Roger Hewitt, DDA board treasurer. (Photos by the writer.)

The proposed budget shows $19.3 million in revenues from the public parking system and $4.8 million in tax increment finance capture. Overall, it shows $24,237,186 in revenues against $26,531,972 in expenses. The use of fund balance to cover the difference leaves the DDA with an estimated fund balance at the end of FY 2015 of about $3.3 million. FY 2015 runs from July 1, 2014 through June 30, 2015. [FY 2015 DDA budget breakdown]

The expenses include $353,344 in salaries and $245,894 in fringe benefits for four staff members, $7,075,571 in payments to Republic Parking for management of the public parking system, and $2.1 million for parking facility maintenance. Accounting for $3.19 million of the expenses is a payment made to the city of Ann Arbor, equal to 17% of the gross revenues to the public parking system.

Included in the budget is a $200,000 grant to the Ann Arbor Housing Commission – as part of a $600,000 request from AAHAC to support improvements to Baker Commons and Miller Manor.

The budget also includes $676,000 for support of the getDowntown program. The board also approved a resolution that pledged to work toward maintaining or increasing the DDA’s support for transportation programs. That resolution came in the context of an approaching May 6, 2014 transit millage ballot question. The 0.7 mill tax was placed on a May 6 ballot by the Ann Arbor Area Transportation Authority board on Feb. 20, 2014. The tax would be levied by the AAATA only if it wins a majority of support among voters across its three member jurisdictions: the city of Ann Arbor, the city of Ypsilanti and Ypsilanti Township. The DDA board resolution came in part as a response to the fact that the DDA will be capturing a portion of the new millage under its tax increment finance (TIF) funding mechanism.

The board also approved the award to Republic Parking of the full $50,000 annual discretionary management incentive. Republic Parking’s contract with the Ann Arbor DDA covers just actual costs, but also includes a $200,000 annual management fee. Of the $200,000 management fee, $50,000 is awarded to Republic on a discretionary basis. It was last year, at the board’s March 6, 2013 meeting, when the DDA board decided for the first time in five years to award the full $50,000 of the incentive. The year before, at its Feb. 1, 2012 meeting, the board determined to award $45,000 of the discretionary amount. That matched the same figure awarded in 2011, 2010 and 2009.

The board also heard the usual range of reports from committees as well as public commentary. A highlight of announcements included the upcoming closure of the surface parking facility at the old Y lot, as the city-owned property is sold to hotelier Dennis Dahlmann. The closing is expected sometime between March 13-15. The lot is located on William Street between Fourth and Fifth avenues, across from the downtown library and south of the Blake Transit Center.

FY 2015 Budget

The board considered a resolution to submit its FY 2015 budget to the city council for approval. The 2015 fiscal year starts July 1, 2014.

The proposed budget shows $19.3 million in revenues from the public parking system and $4.8 million in tax increment finance capture. Overall, it shows $24,237,186 in revenues against $26,531,972 in expenses. The use of fund balance to cover the difference leaves the DDA with an estimated fund balance at the end of FY 2015 of about $3.3 million. FY 2015 runs from July 1, 2014 through June 30, 2015. [FY 2015 DDA budget breakdown]

The expenses include $353,344 in salaries and $245,894 in fringe benefits for four staff members, $7,075,571 in payments to Republic Parking for management of the public parking system, and $2.1 million for parking facility maintenance. Accounting for $3.19 million of the expenses is a payment made to the city of Ann Arbor, equal to 17% of the gross revenues to the public parking system.

The budget also includes $676,000 for support of the getDowntown program, as well as $300,000 in discretionary spending from parking revenues. Included in the budget is a $200,000 grant to the Ann Arbor Housing Commission – as part of a $600,000 request from AAHAC to support improvements to Baker Commons and Miller Manor.

The budget also includes $449,500 for a down payment on a possible elevator replacement at the southwest corner of the parking structure at Fourth & William, as well as possible debt payments on that project.

In taking the step first to submit the budget for approval by the city council, the DDA board is this year following the state’s enabling legislation for downtown development authorities: “Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality.” In this case, the governing body is the Ann Arbor city council.

This is the first time in several years that the statutory procedure has been followed from the start. Last year, the DDA board first voted at its Feb. 6, 2013 meeting to adopt its FY 2014 budget (for the current fiscal year). That came in advance of the city council’s approval on May 20, 2013 of the city’s FY 2014 budget, which includes the DDA as a component unit.

The pattern followed last year – adoption by the DDA board of its budget in advance of the city council’s approval – had been the prevailing custom for several years. But the council decided at its May 20, 2013 meeting to revise the DDA’s budget in a way that made it significantly different from the one the DDA board had approved three months earlier. In addition to recognizing an additional $568,000 in tax increment finance revenue (TIF), the council’s action transferred an additional $300,000 from the DDA’s TIF fund to the DDA’s housing fund.

Then at the DDA board’s June 5, 2013 meeting, a vote was taken to re-adopt the FY 2014 budget that had been approved by the city council. The council’s $300,000 transfer from the TIF fund into the housing fund was echoed in the revision the council made on Nov. 18, 2013 last year to the local law regulating the Ann Arbor DDA. The following passage was added:

Tax increment financing seed funds for the Housing Fund shall be budgeted effective tax year 2016 at an amount no less than $300,000. Every year thereafter the minimum amount budgeted shall be adjusted at the same rate of increase as the increase in the total TIF capture. …

The 2016 tax year corresponds to the 2017 fiscal year. So the $300,000 figure is not required by law for another two years. At the March 5, 2014 board meeting, however, the budget was amended to add $100,000 to the housing fund expenditure line, at the request of board member Bob Guenzel. He’s long championed the cause of affordable housing and wanted to give the board some additional flexibility to spend additional money on that area, without making a mid-year budget change. Such a mid-year change would, based on remarks at the meeting, require city council approval.

In addition to the $200,000 grant to the AAHC, other housing fund expenditures for FY 2015 include $75,000 for a housing needs assessment.

FY 2015 Budget: Board Discussion

Roger Hewitt, the DDA board treasurer, noted that the operations committee had met the previous week, before the continued board retreat. The committee had come up with a budget proposal for the upcoming fiscal year. The fiscal year runs from July 1 through June 30 each year. Based on the board’s discussion at the retreat, he and DDA executive director Susan Pollay, deputy director Joe Morehouse, and board vice chair John Mouat had frantically crunched some numbers, Hewitt said, trying to figure out how to incorporate the board’s ideas from the retreat into the upcoming budget.

DDA board member Russ Collins, who is executive director of the Michigan Theater. In the foreground is board member Al McWilliams.

Hewitt noted that some of the ideas would not be incorporated because the timeframe for design and construction would probably not fall within the next fiscal year.

Some capital funds were removed but enough for design and engineering was left to continue with the streetscape effort, Hewitt said. He noted that the budget was formatted according to the requirements of the city of Ann Arbor. [Considerable confusion unfolded subsequently about apparent mismatches between the totals shown in the two versions. The board's review of the budget was based on the kind of breakdown the board has historically used for its budget planning.] Hewitt then reviewed the more detailed breakdown – which is a version that the board has used historically to set its budget.

