ordinance change could affect how the DDA calculates a possible refund, however. Crawford told Briere he would have to double-check to see if an August change in the ordinance could affect July distributions. He thought that as long as you stay within the fiscal year, a change can be made.

Outcome: The final tally on the postponement was 4-5 in favor. Voting no were Teall, Hieftje, Briere, and Taylor. Voting yes were Warpehoski, Anglin, Petersen and Lumm. Voting last was Kunselman, who counted the tally at 4-4 and voted no so that he would be on the prevailing side. This put him in a position to bring back the vote for reconsideration at the council’s next meeting, on May 6.

DDA Ordinance Revisions: Tabling

With the motion to postpone having failed, Briere moved to table the item. And she asked the city administrator, the mayor, Kunselman, the city’s CFO, and the DDA representatives to begin meeting. It’s a double motion, she allowed, but she was doing it because it was in the interest of time.

Hieftje invited further discussion on the tabling. There was none. [Under Robert’s rules, a motion to table is in any case not supposed to be subject to debate.]

Outcome: The motion to table failed on a 5-4 vote – because it did not have a six-vote majority. Voting for tabling were Teall, Warpehoski, Hieftje, Briere and Taylor. Voting against tabling were: Anglin, Petersen, Lumm and Kunselman.

At that point Lumm got clarification that the council would in fact be voting on the issue that night.

DDA Ordinance Revisions: Amendment – Delayed Enactment

Petersen then proposed a possible amendment to the ordinance. She proposed that the clarification of the calculations would be enacted starting in fiscal year 2015 instead of fiscal year 2014, as originally called for. The benefit, she said, is that it would be consistent with the other timing issues that are mentioned in connection with implementing the DDA board governance changes. From a financial perspective, it would also eliminate the impact of the ordinance clarification’s $363,000 shortfall to the DDA in FY 2014. After that, Petersen, said, the shortfalls were, in her mind, minimal and actually became windfalls.

Teall responded to Petersen’s proposed amendment by questioning why the postponement Petersen had voted for could not have been proposed for longer – past the second meeting in June. She wondered why the ordinance revision couldn’t be postponed until next fall. Petersen replied that the postponement had been voted down. Petersen also indicated that she would rather have postponed the issue – but given that a vote appeared imminent, she wanted to set about to amend the ordinance.

Petersen indicated that she would rather have used the postponement to allow Kunselman and the DDA to come up with something that was mutually agreeable. But because the postponement did not get approved, she was simply looking for a different option that might be agreeable to the DDA and might make everyone feel a little bit better that the DDA would not be taking a “hit” in fiscal year 2014. Petersen had been hoping that this was something that Kunselman could have led the DDA to agree to, but in the absence of that possibility, she was proposing it herself.

Hieftje asked for deputy director of the DDA Joe Morehouse to come forward and walk the council through a version of the DDA’s 10-year planning document. Hieftje got confirmation that in FY 2015 and FY 2016, the DDA’s TIF fund balance was planned to be $441,060 and $264,816. Hieftje questioned whether it would even be possible for the DDA to undertake TIF projects with fund balances that low. Susan Pollay, executive director of the DDA, indicated that the concern would be about leaving the DDA with a zero fund balance. Pollay indicated that in a previous year, the auditor had highlighted a deficit in the DDA’s parking fund. Hieftje pointed to streetlight replacements on Main Street and curb ramp replacements as projects that might not happen if the ordinance amendments were to be enacted.

At that point, Kunselman had gotten out of his seat and moved down the table to talk with Petersen. Hieftje objected, saying, “We don’t usually have side conversations during the debate.” Hieftje continued by saying that it was hard for him to understand how people could say that this was not going to harm the DDA or its ability to do projects.

Lumm countered by asking Crawford to confirm what the impacts are of the ordinance changes on the DDA. She felt that the rhetoric had escalated and that the council was now hearing how catastrophic an impact this is going to have on the DDA. Lumm began her recitation of the financial information. For FY 2013, Lumm noted, there is no TIF refund planned. For FY 2014 as a result of new developments, the gross TIF is projected to grow by $650,000 or 17%, to $4.5 million and then to grow by roughly $100,000 a year. “So far so good?” she asked Crawford. Yes, he replied.

But under the ordinance amendments, Lumm continued, in FY 2014 there would be a $930,000 refund to the various taxing entities, of which the city would receive $490,000. The DDA would retain $3.57 million, which represents a $280,000 reduction compared to the current year, she said. So what folks are characterizing as “the sky is falling” and dismantling the DDA is all about a $280,000 year-to-year reduction to the DDA’s revenues compared to this year, which is equivalent to a 1% reduction for a $25 million annual operation, she concluded. The city of Ann Arbor would receive $490,000 more, she continued. Under the ordinance revisions, she said, TIF revenue to the DDA is projected to reach $4.6 million by 2023. That’s 19% higher than the FY 2013 level, Lumm said.

Crawford had two comments on Lumm’s remarks. After FY 2014, he said, the city had used the standard DDA assumption for growth. [That means that those numbers don’t assume completion of major new construction like 624 Church St., which has been approved by the council, or 413 E. Huron, which might be approved.]

The numbers that have been discussed also don’t include the reduction due to the elimination of the personal property tax, Crawford noted. That amounts to about $175,000 a year, he said. Lumm countered by saying that the personal property tax would be eliminated regardless of the ordinance change.

Outcome: Petersen then asked if her amendment might be accepted as “friendly,” which meant that no vote would be needed. Petersen’s amendment was accepted as friendly.

DDA Ordinance Revisions: Disclosure

Warpehoski at that point said he wanted to take the opportunity again to disclose that his wife, Nancy Shore, is the director of the getDowntown program, which is funded in part by DDA parking revenue funds. His understanding of Shore’s funding was that it was not the case that her job would be in jeopardy. He said if anybody had questions about the ethics of his voting on the item, they could excuse him from voting. He wanted to make sure that that was on the table.

Warpehoski read aloud the bulk of the relevant city charter passage.

The charter has two parts that address voting duty and recusal of councilmembers:

Except as otherwise provided in this charter, each member of the Council present shall cast a “yes” or “no” vote on each question before the Council, unless excused therefrom by a vote of at least six members.

A member of the Council shall not vote on a question in which the member has a financial interest, other than the general public interest, or on any question involving the member’s own conduct. If a question is raised under this section at any Council meeting concerning the eligibility of a member of the Council to vote on any matter, such question shall be finally determined by the concurring vote of at least six members of the Council, not including such member

No one responded to Warpehoski’s disclosure and no vote was taken to determine the issue.

DDA Ordinance Revisions: Governance

Lumm continued by characterizing the impacts of the ordinance amendments on the DDA as “not that significant,” once you get past the hyperbole about dismantling the DDA. The goal is to define the funding formula for the DDA, which would result in improved fiscal discipline, accountability, and controls, she said. She did not think that could be inappropriate.

Lumm began to turn the conversation toward the governance aspects of the DDA ordinance amendments. She supported a strong and autonomous DDA, and contended that today Ann Arbor does not have an arm’s-length, independent DDA. Instead, Lumm continued, the DDA is currently an extension of the mayor and the city council. She felt the best interests of the DDA, the downtown, and the city would be better served by more independence and fresh eyes, so for those reasons she supported the governance aspects of the proposal.

Those governance issues include term limits and some guidelines with respect to appointing elected officials to the DDA board. The result was that significant funding decisions are made outside the regular budgeting process, Lumm said. With little or no accountability, the DDA awards around $2 million in grants annually. She wasn’t saying those grants have been inappropriate, but the decision about whether to use a half-million dollars a year to pay for debt on the new city hall/Justice Center (as the DDA does) or to fund public safety personnel should be a decision made inside the budget process, not outside, she said.

So Lumm supported the elements of the ordinance revisions that more clearly defined TIF capture and how much the DDA retains and how much is refunded to the original taxing entities. She did not feel it represented a hardship to the DDA. Clarifying the funding represents a positive step forward in terms of transparency, accountability, and control and ultimately results in an equitable sharing of revenues, she said. By passing the ordinance revisions, she felt that the council would be taking a step toward re-establishing a high-performing, autonomous DDA, coupled with the appropriate levels of controls and accountability. She concluded that she would be supporting the amendments.

DDA Ordinance Revisions: Amendment – Capital Budget

Briere said she wished she felt as confident as Lumm did that the proposed language change provides the clarity that she seeks. So she offered an amendment that would add language:

The authority shall submit their capital budgets to incorporate them into the City’s Capital Improvement Plan (CIP). The authority shall at the time they submit their budget for Council approval identify that portion of the budget which is operating and that which is capital projects.

The purpose of the change, Briere said, was to reflect a concern she had heard over the years. The concern was that the city had repeatedly asked the DDA to undertake projects on behalf of the city, and that the DDA had always said yes. The DDA has allocated its funds to undertake those projects, but they are never in the city’s capital improvements plan, because the DDA is an independent organization, she said.

While the city council approves the DDA’s budget, the city council does not approve the DDA’s allocations. So by having the DDA provide the city with a list of proposed capital improvements at the same time that the city council looks at the capital improvement plan, and by breaking the budget into capital improvements versus operating funds, that would allow the council to ask questions about the DDA’s intended capital improvements. If some people felt that the DDA had spent its money carelessly without council approval, her goal was to begin to address that, Briere said.

Hieftje wondered what added clarity Briere’s amendment achieved. Briere noted that when a project springs forth as full-blown, people might have the impression that they’ve never heard of it before. This is an attempt to guard against that, she said.

Outcome: Briere’s proposed amendment passed on a unanimous vote.

DDA Ordinance Revisions: Amendment – Term Limits

Hieftje then indicated that he had a particular point he wanted to make – but someone else would need to move the amendment, which related to the term limits set forth in the ordinance changes. He noted that the DDA works on long-term projects, saying that the South Fifth Avenue underground parking structure was in the making for about 10 years. He attributed the idea to former DDA board member Rob Aldrich.

Currently on the DDA board there are five members who are in their second term, Hieftje said. Three members are in their first term. One member is in his third term. And one member [Leah Gunn] has served many terms. Hieftje indicated she would be retiring from the board this year. He did not see a need for term limits on the DDA, saying that they had not turned out well for the state of Michigan in the legislature – something he felt was acknowledged by most people. He thought there could be at least two members who did not wish to be reappointed this year, which meant there would be two vacancies coming up. So he asked if there was someone who would be willing to offer an amendment to strike the term limits from the ordinance change. The proposal was moved by Teall and seconded by Warpehoski.

Lumm indicated that she would not support the elimination of term limits. She felt that most organizations have bylaws that cover term limits. She called term limits “a positive” and felt they were appropriate. She described the DDA board as composed of many current and former elected officials. Some have joked that the DDA board has become like a kind of “retirement home for former councilmembers,” Lumm said. It needs greater independence, she contended.

Under mayor Ingrid Sheldon, Lumm said, term limits for all boards were the norm. The expectation at the time – of both Democrats and Republicans who served with Sheldon – was that there would be term limits, and there was a lot of turnover. She felt there was little turnover on many of the city’s boards and commissions. She felt the term limits would help strengthen the DDA as an organization. She wanted the board composition to be more reflective of the downtown community. She did not want it to be an extension of the city council – which is what she felt like it was today.

Lumm questioned why the DDA had pledged $508,000 a year to pay for the new police/courts building. If she owned a downtown business, she would ask the question: How does that help my downtown business? Actions like that are taken by the DDA because the makeup of the board makes it an extension of “this group sitting here,” and that’s not healthy, Lumm contended.

Responding to Lumm’s question about the DDA’s support of the police/courts building, Hieftje noted that public buildings are one of the things that the DDA is enabled by state statute to spend money on. Hieftje also cited David DeVarti and Leah Gunn – long-time former and current members of the DDA board – as a counterexample to Lumm’s contention that there had been defacto term limits imposed under Sheldon.

Taylor noted that a broad base of business leaders in the downtown and in Ann Arbor had voiced their wholehearted support for the DDA, emphasizing the “it-ain’t-broke aspect of the organization.” So he supported the amendment to strip out the term limits.

Stephen Kunselman (Ward 3).

Kunselman told Hieftje that he was willing to support stripping out the term limits “if you’re going to tell us right now before we go too much further that you’re willing to support this ordinance amendment, if it contains the TIF capture methodology that has recently been amended [in a friendly way]…” Kunselman continued: “It’s three o’clock in the morning. If you give us your word that you’re going to vote on amending the ordinance with regards to the TIF capture, then we can get through this. Otherwise we’re going to go through all this …”

At that point, Hieftje interrupted Kunselman by saying “Absolutely not!” Kunselman sighed: “Well, then, here we go.”

Warpehoski supported the stripping out of term limits. He felt that boards need both renewal and historical memory. He felt that a small staff of four people, which the DDA has, is not adequate to provide the kind of living memory that a long-term board member can provide.

Warpehoski stressed that if the council did not want to re-appoint someone, it was a matter of lining up the votes to accomplish that. Petersen indicated she did not support stripping the term limits out, because she felt it’s helpful to have some planned turnover. Anglin felt like term limits might help reinvigorate some boards. Some people are intimidated from applying to boards because they feel like they would not fit in, he said.

Outcome: The vote on stripping out term limits failed on a 5-4 vote, because it did not get the needed six-vote majority. Voting against term limits were: Teall, Warpehoski, Hieftje, Briere, and Taylor. Voting for term limits were Anglin, Petersen, Lumm, and Kunselman. Higgins and Kailasapathy were absent.

DDA Ordinance Revisions: Denouement

After the failed outcome of the attempt to amend the ordinance revision, Warpehoski noted the dynamic that had evolved from the absence of two councilmembers. He also pointed out the lateness of the hour. “We’re not getting anything done. We’re not thinking straight.” He moved to adjourn the meeting until Monday, April 22, at which time it would continue.

After a brief recess, the council came back and Warpehoski’s motion was to postpone all remaining agenda items until May 6, the next regular meeting, thus ending the April 15 meeting.

Outcome: The council voted unanimously to postpone all remaining items on its agenda until May 6. [.pdf of DDA ordinance as it will appear on the council's May 6, 2013 agenda]

April 15 Actions

The council did take action on a limited set of items at the April 15 meeting. Some of them were moved ahead on the agenda at the start of the meeting, because they were pressing matters or else needed eight votes to pass – like items involving land acquisition. The agenda changes reflected an implicit recognition that some councilmembers might need to leave before the meeting concluded.

Action: Wastewater Treatment Pumps

The council was asked to consider a $122,595 contract with Hubbell, Roth & Clark Inc. for replacement of “secondary effluent pumps” at the city’s wastewater treatment plan. One of the pumps had failed catastrophically. At the council meeting, wastewater treatment facility manager Earl Kenzie told the council that an assessment was made of the other five pumps to determine if the one pump should simply be replaced or if all of them should be replaced. That assessment, Kenzie said, showed that the other five pumps, which are over 30 years old, are in similar shape.

Outcome: The council unanimously approved the contract with Hubbell, Roth & Clark Inc. for the pump replacement.

Action: Bridge Maintenance Program

On the council’s agenda was an application for funding under the state and federal local bridge program, which the city hopes will fund up to 95% of eligible construction costs. The remaining 5% would need to be paid by the city of Ann Arbor. The city is also responsible for design, construction engineering and testing costs.

The three city bridges that would have preventative maintenance done with funding from the program would be: the Fuller Road bridge over the Norfolk Southern Railroad tracks; the Maiden Lane Bridge over the Huron River; and the East Medical Center Drive bridge over the Norfolk Southern Railroad.

Outcome: The council unanimously approved the funding application for the local bridge program.

Action: MDOT Application for 721 N. Main St.

The council was asked to approve an application to the Michigan Dept. of Transportation (MDOT) and the Southeast Michigan Council of Governments (SEMCOG) for funding through the transportation alternatives program (TAP) to support future city work on its property at 721 N. Main St.

During the brief discussion by the council, Sabra Briere (Ward 1) noted that the city had been awarded $150,000 by Washtenaw County parks & recreation for the 721 N. Main site, which is contingent on approval of a $300,000 grant that the city has requested from the Michigan Dept. of Natural Resources Trust Fund. Briere expressed her hope that the TAP money could be another grant that will bring amenities to the city property, including pathways and a wetland.

Outcome: The council unanimously approved the grant application to MDOT and SEMCOG for the 721 N. Main property.

Action: Land Purchase Near Ruthven Nature Area

The council considered a resolution to purchase another parcel within the city limits adjoining an existing nature area. The purchase price for the roughly 8-acre vacant parcel owned by Windy Crest Partnership – located just east of the Ruthven Nature Area – was $110,000. The parcel fronts on Meadowcreek Drive.

The parcel purchased by the city lies mostly within the floodplain or floodway as this image shows.

The city’s share of the purchase price is $82,500, with the remaining $27,500 contributed from Washtenaw County parks & recreation. Including the $13,000 in closing and due diligence costs, the city of Ann Arbor’s share amounted to $95,500, which will be paid from the city’s open space and parkland preservation millage proceeds.

The parcel is mostly in the floodway, as Millers Creek runs through it. Future costs associated with maintaining the site will include management by the city’s natural area preservation staff, who will conduct ecological burns and remove non-native species.

Purchase of the Meadowcreek Drive property marks the third similar acquisition by the city in about the last seven months, using funds from the open space and parkland preservation millage. At its Oct. 15, 2012 meeting, the council authorized the acquisition of a parcel on Hampstead Lane, adjoining the Kuebler Langford Nature Area. And at its March 4, 2013 meeting, the council authorized the acquisition of a roughly 0.357-acre piece of vacant land located on Orkney, adjoining the Bluffs Nature Area.

During the brief council deliberations, Jane Lumm (Ward 2) said she was pleased to see the item on the agenda. She ventured that sometimes people forget that the greenbelt and open space millage was conceived of having a two-thirds to one-third split between land purchased outside and inside the city. She noted that the parcel is in Ward 2, which she represents. She called the acquisition a high value investment of the millage proceeds.

Outcome: The council voted unanimously to purchase the parcel.

Action: Riverside Easement for DTE

The council considered an easement between the city of Ann Arbor and DTE Energy – for land in Riverside Park where utility poles are located.

The easement had been recommended for approval by the Ann Arbor park advisory commission at its March 19, 2013 meeting. [.pdf of easement agreement]

DTE Energy Buckler substation site plan. (Links to larger image)

The easement agreement is needed so that DTE can remove old utility poles and install new poles and overhead lines – generally in the same location as existing poles and lines at Riverside Park. The easement allows DTE to provide maintenance on those poles and lines. DTE requested the easement in relation to an $8 million new electrical substation that the energy firm is building on land adjacent to the park. The Buckler substation’s site plan was approved last year by the city’s planning commission on June 5, 2012. It did not require city council approval.