In addition to the standard budget elements, Hewitt ticked through several other highlights. He indicated that a $114,000 item was a marketing expense including some pedestrian counts and some discretionary funds. He noted that no money has yet been approved for that purpose but these were issues identified at the retreat.

Capital expenditures had been reduced a bit from the initial draft budget – because Hewitt felt it was going to be hard to get everything up and running and under construction for some planned sidewalk construction within one fiscal year. So the board is waiting on the sidewalks until the streetscape framework plan is done, Hewitt said. He indicated that the board wanted to get the results of the streetscape framework study – which would be completed by the end of this year – and then prioritize which sidewalk work should be done first. [The board authorized a $200,000 contract for development of a streetscape framework plan at its Nov. 6, 2013 meeting.]

For bonds and interest payments, Hewitt continued, those figures have been bumped up with the intention of doing the project on the Fourth & William parking structure – to replace the stairway and elevator tower as well as to undertake some pedestrian improvements on that structure. Hewitt noted that the project has not yet been approved, but money is being included in the budget for both the down payment on the bond and increased bond payments.

FY 2015 Budget: Elevator Project

John Splitt described the elevator replacement project in somewhat more detail later in the meeting.

Image from preliminary drawings by the Carl Walker design team for renovated southwest elevator and stair tower for the Fourth & William parking structure.

In addition to replacing the elevator and stairway tower, the board is considering doing some work on the south and east sides, using some surfaces that are more reflective and perhaps installing some awnings. The stairway and elevator towers would be glass-enclosed and would open up things significantly, he said. The design team from Carl Walker had been invited back to the next operations committee meeting this month, Splitt reported. He said the committee was expecting to see a more detailed schematic design with proposals on phasing of construction at its next meeting. He was not sure if the presentation would be ready at the April meeting of the full board – but he hoped so.

Mouat added that the current undertaking really is looking at a kind of a “master plan” for renovations to the structure and how they might be phased over time. Splitt ventured that the Fourth & William parking garage had at least 30 years – or possibly 50 – of life left in it. And he did not think it should live out the rest of its life with the current elevator and stair tower.

The project is estimated to cost on the order of $3 million, depending on whether it’s eventually approved by the board and the scope and staging of the improvements (which could include exterior cladding, awnings, and electronic real-time information signs for bus arrivals). Very preliminary drawings were provided to the DDA’s operations committee at its Feb. 26 meeting. That preliminary work was authorized by the DDA board at its Jan. 8, 2014 meeting. The team from Carl Walker Inc. will follow up with more detailed drawings and cost estimates for various options.

FY 2015 Budget: Housing

Roger Hewitt said that $200,000 would be transferred into the housing fund, with the intention of spending approximately $275,000 – including $200,000 as a grant to the Ann Arbor Housing Commission and $75,000 on a housing needs assessment. Hewitt noted that the housing fund balance from the previous year was anticipated at nearly $400,000, so there would be enough money to cover that.

DDA board member Bob Guenzel.

Later in the meeting, reporting out from the partnerships committee, Bob Guenzel reviewed the Ann Arbor Housing Commission’s grant request made to the DDA’s partnerships committee. The request had come from AAHC executive director Jennifer Hall. Guenzel ventured that most DDA board members were aware that the AAHC had made a request of $600,000 to support improvements to AAHC’s Baker Commons and Miller Manor. At the most recent partnerships meeting, Hall had presented additional financial information, he reported. A lot of the focus of the discussion had been on the timing of the payments from the DDA, Guenzel said. Hall had indicated it could be done over three fiscal years – $200,000 per year. No final action had been taken, Guenzel reported, and discussion would continue.

Some back-and-forth among board members unfolded as Guenzel expressed an interest in adding $100,000 in discretionary spending for the housing fund. He indicated that he was not aware of a specific grant request that would tap that money, but he felt it might be useful to go ahead and budget the money to avoid the need for a midyear budget amendment. The back-and-forth between Guenzel and Hewitt indicated that the DDA board believes that such a midyear budget amendment would require approval of the Ann Arbor city council. The board agreed to add $100,000 to the housing fund’s expenditure line under discretionary spending.

FY 2015 Budget: Parking

Parking revenue is based on the current rate structure, Hewitt said. The “miscellaneous” item in the budget is money the DDA gets from the University of Michigan as part of the shared-use agreement for the Forest parking structure, Hewitt explained. He also highlighted the $3.19 million payment to the city of Ann Arbor, which is the 17% of gross revenues from the public parking system. That percentage payment is specified in the contract under which the DDA manages the parking system for the city.

Hewitt explained the difference between the “parking maintenance” line item and the “capital costs” line item in the parking maintenance fund. Parking maintenance is for relatively small items of less than $5,000 apiece. Capital costs are major repairs – like chipping out concrete and replacing it, putting new sealant on, or major painting jobs. These are the sorts of things that are needed in the parking structures to keep them in good shape, Hewitt explained. And the parking structures are in good shape because the DDA has been undertaking this kind of maintenance for a number of years, he said. It’s important to put enough money into the structures to maintain them so that they can live out their entire expected useful life, Hewitt said.

Hewitt noted that the FY 2015 budget reflects a deficit in the parking and the parking maintenance funds. But there are sufficient reserves in those funds to cover that gap, he added. Hewitt floated the possibility of increasing parking rates in the future. “Down the road we may – we are undoubtedly going to have to start looking at some at least inflationary increases in parking rates to cover our costs,” he said.

The total fund balance across all funds, Hewitt concluded, is about $3.3 million. That’s approximately 14% of expenditures, he said. Ideally, the DDA would like to be in the 18-20% range. But Hewitt called 14% reasonable, given that the major construction project of the Library Lane underground parking structure had been completed and the desire of the DDA to maintain some kind of momentum going into the future.

Board member Rishi Narayan asked if the percentage of operating expenses that should be held in reserve was evaluated across all funds or by each fund. Some back-and-forth between Hewitt and DDA deputy director Joe Morehouse established that the auditor looks at fund balances in each individual fund.

Morehouse was also called on to explain the difference between fiscal year and tax year in the context of a new ordinance requirement, approved by the city council late last year, that the DDA budget a minimum of $300,000 per year for the housing fund. The ordinance refers to tax year 2016, which corresponds to fiscal year 2017, Morehouse explained. [The assessor assesses values on Dec. 31 of a particular year. That sets the basis for the taxes collected the following July, which is the next fiscal year.]

FY 2015 Budget: Transportation

In reviewing the budget, Hewitt also noted that the alternative transportation line item of $676,000 is for the go!pass program, which has not yet been approved.

Reporting out from the operations committee, Keith Orr reviewed the getDowntown program’s funding request. The operations committee had some questions and had asked getDowntown director Nancy Shore to break down some of the categories of requests into more specific items. Shore was going to return for the March committee meeting so that the funding request can be considered at the next DDA board meeting in April.

That budget includes enough to cover a transportation funding request for the AAATA’s getDowntown program, which the board will consider at its April meeting. The bulk of DDA’s getDowntown funding supports the go!pass, a program in which downtown employers can participate to allow employees to take unlimited bus rides at no cost to the employee. Employers pay $10 per employee per year for the passes. An “all-in” clause requires employers to purchase go!passes for all employees.

The fares for rides taken with a go!pass are covered in smaller part by the employer payment and in larger part by an annual grant from the DDA. The total grant request this year reflects an 11% increase from last year:

                         FY 2014    FY 2015
getDowntown             $ 40,488   $ 43,000
go!pass                 $479,000   $529,000
Transportation Options  $ 91,174   $105,264
TOTAL                   $610,662   $677,264

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The board is expected to vote on the go!pass request at its April board meeting.

Outcome: The council unanimously approved submission of its FY 2015 budget to the city council for approval.

Transportation Resolution

The board considered a resolution that pledged to work toward increasing the DDA’s support for transportation programs.

The resolution came in the context of an approaching May 6, 2014 transit millage ballot question. The 0.7 mill tax was placed on a May 6 ballot by the Ann Arbor Area Transportation Authority board on Feb. 20, 2014. The tax would be levied by the AAATA only if it wins a majority of support among voters across its three member jurisdictions: the city of Ann Arbor, the city of Ypsilanti and Ypsilanti Township.

The DDA board resolution came in part as a response to the fact that the DDA will be capturing a portion of the new millage under its tax increment finance (TIF) funding mechanism. The ballot language itself highlights DDA tax capture among other TIF authority capture:

PUBLIC TRANSPORTATION IMPROVEMENT MILLAGE

To improve public bus, van, and paratransit services – including expanded service hours, routes, destinations, and services for seniors and people who have disabilities – shall the Ann Arbor Area Transportation Authority levy a new annual tax of 0.7 mills ($0.70 per $1,000 of taxable value) on all taxable property within the City of Ann Arbor, the City of Ypsilanti, and the Charter Township of Ypsilanti for the years 2014-2018 inclusive? The estimate of revenue if this millage is approved is $4,368,847.00 for 2014. This revenue will be disbursed to the Ann Arbor Area Transportation Authority and, as required by law, a portion may be subject to capture by the downtown development authorities of the Cities of Ann Arbor and Ypsilanti, the Washtenaw County Brownfield Redevelopment Authority, and the local development finance authority of the Charter Township of Ypsilanti.

The city of Ann Arbor’s financial staff are currently projecting the DDA’s TIF revenue for fiscal year 2015 to be about $4.8 million. Given the roughly 28 mills of tax on which the DDA captures taxes, that works out to a 0.7 mill equivalent of $120,000 (4,800,000/28)*0.7=120,000]. That’s consistent with the AAATA’s estimates of about $119,000 that would be captured from the 0.7 mill transit tax by the Ann Arbor DDA.

The DDA “resolved” clause of the resolution as amended at the meeting read:

Resolved, If the voters support approval of a new five-year transit millage, the DDA, which has been a long-time supporter of transit as a key strategy to meet its mission, will work to maintain or increase its support for transportation-related programs and projects.

Transportation: Public Commentary

Martha Valadez spoke to the board on behalf of Partners for Transit during public commentary at the start of the meeting, reminding the board that she’d also spoken at board’s Feb. 5, 2014 meeting. She was there to tell the board about the importance of the campaign to support the Ann Arbor Area Transportation Authority’s millage proposal, saying she hoped to get the DDA’s support for the millage proposal that will be on the May 6 ballot. She reviewed how the millage would be 0.7 mills for taxpayers in the city of Ann Arbor, the city of Ypsilanti and Ypsilanti Township. [For detailed background, see "Tax Question Focus of Transit Board Meeting."]

Valadez talked about how one of the goals of the millage is to create a better connected urban core in Washtenaw County. She described how the volunteers who are working on the campaign are very committed to the work that they are doing, saying that the increased service would change a lot of people’s lives. She described how a volunteer at a meeting the previous night who lived in Ypsilanti Township would be able to work more hours in Ann Arbor and not have to worry about getting home late in the evening. She asked for the DDA board’s support for the five-year plan that this millage would support. She asked for the board to endorse the millage proposal or for individual board members to make endorsements on behalf of their businesses. She offered to set up appointments one-on-one with board members after the meeting to talk about the millage.

Ray Detter reported out from the previous night’s downtown area citizens advisory council meeting, saying that the CAC would support voter approval on May 6, 2014 of the Ann Arbor Area Transportation Authority’s request for a 0.7 mill tax to improve transportation service. The five-year service improvement plan, Detter continued, would provide an additional 90,000 service hours for the greater Ann Arbor area.

Transportation: Board Discussion

Keith Orr introduced the item by saying that it was largely in response to the fact that a millage was being proposed by the Ann Arbor Area Transportation Authority. The last two “whereas” clauses are important, he said, because those clauses note that the DDA has a keen interest in supporting transportation:

Whereas, The Ann Arbor DDA has a keen interest in using these new millage funds for transportation-related purposes in support of the DDA’s Renewal Plan;

Whereas, These purposes may include and are not limited to such projects and programs as a future downtown circulator, repairs and enhancements to bus stops and bus shelters, the connector, bicycle facilities including bicycle parking, and other transportation-related facilities and services;

Orr explained that a certain portion of the new millage would be captured by the DDA. The resolution assures people that the DDA’s dedication to transportation would continue, he said, “recognizing that additional revenues would be coming our way.”

Russ Collins asked: “Why are we working to increase?” He ventured that the purpose of the resolution was to assure voters that the DDA would sustain its commitment, and that the DDA would not be withdrawing any funding. Orr responded to Collins by saying that about $90,000 of tax capture would come to the DDA – which he said coincidently was about the amount of support that the DDA had contributed to the LINK.

[The AAATA is estimating the DDA's capture of the millage at about $119,000. The city of Ann Arbor’s financial staff are currently projecting the DDA’s TIF revenue for fiscal year 2015 to be about $4.8 million. Given the roughly 28 mills of tax on which the DDA captures taxes, that works out to a 0.7 mill equivalent of $120,000 (4,800,000/28)*0.7=120,000], which is consistent with the AAATA’s estimate.]

By way of additional background, the DDA ended its support of the downtown circulator called the LINK in 2009 at its June 3, 2009 meeting. A breakdown of the cost of service funding for the LINK circulator from September 2008 to April 2009 was as follows:

$145,385  University of Michigan
$131,267  State operating assistance
$ 10,000  AAATA advertising revenues
$ 71,023  AAATA operating subsidy
$ 71,023  Downtown Development Authority

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Orr stressed that the resolution was not a quid pro quo – that if the voters approve the millage that the DDA would undertake a particular action.

City administrator Steve Powers, who also serves on the DDA board.

Rather, Orr explained, the resolution was to make clear that the DDA understood that if voters passed the millage, then their expectation was that the millage would be used on transportation. John Mouat said Collins’ point was a good one, wondering if the DDA should commit to an increase.

The back-and-forth that ensued resulted ultimately in the addition of “maintaining” as an option along with increasing support.

City administrator Steve Powers indicated that the resolution was consistent with what the DDA has done with other taxing jurisdictions as far as investing the DDA’s tax capture back into facilities.

It’s also consistent with the discussion that’s going on now in Lansing, Powers said, involving DDA reforms.

This is the direction that the DDA might be forced to go in any case by the legislature, Powers ventured. He described pending legislation in Lansing as “an active possibility.”

Outcome: The board unanimously approved the resolution on maintaining or increasing support for transportation.