The overall project entails building the substation in the utility company’s Ann Arbor service center – to provide a way to distribute an increase in electrical power to the downtown area due to increased demand for electricity. The project includes two 15.5-foot tall electrical transformers and related electrical equipment on raised concrete pads, and a new power delivery center (PDC) – a 630-square-foot, 12.5-foot tall steel structure. The source of power will be transmitted through underground sub-transmission cables in an existing manhole and conduit system.

The project also needed a variance to the 15-foot conflicting land use buffer requirements along the east side property line, adjacent Riverside Park. DTE requested a variance that would allow the firm to plant 23 trees along the far western side of Riverside Park instead of on DTE property. PAC recommended approval of that variance at its Feb. 28, 2012 meeting. It was subsequently authorized by the zoning board of appeals on June 27, 2012.

In addition to planting trees in the buffer, DTE plans to remove 15 trees along Canal Street, which will be replaced by 50 trees in other parts of the park. As stipulated by city ordinance, DTE also will be required to pay the city a “tree canopy loss” fee. According to the city’s urban forestry website, the current canopy loss rate is $186/inch for shade trees and $172/inch for ornamental trees. For this project, DTE will pay $23,800, which will be earmarked for future improvements to Riverside Park.

Construction on the substation will take place during the summer of 2013.

Outcome: Without discussion, the council unanimously approved the easement.

Action/Postponement: Summit Townhomes

The site plan and necessary zoning for the Summit Townhomes project both appeared separately on the council’s agenda. But the council reached only the zoning question before voting to postpone everything.

Both the site plan and zoning request previously had been postponed by the council at its March 18, 2013 meeting. The property is located at 2081 E. Ellsworth Road.

The parcel for the Summit Townhomes development (shaded yellow). The blue line is the boundary between the Malletts Creek and the Swift Run watersheds.

The developer plans to build 24 attached residential units in four separate buildings, with each building between 80 to 160 feet in length. Each of the 24 units would have a floor area of about 1,300 square feet, and an attached one-car garage. The plan includes two surface parking areas on the east and west sides of the site, each with 12 spaces. To do this, the property needs to be zoned as R3.

March 18 had been the first time the site plan had been before the council. But the R3 (townhouse district) zoning for the property, annexed from Pittsfield Township, had been previously considered by the council, and referred to the planning commission for re-review. The planning commission then confirmed its original recommendation for R3 zoning.

In more chronological detail, the zoning item had first appeared on the city council’s Jan. 7, 2013 agenda, when it received initial approval. However, at its Feb. 4, 2013 meeting, the council heard from about a half dozen people who spoke during the public hearing, in opposition to the zoning – citing concerns about congestion and overcrowding. So councilmembers voted unanimously to refer the zoning issue back to planning commissioners for another look. The council indicated interest in hearing more detail on drainage issues, and the level of recreational services offered in that general area of the city, as well as information about public safety issues.

At their Feb. 21, 2013 meeting, planning commissioners voted again to recommend that the site be zoned R3 (townhouse district) – the same zoning they had previously recommended at their Nov. 20, 2012 meeting.

The project has been working its way through the city’s approval process for several months. The site plan had been postponed by planning commissioners in June of 2012 and again on Nov. 20, 2012, but was ultimately recommended for approval at the commission’s meeting on Jan. 3, 2013.

Before recommending the site plan, planning commissioners had previously recommended approval of annexation and zoning of the site in 2012. At their June 19, 2012 meeting, commissioners had approved annexing the 2.95-acre site, just east of Stone School Road, from Pittsfield Township into the city of Ann Arbor. The annexation was subsequently authorized by the city council.

On the zoning question, council deliberations consisted of just some brief remarks by Christopher Taylor (Ward 3). He observed that the issue had been postponed on a number of occasions, and at this point he was willing to let it go forward. Residents in the area had spoken persuasively about a number of concerns involving density and traffic congestion. But Taylor felt that residents recognized that the differences between the various options were marginal – even though those differences had been large enough that the question had merited further inquiry.

Outcome: The council voted unanimously to approve the R3 (townhouse) zoning, but did not reach the site plan approval before voting to postpone everything on its agenda. So the site plan will return to the council’s May 6 agenda.

Postponement: Theta Delta Chi Site Plan

On the council’s agenda was a site plan for the expansion of the Theta Delta Chi house at 700 S. State. The property is located at the southwest corner of State and Monroe streets.

Aerial view of Theta Delta Chi property, at Monroe and State streets.

The city planning commission had recommended the project for approval at its Feb. 21, 2013 meeting. Commissioners also granted a special exception use for the building.

The proposal includes expanding the square footage from 12,386 square feet to 14,752 square feet by making an addition at the rear of the fraternity house. The property is zoned R2B (two-family dwelling district and student dwelling district), and the size of the lot would allow for occupancy of up to 50 people. However, the fraternity is not proposing to increase its current occupancy of 33 residents.

The new addition will include an expanded restroom and shower facilities, common space, a resident manager’s apartment, and a bike room with nine bicycle spaces. According to a staff memo, the project entails moving the driveway, which is accessed off of Monroe Street, about five feet to the east. To do this, the fraternity will need to enter into an agreement with the Ann Arbor Downtown Development Authority and shift two on-street parking meters a few feet to the east.

The project also will require several variances from the city’s zoning board of appeals, including: (1) permission to alter a nonconforming structure (due to height and setbacks); (2) variances from Chapter 59 (off-street parking) to reduce the number of parking spaces required and allow one parking space in the front open space; (3) a variance from Chapter 47 (streets) to reduce the drive opening width; and (4) a variance from Chapter 62 (landscape and screening) to reduce the conflicting land use buffer width.

Other changes planned for this project include converting a yard on the south side of the house into a large patio. That area is currently used for parking. A new shed for a dumpster, recycling carts, and bike storage is proposed near the southwest corner of the site.

The fraternity is adjacent to apartment buildings and across the street from the University of Michigan law school.

Outcome: The council did not reach the Theta Delta Chi site plan on its agenda before deciding to postpone every item. It will appear on the council’s May 6 agenda.

Postponement: Privacy Law

The council was asked to consider a new ordinance regulating the use of public surveillance cameras. [.pdf of ordinance as presented to the council on April 15, 2013] This was to have been the first reading of the ordinance. All ordinances require readings at two separate meetings of the council before they can be enacted.

The proposed video privacy ordinance would not apply to CTN cameras like this one mounted in the Ann Arbor city council chambers.

The new ordinance would apply only to a limited range of cameras – those used by the city of Ann Arbor “to monitor human activity without the physical presence of an operator, including cameras on remotely operated aerial vehicles.” The ordinance would not apply to a range of city of Ann Arbor cameras, for example: cameras used to improve traffic design, security cameras operating in jails, prisons, water treatment facilities, public housing facilities, or the Ann Arbor Airport and other governmental facilities.

The new ordinance would allow for public surveillance cameras to be installed for 15 days or less at the discretion of the city administrator if the purpose is to address a specific criminal problem.

A period of longer than 15 days would require two-thirds of nearby residents to give written permission. Regardless of the period of the installation, on-site notice of the camera’s presence would be required. If a private residence is in the public surveillance camera’s range, then the residents of that property would have to give written permission for the installation.

A public surveillance camera could not be used for live-monitoring, except in emergencies, and audio recording would not be permitted. Access to the recorded images would be limited to “employees of the police department and attorneys involved in criminal proceedings.” After 90 days, surveillance recordings would be deleted unless they are part of an ongoing investigation. A report on the effectiveness of a camera would be published on a public website after its removal.

The council had been alerted to the forthcoming ordinance proposal nearly four months ago, when Chuck Warpehoski (Ward 5) told his colleagues at their Dec. 20, 2012 meeting that he and wardmate Mike Anglin would be bringing a proposal forward.

At that meeting, Warpehoski said the Ann Arbor police department doesn’t currently use that surveillance technique, but there had been some concerns in other communities.

By way of additional background, the ordinance has been long in the works but has been delayed. Former Ward 1 councilmember Sandi Smith had announced at a council meeting over a year ago, on Aug. 4, 2011, that she’d be bringing a video surveillance ordinance for consideration at the council’s Sept. 6, 2011 meeting. And a year before that she’d indicated the human rights commission would be working on the issue.

Outcome: The video privacy ordinance was not reached on the agenda before the council decided to postpone everything remaining on the agenda. The video privacy ordinance will be added to the council’s May 6 agenda.

Postponement: 413 E. Huron

One of the major agenda items of the April 15 meeting was the site plan application for 413 E. Huron – a proposed 14-story, 216-apartment building at the northeast corner of Huron and Division streets.

From the site plan application for 413 E. Huron. Critical root zones of landmark trees are shown by the dashed circles. The root zones were a focus of much of the questioning by councilmembers on March 18, and was a focus of public commentary on April 15.

The project was presented to the council as a “by right” project, which means that in the judgment of the city planning staff, it met all the zoning requirements.

The Chronicle counted 51 speakers during the public hearing on the 413 E. Huron site plan.

The council had previously postponed a site plan decision on April 1, 2013 and on March 18, 2013.

Consideration of the site plan came after the council had considered and postponed, then finally voted not to impose a possible moratorium on site plan applications in the D1 (core downtown) area.

Instead, the council voted on March 18 to give the planning commission direction to review the city’s D1 zoning. The scope of that review and a deadline of Oct. 1 was given at the council’s April 1 meeting.

A new public hearing on the project was started at the April 1 meeting, and held open so that it could resume on April 15. That public hearing will continue on May 6.

Images for the proposed 413 E. Huron project, at the northeast corner of Huron and Division. On the left is an early rendering provided by the developer. On the right is an updated version presented to the city council on March 18, 2013.

During council communications time, mayor John Hieftje took the opportunity to repeat a point that has been made during public commentary at previous meetings. The point was that the 2009 A2D2 rezoning, which designated as D1 (downtown core) the parcels where the 413 E. Huron is intended to be built, imposed a height limit of 150 feet, where no height limit had previously existed.

Hieftje continued by noting that the density allowed under the D1 zoning was only slightly higher than the previously-allowed density.

Sabra Briere (Ward 1) thanked Hieftje for making the point. She also pointed out that the previous zoning would have allowed only for a single use. It could not have been built as a multi-use like the proposed 413 E. Huron project and still met the code. Whether anybody would have built a commercial building that tall is something that “we’ll hopefully never know,” she said.

Outcome: The council did not reach the 413 E. Huron site plan on its agenda before deciding to postpone everything remaining. The site plan will appear on the council’s May 6 agenda.

Postponement: Misc.

A number of other agenda items were subject to the wholesale postponement of everything remaining on the council’s April 15 agenda. Those included the following:

• The appointment of Stephanie Buttrey as a member of the greenbelt advisory commission (GAC). Nominations to GAC are somewhat different from most other boards and commissions, in that nominations are made by the council as a body, not the mayor. Buttrey is being nominated to serve out the remainder of Liz Rother’s term – through June 30, 2014. Rother resigned the position. The resolution to appoint Buttrey was slated to be effective May 6 – which reflects the council’s typical practice of placing the resolution on the agenda as a “nomination” but then postponing the vote until the next meeting. In that respect the pattern is consistent with appointments for which the mayor places nominations before the council at one meeting, with a council vote taking place the following meeting.
• Confirmation of nominations to boards and commission made at the council’s April 1 meeting. Those included Sheila Steinman to the commission on disability issues and a reappointment of Ingrid Ault to the housing and human services advisory board. On April 1, Nickolas Buonodono had been nominated to replace Leigh Greden on the Ann Arbor Housing Commission (AAHC) board, after Greden had reached the end of a term. However, that nomination was not on the council’s April 15 meeting agenda for confirmation. According to AAHC executive director Jennifer Hall, who spoke to The Chronicle in a telephone interview, Greden may seek reappointment for a second term if he can accommodate his schedule to the meeting times.
• An amendment to an emergency purchase order for $7,500 with Waste Management Inc. for the Dexter Avenue improvements project. The council had previously authorized an emergency purchase order for $45,000 to remove contaminated soil discovered during excavation. It turned out there was more contaminated soil than initially thought.
• Establishment of a contingency budget of roughly $10 million for the facilities renovations project at the wastewater treatment plant. The council had previously awarded a roughly $10.8 million contract with Malcolm Pirnie Inc. (MPI) for engineering services. And the council had approved the tentative award of a roughly $93 million construction contract with Walsh Construction Company II LLC.
• Approval of $262,000 in payments to Ultimate Software Group over the next two fiscal years. The city uses the software for human resources and payroll services.

Present: Jane Lumm, Mike Anglin, Margie Teall, Sabra Briere, Sumi Kailasapathy, Sally Petersen, Stephen Kunselman, Christopher Taylor, Marcia Higgins, John Hieftje, Chuck Warpehoski.

Next council meeting: Monday, May 6, 2013 at 7 p.m. in the second-floor council chambers at city hall, 301 E. Huron. [Check Chronicle event listings to confirm date]

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Cover of the A2Y Chamber member directory. The Ann Arbor Chronicle is among the members listed.

In the interim, the city council has undoubtedly received communications lobbying for and against these changes. Among those communications was a letter sent on April 12 – with signatures from representatives of eight different entities that have significant specific interests in downtown Ann Arbor: “We write to oppose the proposed ordinance amendment … [P]aramount is the proposed change to the current ordinance procedure for calculating potential rebates of higher than anticipated TIF revenues back to taxing units …”

One of the eight signatories is unique – for two reasons.

First, the Ann Arbor/Ypsilanti Regional Chamber is the only one of which The Ann Arbor Chronicle is a member.

Second, the chamber is unique among the eight because it’s the one that has the legal and public policy resources to arrive at a position based on the legal and public policy merits of the issue. But in this case, the chamber has chosen a view that seems only half-informed by legal and public policy analysis.

With access to legal talent like Doug McClure, a recent candidate for 22nd Circuit Court judge who is chair of the chamber’s public policy committee, I’d expect this regional chamber to support the kind of clear, solid, forward-looking legal foundation that the proposed ordinance amendments would provide for us as a regional community. That’s especially true given that so many people – for and against the ordinance changes – agree that the current ordinance language lacks clarity.

And the idea that the chamber would support whatever interpretation the DDA chooses to give the ordinance – in the DDA’s sole judgment, with millions of regional tax dollars at stake – is bizarre from a public policy point of view. It’s especially bizarre given that this purportedly regional chamber has access to regional public policy talent like Andy LaBarre. He’s the chamber’s vice president of government relations who’s a former staffer for Congressman John Dingell. LaBarre is also an elected representative serving on a regional governing body that has tax dollars at stake in this debate – the Washtenaw County board of commissioners.

But the chamber chose to glance past the legal and public policy issues, opting instead to allow personal, petty mayoral politics to cloud its collective thinking.

What’s even more incredible is that the chamber has chosen wording for its letter – which it then recruited the other entities to sign – that would actually point an alert reader to the relevant legal and public policy issues. If the chamber itself had taken the words in its own letter more seriously, perhaps that would have guided the organization to take a position in favor of the ordinance changes.

In this column, I’ll lay out an analysis of the wording that the chamber has chosen – “… which the DDA calculates using its judgment within the standards set by the ordinance” – and explain why those words point the way to supporting the ordinance changes.

Brief Background

Among the revisions the council is poised to make to Chapter 7 – the part of the city code that establishes the Ann Arbor Downtown Development Authority – are some related to board membership. Term limits would be placed on DDA board members. And elected officials of taxing jurisdictions that have their taxes captured by the DDA could serve on the DDA board only by mutual written agreement. [.pdf of ordinance revisions given initial approval on April 1, 2013]

Those are amendments that count arguably as “just politics”– and could be scrapped, as far as I’m concerned. If we don’t like mayor John Hieftje’s appointments to the DDA board, then we should elect somebody else as mayor, or ask our city council representatives to vote against the confirmation of Hieftje’s nominations.

But most significant of the revisions would be those that clarify how the DDA’s TIF tax capture is calculated. The “increment” in a tax increment finance (TIF) district refers to the difference between the initial value of a property and the value of a property after development. The Ann Arbor DDA captures the taxes – just on that initial increment – of some other taxing authorities in the district. Those are the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. For FY 2013 – the current fiscal year – the DDA will capture roughly $3.9 million in taxes.

The Chronicle has reported on this issue in gory detail on multiple occasions, and I won’t repeat that history and analysis here. For those readers who need additional background, here’s a sampling of more recent Chronicle reports: “Deliberations on DDA Pave Way for Final Vote,” “DDA Ramps Up PR After First Council Vote,” and “Column: Math Is Hard, But This Ain’t Math.”

However, it’s worth highlighting at least one bit of what appears to be revisionist history. Questions about how the DDA’s TIF capture is calculated first arose in the spring of 2011. The context was the year-long, extremely difficult negotiations between the DDA and the city over terms of a new contract under which the DDA would manage the city’s parking system. The Chapter 7 issue emerged just as the DDA board was set to vote on the parking system contract at its May 2, 2011 meeting.

When the issue was first identified by the city’s financial staff, the DDA board postponed voting on the new contract. The period of the postponement was used to analyze whether the DDA’s Chapter 7 obligations could be met – at the same time the DDA was ratifying a new parking system contract, which required the DDA to pay the city of Ann Arbor 17% of gross parking revenues.

At the time, the consistent narrative on all sides was this: We didn’t realize the Chapter 7 paragraphs even existed. So when representatives of the DDA now contend that “We’ve been doing it this way for 30 years – why change now?” that’s not consistent with their 2011 narrative.

Initially during that 2011 timeframe, the DDA agreed that money was owed to other taxing authorities, not just for that year, but for previous years as well. And the DDA paid a combined roughly $473,000 to the Ann Arbor District Library, Washtenaw Community College and Washtenaw County in 2011. The city of Ann Arbor chose to waive its $712,000 share of the calculated excess.

Subsequently, the DDA reversed its legal position, and contended that no money should have been returned at all. That decision came at a July 27, 2011 DDA board meeting, and has been the position held by the DDA since that time.

Its Judgment

Now back to the A2Y Chamber’s letter. The one-page document is relatively brief – just three paragraphs. The key phrase comes in the first paragraph [emphasis added]:

We write to oppose the proposed ordinance amendment before the Ann Arbor City Council pertaining to the City’s Downtown Development Authority (DDA). There are many important issues brought forth within this ordinance, but paramount is the proposed change to the current Ordinance procedure for calculating potential rebates of higher than anticipated Tax Increment Financing (TIF) revenues back to taxing units, which the DDA calculates using its judgment within the standards set by the Ordinance.

If you stress the word “its” in the phrase “its judgment,” that induces the natural question: Who else’s judgment, besides the DDA’s, should be used to calculate the return of TIF monies?

Its Judgment: City Attorney? City Treasurer?