Republic Parking Management Incentive

The board considered a resolution awarding Republic Parking the full $50,000 of its annual discretionary management incentive. Republic Parking’s contract with the Ann Arbor DDA covers just actual costs, but also includes a $200,000 annual management fee. Of the $200,000 management fee, $50,000 is awarded to Republic on a discretionary basis. [.pdf of DDA staff memo on Republic Parking management incentive]

It was last year, at the board’s March 6, 2013 meeting, when the DDA board decided for the first time in five years to award the full $50,000 of the incentive. The year before, at its Feb. 1, 2012 meeting, the board determined to award $45,000 of the discretionary amount. That matched the same figure awarded in 2011, 2010 and 2009.

The direct costs for Republic Parking budgeted by the DDA for FY 2014 – the current fiscal year ending June 30 – are $6,569,316 out of about $19,348,016 in budgeted gross revenue for the parking system.

Part of the basis this year leading to the recommendation to award the full $50,000 was improvement in bi-monthly customer surveys over the year:

2013
5-Excellent 42.8%
4 31.6%
3 13.3%
2 3.3%
1-Poor 2.8%
Non-Responsive 6.2%

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The staff memo on the incentive notes that the DDA’s independent inspector’s cleanliness rates were 92.3% for the entire system, compared to 91.71% for last year.

The Dec. 31, 2013 accounts receivable balance for parking permit accounts was $22,920. That’s 4.4% of the average monthly billing, which is below the DDA’s target of 5%.

The memo also notes that the dead ticket average was 1.75% for the year, which is an increase from last year’s 1.01%. The target maximum for that statistic is 1.75%.

A staff memo accompanying the resolution awarding the $50,000 incentive cited additional factors:

• Completion and opening of the First and Washington parking structure, including overseeing the installation of equipment, managing final construction-related maintenance, coordination of opening operations with the final construction in the garage.
• Modernization of the parking equipment at two parking facilities.
• Completion of a Library Lane parking structure office.
• Implementation of reservation parking for Art Fair and the 1st NHL Winter Classic.
• Outstanding success with the first time events of New Year’s Eve “Puck Drops Here” and NHL Winter Classic, despite the weather obstacles presented.
• Maintaining of the parking facilities during the past extreme weather, which included removing large amounts of snow from the facilities and from parking meter areas in sub zero temperatures.

The Ann Arbor DDA manages the city’s public parking system under contract with the city of Ann Arbor. The contract calls for 17% of gross parking revenues to be paid to the city of Ann Arbor.

Republic Parking Management Incentive: Board Discussion

Roger Hewitt introduced the item by describing how the contract with Republic parking works: Republic’s costs are covered, but the contract also includes a management fee worth potentially $200,000 per year. Of that, $150,000 is guaranteed. The additional $50,000 can be awarded at the discretion of the board, based on performance. Hewitt directed everyone to the staff memo, which describes some of the objective and subjective criteria used for evaluating performance. Hewitt then reviewed the points of the memo in detail.

Hewitt noted that the surplus this past year was over $1 million, which he attributed in large part to the work of Republic Parking manager Art Low, working with new technology to make the operations as efficient as possible. Hewitt said he strongly endorsed awarding the full amount of the management incentive. “I cannot be happier with the job that Republic Parking has been doing on our system,” Hewitt said. He described Ann Arbor’s public parking system as one of the best maintained parking systems in the country.

Russ Collins added that a strict look at the statistics indicates that the parking system is generally on a very high level, and slightly above last year. Based on previous performance and current performance, Collins felt that the award of the full amount of the incentive was completely warranted.

Outcome: The board voted unanimously to award the full $50,000 management incentive to Republic Parking.

Communications, Committee Reports

The DDA board’s meeting included the usual range of reports from its standing committees and the downtown area citizens advisory council.

Comm/Comm: Fifth & William Parking Lot

DDA executive director Susan Pollay announced that the Fifth & William parking lot (the former Y lot) would be closed starting sometime between March 13-15, 2014. That’s because the city-owned property is being sold to downtown hotelier Dennis Dahlmann. Pollay said it’s very exciting and the DDA is looking forward to the new project being built there.

By way of background, a project has yet to be submitted to the city, and will take several months to make its way through the approval process. The Ann Arbor city council approved a purchase agreement with Dahlmann for the city-owned land, for $5.25 million, at its Nov. 18, 2013 meeting. One of the terms of the agreement is that Dahlmann must complete construction and receive a certificate of occupancy for the project on the site by Jan. 1, 2018.

Dahlmann made a proposal for the DDA to lease the property from him for $150,000 a year – so that the DDA could continue to provide public parking spaces there until construction of Dahlmann’s project could begin. The response from DDA operations committee members on Jan. 29 was unenthusiastic. They felt it would provide an incentive for Dahlmann to delay developing the land. They also felt that in the immediate vicinity of that lot, there was adequate parking – at the Fourth & William and the Library Lane structures. Finally, the DDA had calculated that with the $150,000 rent payment to Dahlmann, the net annual income to the parking system – assuming all 141 spaces in use – would be just $12,333 a year. [.pdf of DDA financial analysis of Dahlmann's proposal]

Comm/Comm: 120 W. Huron Hotel

Reporting out from the partnerships committee, Bob Guenzel described a request from First Martin Corp. Mike Martin had attended the partnerships committee meeting to make a request on behalf of the 120 W. Huron project – which Guenzel ventured most people knew was for a hotel. Martin had made a specific request for a DDA grant to support project elements that benefit the public – streetscape, additional lighting, LEED certification, historic preservation of the bus facade.

The committee had decided to defer the request while it considers whether it should create a new DDA partnership grant policy that would support projects like this, Guenzel reported. Guenzel indicated that a draft policy would likely be considered at the next committee meeting. A brownfield grant policy that had previously been generated – in response to the 618 S. Main project – was circulated as a possible template to use for the new policy.

Comm/Comm: Footing Drain Lawsuit

Ray Detter reported out from the previous night’s downtown area citizens advisory council meeting. He reported how there had been discussion of the recently filed lawsuit against the city of Ann Arbor, which challenges the legal foundation of the city’s footing drain disconnection ordinance. He reviewed how the ordinance was enacted in 2001, which established a program under which property owners can be required to disconnect their footing drains from the sanitary sewer system. The intent of the ordinance, he continued, is to diminish the risk of sanitary sewer overflows into the Huron River and sanitary sewage backups in homeowners’ basements.

Detter pointed DDA board members to the Feb.28 Ann Arbor Chronicle coverage of the issue. [See "Lawsuit Filed on City Footing Drain Program."] Detter noted that a motion for a preliminary injunction had also been filed in connection with the lawsuit, asking the court to order the city to stop enforcement of the footing drain disconnection ordinance. Among the lawsuit’s many claims, Detter continued, is that it violates the U.S. Constitution. Detter called it a very serious lawsuit. If the preliminary injunction were granted, he contended, it would have the immediate effect on downtown development as well as the development plans of the University of Michigan.

Comm/Comm: Courthouse Square

Ray Detter also reported that the CAC supports age diversity in the downtown. Courthouse Square – an apartment building for senior citizens at the southwest corner of Huron and Fourth – has been sold to Wickfield Properties, he said. The CAC was urging Wickfield, the DDA, the city council, and the entire community to help support housing projects that can help further age diversity in central Ann Arbor. He ventured that it’s not known yet what will happen with Courthouse Square.

Comm/Comm: Connector Study

An alternatives analysis is currently being conducted by the AAATA for the corridor running from US-23 and Plymouth southward along Plymouth to State Street, then further south to I-94. The alternatives analysis phase will result in a preferred choice of transit mode (e.g., bus rapid transit, light rail, etc.) and identification of stations and stops. The study has winnowed down options to six different route alignments.

Roger Hewitt reported out on the connector study, for which he serves on an advisory group. The group had reviewed some very preliminary cost estimates, and received a status report on the modeling project. The modeling project took a lot of demographic and transportation data to try to determine what ridership would be, based on placement of stations at different locations, Hewitt explained. It’s a very complex modeling that is used in the analysis, he said. The group is using the modeling techniques of the Washtenaw Area Area Transportation Study (WATS). The modeling project should be done by the middle of March, he said, and the information would be available by the end of March – as the group tried to determine what the final alignment of routes would look like. “We’re kind of slogging through the technical part now,” he concluded.

Comm/Comm: TiniLite

During public commentary at the end of the meeting, Changming Fan introduced himself as president of TiniLite World Inc., which been registered in Ann Arbor since 1996. He said he appreciated being in a democratic country and felt like he wanted to stand up and say something because he felt like he had the freedom to do that.

He told the board he was a graduate of the University of Michigan. He described himself as an entrepreneur and an inventor. He also said he loves the politics involved with public art and public safety. He wanted to contribute what he learned in China and at the University of Michigan to the city of Ann Arbor. He has developed the LED technology made by TiniLite since 1996, he said. There are a lot of things that we should do to make Ann Arbor be the best town it can be, he said. In 2005, Ann Arbor had become the first city to install LED streetlights. He said that Ann Arbor should continue that legacy by using LED lights to create art, using his technology. He wanted to make a positive impact in that way, he said.

Comm/Comm: Puddles

During public commentary at the conclusion of the meeting, Ed Vielmetti told the board he wanted to talk to them about snow. [He was reprising his remarks made at the Jan. 7, 2009 DDA board meeting.] He pointed out that there’s a lot of it and at some point it’s going to melt, and it would try to drain into the catch basins downtown. Some of the basins are currently blocked by snow and ice, he noted. There also are large and small piles of snow blocking pedestrian paths downtown. He said he’s tried to figure out who’s responsible for dealing with this issue and it’s hard to figure out. At that point DDA board member Russ Collins joked: “Engineers!”

Vielmetti said that sidewalk clearance is the responsibility of property owners, and clearing the street is the responsibility of the city. But Vielmetti said he wasn’t sure who is responsible for dealing with the puddles in the street that people have to walk around or not come downtown because it’s hard to cross the street. He thought that the DDA has a role in that.

As far as the narrow question of who should clear the catch basin, Vielmetti proposed that the DDA look into possibly partnering with the Huron River Watershed Council, which has an adopt-a-storm-drain program administered by Jason Frenzel. [Frenzel recruited volunteers for the program at last year's Green Fair.] Vielmetti described the HRWC’s program as for residential areas right now, but ventured that HRWC would be a point of contact for the DDA.

Vielmetti mentioned the intersection of Church Street and South University as one that had been bad in the past. It’s not a situation that can be looked at with pride, he said, and where we can say that all of Ann Arbor citizens can easily cross the street. He said he did not know who is responsible for it but he ventured that a better job can be done. And he figured that the dollar amounts involved would be small, compared to the benefit.

Comm/Comm: Public Art

In his report from the previous night’s downtown area citizens advisory council meeting, Ray Detter said the CAC wanted to state it supports continued efforts of the city – despite recent actions of the city council – or other groups and individuals to make sure that additional public art installations remain an important city goal.

Comm/Comm: Library Lot

Ray Detter also reported that the CAC reaffirmed its support for a public plaza, with a walkway to Liberty Plaza, as part of a plan to create tax-producing private development on a major part of surface of the Library Lane parking structure. The CAC also believes that any future private development should be pursued cooperatively, and should be integrated with an adjoining plaza, the Ann Arbor District Library, the Ann Arbor Area Transportation Authority and all nearby public and private spaces.

Comm/Comm: Welcome to New UM President

Ray Detter said the CAC wanted to welcome the new University of Michigan president Mark Schlissel to downtown Ann Arbor. He said the Schlissel family would be “inhabitants of Sloan Plaza.” His family would live there while the university president’s historic home on South University Avenue is being renovated.

Present: Al McWilliams, Bob Guenzel, Roger Hewitt, Steve Powers, John Splitt, Rishi Narayan, Russ Collins, Keith Orr, John Mouat.

Absent: Cyndi Clark, Joan Lowenstein, Sandi Smith.

Next board meeting: Noon on Wednesday, April 2, 2014, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date]

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DDA board action on the $280,000 was taken at its Dec. 4, 2013 meeting, and came after the Ann Arbor city council had declined to approve an additional $280,000 budget allocation.

Downtown Ann Arbor Main Street light pole on the northeast corner of Main & William. Photograph is from the city of Ann Arbor, taken in April 2012.

According to the DDA’s resolution, staff will use the DDA funding to begin now with replacement of those poles most in need of replacement, with the remainder replaced in the summer of 2014.

The DDA board action was somewhat expected based on a mid-November email sent by city administrator Steve Powers to Ann Arbor city councilmembers, indicating that no further city council action would be required to get all 81 light poles replaced. Powers’ email indicated that on Oct. 31 and Nov. 1, city staff had inspected the Main Street light poles – and based on assessment of the city’s signs and signals staff, it was determined that 36 poles should be replaced within six months or sooner and that the remaining 45 light poles should be replaced within 1 to 2 years. It was the DDA that was developing a plan for the 45 remaining light poles, Powers wrote.

The issue has a history that’s interwoven with the oftentimes fractious relationship between the Ann Arbor city council and the DDA.

By way of additional background, in April 2013 when the council gave initial approval of the change to the city ordinance that regulates the DDA’s TIF (tax increment finance) capture, one argument against that move was that it would leave the DDA without sufficient revenue to pay for the roughly $580,000 cost of replacing the decorative light poles, which are described by some as an iconic feature of Main Street.

Replacement was characterized as an urgent public safety issue, because the bases of some of the poles are rusting. Various statements were made about the number of light poles that had failed, but responding to an emailed query from The Chronicle earlier this year, city of Ann Arbor staff indicated that in early 2012 two of the light poles fell – due to a structural failure at the base of the poles caused by rust. After inspection of all the poles, two additional light poles were deemed to be in immediate risk of falling and were also replaced. As part of the council’s FY 2014 budget deliberations, the council altered the DDA’s budget and directed the DDA to allocate $300,000 toward the replacement of the Main Street light poles.

The council’s specific action on May 20, 2013 was to alter the DDA’s budget by recognizing additional TIF revenues of more than $568,000, and shifting $300,000 of that revenue from the DDA’s TIF fund to the DDA’s housing fund. The council’s budget resolution also recommended that the DDA spend $300,000 of its TIF fund on the Main Street light pole replacement. Earlier this year, in response to an emailed query from The Chronicle, city administrator Steve Powers indicated that the city council was expected to be asked to act on the matter either at its July 15 or Aug. 8 meeting. But the issue was not placed before the council until Oct. 21.