Besides the DDA, it might be reasonable to turn to the Ann Arbor city attorney for guidance on the TIF capture question. The city attorney has a special role to play, because the TIF rebate calculations are ensconced in a city ordinance – and one of the city attorney’s responsibilities under the city charter is to “prosecute ordinance violations.” Does the city attorney’s office have a view on the subject?

Based on an email sent nearly two years ago, on May 2, 2011 by city treasurer Matt Horning to DDA deputy director Joe Morehouse, the city attorney office’s initial review of the existing Chapter 7 ordinance language was at least consistent with the kind of clarification the city council’s April 15 approval would give.

Unless you believe that Horning was acting as an agent of city councilmember Stephen Kunselman – sponsor of the ordinance amendments and master of inflammatory political rhetoric surrounding mayor John Hieftje – then there’s no anti-mayor politics at the core of this issue. It’s just law and math.

Horning’s email expresses his view that the relevant paragraphs of the ordinance are to be understood as a limit on the DDA’s TIF capture revenue, and he reports that a preliminary consultation had been received from the city attorney’s office:

It is a bit ambiguous, but I think the intent is that the DDA should not get any more tax revenue than was anticipated by the plan. From 1982 to 2002, the original plan had very high estimates of capture, and so this clause was far from being triggered. In the new plan, the estimates were reduced significantly. From 2003 until now, the capture has exceeded the plan. … We have had preliminary consultation with the attorney’s office, but have yet to obtain an opinion as to whether our interpretation is correct. [.pdf of Horning's May 2, 2011 email]

This issue would present a logical opportunity for city attorney Stephen Postema to contribute an opinion – given that it’s a million-dollar issue. But for reasons that remain opaque to many in the community, Postema has resisted writing any opinions during his roughly 10-year career as city attorney. Under the city charter, the city attorney’s written opinions are to be filed with the city clerk’s office for easy reference by third parties. None have been filed.

So it’s fair to conclude that Horning was never provided with a formal opinion from the city attorney’s office. He may have received an “advice memo” on the topic – but the city typically shields such memos from disclosure, citing attorney-client privilege.

Still it’s relevant that Horning consulted with the city attorney’s office, and apparently got at least a preliminary indication back in 2011 that the paragraph in question can be reasonably understood as a limit on the DDA’s TIF revenue – a cap on the TIF revenue it receives. Otherwise put, the paragraph explains conditions under which a refund to other taxing authorities should be paid, independent of other considerations.

And under questioning from city councilmember Sumi Kailasapathy (Ward 1) at the council’s April 1, 2013 meeting, assistant city attorney Mary Fales appeared to support that view as well. From The Chronicle’s meeting report:

Kailasapathy indicated she felt there was some confusion, because what [Stephen] Kunselman was talking about is fund balance – which is a balance sheet item. But the TIF refund described in Chapter 7 actually has to do with the revenue income level, she explained. So if you take in revenue at a certain level, and if there is excess, then you have to refund some of it. She asked [assistant city attorney Mary] Fales if Fales agreed that this was a point of confusion. She asked Fales to confirm that the refund is actually based on revenue, not on the balance sheet. “I think that’s true,” Fales said.

That’s different from the DDA’s current legal position, which seems to be that the paragraph is a calculation related only to surplus funds that the DDA might have after satisfying obligations to make payments toward bonds. Further, the DDA’s position is that ordinance language allows the DDA to plan for bond obligations to be taken on by the DDA, independent of the cap on TIF revenues expressed in the ordinance.

Its Judgment: Other Taxing Jurisdictions?

Who else, besides the Ann Arbor DDA, might have a judgment to offer in this dispute? I think one logical set of interested parties, whose judgment should count for something, would be the jurisdictions whose taxes are captured by the DDA.

We know a dispute exists over the interpretation of the ordinance with respect to tax capture. So it’s reasonable to ask what the view is of those taxing authorities, whose tax revenues are captured and used by the DDA. After the DDA board meeting on April 3, 2013, I talked with DDA board treasurer Roger Hewitt, who defended the DDA’s unilateral decision in 2011 on the interpretation of the ordinance. His defense depended in part on his claim that DDA board members were hearing objections only from the Ann Arbor District Library.

However, that’s not the whole story. During that period in 2011, The Chronicle had reported concerns expressed by Josie Parker, director of the Ann Arbor District Library, but also by Larry Whitworth, who at the time served as president of Washtenaw Community College.

How about the Ann Arbor city council and the Washtenaw County board of commissioners? Hewitt contended on April 3 that the DDA board was hearing in 2011 that those bodies agreed with the DDA’s interpretation. I’ll give Hewitt this: It’s easy to imagine that Leah Gunn – who has served on the DDA board since 1991 and was a county commissioner in 2011 – would agree with her own interpretation. It’s also easy to imagine that then-councilmember Sandi Smith and mayor John Hieftje – who are also long-time DDA board members – would agree with their own interpretation.

But despite individual opinions, neither of those two bodies – the Ann Arbor city council, or the Washtenaw County board of commissioners – weighed in with a resolution stating their agreement with the DDA’a position. And I think whatever private assurance the DDA board and staff might have received about the view of other public bodies, that’s not an adequate foundation on which to base a multimillion-dollar decision.

To test the strength of the claim that the current Washtenaw County board agrees with the DDA’s interpretation of the TIF capture, I asked commissioner Andy LaBarre to take off his A2Y Chamber hat and put on his Washtenaw County board of commissioners cap. Does he even have a position on the DDA ordinance revisions that the city council is considering on April 15? Via email, LaBarre’s answer as a commissioner was this:

No, as a county commissioner I don’t have a position because I don’t know with enough certainty if the TIF calculation is correct. I would guess the calculation is on, but I don’t have a high enough confidence in that to take a formal position. Or more to the point, I don’t personally have the same level of certainty the [Chamber's] letter does.

In connection with the other taxing jurisdictions, there’s a myth surrounding their status in this dispute – a myth that for many people justifies their belief that the DDA alone should reasonably decide this issue. The myth was recited recently by city council veteran Marcia Higgins at a Sunday night caucus: that the other taxing jurisdictions had an opportunity in 1982, and again in 2003, to opt out of having their taxes captured by the Ann Arbor DDA.

Higgins isn’t the only veteran public official who believes this. I keep encountering all sorts of people who take as an article of faith that of course the other taxing jurisdictions had an opportunity to opt out of having their taxes captured. One of those people is a member of the A2Y Chamber’s public policy committee.

I understand how the idea that the other jurisdictions had an opt-out opportunity helps people get comfortable with the idea that it should now only be up to the DDA to decide the calculation. But the historical facts don’t lend that comfort.

Fact: The opt-out provision in the state statute was added in 1994, after the Ann Arbor DDA was established. Here’s the amendment that was added:

(3) Not more than 60 days after a public hearing held after February 15, 1994, the governing body of a taxing jurisdiction levying ad valorem property taxes that would otherwise be subject to capture may exempt its taxes from capture by adopting a resolution to that effect and filing a copy with the clerk of the municipality proposing to create the authority. The resolution takes effect when filed with that clerk and remains effective until a copy of a resolution rescinding that resolution is filed with that clerk.

And the 2003 renewal plan was crafted so that it did not trigger the opt-out provision – because it did not alter the boundary of the DDA’s TIF capture district.

Think about the end date of the 2003 renewal plan – the year 2033. Dating from 1982, when the DDA was established, that will mark a half-century of tax capture from other jurisdictions’ tax levy, absent any legislative ability of those jurisdictions to object.

In that context, I think it’s reasonable to expect the Ann Arbor DDA to show a little more respect for the judgment of the other taxing authorities, when it comes to settling this dispute.

But the real question is this: Is it even a matter of judgment, or is it a matter of law and math?

Its Judgment

Back to the chamber’s letter: “… which the DDA calculates using its judgment within the standards set by the ordinance …”

If you stress the word “judgment” in the phrase “its judgment,” that induces the natural question: What else might the DDA use instead of judgment? Given that the “standards set by the ordinance” are part of the ordinance, I think it’s reasonable to expect that the DDA would simply apply the law.

How does judgment even enter into the equation?

Its Judgment: Calculations

I’ve added paragraph numbers below to help keep things straight, but in the city code the paragraphs aren’t numbered. The main paragraph in question is this one [emphasis added]:

¶1 If the captured assessed valuation derived from new construction, and increase in value of property newly constructed or existing property improved subsequent thereto, grows at a rate faster than that anticipated in the tax increment plan, at least 50% of such additional amounts shall be divided among the taxing units in relation to their proportion of the current tax levies. If the captured assessed valuation derived from new construction grows at a rate of over twice that anticipated in the plan, all of such excess amounts over twice that anticipated shall be divided among the taxing units. Only after approval of the governmental units may these restrictions be removed.

On the question of how the calculations are to be done, it’s clear from the city treasurer’s May 2, 2011 email that he was using a cumulative method of evaluating the rate of growth – which is the method that the current ordinance amendments would explicitly clarify.

Here’s how I reach that conclusion. Based on the calculations I did back in 2011 using the cumulative method, I came up with more than $2 million that the DDA should have rebated to the other taxing jurisdictions. That’s roughly what city treasurer Matt Horning indicated in his March 2, 2011 email to DDA deputy director Joe Morehouse: “As you can see, the result would be a $2 million issue for the DDA, $1.2 million of which would be owed to the City.”

Instead, the DDA calculated a rebate using a method that requires consideration of just the immediately preceding year – instead of evaluating the anticipated rate of growth since the start of the TIF plan. Using that approach, the DDA came up with a roughly $1.1 million combined total that was owed to the other taxing jurisdictions. That is, based on the totals Horning reported, he was not evaluating the rate of growth just by looking at the immediately preceding year, but rather using the same kind of cumulative method that I did. And that’s the same kind of method that the ordinance revisions seek to clarify.

Just as an exercise, let’s imagine a completely different scenario – a hypothetical one where the actual growth in tax valuation in the DDA district was far less than anticipated in the plan. That’s the scenario in Chart A below.

Chart A: Hypothetical TIF valuation. Blue bars are the estimates for growth in the DDA TIF plan. The red line is the hypothetical actual valuation in the DDA district.

In Chart A, I think it’s clear to any fair-minded, reasonable person that no rebates would owed by the DDA for this time period – because for every year, the tax valuation was less than what was anticipated in the TIF plan. That is, the red line is lower than the blue bars.

But wait. On the DDA’s interpretation of the ordinance, which would use a year-to-year approach, in YEAR X+8, a rebate would be owed. To see this, have a look at Chart B, which is just like Chart A, with the addition of a purple line:

Chart B: Chart A: Hypothetical TIF valuation. Blue bars are the estimates for growth in the DDA TIF plan. The red line is the hypothetical actual valuation in the DDA district. For YEAR X+8, under the year-to-year method, you compare the slope of the purple line with the slope of the red line.

Using the year-to-year method, in YEAR X+8 you must check the slope of the purple line (anticipated rate of growth from previous year) against the slope of the red line (actual rate of growth). When you check the slopes of those two lines in Chart B, it’s clear that the “actual rate” exceeds the “anticipated rate” of growth – which means that on that scenario, which intuitively calls for no rebate, you’d still wind up rebating TIF capture to the other taxing authorities. Conclusion: the year-to-year method is absurd.

Moving from the hypothetical to the actual world, in Chart C below, the actual valuation (the green line) exceeds the growth anticipated in the TIF plan. So intuitively, a rebate is owed, defined by half the distance between the green line and the blue bars. Only if you were looking for an arbitrary and counter-intuitive way to calculate excess would you say: Look at YEAR X+8! The green line sloped downward that year, so that means that actual growth was not as much as anticipated!

Chart C: The green line shows actual valuation. The blue bars depict the TIF plan projections for the increase in valuation, based on pessimistic, realistic, or optimistic projections. Year X is 2004. Data for the final two years was estimated. For other years, the figures are actual.

There’s no politics in that chart. It’s abundantly clear that the cumulative method is the only reasonable application of the existing ordinance language.

Its Judgment: Loopholes

Just for readability, here’s the key paragraph again, with emphasis added in italics. Again, I’ve added paragraph numbers to help keep things straight, but in the city code the paragraphs aren’t numbered.

¶1 If the captured assessed valuation derived from new construction, and increase in value of property newly constructed or existing property improved subsequent thereto, grows at a rate faster than that anticipated in the tax increment plan, at least 50% of such additional amounts shall be divided among the taxing units in relation to their proportion of the current tax levies. If the captured assessed valuation derived from new construction grows at a rate of over twice that anticipated in the plan, all of such excess amounts over twice that anticipated shall be divided among the taxing units. Only after approval of the governmental units may these restrictions be removed.

The DDA’a current legal position relies crucially on the ordering of three un-numbered paragraphs in the ordinance and equally crucially on a choice of antecedent for the phrase “as set forth above” in this paragraph. [Again, I've added numbering to keep things straight, but the paragraphs are un-numbered in the city ordinance.]

¶3 Tax funds that are paid to the downtown development authority due to the captured assessed value shall first be used to pay the required amounts into the bond and interest redemption funds and the required reserves thereto. Thereafter, the funds shall be distributed as set forth above or shall be divided among the taxing units in relation to their proportion of the current tax levies.

By way of background, the use of “above” to refer to a specific portion of a piece of legislation is frowned upon by the state of Michigan’s Legislative Services Bureau in its official style guide. A complete list of vague and ambiguous terms to be avoided, according the LSB style manual, includes: above, hereinabove, aforementioned, hereinafter, aforesaid, hereinbefore, foregoing, heretofore, hereafter, preceding, herein. But that style guide dates from 2003, and Ann Arbor’s DDA ordinance was originally enacted in 1982, so we’re stuck with “as set forth above.”

On the DDA’s interpretation, “as set forth above” crucially refers to ¶1. That puts payment of the “refund” – according to calculations explained in ¶1 – chronologically second after payment of bond obligations, even though it’s listed first. Based on this chronological sequence, the DDA’s position is essentially that the language in ¶3 can be used as a loophole – to circumvent the requirement in ¶1 that excess TIF revenue be returned to the other taxing authorities. On the DDA’s interpretation, if the check the DDA writes to pay bonds is so large that the DDA can’t write a check to pay refunds to other taxing authorities, then the DDA doesn’t have to pay refunds to the other taxing authorities.

But more sensibly, the language in ¶1 is a condition that is supposed to affect how the DDA plans for the amount of bonding obligations it is able take on. That is to say, the most sensible way to understand the ordinance, taken as a whole, is that the DDA is supposed to take on bonding obligations only to the extent that these obligations would still allow the DDA to pay refunds to other taxing jurisdictions as spelled out in ¶1. That’s the only sensible interpretation to give the ordinance, even if the DDA is correct in assigning ¶1 as the antecedent of “as set forth above.”

But I don’t think it’s even reasonable to interpret the antecedent of “as set forth above” as ¶1. According to the DDA’s interpretation, the phrase “as set forth above” and “divided among the taxing units” would be redundant – because ¶1 would be nothing more than a special condition on how the money is to be divided. So the DDA could maintain its peculiar interpretation of the ordinance, even if the phrase “as set forth above” were completely omitted.

More plausibly, the antecedent of “as set forth above” would not make the phrase redundant, but refers simply to a section even farther “above” – about the purpose of the DDA. That purpose is “… to act in the best interests of the city to halt property value deterioration, increase property tax valuation where possible in the business district of the city, eliminate the causes of that deterioration, and to promote economic growth…”

Or a different likely antecedent of “as set forth above” would be the content of the “development plan” described in the section on the powers of the authority.

Either of those antecedents yields a paraphrase of ¶3 that does not allow for the “loophole” interpretation used by the DDA and would not result in redundancy. That sensible paraphrase would go something like this:

Tax funds that are paid to the downtown development authority due to the captured assessed value, after the “excess” to greater-than-anticipated growth is divided among the other taxing jurisdictions, shall first be used to pay the required amounts into the bond and interest redemption funds and the required reserves thereto. Thereafter, the funds shall be spent by the downtown development authority in the service of the development plan and according the authority’s purpose, or shall be divided among the taxing units in relation to their proportion of the current tax levies.

A further difficulty for the DDA’s legal position is that it did pay back more than $400,000 to other taxing jurisdictions in 2011. So if the DDA’s current legal position is correct, then it violated the ordinance in 2011 – because ¶3 doesn’t provide an option. The ordinance does not state that the money “may first be used to pay” but rather that the money “shall first be used to pay.”

If the DDA is serious about its current legal position, then it has a fiduciary and legal responsibility to reclaim the money it “erroneously” paid back in 2011. The fact that the DDA has not done so reveals that the DDA does not actually believe its own current legal position.

Conclusion: Kunselman

I totally understand why some councilmembers might feel uncomfortable voting for the clarification of the ordinance language – even if they can acknowledge how the amendments merely give clarity to the most sensible interpretation that already exists in the ordinance language.

And I totally understand why some councilmembers might feel uncomfortable voting for the ordinance amendments – even if they agree that the clarified interpretation would still result in an adequate amount of TIF revenue to the DDA. That’s because the clarified method of calculation still results in more TIF revenue to the DDA than the DDA itself is currently projecting on a 10-year horizon.

Why am I so understanding? As one city councilmember described it to me, they’re reluctant to vote for the amendments because they’re concerned this might appear to be condoning Stephen Kunselman’s “bad behavior.” As I understand it, the “bad behavior” includes Kunselman’s reported desire to provide “consequences” for those DDA board members who have in the past supported Kunselman’s opponents in city council races.

That will make it an easy political vote for some councilmembers on April 15: Vote against Kunselman based on his overtly political and “ill-mannered” style. So I completely understand why some councilmembers will take that easy political path and vote against the amendments. I hope for better from my local elected representatives, but would still predict that some will take the easy political path.

What I don’t understand is why the A2Y Chamber, with sufficient legal and public policy resources to reach the same non-political conclusion that the city treasurer did, decided to ignore the merits of the legal and public policy issues.

As a chamber member, I think The Chronicle deserved way better than we got from that organization’s April 12 letter opposing the ordinance amendments.

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This panel is from The Chronicle’s monthly comic, Bezonki, which is drawn by local artist Alvey Jones, a partner at the WSG Gallery. Bezonki is really terrible at math, which could explain why stuff is always exploding during his adventures. (This image links to a listing of all of the Bezonki panels.)

However, over the last several weeks, a significant issue has been brought forward for debate that’s been portrayed by some local officials as far more complex than that.

For now, let’s not even think about what the issue might be. It could be zoning. Or dog parks. Or parking rates. Or police staffing levels. Or public art. Or express bus service. Or outdoor signs. Or none of those. Call it Issue X.

As I’ve chronicled the workings of Ann Arbor’s local governance recently, I’ve watched as two local representatives – one elected and one appointed – have seemed to portray Issue X as too mathematically challenging to grasp. I chalk that up to politics: If the math can be set aside, then the conversation can more easily move to pure politics – the strong suit of elected and appointed officials.