In timeline overview form:

• April 1, 2013: Initial approval of DDA TIF capture ordinance revision (Chapter 7). Main Street light poles were cited as a project the DDA might not be able to pay for if the Chapter 7 revisions were approved.
• April 15, 2013: City council approves an amendment to the Chapter 7 revision, put forward by Sally Petersen (Ward 3), which delayed application of the revised language until FY 2015.
• May 20, 2013: City council approves FY 2014 budget amendment that affects DDA budget:
  

  Whereas, The DDA is forecasted to receive $568,343 more in TIF revenues than anticipated in the proposed FY14 budget;
  Whereas, Council desires to support the public housing program in the DDA area;
  RESOLVED, The DDA TIF fund revenue and expenditure budgets be increased by $568,343 for the purposes of creating a one-time transfer;
  RESOLVED, The DDA Housing fund revenue and expenditure budgets be increased by $300,000 to reflect Council’s desire for the DDA to support affordable housing in the DDA area; and
  RESOLVED, Ann Arbor City Council requests that the DDA allocate at least $300,000 for the replacement of the light poles on Main Street.

• June 5, 2013: DDA board meets and executive director Susan Pollay reports the council’s action. She tells the board that she’s meeting with city staff to figure out how the light poles will be paid for.
• July 3, 2013: DDA board allocates $300,000 for the light pole replacement project at the same meeting it allocates $250,000 for other capital projects, and $59,200 to support the creation of a business improvement zone in the South University area. One “whereas” clause characterized the council’s action in a way that is not based on the wording of the city council’s May 20 budget amendment:
  

  Whereas, Through the 2013/14 budget approval process it was determined that the City would undertake this street light replacement in calendar year 2013, with the DDA allocating $300,000 toward the cost of the project, and the City allocating $216,000; [.pdf of complete DDA light pole resolution]

• Oct. 21, 2013: Ann Arbor city council rejects a supplemental budget allocation of $280,000 toward the downtown light pole replacement project on a 7-4 vote. It needed eight votes to pass.
• Dec. 4, 2013: DDA board approves $280,000 allocation from the remainder of its 2002 State Street Improvements Project and with funds to be assigned in the DDA’s FY 2015 TIF capital improvements budget.

This brief was filed from the DDA offices at 150 S. Fifth Ave., Suite 301. A more detailed report will follow: [link]

Left to right: DDA board member Keith Orr, mayor John Hieftje.

The DDA had actually already adopted its FY 2014 budget – back on Feb. 6, 2013. And although it’s been customary in the past years for the DDA to adopt its budget in advance of the city council’s approval, the state enabling statute for downtown development authorities provides a different sequence: “Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality.”

Considerable debate on the DDA’s budget had unfolded among city councilmembers at their May 20, 2013 meeting. And the council had ultimately decided on a 10-1 vote to approve a FY 2014 budget for the DDA that differed from the one the DDA had adopted in February. In addition to recognizing an additional $568,000 in tax increment finance revenue (TIF), the council’s action transferred an additional $300,000 from the DDA’s TIF fund to the DDA’s housing fund.

At their June 5 meeting, some DDA board members balked at the council’s action, citing the replacement of rusting-out light poles on Main Street as a more pressing need than reserving funds for undetermined future housing projects. But ultimately the board adopted the council’s approved budget on an 8-2 vote – with dissent from Sandi Smith and John Mouat. Absent from the meeting were Russ Collins and Nader Nassif.

At the June 5 meeting, the board concluded that a portion of the more than $516,000 cost for the Main Street light poles would need to come from the city’s general fund. Mayor John Hieftje indicated at the meeting that in the next month he expected the city council would be presented with a budget resolution authorizing the difference between the $516,000 total cost and the $268,000 that the DDA considers available in its council-approved budget.

Also approved by the DDA board were annual routine adjustments to its current year’s budget, which are undertaken to ensure that actual expenses and revenues are reflected accurately. The adjustments are made so that expenses do not exceed revenues in any of the funds. During those deliberations, back-and-forth between board treasurer Roger Hewitt and Newcombe Clark indicated a realization that the kind of budget amendment they were undertaking for FY 2013, at the end of the fiscal year, might be used to work around the budget levels authorized by the city council. It’s not completely clear if that strategy is possible.

But in response to Hewitt’s assurance that budget amendments could be enacted for any reason – as long as expenditures didn’t exceed revenues – Clark made his comment about people staying up too late on Monday nights. [The city council meets on Monday nights, and the council's deliberations on the DDA budget have gone long into the evening. If the DDA board can change its budget after adopting the council-approved version, then the council's deliberations would seem to be moot.]

The June meeting was Clark’s penultimate one, as his term expires at the end of July and he’s moving to Chicago to take a job there. The board’s July 3 meeting will also be board chair Leah Gunn’s last meeting, which will mark the end of over two decades of service on the DDA board, beginning in 1991.

The parking revenue and patrons report from the public parking system was one of the regular highlights of the meeting. The DDA manages Ann Arbor’s public parking system under a contract with the city. The parking report was complemented by a board resolution that awarded five additional monthly parking permits to The Varsity residential project, bringing its total to seven. The DDA can assign monthly permits to residential projects under the city’s contribution in lieu (CIL) program – which provides a mechanism for building housing without providing parking spaces onsite.

Local developer Peter Allen addressed the board during public commentary, reporting that his company had been one of three to submit bids in response to the city’s RFP (request for proposals) for brokerage services to sell the former Y lot at Fifth and William streets. He told the board he thinks the parcel is worth $5-7 million or more.

Budget Issues

The board handled two major budget issues and entertained discussion on others. The main issues were: (1) the adoption of the city-council approved FY 2014 budget, on which the council had voted at its May 20, 2013 meeting; and (2) adjustments to the FY 2013 budget, which is the current fiscal year now drawing to a close on June 30.

During deliberations at the May 20 meeting, the council had ultimately decided on a 10-1 vote to approve a FY 2014 budget for the DDA that differed from the one the DDA had adopted in February. Christopher Taylor (Ward 3) cast the sole vote of dissent. In addition to recognizing an additional $568,000 in tax increment finance (TIF) revenue, the council’s action transferred an additional $300,000 from the TIF fund to the DDA’s housing fund.

Budget Issues: FY 2014

By way of background, according the state’s enabling statute for downtown development authorities, a DDA is supposed to adopt its budget after the governing municipality approves it [emphasis added]:

125.1678 Budget; cost of handling and auditing funds. Sec. 28. (1) The director of the authority shall prepare and submit for the approval of the board a budget for the operation of the authority for the ensuing fiscal year. The budget shall be prepared in the manner and contain the information required of municipal departments. Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality. Funds of the municipality shall not be included in the budget of the authority except those funds authorized in this act or by the governing body of the municipality. (2) The governing body of the municipality may assess a reasonable pro rata share of the funds for the cost of handling and auditing the funds against the funds of the authority, other than those committed, which cost shall be paid annually by the board pursuant to an appropriate item in its budget

However, the Ann Arbor DDA board has typically adopted its budget before the city council approves the city’s fiscal year budget, of which the DDA’s budget is a component.