To be clear, Issue X is fraught with politics. But I don’t think that focusing on the politics of Issue X serves the interests of Ann Arbor residents.

Issue X is also fraught with mathematical calculations. But not everyone is comfortable with equations.

So in this column I’ll sketch out an analogy that I think, on a purely conceptual level, accurately captures the essence of Issue X – in non-mathematical, non-political terms.

Issue X: The Gas Cards

Imagine a company called CommunityWorks. The company has five frontline employees in the Ann Arbor area: Allison, Ann, Walter, William and Dan. Each employee has a company automobile. The company gives four of the employees a card with a magnetic strip – which they can swipe at the CommunityWorks pump to put gasoline into their automobiles. Using that gasoline, they can drive places to do important work for the company. But Dan is the odd man out. Dan doesn’t receive a gasoline card.

So what is Dan supposed to do for gasoline to keep his car running?

Issue X: How Dan Gets Gas

Dan gets his gasoline using a CommunityWorks company policy, set forth by the CEO. The policy allows Dan to go to the other employees’ cars and extract gasoline from their tanks. So Dan routinely hooks up a hose to Allison’s car – and to Ann’s and Walter’s and William’s – and extracts some gasoline from their tanks.

It’s just a small portion of the gasoline in each tank that Dan extracts. The amount is strictly regulated by a special meter – given to Dan by the CEO and calibrated by Ann’s supervisor. Dan is required to attach the special meter to the gasoline extraction hose whenever he uses it to extract gasoline from someone else’s tank.

The other employees know that Dan is doing this, and they might grumble about it from time to time – because other than Ann, they didn’t have any say in the formulation of the gas hose policy. But they understand that it’s all perfectly consistent with the policy. Still, they sometimes ask Dan where he’s driving with the gasoline he has extracted from their tanks. They ask, because they themselves can’t drive quite as far to do their own work for the company – on account of the gas that Dan takes out of their tanks. So they feel it’s fair to ask Dan to account for where he drives.

And Dan will explain that he’s used their gasoline, for example, to make client visits. And Dan will tell them that this generates more income for the company. And Dan often talks about the fact that he calls on really difficult clients, and convinces those difficult clients to do business with the company. These are the clients that Allison, Ann, Walter and William would probably not otherwise call on, according to Dan.

The company’s employees seem to be mostly satisfied with the arrangement – and they all agree that Dan is a solid employee who makes a positive contribution to the company. Dan is able to make pleasant small talk around the water cooler.

And the other employees think it might be possible that what Dan is saying is true – that Dan is generating additional income for the company, that allows additional gasoline to be put into the pump for the other employees: Allison, Ann, Walter and William.

Issue X: The Special Meter

But one day, as Ann is watching Dan extracting the gasoline from her tank, she notices that Dan has attached the special meter to the hose in an odd way. It looks upside-down to her. And when questioned about it, Dan concedes that it looks upside-down, but says he’s always done it that way. It turns out that Dan’s way of attaching the meter to the hose increases the amount of gasoline that Dan is able to extract from the other employees’ gas tanks.

So Ann says to Dan: I think you ought to attach the meter so that it’s right-side-up. Dan agrees in the future to use the meter in its right-side-up position. And Dan even goes so far as to put back some gasoline into the other employees’ tanks based on the excess amounts he’s previously extracted.

But then Allison, Walter and William notice something: Dan didn’t use the special meter that the CEO had given him to measure out the amount of gasoline he put back into their tanks. They notice that Dan used a different meter – one that returned to them less gasoline than the company’s meter would have dispensed.

So they question Dan about this. Dan’s response: I’ve hired a mechanic who tells me the technique I’ve always been using to attach the meter to the hose is actually an acceptable way to do it; and, by the way, I didn’t need to put that gasoline back into your tanks in the first place.

Issue X: Resolving the Dispute

Ann’s supervisor – the guy who calibrated the meter – proposes that a safety clamp be added, to ensure that in the future, when the meter is attached to the hose, it’s right-side-up.

Tax Increment Finance (TIF)

I’m guessing that at least some Chronicle readers quickly recognized Issue X as the Ann Arbor Downtown Development Authority tax increment finance (TIF) capture. In terms of Issue X, the city council is Ann’s supervisor.

The council is currently poised to add a safety clamp to the meter that attaches to the DDA’s TIF revenue hose. That safety clamp takes the form of revisions to Chapter 7 of the city’s code, which established the DDA.

When the politics and the math are stripped away – as they are in the CommunityWorks analogy – it’s easy to see why those ordinance revisions received majority support (7-3) when the council took its initial vote on April 1.

And it’s easy to see why city councilmembers who are focused on the substance of the issue, instead of the politics, would support those revisions on April 15. That’s when the council is set to take its second and final vote.

Cast of Characters, Props

A more complete key to the characters in the CommunityWorks analogy:

• gasoline: tax money
• gas card: legal authority to levy a tax
• extracted gasoline from another tank: tax increment finance (TIF) revenue
• gas hose and meter: Michigan’s Downtown Development Authority Act
• inner workings of gas hose meter: Ann Arbor’s DDA ordinance (Chapter 7)
• Allison: Ann Arbor District Library
• Ann: City of Ann Arbor
• Ann’s Supervisor: Ann Arbor city council
• Walter: Washtenaw County
• William: Washtenaw Community College
• Dan: Ann Arbor Downtown Development Authority
• The Mechanic: DDA legal counsel
• CommunityWorks: State of Michigan
• CEO of CommunityWorks:  Michigan state legislature

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From left: Jane Lumm (Ward 2), assistant city attorney Mary Fales and Stephen Kunselman (Ward 3). (Photos by the writer.)

After two postponements, the council gave initial approval to a set of changes to the ordinance that establishes the Ann Arbor Downtown Development Authority (DDA). The changes can be divided into those that affect board composition and those that relate to the computation of the DDA’s tax increment finance (TIF) capture.

The tax calculations have implications of roughly $1 million a year for the DDA and the taxing jurisdictions whose taxes are captured by the DDA. Those taxing jurisdictions include the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. The vote was 7-3, as mayor John Hieftje, Margie Teall (Ward 4) and Chuck Warpehoski (Ward 5) voted no. Christopher Taylor (Ward 3) was absent. The final vote will likely come at the council’s April 15 meeting. Councilmembers are not obligated to vote the same way the second time around.

The council also wrapped up an issue that has appeared on its agenda for several meetings. At its March 18 meeting, the council had finally decided not to enact a moratorium on site plan applications in D1 (downtown core) zoning districts. Instead, the council had directed the planning commission to conduct a review of D1 zoning. But councilmembers had left open the question of the exact scope of work and the timeframe for its completion by planning commissioners. At the April 1 meeting, the council allowed the commission six months, until Oct. 1, to review the following: the appropriateness of D1 zoning on the north side of Huron Street between Division and South State and the south side of William Street between South Main and Fourth Avenue; the residential premiums; the zoning for the University of Michigan Credit Union parking lot.

Other business was further delayed by the council. At the developer’s request, the council postponed for a second time the 413 E. Huron project, a proposed 14-story, 216-apartment building at the northeast corner of Huron and Division streets. That project will come back before the council at its April 15 meeting. A new public hearing on the 413 E. Huron site plan application was started on April 1 and will continue on April 15.

The council also postponed a second and final vote on changes to the city’s sign ordinance. The changes would prohibit any new billboards, and allow only a limited range of digital signs. That won’t come back before the council until May 6. Several people addressed the council during the public hearing. All of them worked for Adams Outdoor Advertising, and spoke in opposition to the changes. Because of the postponement, the council extended a moratorium on digital sign applications, which has now been in place for a year.

The council also extended a moratorium on spending of monies that have been set aside under the city’s Percent for Art ordinance. A revision to that ordinance, which would likely eliminate the public art set-aside but still allow for aesthetic elements to be built into a project, is expected to be brought forward in the next few weeks. The public art ordinance revisions are being crafted by a council committee that was tasked with that responsibility in December of 2012.

At its April 1 meeting, the council also approved contracts for renovations at the Gallup Park canoe livery, and the Argo and Geddes dams. In addition, the council approved a lease for additional parking in connection with the Argo Cascades.

Other business at the meeting included council approval of the notice to issue bonds for the city’s drinking water system. The council also authorized contracts in connection with street reconstruction and sidewalk repair work for the 2013 season.

DDA Ordinance

Several revisions to Chapter 7, a city ordinance governing the Ann Arbor Downtown Development Authority (DDA), were on the council’s agenda, having been postponed twice previously. The council had postponed voting at its March 18, 2013 and March 4, 2013 meetings. [.pdf of DDA ordinance given initial approval on April 1]

The revisions considered by the council fell roughly into two categories: (1) those involving board composition and policies; and (2) calculation of tax increment finance (TIF) capture in the DDA district.

In the first category are: a new prohibition against non-mayoral elected officials serving on the DDA board except by agreement with the other taxing jurisdictions; term limits on DDA board members; and a new requirement that the DDA submit its annual report to the city in early January.

An amendment to the ordinance changes offered by Jane Lumm (Ward 2) during the meeting was accepted as friendly. It was meant to assure a focus on the DDA’s support of housing. It stipulated that if tax increment financing is used as the financing method for an approved authority project, the project must meet one of the DDA’s adopted plan goals. Among those plan goals is support of housing. Lumm’s change provides the ability of the DDA to make investments in properties not just in the district, but also in neighborhoods near the district.

More significantly, among the proposed revisions to Chapter 7 are changes that are meant to clarify how the DDA’s TIF tax capture is calculated. The “increment” in a tax increment finance district refers to the difference between the initial value of a property and the value of a property after development. The Ann Arbor DDA captures the taxes – just on that initial increment – of some other taxing authorities in the district. Those are the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. For FY 2013, the DDA will capture roughly $3.9 million in taxes that would otherwise have gone to those other entities.

The proposed ordinance revision would clarify existing ordinance language, which includes a paragraph that appears to limit the amount of TIF that can be captured. The limit is defined relative to projections for the valuation of the increment in the TIF plan, which is a foundational document for the DDA. The result of the clarification to the Chapter 7 language would mean about $363,000 less TIF revenue for the DDA in FY 2014 – compared to the $3.933 million shown in the DDA’s adopted budget for that year. For FY 2015, the gap between the DDA’s budget and the projected TIF revenue – using the proposed clarifying change to Chapter 7 – is just $74,000.

However, the total increment in the district on which TIF is computed is expected to show significant growth. And under the proposed clarification of Chapter 7, that growth would result in a return of TIF money to other taxing jurisdictions – that would otherwise be captured by the DDA – totaling $931,000 each year for FY 2014-15. The city of Ann Arbor’s share of that would be roughly $559,000, of which $335,000 would go into the general fund. The city’s general fund includes the transit millage, so about $69,000 of that would be passed through to the Ann Arbor Transportation Authority.

In the Chapter 7 ordinance language, the amount of TIF capture that’s returned to the other taxing jurisdictions is tied to growth in the valuation in the district. Under Chapter 7, if the actual rate of growth outpaces the growth rate that’s anticipated in the TIF plan, then at least half the excess amount is supposed to be returned to the other taxing authorities in the DDA district. In 2011, the DDA for the first time returned excess TIF capture to other authorities, when the existence of the Chapter 7 language was reportedly first noticed. At that time, the DDA made repayments of TIF monies to other authorities of around $400,000, which covered what was owed going back to 2003. When the DDA calculated the amounts owed in 2011, the city of Ann Arbor waived its roughly $700,000 share. Subsequently, the DDA reversed its legal position, contending that it had not needed to return the money it had repaid.

In 2011, the DDA used a year-to-year interpretation of the Chapter 7 language instead of computing the rate of growth against the base year in a cumulative fashion. That is a point that the Chapter 7 revisions would clarify. At the two previous meetings when the council had considered but postponed voting on the ordinance amendments, that specific point had not been addressed. But the substitute ordinance revision offered on April 1 clarified the current language in favor of the cumulative methodology.

The figures below come from the city of Ann Arbor’s financial services staff. Labels are The Chronicle’s.

MOST RECENT PROJECTIONS FOR TIF CAPTURE (in millions)
 FY 13   FY 14  FY 15
========================== 
 3.957   3.933  3.756  DDA Adopted Budget TIF Revenue
 3.957   4.501  4.613  Projected TIF, DDA View 
 3.957   3.570  3.682  Projected TIF, Clarified Ch. 7
          .568   .857  Budgeted vs Projected, DDA View
         (.363) (.074) Budgeted vs Projected, Clarified Ch. 7
==========================

ADDITIONAL REVENUE FROM CLARIFIED CH. 7
 FY 13   FY 14  FY 15
========================== 
          .335   .335  City General Fund
          .223   .223  City Non-General Fund
          .559   .559  Total City

          .372   .372  Total AADL, WCC, WC
          .931   .931  Total

-

These projections do not include the additional tax capture that would result in future years from completion of City Apartments, 624 Church, 618 S. Main, or 413 E. Huron (assuming that it is approved).

DDA Ordinance: Task Force

During council communications time at the start of the meeting, Sally Petersen (Ward 2) reminded her colleagues that she’d announced at the previous meeting  – very late during the evening – that she would be bringing forward a resolution to establish a task force focused on the DDA. She had proposed the group’s specific assignment as conducting a strategic assessment of the priorities for economic development between the DDA and the city. After that, she’d had conversations with the DDA and had changed the scope of that initiative a bit. The focus would not just be the DDA but rather the idea of economic development – which would align the priorities of the city, the DDA and Ann Arbor SPARK. She was working with the city attorney’s office on the language of the resolution, she said, and is hoping to bring that resolution forward on April 15.

DDA Ordinance: Audit Committee Update

During council communications time at the start of the meeting, Sumi Kailasapathy (Ward 1) gave an update on the activities of the council’s audit committee. She said the committee did get answers to its questions via the city’s CFO. The auditor indicated that during the past year’s audit, the auditor did not review the DDA’s TIF capture for compliance with Chapter 7 of the city code. She found that “really troubling” because the DDA’s own 2003 renewal plan states that the TIF account has to be tested for compliance under the state of Michigan’s Downtown Development Authority Act. Secondly, Kailasapathy continued, the auditor’s own report on controls and compliance states that they tested the DDA’s financial statements for compliance – but when specifically asked if it was tested for Chapter 7 compliance, the answer was that it had not been. She indicated that she felt DDA deputy director Joe Morehouse, who handles the DDA’s finances, and city CFO Tom Crawford need to take up this issue. She stated that an audit has high standards, and if compliance with Chapter 7 has not been tested, then it needs to be tested. She ventured that it might be necessary to reissue the financial statements of the DDA.

Margie Teall (Ward 4), who chairs the audit committee, responded to comments made by Kailasapathy at the council’s March 18 meeting, when Kailasapathy noted that Teall had not been being willing to call a meeting. [A previous meeting of the audit committee was called by two of its members – Kailasapathy and Stephen Kunselman (Ward 3) – which is a possibility under Robert's Rules. The other possibility is for a meeting to be called by the chair.] Teall contended she had always been willing to meet. But she was waiting until all the DDA staff could attend. [DDA deputy director Joe Morehouse was on medical leave.] Teall noted that the audit committee would be meeting with the DDA staff the following day, and pointed out that DDA staff had acknowledged the shortcomings, and said they’d be addressing them. Teall indicated that the response from the DDA staff to the questions they been asked was that they’re “on top of that.”

DDA Ordinance: Council Deliberations

Stephen Kunselman (Ward 3) led off the deliberations by saying that the item had appeared a couple of times previously on the council’s agenda and he hoped that this evening the council could finally get some discussion going, and take the initial vote at the first reading.

What he had done in cooperation with Sumi Kailasapathy (Ward 1) – the co-sponsor on the proposed ordinance changes – was to put together a substitute version for the original. The substitute version reflects some changes that had been talked about “out in the community,” Kunselman explained. Some of those included the cumulative methodology for calculating the tax increment finance (TIF) capture.

In addition, the section on board composition is different in the substitute version. Rather than preventing any elected officials from serving on the DDA board, based on discussions with some of the members of the other taxing jurisdictions whose taxes the DDA captures, it had become apparent, Kunselman said, that anything the city was doing should be done in concert with the taxing jurisdictions. He then quoted from the revised substitute ordinance changes:

(1) Except for the Mayor as provided above or by mutual written agreement of the taxing jurisdictions levying taxes that are subject to capture by the authority, no public official of any taxing jurisdiction levying taxes that are subject to capture by the authority shall be eligible for appointment, whether in his or her official capacity or as an individual; and
(2) No member may serve more than 2 consecutive full terms.

Kunselman said he knew there had been a lot of information going around generated by the city staff and by the Ann Arbor DDA board members – talking to various groups to seek support for their position. His perspective on the issue, he said, was to focus on “keeping the DDA’s budget relatively whole, tightening up some of the administrative functions.” He felt it would become apparent that there are some elements of the state law which the Ann Arbor DDA’s financing plan doesn’t follow, but the proposed amendments would bring clarity to that. “We know that there is an issue with the clarity of the TIF methodology,” he said. He noted that the mayor had received a letter from one of the taxing jurisdictions [the Ann Arbor District Library] disagreeing with the method that had been used.

“If we allow these things to occur on our watch, then we are complicit to the fact that we’re ignoring what the law says,” Kunselman said. He then quoted from the state enabling legislation for DDAs:

The plan may provide for the use of part or all of the captured assessed value, but the portion intended to be used by the authority shall be clearly stated in the tax increment financing plan.

Kunselman ventured that everyone had seen the three columns that are included in the Ann Arbor DDAs financing plan – which show projections of growth labeled as pessimistic, realistic, and optimistic. For whatever reason, Kunselman said, the DDA board keeps approving a budget based on the optimistic version of the TIF financing plan. The realistic column is the one that is set in bold typeface, he noted. If it’s not clear, then Kunselman contended that it is not in compliance with the state law. That was his whole point in bringing the amendments forward. His point was to bring confidence back to the DDA. Responding to criticism about what Kunselman was actually trying to accomplish, he spoke directly to mayor John Hieftje: “Mayor, I have never asked for the dissolution of the DDA. And I’m certainly not about to now. I’m just trying to give our DDA institution some clarity, some confidence, and some trust in how it works on our behalf.”

Stephen Kunselman (Ward 3).

Sabra Briere (Ward 1) asked for clarification about Kunselman’s effort to put the substitute ordinance amendments before the council for consideration. Hieftje checked with Kailasapathy that it would be acceptable to consider the substitute version. And with that the substitute amendments were before the council.

Hieftje ventured that councilmembers would have several questions for staff. He invited executive director of the Ann Arbor DDA Susan Pollay to the podium. Hieftje noted that the council had only recently received some answers to questions that had been posed by email. He began by reading off some of them from his laptop screen: Will the DDA continue to be able to make grant payments to the city for the courts and police building? Hieftje noted that the Ann Arbor DDA had awarded the city a grant to support the construction of the new Justice Center [aka police/courts building] – and he had seen the paperwork on that. [As a member of the DDA board, Hieftje voted for the $8 million grant, which was to be paid in roughly $0.5 million installments.]

He explained that the amount of the grant worked out to $508,000 a year. Hieftje then recited the history of how Washtenaw County had decided that the city needed to move the 15th District Court out of the county courthouse space. And a new building with a police station had been completed by the city [called the police/courts building, the Justice Center or the municipal center]. Hieftje characterized the situation as “the DDA stepping up to the plate.” Hieftje alluded to the fact that under the state statute, a public building in the downtown area was an eligible DDA project.

About the DDA resolution pledging the $8 million grant to support the construction of the new Justice Center, Hieftje told Pollay: “As I read that, though, that is a grant. And if the DDA felt that they had other uses for those funds, it would be at the discretion of the DDA to move those?” Pollay’s answer: “It is.”

Hieftje moved on to the topic of the other activities: What other aspects of the DDA’s activities would be impacted by the ordinance change? He indicated that the DDA had identified various things. Margie Teall (Ward 4) asked about the impact on affordable housing grants.

Pollay indicated that whether such grants would continue would depend on the budget. She said the DDA was just finishing a period where a significant amount of construction had taken place, and fund balances are approaching their minimum, she said. The housing fund is now at zero, she reported. In the next two-year budget, recently adopted by the board, the DDA is anticipating transferring some additional money into the housing fund. But that depends on revenues, she said, which would determine whether there would be sufficient money to make those housing funds transfers. An upcoming grant is planned for the Village Green City Apartments project, which will have four units of affordable housing – with “affordable” defined as accessible to residents with incomes at 60% of the average median income or below. That grant would exhaust all of the housing fund balance, Pollay said.

Depending on whether the ordinance is enacted, she continued, the housing fund balance could be restored or not. At that point, Jane Lumm (Ward 2) indicated she had emailed everyone a note in the last 15 minutes related to Teall’s question. She was suggesting an amendment to the ordinance changes to address the concern that Teall had expressed. She had sent the amendment at 8:10 p.m., she said. Not all councilmembers had received Lumm’s message. So she sent the message again.

The amendment was eventually accepted later as friendly by Kunselman and Kailasapathy. With italics indicating additions and strike-through indicating deletions compared to the original version, Lumm’s amendment read as follows:

(4) Development Plan Projects: In identifying, approving, and financing possible projects to meet the goals of the plan, the authority shall comply with the following:

If tax increment financing is used as the financing method for an approved authority project, the project must be meet one of the adopted development plan goals specifically allowed under Act 197 and directly benefit properties within the downtown development district or near-downtown neighborhoods.

While Lumm sorted out the email issue, Hieftje followed up with more questions for Pollay.

He confirmed with Pollay that the Library Lane underground parking garage was the largest project that the DDA had ever undertaken. It was anticipated, Hieftje said, that the Library Lane project would have a significant impact on the TIF fund, and on the TIF fund balance as a consequence of that major construction project. But he ventured it was anticipated that in the future there would be additional revenues generated by new developments in the downtown, and that those additional TIF capture revenues would be used to replenish the DDA’s fund balances and prepare for future projects. Pollay confirmed for Hieftje: “That is all correct.” Hieftje added, “That’s the way I remembered it as well.”

Kunselman followed up with a question for the city attorney’s office: How much of the TIF can be kept in savings, if state law requires – and the city’s own Chapter 7 states – that surplus funds should be paid back to the taxing jurisdictions? We’ve heard that there is $2 million worth of TIF money sitting in the DDA’s account, Kunselman said, and we know that $4 million worth of TIF was transferred to the parking fund. It seemed to him that there was a lot of TIF money sitting in an account. He then quoted from the state statute:

The authority shall expend the tax increment revenues received for the development program only pursuant to the tax increment financing plan. Surplus funds shall revert proportionately to the respective taxing bodies.

And the city’s Chapter 7 indicates that if the rate of growth in the tax valuation within the DDA district exceeded a certain rate, then money has to be returned to the taxing jurisdictions, Kunselman said. He reiterated the Ann Arbor District Library’s disagreement with the DDA’s method of calculating the excess TIF capture. He returned to the issue of the three different columns of estimates in the TIF plan – and the DDA’s practice of using the optimistic column as opposed to the realistic column. “Where do we stand on the issue of state law on this issue of surplus?” Kunselman asked the city attorney.

Assistant city attorney Mary Fales indicated that her understanding of the DDA’s position is that there currently is not a surplus – that the funds are encumbered, either in reserves or for actual expenses. If there were a surplus, she continued, it would be applied based on Chapter 7, and distributed according to state law. She understood Kunselman’s intent to clarify the language of the ordinance, as involving the application of a specific element of Appendix C (the realistic approach) and the use of a cumulative method.

Sabra Briere (Ward 1). In the background is Sumi Kailasapathy (Ward 1).

Briere indicated she was not clear about what the word “surplus” means. When the city deals with its budget, she continued, they try to balance anticipated revenues against the anticipated expenditures. But in any given year the city might end up with money that’s transferred into the fund balance. That fund balance is then used perhaps in a subsequent year. When Kunselman talks about surplus dollars, does that refer to the same situation? she asked. Or is he talking about money that falls outside of the “interesting calculation” that is supposed to be done? What she thought of as fund balance had been described by Kunselman as surplus. “What does surplus mean?” she asked.

Fales noted that the state’s DDA statute does not define the word “surplus.” So you would apply normal principles to define it, which would be funds that are not required for immediate expenses or anticipated expenses – because that’s usually what surplus means, Fales told Briere. Briere asked if that meant for a given year or for a longer period – say if someone anticipated that they would be spending funds in three years. Fales said that the report the DDA is required to do is for specific information on an annual basis. On an annual basis, the DDA could identify encumbered funds, she said.

Kailasapathy indicated she felt there was some confusion, because what Kunselman was talking about is fund balance – which is a balance sheet item. But the TIF refund described in Chapter 7 actually has to do with the revenue income level, she explained. So if you take in revenue at a certain level, and if there is excess, then you have to refund some of it. She asked Fales if Fales agreed that this was a point of confusion. She asked Fales to confirm that the refund is actually based on revenue, not on the balance sheet. “I think that’s true,” Fales said.

Sally Petersen (Ward 2) indicated she had a question for DDA board treasurer Roger Hewitt. She recalled a conversation that the two of them had in September 2012 when they had first met. She wanted to make sure that she had the correct assumption in mind. She remembered expressing some concern to Hewitt about TIF being used to pay down the parking garage bonds. “I believe you assured me that at the end of fiscal year 2014-15, that TIF transfers for the parking garage bond payments would no longer happen.”

Hewitt indicated he thought that was correct, but thought it could be a year later than that. After some consultation with Susan Pollay and Joe Morehouse, Hewitt indicated that the TIF transfers to support the parking fund payments would continue past fiscal year 2015 for another year. Petersen asked if that was in the DDA’s three-year or five-year budget. Hewitt indicated that the budget for the DDA is adopted two years at a time. Beyond that, Hewitt said, the DDA uses a 10-year plan, which is a planning document, not a budget document.

Petersen got confirmation that the bonds in question are bonds the city has issued on behalf of the DDA. Hewitt took the opportunity to address the impact of the proposed ordinance change, which would strike one of the paragraphs that describes bond obligations. “The funds that we’re talking about being returned to the city, are only after the debt service has been satisfied,” Hewitt contended. He described the debt service of the DDA as being around $7 million a year. Petersen clarified with Hewitt that the bonds in question are not DDA bonds but rather city bonds. Hewitt allowed that they are city bonds, but the DDA has pledged its revenues to pay the debt service on the bonds.

Petersen indicated that she felt it was debt service on the DDA’s own bonds that is a “disqualifying condition” laid out in the ordinance, not debt service on the city’s bonds. She wanted to know if debt service on the city bonds would count as a disqualifying condition for the refund if the bonds are city bonds versus DDA bonds. City CFO Tom Crawford indicated that the city staff had spent a fair amount of time looking at that provision of the Chapter 7 ordinance: “It’s not very clear, it’s very confusing,” he said. The city’s interpretation is that it was not just restricted to DDA bonds but also included city bonds. Crawford indicated that there are still some DDA bonds that are being paid off and also some bonds that the city has issued on behalf of the DDA. “But it’s not real clear in the language,” he allowed.

Susan Pollay brought the DDA’s outside counsel, Jerry Lax, to the podium. Lax ventured that no one would say anything that provides crystal clarity, but as he understood the state-enabling legislation for DDAs, it specifically authorizes city bonds to be used for the kind of purposes that the DDA fulfills, and specifically authorizes the pledging of DDA funds for the repayment of those bonds. And the statute specifically allows for TIF funds for that purpose, he said. What Chapter 7 provides, Lax continued, is a provision that indicates money is not to be returned to the taxing authorities while there were debt obligations to be paid.

From left: Sabra Briere (Ward 1), Jane Lumm (Ward 2) and assistant city attorney Mary Fales.

Jane Lumm (Ward 2) admitted to being confused. She quoted out the paragraph about payment into bond reserve funds. It’s not clear exactly what that means, she said. She felt it might be interpreted as just a guide to say: Make sure you pay the debt service. Or it might mean that no refund should be made if the debt service is greater than the TIF capture. She noted that currently the amount paid by the DDA in debt service is far in excess of the TIF revenue, but she pointed out that parking revenues are also used for debt service.

Lumm also observed that the DDA has “flip-flopped” on the question. In 2011, the DDA had made refunds, she noted. But later in 2011, the DDA changed its position and said that it should not have made the refunds, and changed its interpretation of the ordinance.

Lax allowed that it’s understandable why Lumm would raise that point of the DDA changing its position on the ordinance. “Frankly, I think the answer might be a little more simple than it otherwise would appear, which is the initial repayment of monies to other taxing jurisdictions, I think, was simply made erroneously. And I think if you read the entire language of Chapter 7, it’s clear that those did not have to be made.” Lax allowed that there was some confusion about the ordinance language, but he felt there were some things that were moderately clear. One of the things that’s moderately clear is that the state statute does contemplate the use of city bonds to fund DDA projects. He returned to his point that the initial repayments were erroneous. Chapter 7 of the city ordinance is “a touch clearer than people might be suggesting,” Lax contended.

Kunselman asked Lax if the DDA has to put all TIF revenue toward debt. His understanding was that the DDA had put all of its 2012 TIF capture toward payment of parking bonds. Other grants have been paid out of parking revenues. In FY 2011, according to the DDA’s audit, Kunselman continued, the DDA had collected $3.4 million in TIF and the DDA’s expenditures had shown $3.3 million in grants. So almost no money went to pay parking structure debt in 2011, Kunselman said. But under Lax’s interpretation, Kunselman ventured, all TIF first goes toward debt.

Lax disputed Kunselman’s paraphrase of what Lax had said. Lax said he’d simply indicated that under the state statute, TIF funds are available for repayment of debt. Lax said the statute doesn’t say that repayment of debt must be the top priority, or that all of the TIF must be used in that way, or that a certain percentage of it must be used in that way. The state statute says only that the TIF funds are among the DDA assets that can be used for repayment of debt, Lax said. In any given year, if a budgetary decision is made to use TIF funds for specific statutorily-authorized purposes, Lax continued, he thought the statute contemplates that those kinds of decisions are within the judgment of the DDA.

Kunselman came back to the point that before a rebate is given to any of the taxing jurisdictions, on Lax’s interpretation, the DDA has to pay debt. Lax replied that the TIF funds are not being put away into some kind of lockbox, but rather they are being budgeted for authorized purposes.

Pollay added that the kind of projects the DDA undertakes are not annual projects. The projects that the DDA takes on are large capital improvement projects. The Fifth and Division streetscape improvement project took seven years, she said – to be fully planned, to get city council support, to fund, and finally to implement it. If the DDA takes on large projects like that, which was a $7 million capital improvement project, the DDA has to have the ability to have a fund balance sufficient to be able to make the minimum 15% down payment that’s required if a bond is issued – under the city’s own rules. So the DDA in its history has followed a pattern of increasing its fund balances and then depleting them when it takes on capital improvement projects. The DDA is about to begin that cycle again, she said. It takes several years to go through a cycle, she said.

Hieftje asked Pollay what DDA projects would have to be put aside and could not be completed if the ordinance changes were approved. It’s difficult to know, Pollay said. It’s her understanding that in fiscal year 2014, $373,000 would be removed from what the DDA had budgeted for that year. And the year after, there would be another roughly $80,000 less. That would likely impact the DDA’s ability to respond to projects that are “teed up” that the DDA had hoped to take on, she said. The most immediate one was to complete the curb ramp replacements downtown. The DDA and the city share an obligation to complete those repairs. The DDA has taken on the lion’s share of those in the downtown area, she said, but some remain to be done.

The other project the DDA feels is also pretty critical is replacing streetlights on Main Street, Pollay said – because they have reached the end of their useful life. Unfortunately, she added, it’s a very expensive project. The estimate includes replacing the globe lights – which are a signature design element for the Main Street area – and that will amount to around $650,000. The DDA had hoped it could begin to pledge some of their dollars to the city’s public services area to see that streetlight replacement project done this year, Pollay indicated. But that would have to be put off for this year, if the ordinance changes were enacted, Pollay said.

While those two projects were part of the short-term impact, Pollay said the long-term impact goes back to the fund balances. The DDA had just begun developing plans for its next big projects, Pollay said. With a TIF reduction, it would be many more years before the DDA could take on any really significant large project. “And I mean years,” she said, “We just would not have the funds available.” The parking rates have been raised, Pollay continued, and the DDA felt that they were currently at the upper end of where they should be. So there really are no other sources of revenue other than TIF revenues.

Hieftje asked Tom Crawford for confirmation that the ordinance change would put $277,000 back in the general fund. That’s after subtracting the amount that’s passed through to the Ann Arbor Transportation Authority. He asked what the impact would be if the DDA exercised its “discretion” to rescind the $508,000 grant for the police/courts building. Hieftje calculated that would have a negative impact of over $200,000 on the city’s general fund. Crawford confirmed that if the DDA were to not pay the installment of the $8 million grant that the DDA had previously approved, it would create a deficit in the city’s general fund. “I can understand why they might do that given that $559,000 was already coming to the city,” Hieftje said.

Lumm indicated that she figured this meant the city would need to pick up the expenses that the DDA had been covering. Briere noted that the calculations as done under the ordinance revisions would result in roughly an additional $70,000 being paid to the Ann Arbor Transportation Authority. But the DDA already provides a grant to the AATA to subsidize go!passes for $479,000, plus additional funds for transit service on Packard Road and Washtenaw Avenue. She asked Pollay if the ordinance revisions would affect the DDA’s funding of the AATA’s services. Pollay noted that the DDA board had recently approved the AATA grant for fiscal year 2014. So she did not feel that there would be an immediate impact. That would be subject to budgetary considerations in the future.

Briere then turned to the topic of where DDA TIF revenue could be invested. One of the ordinance amendments defines it to be strictly within the boundaries of the DDA district. She asked if that was in any way related to the Ann Arbor Transportation Authority and the amount of money that the AATA receives from the DDA. Susan Pollay explained that parking revenue had been used since the beginning of the DDA’s subsidy for transportation services – because the DDA believes that the parking structures and the bus system are all part of a transportation system. She did not believe that this would be impacted by the proposed ordinance amendments. What would be impacted are those projects that are paid for with TIF revenue. She referenced the state statute:

An authority shall be a public body corporate which may sue and be sued in any court of this state. An authority possesses all the powers necessary to carry out the purpose of its incorporation. The enumeration of a power in this act shall not be construed as a limitation upon the general powers of an authority.

Pollay appealed to that passage as the justification for spending TIF revenue on investments that are physically located outside the geographic boundary of the DDA TIF district. She was not sure which projects the DDA was currently undertaking that would be excluded by the revised Chapter 7 language. “We have not been informed,” Pollay said. [The proposed ordinance amendments were revised through Lumm's friendly amendment to allow for investments in near-downtown neighborhoods.]

Kailasapathy referred to numbers that had been provided by the city’s financial staff. Those figures indicated that since the early 2000s, TIF revenues to the DDA have gone up 91%. She ventured it would be difficult to find another city fund where revenues had gone up by as much as 91%. Looking at the four years between 2010 and 2013, she noted that the parking fund debt service went from 5% to 45%, to 59%, and then a “staggering” 87% for fiscal year 2013. She felt there was a big mismatch. On the one hand, there is a doubling of revenues from TIF. But almost all of it is being spent on one objective – parking. “It almost looks like you could have been a parking authority,” she observed. She ventured that what had tilted the balance was the Library Lane underground parking garage.

Sumi Kailasapathy (Ward 1).

Kailasapathy alluded to the specter Hieftje had raised about the $508,000 police/courts building grant and Briere’s implied concerned that the DDA might cease funding of AATA services. Kailasapathy characterized them as “disaster scenarios,” but she noted that in the next fiscal year there would be a $300,000 reduction [actually estimated at $363,000] compared to what the DDA had budgeted, and the year after that it would actually start to grow, she continued. So the ordinance revisions would not actually reduce the TIF revenue to the DDA into the future. Instead it would simply cap the rate of growth of net TIF revenues, she pointed out. She ventured that when you grow too fast, or when revenue comes in too fast, development is not a thoughtful process. It becomes lopsided, she cautioned.

Kailasapathy asked Pollay to explain why the DDA’s percentage allocation to parking structure debt had increased so much, even while TIF revenue had increased. Pollay noted that the DDA had predicted, and it has come true, that the tax base for all of the taxing authorities had grown, even though the TIF capture by the DDA had also grown. The DDA receives only 17% of all taxes that are collected downtown, Pollay said. She noted that the city staff had indicated the city’s tax levy in the downtown district in the early 1980s was about $1.3 million. This year the city is receiving $4.1 million, Pollay said.

Pollay contended that all of the taxing authorities are seeing the benefit of their tax base growing. Pollay described how it had been a policy choice back in the 1960s that the downtown would not have zoning for parking, and that the parking system would be public. The DDA had inherited a very deteriorated public parking system, Pollay said, and it had replaced or rebuilt six of the current city parking structures. Parking is a fundamental part of how businesses are able to bring in customers and their employees to the city.

As an economic development strategy, the DDA had also invested money in other things. So while Kailasapathy had characterized the DDA as a “parking authority,” Pollay felt it was because the DDA did a very good job at that – and it’s a fundamental tool that the community of businesses relies on. She listed off some of the parking structures: Ann and Ashley, Liberty Square, First and Washington, Library Lane. Parking is something the DDA has supported since its inception. Pollay responded to a follow-up remark from Kailasapathy by listing through some of the non-parking activities that the DDA undertakes. She mentioned grants for affordable housing and for energy improvements, as well as transportation grants.