At the board’s June 5 meeting, Roger Hewitt led off the discussion on adopting the FY 2014 budget by noting that according to the state enabling legislation for DDAs, the city council approves the DDA’s budget, and then the DDA board formally adopts that budget. There were a couple of changes that the city council made compared to the budget that the DDA board had previously adopted in February, Hewitt said. So the board was being asked to consider a revised budget that reflected changes approved by city council. [.pdf of FY 2014 DDA budget adopted in February] [.pdf of revised FY 2014 DDA budget]

Income to the TIF fund was being revised in the budget based on new information from the assessor’s office – to a total of just over $4.5 million, Hewitt told the board. The council had also increased the amount of inter-fund transfers from the TIF fund to the housing fund from $100,000 to $400,000 – a $300,000 increase. The budget the board was being asked to consider, Hewitt said, showed capital costs would be increased from $300,000 to $568,000 – to replace the light poles on Main Street.

Ann Arbor Main Street rusted light pole. (Photo from April 2012 by city of Ann Arbor staff.)

Susan Pollay, executive director of the DDA, indicated that only $268,000 of those capital costs were intended by the DDA currently to be used for light poles on Main Street. She told the board that she was in conversation with city staff about how to come up with the difference between $268,000 and the estimated cost of doing the replacement for the poles – which is $516,000, including warranties and labor. She thought that a resolution would be presented to the city council within the next month asking for a city council approval to appropriate the remaining money from the city’s general fund. Approval for the project would be coming back to the DDA board in July, Pollay said.

Looking at the housing fund in more detail, Hewitt noted that the total $400,000 transfer into the housing fund showed up as income to that fund. Another change to the budget was to move a different $400,000 to support affordable housing in Village Green’s City Apartments project, which had originally been part of the previous year’s budget. That leaves the housing fund balance for fiscal year 2014 at about $382,000, Hewitt concluded.

By way of background, the politics of the housing fund transfer involve pending revisions to the city ordinance that regulates how the DDA’s TIF capture is calculated. The existing ordinance language, enacted in 1982, indicates a cap to TIF revenue, calibrated to the anticipated increase in tax valuation in the TIF plan, which is a foundational document for any DDA. Revenue above the cap is supposed to be returned to the taxing jurisdictions in the district, whose taxes the DDA captures. The DDA contends that it only became aware of the cap in 2011, when it was pointed out by the city treasurer.

The DDA eventually adopted the position that it could give the ordinance language an interpretation that did not require the return of any TIF dollars to the taxing jurisdictions. The DDA’s response to proposed changes to the language to prevent its non-cap interpretation of the ordinance was to raise the specter of a diminished ability of the DDA to support affordable housing. Councilmembers who were pushing to clarify the ordinance responded to the DDA’s political argument, based on affordable housing, with a political move of their own – the forced transfer of money from the DDA’s TIF fund to the housing fund.

Sandi Smith led off deliberations by saying she had a problem transferring $300,000 to the housing fund when the DDA had been working pretty hard to contribute to affordable housing, without a clear path for doing that. It’s been a struggle for the last eight years sitting on the partnerships committee trying to find solid projects and a method to invest in affordable housing downtown, she said. The transfer seems “arbitrary,” Smith said, when there are other very clear needs, giving the light poles as an example. Smith felt the DDA had been very good about putting money aside for housing, but she allowed that the DDA had cut back a couple of years in order to build the new Library Lane underground parking structure. But the board had now begun again to invest in housing and to put some money aside.

It’s challenging now, Smith said, to accept what the council had done by moving an arbitrary amount of money over into the housing fund – without a project that is specifically ready to go. She described it as unfortunate that the city had not approached the DDA partnerships committee beforehand to have a discussion with the chair of that committee or the chair of the DDA board, to ask: “Is this a useful thing for you to do?” She said it had been done in an arbitrary and off-the-cuff way at the 11th hour.

Smith asked what kind of flexibility the board had at this point. She did not see the transfer from TIF to the housing fund as a benefit to anything the DDA is doing as far as affordable housing goes. She did not feel it benefits the downtown in any way to move the money over to the housing fund in a “holding pattern,” waiting for the DDA to find a project to invest in. Hewitt told Smith that he did not necessarily disagree with her, but the state law is clear that the DDA’s budget must be approved by the city council. The DDA adopts its budget after the city council approves it. “The law is the law,” Hewitt concluded.

Newcombe Clark talks with DDA executive director Susan Pollay before the June 5 meeting.

Newcombe Clark drew out the fact that in the council’s resolution passed on May 20, the housing fund transfer is explicitly required, but the council’s direction to spend money on the Main Street light poles is put in terms of a request. He concluded that one of the moves had been forced while the other had been merely requested.

Mayor John Hieftje, who voted with the 10-member majority in supporting the council’s resolution, told the board that these issues had been discussed at the council’s meeting. He had been unsuccessful in convincing other councilmembers that the amount of the housing fund transfer should not be as great, he said. His point at the council meeting had been to stress the importance of replacing the light poles on Main Street, he added. But he noted that the original resolution that had been put forward called for an even greater amount of $500,000 to be transferred to the housing fund, which would have made it unavailable to spend on light poles. What the council had approved had been a compromise. He described the number of light poles that had blown down as three or four. [City staff in the public services area responded to an e-mail query from The Chronicle about the exact number of light poles that had failed, by explaining that two had fallen while two more had been replaced when they were deemed on inspection to be in immediate need of replacement.]

Board chair Leah Gunn ventured that the city’s general fund will have to cover the balance of the expense for the light poles [$516,000 - $268,000 = $248,000]. Hieftje indicated that he was hopeful it would be possible, but he was not sure if that would have majority support on the city council: “I can’t predict that.” But he would be voting to support replacing light poles with general fund money, he said. Smith indicated that to her it was a priority to replace light poles. She characterized the housing fund transfer as “feel-good money,” because there’s pressure for affordable housing – without a commitment by the council to find a way to fund it. She indicated she would not support the budget change even though she knew it would pass. About the council’s fund transfer, she concluded: “It’s nonsensical to me.”

Clark floated the idea that light poles in front of Ashley Mews could be replaced with housing fund dollars. Pollay told Clark that the light poles in need of replacement are located on Main Street between Huron to the north and William on the south – so, no. [Ashley Mews is south of William.] Hieftje added that Craig Hupy, the city’s public services area administrator, had characterized the need to replace the light poles on Main Street as “urgent.” [The need is based on rusting of the poles, which apparently makes them susceptible to catastrophic failure.]

John Mouat indicated agreement with Smith – though he was not so much concerned about comparing replacement of light poles to investment in housing. He was more concerned about the process. He agreed with Smith’s characterization of the amounts as arbitrary. The DDA support of affordable housing needs to take place in the context of a process, he said. So he was not inclined to support the budget. John Lowenstein pointed out that this was for the fiscal year 2014 budget, and that meant that if there were no appropriate housing projects to spend the money on in that fiscal year, then the budget for next year would be amended based on experience rather than “random decisions.”

DDA board member John Mouat.