Pollay continued by saying you don’t think of the DDA as the agency responsible for it, but as you walk on downtown sidewalks, many of them have been improved by the DDA. Hundreds of trees have been installed, along with benches, bike racks, and alley improvements. The DDA has played a part in helping the city sell city-owned property – mentioning specifically the First and Washington sale [where City Apartments is being built]. She hoped the DDA would be able to support the city on the sale of the former Y lot. She characterized the activities of the DDA as fairly broad. Parking is certainly part of what the DDA does, but it’s not the only part, she concluded.

Chuck Warpehoski (Ward 5) mentioned that city CFO Tom Crawford had recollected that the original 1982 TIF plan had been based on an estimated 5% annual growth of taxable value. The current renewal plan is based on estimated growth of around 3%. Warpehoski asked Pollay if that matched her recollection. Pollay indicated that she did not think that the first plan had a cap. The second plan from 2003 was an attempt to reflect the actual growth that the district had seen to that point, she said.

Kunselman asked which projects were included in the city financial staff’s revised estimates. The answer the council had received from the city’s financial services staff was that the bulk of the increased TIF had come from The Landmark (601 S. Forest), The Varsity (on East Washington) and Zaragon West (at Thompson & William). Kunselman followed up by getting confirmation from Crawford that the TIF capture generated for Village Green’s City Apartments project at First and Washington had not been included in the city’s estimates. Crawford told Kunselman that the forecast that was before the council for fiscal year 2014 includes all newly constructed and complete buildings – plus buildings that were under construction. Crawford explained that at the end of each calendar year, the assessors require property owners to pay taxes on partially complete buildings – so that is included in the forecast of TIF revenue provided by the city’s financial staff.

However, Crawford continued, when projections had been made for fiscal year 2015, the financial staff did not attempt to figure out what developments were possibly coming on line. Crawford had done a more traditional forecast of 3% growth, which the DDA uses for planning, because that’s what it’s been over time. So the forecast provided to the council for FY 2015 did not include Village Green’s City Apartments project. There are so many factors that can come in, Crawford said, that “I’d hate to give you only the good news and not some of the offsetting bad news, so we were somewhat conservative in FY 2015.”

Crawford and Kunselman engaged in some additional back-and-forth over the City Apartment’s project. Crawford said he did not think there was a measurable material value of the new project at the end of the calendar year 2012 – as much of the work being done at that point was digging a hole, he said. But Kunselman ventured that now it has several floors that have been constructed. Crawford allowed that if it were to be assessed today, it would have a value.

Kunselman concluded that the numbers that had been provided by city staff – showing a forecast in FY 2015 with a slight deficit to the DDA’s adopted budget for that year – would need to be revised. Crawford allowed that if he were asked a year from now about what he thought of FY 2015, he would say that the DDA could be expecting some additional TIF revenue from the Village Green City Apartments project. Kunselman ventured that if this ordinance amendment were to pass, the DDA would only see a reduction in its TIF revenues just this year. Crawford characterized Kunselman’s conclusion as a “reasonable possibility.”

Petersen said she felt the ordinance amendments did a good job clarifying and improving accountability – for example, with respect to filing the annual TIF report and setting forth how the TIF is calculated.

Sally Petersen (Ward 2) and Stephen Kunselman (Ward 3).

Petersen indicated that her initial concern was the apparent nearly $1 million “hit” the DDA would be taking in the first year – because she did not want to pull the rug out from under the DDA. But the staff’s answer to the questions that councilmembers had asked was that compared to the DDA’s adopted budget, there would only be a reduction by about one-third as much [$363,000]. She’d contemplated the possibility that Year 1 of implementation of the clarified calculations could be delayed until FY 2015, but she didn’t think that would help much. Her point was that there’s not as much of a “hit” in Year 1 as they’d originally thought.

She was also trying to understand how the DDA was able to absorb a $3 million hit in FY 2012-2013 – when the DDA had doubled capital costs compared to its budget. To Petersen, the budget was “fungible” enough that it was able to absorb a $3 million hit, and the $363,000 shortfall was only 10% of that.

Pollay explained that the difference in the budget was attributable to the timing of completing the Library Lane underground garage and the Fifth and Division streetscape project. The budget is not fungible, Pollay said – it’s a matter of tapping the fund balances. Responding to a question from Petersen, Pollay said that the DDA’s TIF fund balance is anticipated to be $840,000 at the end of FY 2014. [Across all of its funds, the DDA has budgeted in a way that leaves nearly $5 million in fund balance – an amount that includes money set aside for parking structure maintenance – at the end of FY 2014.] Petersen observed that the figure is still more than $363,000.

Pollay offered that it’s confusing because the total amount “that would be taken from the DDA” would be more than $931,000. Compared to the revenue that the DDA had budgeted, Pollay allowed it was only $363,000 less – but that was because the DDA didn’t know there would be additional TIF capture beyond what they’d budgeted.

Warpehoski raised a question about whether the additional increment provided by new projects would actually result in more TIF revenue to the DDA – given the nature of the cap as defined in the clarified calculations. Some back-and-forth between Warpehoski and Crawford determined that Warpehoski had misunderstood one of the lines in the chart. The cap on the DDA’s TIF revenue would be roughly $4 million in FY 2015 and would increase 3% each year from that point – which is an amount that the DDA would likely receive, assuming that Village Green completes the construction of City Apartments and other projects that are expected to be built are, in fact, built.

Warpehoski then got clarification that under the substituted ordinance revisions, an elected official could serve on the DDA board only with the agreement of all, not just some, of the other taxing jurisdictions.

Briere said she tended only to be interested in policy. And one of the points of policy deals with term limits. There are already some time limits – that the terms are four years. She wondered why all boards and commissions don’t have uniform restrictions. She wondered why there needed to be a special policy for the DDA board.

Lumm ventured that the council seemed ready for a vote.

DDA Ordinance: Council Deliberations – Final Comments

Hieftje then began his final remarks on the topic. He said that over the last several years, the city had worked very well with the DDA and that’s worked out very well. In the past, when the city has had any issues with the DDA, Hieftje said, they’ve sat down and talked with the DDA, and that’s turned out very well. Since it was established, the DDA has made a tremendous contribution to affordable housing, Hieftje said. This time around, Hieftje continued, the issue should have been approached by starting a conversation with the DDA’s partnership’s committee. Instead, he said, the council had launched a fairly aggressive ordinance change “against” the DDA “without sitting down to talk to them.” He said that it could have been handled in a much better way.

Hieftje responded to the idea that the possibility of the DDA rescinding the $8 million grant for the police/courts building was only a threat. He contended that to him it was “perfectly logical” that if the DDA, which was anticipating an increase of $991,000 in TIF revenue, instead saw $559,000 being returned to the city, then it would be reasonable to say that the city did not need the $508,000 annual installment towards the $8 million grant. Hieftje claimed that if you start to look at the numbers, the revisions to the ordinance would mean there’s a $231,000 deficit to the general city’s general fund. [This would depend on the DDA breaching its obligation to pay the $508,000 annual installment on the police/courts grant.]

Hieftje also noted that $300,000 has been set aside in the DDA’s budget as a way possibly to pay for police in the downtown. That would increase the number of police officers in the city, which was an expressed goal of some councilmembers, he pointed out. Hieftje was also concerned that this would reduce revenue to the DDA at exactly the point when the DDA is trying to rebuild its fund balances.

Hieftje said he couldn’t figure out why the council had started down this road – except for political reasons. He reviewed his basic points, which were that the DDA had been excellent partners, and he didn’t see a good bottom line for the city. The city should have sat down and talked with the DDA about this issue, Hieftje said. [Representatives of the other taxing authorities met with the DDA as a group in the summer of 2011 to discuss the issue. But they did not pursue that conversation – which some in attendance expected would result in either an ordinance change or a memorandum of understanding among the taxing jurisdictions.]

Kunselman responded to Hieftje’s remarks by saying he appreciated Hieftje’s defense of the DDA, but it was not Kunselman’s intent to sit there and “bash” the DDA. Part of the issue, Kunselman said, is about bringing revenue to the city and the other taxing jurisdictions, who need those additional tax dollars. He said he didn’t think the DDA knows how to spend tax dollars better than Washtenaw County, Washtenaw Community College or the Ann Arbor District Library.

Responding to the idea that the DDA might provide a grant to fund police officers in the downtown, Kunselman dismissed the idea that the city would hire police officers based on a year-to-year grant. That was especially true, Kunselman said, if the DDA could simply exercise discretion to rescind its grants, as Hieftje had claimed was possible. Adopting the ordinance revisions is all about new tax dollars, Kunselman pointed out. All of the projections that the council had seen basically keep the DDA whole, for the most part. He allowed that in the next year, there could be a couple hundred thousand dollars less for the DDA compared to what the DDA had budgeted. But he pointed out that in years past the DDA had taken hits and been able to absorb them.

The DDA is the only agency that has not had a reduction in its budget, Kunselman said. When he hears about what wonderful work the DDA does, he questioned how well the DDA actually managed the parking system – given that debt associated with the system was substantially subsidized with TIF revenue. “Out the other end” of the public parking system, Kunselman said, comes $3.1 million of revenue to the city of Ann Arbor. Before the DDA existed, there was a big concern about the public parking system being a “cash cow” for the city – and at that time there was not even a TIF subsidy. He described the hourly cost for parking as including a “surcharge” of an extra 17%, due to the terms of the city’s contract with the DDA. He questioned whether that was consistent with the case law on the definition of taxes and fees – the Bolt decision.

Kunselman said he’d tried to approach the issue delicately, so that the DDA’s budget was left whole and so that the DDA wouldn’t take a hit to their funds. Other than the light pole and sidewalk ramp project, Kunselman said, there weren’t other projects that the DDA would not be able to complete, based on what the council had been told.

Kunselman said Hieftje was trying to make the issue into some sort of “Kunselman against the DDA,” but it’s not, he said. Instead, it’s about bringing trust and confidence back to the DDA as an institution.

Kunselman briefly addressed the question of term limits for DDA board members, which are part of the set of ordinance revisions. There are term limits for the park advisory commission, he said. The existing DDA board members had apparently not read the law about filing the annual TIF report. He concluded that the DDA board needed new blood and new eyes.

He returned then to the question of how the TIF capture is calculated, wondering why Hieftje had voted year after year to approve a budget using the optimistic projection in the TIF plan. “Why don’t you [Hieftje] answer that for all the citizens of Ann Arbor?”

Kunselman wound up his remarks by noting that the ordinance changes were being considered by the council at a first reading. He hoped councilmembers would support the changes at least to get them to the second reading. He told his council colleagues that if they wanted to give the DDA a $931,000 increase in revenue, they could do that. Or they could support some of those dollars coming back to city. It’s recurring revenue to the city, money that can be used to hire firefighters and police officers. He asked his council colleagues if they wanted to make public safety a priority or parking: “You make the choice.”

Responding to Kunselman’s characterization of his effort as delicate, Margie Teall (Ward 4) ventured that delicate is in the eyes of the beholder. She wished that Kunselman had chosen to bring the issue forward in a more collaborative way.

Teall felt like the DDA is being penalized for doing a really great job. The DDA is what’s responsible for making it possible to attract new tax dollars, she said. The DDA has been a good partner in maintaining infrastructure. She appealed to the notion that a “rising tide can lift all boats.” She wouldn’t support the ordinance changes, she said.

Petersen also wished the approach Kunselman had taken had been more collaborative, but she indicated she wanted to separate out the political from the pragmatic issues. In the long term, she felt that the DDA had done good work and expected that the DDA will continue to do good things, and would expect the TIF fund to grow even more. What the ordinance amendments do is provide clarity, she said. While she wished the approach had been more collaborative, she thought it would help strengthen the DDA in the long term.

Jane Lumm (Ward 2) literally rolled up her sleeves before the April 1 meeting started.

Lumm indicated she’d support the ordinance changes at first reading. She presented her support framed by her concept of what a DDA should be. She believed downtown vibrancy is important to any city’s health and she felt a strong, autonomous DDA is an important tool for achieving that. She did not agree with those who said the city should not have a DDA at all. She’d been around before the DDA had taken over the public parking system, and stated that the DDA had done a very good job on that. But she did believe the city needed a strong, independent DDA. Over the last decade it had evolved from an independent, autonomous body supporting the downtown to an extension of the city council. Lumm did not think that was or is in the city’s best interest. The DDA funds selected city projects and programs – outside the regular budget process. However, a decision about whether to use $0.5 million for the police/courts building or to hire police officers is the kind of decision that should be made inside the regular budget process, Lumm said.

In support of an independent DDA, she’s highly supportive of the ordinance changes related to board governance. She preferred the original set of amendments on elected officials. She supported those elements of the ordinance changes that define TIF capture. She was not wedded to enactment of the clarified calculations beginning for the current tax year, but felt it was important to implement the ordinance change fairly and expeditiously.

Responding in part to the criticism against Kunselman that his approach had been inappropriate, Mike Anglin (Ward 5) observed that Kunselman had talked about the issue for at least a year – starting by asking for a budget amendment last year. [That budget amendment failed.] Anglin acknowledged the partnership the city has with the DDA. He did not think that the ordinance amendments by any means crippled the DDA.

Warpehoski said he’d been wrestling over this issue. When he saw the Fiat dealership or other new projects were built outside the DDA district, he liked all that “TIF capture” it provided. [Warpehoski likely meant something more along the lines of "ordinary taxes not subject to TIF capture."] That was important for the city to be able to provide services to residents, he said. But when he looked at the numbers, he contended that 10 years ago, the city received roughly 17% of all the tax revenue in the DDA district, and even now the city receives about 17% of the revenue, even with the DDA’s TIF capture. He concluded that the city is coming out pretty well. There are all the other ways the city has come out ahead, he said – including the $8 million police/courts grant and the 17% of gross revenues from the public parking system. So if the “problem” is getting revenue, he was having trouble understanding that. The existing arrangement was working out fairly well, he thought.

As far as the optimistic, realistic and pessimistic projections in the TIF plan, Warpehoski felt this was similar to the way his organization [Interfaith Council for Peace and Justice] puts together its budget. So he understood why, from a budget planning perspective, the realistic numbers would be used, but he did not understand why that would be the basis for a cap. He raised the point that before the 2003 renewal plan, the projected growth in the TIF plan had been roughly 5% per year, whereas the 2003 renewal plan was roughly 3%. If the 5% had been brought forward with the 2003 renewal plan, then the cap under the cumulative methodology would be well above the amount of TIF received by the DDA.

Chuck Warpehoski (Ward 5).

On the question of term limits, Warpehoski did not feel that term limits have worked well in Lansing. He called term limits “mandatory inexperience.” Sitting next to one of the most veteran councilmembers, Marcia Higgins (Ward 4), he saw the value of experience. While he understood the desire to reach for the money, he could not support the ordinance amendments.

Hieftje returned to the point that it could have been handled in a much better way. He wouldn’t support it because of the bottom line. He again raised the specter of a $231,000 general fund deficit for the city. He wouldn’t say that sometime in the future, the DDA’s TIF couldn’t be reconsidered, and he felt it could be done in a collaborative way. Hieftje allowed that he’s long said that the DDA is an “arm of the city,” but that he felt he could see the DDA taking action to rescind the police/courts grant.

Briere said that as a person who didn’t do all that well in math, she struggled with the issue. She was always looking for the unintended consequence. Every time she looked at the issue more closely, it seemed to become less clear. She allowed that looking logically at the 2003 TIF plan, it’s the figures in the “realistic” column that should be considered. She indicated that she was interested in having more concrete projections 10 years into the future.

Briere said it’s difficult to separate the political from the financial changes. She wished there had been a more collaborative effort. She’d heard Kunselman say that the impact would only be for one year, but she did not understand that. Briere indicated that her vote that night would depend on watching the votes of those who voted before she did. [Based on the sequence of the roll call, Briere had a clear indication that it would pass at first reading before casting her own vote.]

Higgins called the discussion an extremely interesting conversation. She felt the DDA does a very good job. She felt the DDA had been very good stewards – and nothing she’d heard that night takes away from that. On the question of whether the ordinance amendments had been brought forward in a collaborative process, she allowed that the best route is not always the one that’s taken. She appreciated the fact that new councilmembers with new skill sets were looking at the issue, and it made her step back and look at this too. There were some aspects she agreed with and some aspects that give her pause. She said she’d vote yes on first reading. But she was not saying that she’d vote for it on second reading.

Outcome: The vote was 7-3, as Christopher Taylor (Ward 3) was absent. The initial approval was supported by Stephen Kunselman (Ward 3), Sumi Kailasapathy (Ward 1), Sally Petersen (Ward 2), Jane Lumm (Ward 2), Mike Anglin (Ward 5), Marcia Higgins (Ward 4) and Sabra Briere (Ward 1). Voting against it were mayor John Hieftje, Margie Teall (Ward 4) and Chuck Warpehoski (Ward 5).

In order to be enacted, the changes will need to receive approval from the council at a subsequent meeting, following a public hearing, now scheduled for April 15.

D1 Zoning Review

On the council’s agenda was a resolution setting the scope of work and a timeline for direction given at its March 18, 2013 meeting – that the city’s planning commission should review zoning in the D1 (downtown core) zoning district.

Here are the specific areas of inquiry the planning commission is supposed to address, as set forth in the resolved clause:

RESOLVED, That City Council requests the City Planning Commission to specifically address these issues:
(i) whether D1 zoning is appropriately located on the north side of Huron Street between Division and S. State and the south side of William Street between S. Main and Fourth Avenue;
(ii) whether the D1 residential FAR premiums effectively encourage a diverse downtown population; and
(iii) consider a parcel on the south side of Ann St. adjacent to north of city hall that is currently zoned D1 to be rezoned to the appropriate zoning for this neighborhood; and

RESOLVED, That City Council requests that Planning Commission complete its review and report to the City Council by October 1, 2013.

The three points of inquiry are similar in spirit, but different in their details, from those put forward by Christopher Taylor (Ward 3) at the council’s March 18 meeting. At that meeting, the council had deliberated on the question of whether to give the planning commission direction to conduct the D1 review and to impose a moratorium on the D1 site plans.

The orange-ish area denotes an area zoned as D2 (interface). Darker red areas, including the UM Credit Union parcel (pink arrow), are zoned D1 (downtown core). The red line denotes the boundary of the Ann Arbor Downtown Development Authority district.

At its March 18 session, the council decided to delete the mention of a moratorium from their resolution and to include a promise to define by April 1 the scope of the planning commission’s review and a timeframe for its work.

The first point of inquiry adopted by the council on April 1 differs from that offered on March 18 by omitting mention of historic districts – although the appropriateness of D1 zoning will almost certainly include the relation of D1-zoned areas to historic districts.

The second point of inquiry – about residential FAR (floor area ratio) premiums – had been proposed by Taylor on March 18.

The third point of inquiry is new. The parcel in question is the surface parking lot currently owned by the University of Michigan Credit Union, formerly owned by the now defunct Ann Arbor News.

D1 Zoning Review: Council Deliberations

Sabra Briere (Ward 1) indicated that she and Marcia Higgins (Ward 4) had talked about the content of the ordinance. Higgins had needed to leave the council meeting early, Briere said. The resolution provides additional guidance to the planning commission and sets a clear deadline, she said.

Chuck Warpehoski (Ward 5) expressed some desire that environmental incentives also be included in the review, but he’d concluded that keeping things focused in the resolution as it was written is an appropriate way to move forward.

Jane Lumm (Ward 2) wanted to know how the planning commission would view its responsibility: Would the planning commission feel it had the latitude to consider broader issues? City planning manager Wendy Rampson told Lumm she felt that the commission would initially consider just those issues in the written scope of the resolution and work toward making the Oct. 1 deadline. To the extent that there was time to do so, the planning commission might consider other issues. Responding to a specific question from Lumm about whether six months was enough time, Rampson indicated she thought it was doable. Rampson added that having targeted action is helpful.

Mike Anglin (Ward 5).

Mike Anglin (Ward 5) expressed some concern about the timeframe but said he was glad the planning commission meetings would be televised. Briere, who serves as the city council appointee to the planning commission, told Anglin that the matter would be referred by the commission to its ordinance revisions committee – which met in a way that was noticed to the public and open to the public, but not televised. That committee would make recommendations to the planning commission, and the planning commission would hold a public hearing and give a recommendation to the city council. But she indicated that there would not be a discussion of the topic at every planning commission meeting between now and Oct. 1.

Responding to a question from Anglin, Rampson indicated that the ordinance revisions committee provided an opportunity for public comment at the end of its meetings, usually in an informal way.

Mayor John Hieftje said he was surprised that people were continuing to invest in student-only housing projects, saying that those buildings with 4-5 bedrooms seemed targeted for the student market. He said that Village Green’s City Apartment project, now under construction at First and Washington, was reporting a lot of demand for its 1-2 bedroom units. So he was in favor of making an adjustment to the kind of residential premiums that are offered.

Stephen Kunselman (Ward 3) took the opportunity to ask about the lack of an update on the R4C zoning revisions that have been studied for a very long time now. Rampson indicated that the advisory committee had taken additional time. Some back-and-forth established that Oct. 1 was really a firm deadline. Briere pointed out that there’s significant difference between the resolution that the council was considering for D1 review and the R4C study – in that the council had appointed a group of citizens for the R4C work, which made recommendations to the ordinance revisions committee of the planning commission. Now, what the council is doing had the practical effect of forwarding the matter directly to the planning commission’s ordinance revisions committee. [The draft recommendations for R4C zoning changes will be on the planning commission's April 16 agenda. See recent Chronicle coverage: "R4C Draft Readied for Planning Commission."]

Lumm reiterated the fact that she wanted to make sure the council’s direction was not unnecessarily restrictive.

Outcome: The council voted unanimously to approve the resolution on D1 zoning review.

413 E. Huron

On April 1 the council’s agenda included a resolution on the site plan application for 413 E. Huron – a proposed 14-story, 216-apartment building at the northeast corner of Huron and Division streets.

A new public hearing on the project was started at the April 1 meeting, and held open so that it can resume on April 15. The council first considered the 413 E. Huron site plan at its March 18, 2013 meeting. The new public hearing was the subject of extended discussion by the council.

413 E. Huron: Public Hearing

The council’s vote on the approval of the minutes from previous meetings is typically perfunctory. However, the council’s interest in giving the public additional opportunities to weigh in on the 413 E. Huron site plan resulted in extended conversation about approving the minutes from the council’s March 18, 2013 meeting. On the public hearing, the draft of the minutes, which the council was asked to consider, read as follows:

There being no further comment, the Mayor declared the hearing closed.

Held and Closed

The minutes are based on the fact that mayor John Hieftje said the public hearing was closed, when no one else wanted to speak.

Marcia Higgins (Ward 4) observed that the minutes indicated the public hearing had been held and closed. However, at the point in the meeting when the council voted to postpone the site plan, Higgins said, “We should have then asked to make sure that the public hearing stayed open – as we’ve often done in the past. So I’d like to correct the minutes so that the public hearing would have remained open. It’s been the practice that we’ve had to do that.”

Sabra Briere (Ward 1) ventured that if the minutes are a reflection of what actually occurred at the meeting, she didn’t think it was possible to “correct” the minutes, but she allowed it was possible she might be mistaken about that. City attorney Stephen Postema stated it’s clear that the public hearing needs to go forward in some manner – whether it’s by re-opening it or by some other means. He indicated that one way to accomplish a re-opening would be to reconsider the decision to postpone. Higgins was right about the fact that in the past the re-opening of a hearing has been done at the time of the council’s vote on the item, Postema said. He felt the best way to approach it was to have a new public hearing.

Hieftje got confirmation that the city attorney’s recommendation was to have another public hearing.

Briere wanted to clarify that if it’s a new public hearing, those people who spoke previously can speak at the new public hearing. [If a public hearing is continued, from one council meeting to the next, the council does not typically allow for people who spoke at the first meeting to speak again at the second meeting – because it's the same public hearing that had merely been continued.]

Briere reiterated that the council should just accept the minutes as written. Sally Petersen (Ward 2) asked how the process should have happened. She ventured that the reason the council was in this “predicament” was that when the council voted to postpone consideration of the 413 E. Huron site plan, the public hearing was not re-opened so it could be held open for the next meeting. Hieftje confirmed that Petersen’s understanding was correct.

Higgins added that Hieftje would usually say so at the start of the public hearing if he thinks there was any chance the council would postpone a decision. Hieftje said he’d state something like that only if he thought a postponement was likely – and Hieftje contended he didn’t have any idea the council would postpone 413 E. Huron site plan on March 18.

Assistant city attorney Kevin McDonald talked with Marcia Higgins (Ward 4) before the April 1 meeting.

Higgins questioned whether the new public hearing meant that the council would be considering a brand new site plan. Postema stated that there’s a new public hearing only because the original public hearing hadn’t been held open in the same way it was done in the past. To the extent the site plan has been changed, Postema continued, assistant city attorney Kevin McDonald had recommended that it go back and be treated as a new public hearing at this time.

Higgins stated that she disagreed with the approach of a new public hearing. She felt a new process was being developed for this particular site plan. She said she wouldn’t push it, but felt the council needs to be cognizant of the issue. Hieftje asked Higgins if she was amenable to approving the March 18 minutes and accepting a motion to start a new public hearing later. Higgins said that’s what she thought they’d already decided to do.

When the council reached the public hearing on 413 E. Huron on its agenda, Hieftje indicated that he fully expected that it would be postponed, and that the public hearing would be continued on April 15 if it were to be postponed. No one spoke at the public hearing.

However, during public commentary reserved time at the start of the meeting, Kermit Schlansker commented on what he called a “furor over construction of an apartment complex on Huron Street.” The knowledge that houses will eventually have to be torn town and that people will have to learn to live in apartment buildings in order to save energy is an argument on the side of the apartments, he said. But the city could take a great step toward sustainability by specifying that all new buildings must use a heating system that is at least partially renewable. That could take the form of solar panels on the roof, a solar boiler, a cogeneration system, and an engine-driven heat pump. Eventually, Schlansker said, we will have to use both co-manufactured and solar boilers as heating systems. The easiest choice, he explained would be an engine-driven heat pump, with a cogeneration backup. We have to use every possible trick to ensure our future, he said.

413 E. Huron: Council Deliberations

During the scant deliberations, Jane Lumm (Ward 2) took the opportunity to tell representatives of the developer who were in the audience that she felt the changes that had been made so far – on 8,000 square feet out of 270,000 for the entire project – were about a 3% improvement. She wanted them to understand “what universe” she was coming from.

Outcome: The council unanimously approved the postponement of the 413 E. Huron site plan until its April 15 meeting.

Outdoor Sign Ordinance

On the council’s agenda was final approval of changes to the city’s sign ordinance – to allow for only a limited type of digital signs. Also considered was an extension of a council-enacted moratorium on applications for digital signs, which was set to expire on April 11, 2013.

Billboards on West Liberty Street at First, near the edge of downtown Ann Arbor, looking east. (Photo illustration by The Chronicle.)

If enacted, the changes would mean that a limited type of digital signs would be allowed in the city. But the effect of the proposed ordinance changes would be that no billboards would be permitted – although the existing 28 billboards in the city would be allowed to remain as non-conforming signs. Existing billboards would not be allowed to be retrofitted for digital displays. The council had given initial approval of the changes at its March 18, 2013 meeting. [.pdf of proposed outdoor advertising ordinance]

Under the proposed ordinance changes, new billboards – signs with an area greater than 200 square feet – could not be constructed. And existing signs of that size could not have electronic features added to allow for changeable text or images.

The existing sign ordinance does not allow for any changeable text, except for “noncommercial information which requires periodic change” – like time and temperature. So the proposed changes to the ordinance would allow for changeable portions of a sign, subject to the limitation that the changeable portion of the sign not be more than half the area of any sign and no more than 30 square feet per sign and 15 square feet per sign face. Additional limitations would prevent flashing and scrolling – by not allowing changes to content more often than 15 minutes. The proposed ordinance language states:

Changeable copy shall not and shall not appear to flash, undulate, pulse, blink, expand, contract, bounce, rotate, spin, twist, or otherwise move.

The proposed ordinance restrictions on dynamic elements of signs were motivated in part – based on remarks of city planning manager Wendy Rampson at the council’s March 18 meeting – by the perception that these elements are a distraction to motorists. That argument has been countered by Adams Outdoor Advertising in written communication to the city by citing studies that conclude any distraction does not cause a greater rate of traffic accidents.

The proposed ordinance changes would place a maximum brightness of any illuminated sign, including those that are digital/electronic: 5,000 nits during the day and 100 nits at night, and in no case greater than 0.1 foot-candles above the already existing amount of light at a residential property line. One nit is defined as one candela per square meter. A candela is about the amount of light produced by a common tallow candle.

By way of comparison, an iPhone 5 display is reported to have a brightness of about 500 nits.

The moratorium on digital signs was first enacted for 180 days at the council’s April 17, 2012 meeting. And the city council had extended the moratorium for an additional 180 days at its Oct. 1, 2012 meeting.

Falling under the moratorium are “billboards commonly referred to as ‘electronic message centers,’ ‘electronic message boards,’ ‘changeable electronic variable message signs,’ or any billboard containing LEDs, LCDs, plasma displays, or any similar technology to project an illuminated image that can be caused to move or change, or to appear to move or change, by a method other than physically removing and replacing the sign or its components, including by digital or electronic input.”

Outdoor Sign Ordinance: Public Hearing

Mayor John Hieftje indicated he thought it was highly likely that the vote would be postponed. This led to considerable hesitation on the part of several people who had planned to speak. If they assumed the council would postpone, expecting to be able to speak at the continued public hearing when the council took up the matter again, but the council wound up voting that evening, they’d have forfeited their opportunity to be heard before the vote.

Karolina Shillenn introduced herself as the real estate representative for Adams Outdoor. She told the council that Adams had three objectives that night. First, she asked that the council postpone the vote so that an opportunity could be provided to convey relevant information to the council, saying “Billboards are our business.” Second, she asked that the council maintain the current ordinance requirements, which cap the total number of billboards at 30. There are currently 28 billboards within the city, she pointed out. In addition, she asked that the council maintain the current 350-square-foot size limit. She showed the council an example of a current billboard for the Y, pointing out that it features a city planner on it. The third request she made was for the council to regulate digital signs at the 350-square-foot size, instead of prohibiting digital signs at that size.

Dan Law introduced himself as sales manager at Adams Outdoor. The business of Adams is all about helping local businesses and helping the local economy, he said. It’s difficult to reach customers when there is not a daily newspaper and the airwaves are overcrowded, he said. Billboards offer a nonintrusive way to reach people, he told the council. He takes his responsibility for managing eight account representatives very seriously. Based on what those reps tell him, there is a high demand for billboards and a high demand for digital. The current ordinance allows only 30 billboards, he pointed out. He asked that the council include in the new ordinance an ability for businesses to have a voice, via digital technology. He showed the council examples of billboards for the University of Michigan Credit Union and other local businesses.

Shannon Flowerday introduced herself as the art director at Adams Outdoor. She described the process of creating a visually appealing and successful billboard, comparing the process of design to creating a painting. She described the “rectangle campaign,” which is a way for nonprofits to advertise at no cost.

Dan Martell introduced himself as operations manager at Adams Outdoor. He talked about the physical implementation of the billboards. He described how a design for one advertiser had been printed on vinyl and it had not stretched properly. So Adams Outdoor had gone out several times to re-stretch the vinyl, he said. They were out working in all kinds of weather and were always monitoring the structures to make sure the lights are working and that the overall appearance is aesthetically pleasing.

Mitchell Gasche introduced himself as real estate manager at Adams Outdoor. He routinely deals with federal, state and local regulation, he said. Adams Outdoor encourages regulation, but is against prohibition. The proposed ordinance changes take away their rights, he said. While the current ordinance has a limit of 30 sign faces, and the limit has not been reached since 1994, there’s no need to take away the two additional billboards that could be allowed in addition to the existing 28 billboards.

He noted that digital technology for signs is regulated at the federal, state and local levels as well. Use of digital technology has been allowed at the federal level since 1996, he said, and prohibited flash, scroll or animation. He noted that Adams had sent to the council three studies on the possible distractions to drivers posed by digital signs. They’re safety neutral, he concluded. He asked that Adams Outdoor be included as part of the process. Two weeks is not long enough to deal with the proposed ordinance changes, he said. [The two-week timeframe is the time between the council's initial approval and the final vote, which was before the council at the April 1 meeting.]

Hieftje stated that the public hearing would be continued if the ordinance revision were to be postponed.

Outdoor Sign Ordinance: Council Deliberations

The council took an initial voice vote on postponement that appeared to have succeeded unanimously. But then a question arose about the date of the postponement. And that re-opened the door to deliberations on the question.

Jane Lumm (Ward 2) stated that she was not a big fan of billboards – digital or otherwise. She understands that it impacts sign businesses and has an indirect impact on businesses that use them. She supported the postponement, saying that although the city has had a year to review the issue during the period of the postponement, those who are impacted by the ordinance change had to deal with the issue in the timeframe of just two weeks. She wanted to make sure they had time to raise concerns before the final vote. A postponement also gives time to consider suggestions and consider revisions. She noted that it would be necessary to extend the temporary moratorium on digital signs. Lumm reiterated that she’s generally supportive of the ordinance revisions, but those who are impacted should have an opportunity to be heard.

Sally Petersen (Ward 2) also indicated she was in favor of postponement. She felt there’s a real economic development issue. She also felt there was a certain irony to prohibiting digital sign technology at the same time the city is trying to promote the idea of a tech campus downtown.

Marcia Higgins (Ward 4) was concerned that a two-week postponement is not the right timeline. She asked if councilmembers would consider a different timeframe. Chuck Warpehoski (Ward 5) indicated he might support a different timeframe, but he wanted to know what the mechanism would be for people to provide their input. Higgins stated that she felt the input would be provided to city staff.

After some back and forth – in light of the fact that the moratorium appeared on the agenda later in the meeting with an extension until July 1 – the council settled on May 6 as the date it would take up the sign ordinance again. That came over the dissent of Higgins, who appeared to be in favor of a longer postponement.

Outcome: The council voted to postpone the second vote on the ordinance revisions until May 6, 2013, over the dissent of Marcia Higgins (Ward 4).

Later in the meeting, the council voted to extend that moratorium on digital sign applications until July 1, 2013. According to the resolution approved by the council, the purpose of postponing a decision on the ordinance amendment and extending the moratorium was to allow for additional time to review the proposed amendments and to “gather input from the public and interested parties, and to promote the public health, safety, and welfare of city residents.”

Outdoor Sign Ordinance: Coda

During council communications time at the conclusion of the meeting, Chuck Warpehoski (Ward 5) indicated most of the signs were located in Ward 5, the ward he represents. Given the timeframe, he would likely not be able to see the process through himself – because his wife is due to give birth at the end of May. He indicated an interest in seeing the issue continue to receive attention from staff and the council.

Public Art Spending Moratorium

On the council’s April 1 agenda was the extension of a temporary halt to spending money that’s set aside under the city’s Percent for Art ordinance.

The city’s public art ordinance requires that 1% of all capital project budgets be set aside for public art. Originally set to run through April 1, 2013, the temporary halt on spending – except on projects already in the works – is to be extended until May 31. The three projects currently in the works are installations for East Stadium Bridges, a rain garden on Kingsley Street, and Argo Cascades.

The council had originally enacted the moratorium on spending at its Dec. 3, 2012 meeting. The action came in the context of a failed millage proposal in November 2012, which was meant to provide an alternative funding mechanism to the Percent for Art approach. The millage proposal was put forward in part in response to objections that voters had not explicitly approved the Percent for Art mechanism, which taps all capital funds – even those deriving from fees and millages designated for other purposes.

At the Dec. 3 meeting, a committee consisting of Sally Petersen (Ward 2), Sabra Briere (Ward 1), Stephen Kunselman (Ward 3), Margie Teall (Ward 4) and Christopher Taylor (Ward 3) was appointed to recommend amendments to the city’s public art ordinance.

The committee has met several times and has made recommendations on revisions to the ordinance. However, the committee is not yet ready to convey its final recommendations to the full council.

Based on previous Chronicle coverage, the main recommendation would be to eliminate in the ordinance any reference to a specific percentage for art in a capital project budget. And art funds would not be pooled as they are now – which entails setting aside money from projects into which it would be difficult to incorporate public art. Under the approach likely to be recommended by the committee, city staff would work to determine whether a specific capital improvement project should have enhanced design features “baked in” to a project – either enhanced architectural work or specific public art. The funding for any of the enhanced features would be included in the project’s budget and incorporated into the RFP (request for proposals) process for the capital project.

Another likely recommendation is to encourage an outside organization to solicit funds for specific community‐generated public art projects. Such funds would go into a dedicated fund for public art.

The committee is likely to recommend an increase in the employment level of its public art administrator to more than half-time – whether that is a contract employee or a direct hire. The current public art administrator’s job, held by Aaron Seagraves, is a part-time position.

The committee is also likely to recommend evaluating the changes in the ordinance after three years.

The extension of the moratorium was introduced to the council by Sabra Briere, who’s been working on the council committee. She reported that the city attorney’s office had told her it would take another 30 days, and the extension until May 31 was meant to ensure that there would be sufficient time for the two votes the council would be required to take.

Outcome: The council voted unanimously to approve extending the suspension of public art spending.

Gallup Park Accessibility Work

The council was asked to approve a $512,180 contract with Construction Solutions Inc. for improvements at the Gallup Park canoe livery.

The Ann Arbor park advisory commission had recommended the contract award at its March 19, 2013 meeting. The project budget includes a 10% construction contingency, bringing the total cost to $563,398.

Schematic of the proposed Gallup Park canoe livery improvements.

Construction Solutions, based in Ann Arbor, was the lowest qualified bidder on the project. Other bids were submitted by Braun Construction Group ($534,600); Detroit Contracting Inc. ($554,620); The E&L Construction Group ($580,700); A.R. Brower Company ($607,160); and Terra Firma Landscape ($612,137).

The improvements include barrier-free paths to the docks; barrier-free docks and fishing facilities; an expanded patio area to create barrier-free outdoor seating and to separate these areas from the pedestrian circulation; sliding glass doors from the meeting room; and redesign of the park entry to create a separation between the service drive and the pedestrian pathway.

The project will be funded in part through a $300,000 grant from the Michigan Dept. of Natural Resources Trust Fund, with matching funds from the FY 2013 park maintenance and capital improvements millage.

The project’s first phase will begin on the docks and livery area, with work continuing until Memorial Day in late May. Work will resume after the summer season on Labor Day, focusing on paths and the park entry reconfiguration. The entire project is expected to be finished by mid-November.

During the scant council deliberations, Sally Petersen (Ward 2) noted that the work had been very well received by the city’s disability commission – on which she serves.

Outcome: The council unanimously approved the contract for Gallup Park improvements.

Dam Work at Argo, Geddes

On the council’s agenda was the award of a $295,530 contract to Gerace Construction Co. for repair work and repainting at Argo and Geddes dams, as well as site improvements around Argo Dam.

The contract had been recommended for approval by the city’s park advisory commission (PAC) at its March 19, 2013 meeting.

Gerace, based in Midland, submitted the lowest of four qualified bids for this work. Other bidders were Anlaan Corp. ($354,050); E&L Construction ($457,989); and Spence Brothers ($797,000). According to a staff memo, the work entails “repair and repainting of gear housings, lift equipment, tainter gate structural steel, miscellaneous concrete repair, and minor site improvements. Site improvements include addition of riprap and constructing a path to portage around Argo Dam.”

At PAC’s meeting, Brian Steglitz, an engineer with the city, indicated that the work is being done in response to feedback from state regulators. The two dams are inspected every three years by the Michigan Dept. of Environmental Quality (MDEQ).

The project will be funded from the city’s parks maintenance and capital improvements millage.

At the council’s April 1 meeting, Mike Anglin (Ward 5) and Stephen Kunselman (Ward 3) questioned the idea of paying for the repairs only out of the parks millage, but were content to leave the question open for future discussion.

Outcome: The council unanimously approved the contract for the dam repairs.

Longshore Parking for Argo Livery

Having been postponed from its previous meeting on March 18, 2013, the council was asked to approve a $3,000 lease to accommodate overflow parking for the Argo canoe livery.

Sabra Briere (Ward 1) had asked that the item be separated out from the consent agenda on March 18. Briere had heard concerns that the lot is not very well-graded and that there’s a lot of runoff. She had wondered if there was a way for the city to enforce maintenance of the lot through the lease.

The lease had been recommended for approval by the city’s park advisory commission at its Feb. 26, 2013 meeting. The lease of the parking lot at 416 Longshore Drive – with about 40 spaces – will cover Saturdays, Sundays and holidays from May 25 to Sept. 2, 2013, with an option to renew administratively for two successive one-year periods.

City parks staff reported that the overflow parking at this lot had been used during the 2012 season, and they recommended continuing the lease. According to city records, the land is owned by the Stewardship Network.

At the council’s April 1 meeting, Briere indicated that it was not feasible to enforce through the contract the kind of improvements that would be necessary to manage stormwater better.

Outcome: The council unanimously approved the lease for the parking lot.

Summer 2013 Street, Sidewalk Contracts

The council was asked to approve a contract for street resurfacing in Ann Arbor – with Barrett Paving Materials Inc. in the amount of $3,583,944. The council has also approved two contracts in connection with the city’s 2013 ramp and sidewalk repair project – a $748,576 contract with Doan Construction Company and a $207,350 contract with Precision Concrete Cutting.

The work will occur in the spring and summer of 2013.

2013 Ann Arbor street resurfacing program.

The city has a ramp and sidewalk repair program in place that is meant to repair deficient sidewalks (not install new sidewalks) throughout the city over a five-year period – which is the duration of a 1/8 mill tax approved by voters in 2011. Each year about 20% of the city is covered by the repair program.

The contract with Precision Concrete Cutting reflects the city’s interest – where feasible – in slicing off portions of sidewalks that have “vaulted,” to restore the surface to horizontal. Slicing is more cost effective than removing and re-pouring.

The streets to be resurfaced include the following.

• State Street: Oakbrook to Eisenhower (April – June)
• Barton: Pontiac to Plymouth (August – October)
• Sorrento: King George to end (April – May)
• Alley “Benjamin”: Sybil to Benjamin (May – June)
• Alley “Mary”: Benjamin to Hoover (May – June)
• Franklin: Stadium to Hutchins (June – July)
• Hiscock: Brooks to Spring (June – July)
• Arbana: Mark Hannah to Huron (July – August)
• Mark Hannah: Arbana to Arbana (July – August)
• Waldenwood: Earhart to Penberton (July – August)
• Birch Hollow: Tacoma to Stone School (August – September)
• Penberton & adjacent courts: Waldenwood to Waldenwood (TBD)
• Sulgrave Place: Barrister to end (TBD)

According to the staff memo accompanying the agenda item, Depot Street (Main to Carey) was included as part of the original bid package. However, the storm sewer within Depot Street – based on early indications from the Allen Creek Railroad berm opening feasibility study – could be impacted by possible solutions related to a railroad berm opening. So other local streets will be substituted for Depot Street this year.

During council deliberations, Chuck Warpehoski (Ward 5) noted that some of the curb ramps on the work schedule were upgrades to existing ramps, when some locations didn’t have ramps at all. He wanted to weigh the benefit of that in the future.

Mike Anglin (Ward 5) reported that a woman had fallen on a sidewalk and cracked her knee. If there’s a lawsuit, he said, the sidewalks should be repaired immediately, even if it’s not the city’s fault.

Stephen Kunselman (Ward 3) got an explanation from city staff on the areas of work to be covered with the sidewalk work.

Outcome: The council voted unanimously to approve the street resurfacing and sidewalk repair contracts.

Drinking Water Bond Notice

The council was asked to approve the publication of a notice of intent to issue water supply system revenue bonds totaling $18.5 million to pay for additions and improvements to the city’s water supply system.

According to the staff memo accompanying the agenda item, the first in the series of bonds is expected to be for around $3.8 million and will be sold directly to the Michigan Finance Authority as part of its Drinking Water Revolving Fund program. The bonds will be paid solely from revenues to Ann Arbor’s drinking water system.

During the brief council deliberations, Mike Anglin (Ward 5) got some clarification on the interest rates from city CFO Tom Crawford. Crawford indicated that for a question about some maximums, he would need to talk to the city’s bond counsel.

Outcome: The council voted unanimously to approve the publication of a notice of intent to issue revenue bonds.

Communications and Comment

Every city council agenda contains multiple slots for city councilmembers and the city administrator to give updates or make announcements about important issues that are coming before the city council. And every meeting typically includes public commentary on subjects not necessarily on the agenda.

Comm/Comm: Library Lane Ice-Skating Rink

Stewart Gordon gave the council an update on the status of an initiative to install a temporary ice-skating rink on the top of the Library Lane underground parking garage on South Fifth Avenue. The rink would use synthetic ice. He reported that he’d done a long interview with the woman who runs the ice rink at the Hancock Building in Chicago. He summarized the information he’d obtained from that interview for the council. The material is durable and skateable. The size of the rink is very important, he said. Children like it but it’s too small for adults, he said. At the Hancock Building a liability waiver is signed, but no accidents or claims had been made in the course of three seasons.

Shoe storage is provided as well as a place to change into skates, Gordon reported. Sharpening skates is important, he noted, and the Hancock Building staff have been trained to do skate blade sharpening during slower periods. Negative features include the fact that the specific product that had been chosen in Chicago requires that a lubricating gel be applied twice a week. He described it as a “nasty, messy, hands-and-knees” process. Other products don’t require that kind of maintenance, because the lubricant is impregnated in the plastic, he said. So that’s the kind of product that would be used in Ann Arbor.

A final point he made is that unless it’s large enough to skate on comfortably, the rink becomes a one-time novelty. At this point, the city of Chicago has installed two ice rinks downtown – so the clientele for the synthetic ice rink is gradually declining. Gordon told the council that his group was ready to work with the city’s park advisory commission and the Ann Arbor Downtown Development Authority. [Gordon and Alan Haber had made a presentation on this project at the park advisory commission's March 19, 2013 meeting.]

Comm/Comm: Park Advisory Commission Update

Mike Anglin (Ward 5) urged people to watch the March 19, 2013 meeting of the city’s park advisory commission (PAC). [Anglin serves as one of two ex officio, non-voting city council appointees to PAC. The other council representative to PAC is Christopher Taylor (Ward 3).] He highlighted two presentations from city staff that were worth hearing: one on the city’s golf courses, and the other on the canoe liveries. Anglin expressed praise for the parks staff.

Chuck Warpehoski (Ward 5) followed up on Anglin’s remarks, adding praise of his own. He’d noticed some illegal dumping in a neighborhood park and notified park staff. They’d been responsive, he said.

Comm/Comm: North Main Task Force

During communications time, Sabra Briere (Ward 1) gave a brief update on the activities of the North Main/Huron River task force. The group has been meeting every three weeks as a whole, and has formed four subcommittees, which have met in addition to the full task force. The draft recommendations were presented at a meeting of the full task force on the previous Wednesday [March 27], she reported. The recommendations will now be compiled and organized and looked at again before a meeting on April 17. A draft reported is expected by the beginning of May. The group expects to hold a public meeting on May 22 and again in June. The full report is due by the end of July. She was pleased with cooperation that had been displayed during the task force’s work. She hoped the final report would reflect short-term and long-term recommendations to the council.

Comm/Comm: Unwanted Newspapers/Circulars

During communications time at the start of the meeting, Chuck Warpehoski (Ward 5) noted that a lot of people seem to complain about unwanted advertising circulars being delivered to their premises – like the AnnArbor.com Express. He ventured that council veterans around the table had likely heard this before. He asked them to “indulge a newbie.” [Warpehoski was first elected in November 2012.] He described the various aspects of the issue – from environmental concerns to public safety. A stack of such circulars that accumulate while someone is away could send the message “rob this place, nobody’s paying attention,” he said. He knew that city attorney has looked at the issue before. He asked other councilmembers to let him know what they’d been hearing about the issue. [An attempt to revise the city ordinance on handbills and unwanted newspapers put forward by Christopher Taylor (Ward 3) in late 2011 got little traction on the council.]

Comm/Comm: Urban Core Transit

Stephen Kunselman (Ward 3) reported that on March 28 there’d been a robust discussion of governance and financing for improved or expanded transit in the “urban core” communities – attended by a number of elected officials from Ypsilanti, Ypsilanti Township, Pittsfield Township, as well as several other nearby jurisdictions. The meeting was hosted by the Ann Arbor Transportation Authority. Kunselman wanted to let everybody know they were making some headway. Attending the meeting besides Kunselman from the Ann Arbor city council included: mayor John Hieftje; Chuck Warpehoski (Ward 5); Sabra Briere (Ward 1); and Sally Petersen (Ward 2). [See: "Costs, Services Floated for Urban Core Transit"]

Comm/Comm: Affordable Services

At the start of the meeting during public commentary reserved time, Thomas Partridge called on the council to fund affordable housing and transportation for those who need it – the most vulnerable among us. As Partridge often does, he called on mayor John Hieftje to step aside and resign or face future recall. On the day after the annual celebration of the most significant holiday in Christendom, Partridge said, it was time for us to unite as Christian Democrats for progress on issues the city has long neglected.

Partridge also addressed the council at the conclusion of the meeting.

Present: Jane Lumm, Mike Anglin, Margie Teall, Sabra Briere, Sumi Kailasapathy, Sally Petersen, Stephen Kunselman, Marcia Higgins, John Hieftje, Chuck Warpehoski.

Absent: Christopher Taylor.

Next council meeting: Monday, April 15, 2013 at 7 p.m. in the second-floor council chambers at city hall, 301 E. Huron. [Check Chronicle event listings to confirm date]

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The 7-3 vote came at the council’s April 1, 2013 meeting. In order to be enacted, the changes will need to receive approval from the council at a subsequent meeting, following a public hearing.

The revisions considered by the council fell roughly into two categories: (1) those involving board composition and policies; and (2) calculation of tax increment finance (TIF) capture in the DDA district.

In the first category, the revisions to Chapter 7 that were given initial approval by the council included: a new prohibition against non-mayoral elected officials serving on the DDA board except by agreement with the other taxing jurisdictions; term limits on DDA board members; and a new requirement that the DDA submit its annual report to the city in early January.

An amendment to the ordinance changes offered by Jane Lumm (Ward 2) was accepted as friendly. It was meant to assure a focus on the DDA’s support of housing. It stipulated that if tax increment financing is used as the financing  method for an approved authority project, the project must meet one of the DDA’s adopted plan goals. Among those plan goals is support of housing. Lumm’s change provides the ability of the DDA to make investments in properties not just in the district, but also in neighborhoods near the district.

More significantly, the council gave initial approval to proposed revisions to Chapter 7 that would clarify how the DDA’s TIF tax capture is calculated. The “increment” in a tax increment finance district refers to the difference between the initial value of a property and the value of a property after development. The Ann Arbor DDA captures the taxes – just on that initial increment – of some other taxing authorities in the district. Those are the city of Ann Arbor, Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. For FY 2013, the DDA will capture roughly $3.9 million in taxes.

The proposed ordinance revision would clarify existing ordinance language, which includes a paragraph that appears to limit the amount of TIF that can be captured. The limit is defined relative to the projections for the valuation of the increment in the TIF plan, which is a foundational document for the DDA. The result of the clarification to the Chapter 7 language would mean about $363,000 less TIF revenue for the DDA in FY 2014 – compared to the $3.933 million shown in the DDA’s adopted budget for that year. For FY 2015, the gap between the DDA’s budget and the projected TIF revenue – using the proposed clarifying change to Chapter 7 – is just $74,000.

However, the total increment in the district on which TIF is computed would show significant growth. And under the proposed clarification of Chapter 7, that growth would result in a return of TIF money to other taxing jurisdictions – that would otherwise be captured by the DDA – totaling $931,000 each year for FY 2014-15. The city of Ann Arbor’s share of that would be roughly $559,000, of which $335,000 would go into the general fund. The city’s general fund includes the transit millage, so about $69,000 of that would be passed through to the Ann Arbor Transportation Authority.

The amount of TIF capture that’s returned to the other taxing jurisdictions is tied to growth in the valuation by the Chapter 7 language. Under Chapter 7, if the actual rate of growth outpaces the growth rate that’s anticipated in the TIF plan, then at least half the excess amount is supposed to be redistributed to the other taxing authorities in the DDA district. In 2011, the DDA for the first time returned excess TIF capture to other authorities, when the existence of the Chapter 7 language was reportedly first noticed. At that time, the DDA made repayments of TIF monies to other authorities of around $400,000, which covered what was owed going back to 2003. When the DDA calculated the amounts owed in 2011, the city of Ann Arbor waived its roughly $700,000 share.

In 2011, the DDA used a year-to-year interpretation of the Chapter 7 language instead of computing rate of growth against the base year in a cumulative fashion. That is a point that the Chapter 7 revisions would clarify. At the two previous meetings when the council had considered but postponed voting on the ordinance amendments, that specific point had not been addressed. But the substitute ordinance revision offered on April 1 clarified the current language in favor of the cumulative methodology. Previously, the council had postponed voting at its March 18, 2013 and March 4, 2013 meetings.

The figures below come from the city of Ann Arbor’s financial services staff. Labels are The Chronicle’s.

MOST RECENT PROJECTIONS FOR TIF CAPTURE (in millions)
 FY 13   FY 14  FY 15
========================== 
 3.957   3.933  3.756  DDA Adopted Budget TIF Revenue
 3.957   4.501  4.613  Projected TIF, DDA View 
 3.957   3.570  3.682  Projected TIF, Clarified Ch. 7
          .568   .857  Budgeted vs Projected, DDA View
         (.363) (.074) Budgeted vs Projected, Clarified Ch. 7
==========================

ADDITIONAL REVENUE FROM CLARIFIED CH. 7
 FY 13   FY 14  FY 15
========================== 
          .335   .335  City General Fund
          .223   .223  City Non-General Fund
          .559   .559  Total City

          .372   .372  Total AADL, WCC, WC
          .931   .931  Total

-

These projections do not include the capture that would result in future years from completion of City Apartments, 624 Church, 618 S. Main, or 413 E. Huron (assuming that it is approved).

The initial approval was supported by Stephen Kunselman (Ward 3), Sumi Kailasapathy (Ward 1), Sally Petersen (Ward 2), Jane Lumm (Ward 2), Mike Anglin (Ward 5), Marcia Higgins (Ward 4) and Sabra Briere (Ward 1). Voting against it were mayor John Hieftje, Margie Teall (Ward 4) and Chuck Warpehoski (Ward 5). Christopher Taylor (Ward 3) was absent.

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]

Some background: At its May 2, 2011 meeting, as it was poised to ratify a new contract with the city of Ann Arbor, under which it would continue to manage the city’s public parking system, the DDA board was informed of a previously unnoticed provision in the city’s DDA ordinance – Chapter 7 of the city code. Chapter 7 limits the amount of taxes the DDA could capture in its TIF district. Excess TIF capture is to be divided among the taxing authorities in the district.

At its May 20, 2011 meeting, the DDA board voted to accept a method of excess TIF calculation that amounted to roughly $473,000 of excess TIF capture since 2004 to be divided among the following taxing authorities, which have a portion of their tax revenues captured in the DDA TIF district: Washtenaw County, Washtenaw Community College, and the Ann Arbor District Library.

At its May 30 session, the Ann Arbor city council voted to waive the $711,767 in excess TIF capture that was owed to the city of Ann Arbor based on that method of calculation.

The Chronicle has published two op-ed pieces on the subject, arguing that the method the DDA used to calculate the excess TIF was not accurate: “Taxing Math Needs Another Look” and “TIF Capture is a Varsity Sport.”

This brief was filed from the DDA offices at 150 S. Fifth Ave. A more detailed report will follow: [link]