Gunn noted that the DDA’s partnerships committee would be meeting with representatives of the housing community later in June to find out what affordable housing projects are in the pipeline. But the DDA’s commitment to affordable housing is clear, and the light poles are an emergency, Gunn concluded. During her report out from the partnerships committee, Sandi Smith had noted that the June meeting would include representatives of the affordable housing community so that the DDA board can be as informed as possible about the joint city and county goals, and how the DDA can align its work plan to best help the process. That meeting will take place two hours later than it usually does – which puts the time at 11 a.m. on June 12.

Given that the meeting with representatives of the housing community was pending, and that the city council was going to be considering possible action on funding light poles, Hieftje ventured that the DDA board had the option of postponing the vote on the budget until its next meeting, in July. Bob Guenzel responded to Hieftje by pointing out it was not actually an option because the board needed to adopt the budget before the fiscal year started. Guenzel then stated, “But I assume we can amend the budget along the way if we decide to do that in July, and that can be done.” This comment set the stage for discussion later in the meeting – about the DDA’s ability to change its budget later in the year without city council approval.

Keith Orr agreed with Mouat’s point about the process. It struck him as odd that some councilmembers said they were looking for a more autonomous DDA [an allusion to comments by Jane Lumm (Ward 2)], but at the same time the council is also giving very specific direction about how to spend the money.

Outcome: The DDA board approved the fiscal year 2014 working budget on an 8-2 vote. Dissenting were Sandi Smith and John Mouat.

Budget Issues: FY 2013

The board was also asked to consider amendments to its current year’s budget to reflect the actual revenues and expenses through the year – mainly to avoid the possible circumstance that has arisen in the past in which expenses might exceed revenues in a particular fund, which is a violation of state law. Hewitt noted that the board had already undertaken a midyear budget adjustment – to reflect some of the costs of the Library Lane parking garage construction. Changes considered at the June 5 meeting included items related to the Zingerman’s brownfield grant, pushing a $400,000 payment for Village Green’s affordable housing units to the next fiscal year, adding in grants to the Ann Arbor Housing Commission for Baker Commons improvements.

Hewitt noted that the maintenance fund for the parking system was getting down to its lowest level. The DDA has been using maintenance funds, Hewitt said, to pay for the new Library Lane parking structure. But for the next year’s budget there is a transfer of $4.4 million back into the parking maintenance fund, he reported.

Then came Clark’s inquiry about the possibilities for amending the budget generally, given that the board was amending that year’s budget to adjust it for variances near the end of the fiscal year. Clark questioned what the requirement was for amending the budget: Was the DDA required to amend its budget twice a year? Hewitt indicated that it was only necessary once, but the DDA had amended the budget previously this year – because a huge amount of construction costs had come in that were not reflected in the budget for this year. So a midyear revision was done to give a clearer idea of where the DDA would be at the end of the year.

Clark asked if the requirement was only that expenses be updated that were above budget, or if adjustments to revenue were also required to be made. Hewitt indicated that both kinds of revisions were supposed to be made – for revenues and expenses. The important thing is that the expenses can’t be above what were budgeted. Clark then made clear why he was asking question: Does it need to go back to the city council for approval? he asked. The answer Hewitt gave Clark was no. The council approves the DDA’s budget for the upcoming fiscal year, Hewitt said. But the council does not need to approve the DDA’s final budget, which reflects the DDA’s actual expenses and revenues, Hewitt contended.

Clark inquired whether there was some threshold for a reason the DDA might change its budget. Does the state of Michigan care why the DDA might change its budget? Clark asked. Not that he was aware of, Hewitt said: “It’s up to us.” The important thing is that the DDA can’t have negative fund balances, Hewitt said, stressing that the DDA can’t spend more money than it has budgeted for. Clark’s summary of what he’d drawn out: “Too many people’ve been staying up too late on Mondays, then.” The allusion was to the fact that city council had debated issues of DDA budget control at its Monday meetings, long into the night.  If the DDA retains the ability to amend its budget later, that would allow the board to work around the council-approved budget parameters.

Outcome: The DDA approved the adjustments to its FY 2013 budget.

Budget Issues: Police Funding

At its June 3, 2013 meeting, the city council had voted 8-2 to encourage the DDA to consider allocating $270,000 to fund three police officers for the downtown area. During her communications time, board chair Leah Gunn reported the council vote, which had been approved two days earlier. Gunn told the board that she was referring the request to the board’s operations committee. She indicated that the board needed to talk to the chief of police and other community members in order to weigh the council’s request.

Budget Issues: DDA Ordinance Revisions

During communications time, Roger Hewitt noted there had been quite a lot of discussion about modifying the ordinance regulating how the tax increment finance (TIF) capture for the DDA is defined. The issue had been postponed until September, he noted. [That vote by the city council postponing final consideration until Sept. 3 came on May 6, 2013.] The previous day, he and Bob Guenzel along with Susan Pollay had some informal discussions of the ordinance along with some councilmembers, Hewitt reported. [The proposed ordinance revision would clarify the existing language in Chapter 7 of the city code, originally enacted in 1982, so that the DDA's preferred interpretation – which does not cap the DDA's TIF revenue – would not be possible.]

Budget Issues: Third Quarter Update

The third-quarter financial report was also delivered by Roger Hewitt. He noted that the $1.28 million increase in parking revenue was due to the loan that the DDA had received for parking equipment from Republic Parking. Accounting rules required the DDA to show that money as revenue, with interest to be deducted as expenses. He noted that utility costs have been higher than anticipated, as were bank charges. The increased bank charges, he said, were attributed to the increased use of credit cards by parking customers. Fees charged for those credit card transactions continue to go up, he said. Hewitt also highlighted that the $400,000 payment to Village Green to support affordable housing in the City Apartments project would not take place this fiscal year. That would be pushed to the following year.

Parking for The Varsity

The DDA board was asked to consider assigning monthly parking permits to The Varsity, a residential high-rise building at 425 E. Washington St. in downtown Ann Arbor. The request was for five additional monthly parking permits in the public parking system, bringing The Varsity’s total to seven.

The right to purchase monthly parking permits – under the city’s “contribution in lieu” program – is administered by the DDA.

The DDA had previously approved two permits for The Varsity, which is a 13-story, 173-unit, 178,380-square-foot apartment building for approximately 418 people. Construction is nearing completion.

The project needs to provide a total of 76 parking spaces. That parking is required in order to qualify under the city’s zoning code for the additional floor area that the project contains, beyond a basic 400% floor area ratio (FAR). If the parking is not provided onsite, a developer can meet a parking requirement by making an upfront payment of $55,000 per space or by purchasing monthly permits in the public parking system for an extra 20% of the current rate for such permits – with a commitment of 15 years.

The Varsity’s developer had originally planned to meet part of the 76-space requirement with two spaces that were assigned to a car-sharing service. That arrangement fell through. And the developer lost a space due to physical constraints related to ADA (Americans with Disabilities Act) compliance. Car-sharing spaces can count as four spaces apiece for satisfying parking requirements.

That led to the request for an additional five spaces, for a total of seven for The Varsity.

The Varsity is the second project to use the parking CIL. On Oct. 3, 2012, the DDA board voted to approve the purchase of up to 42 monthly permits by the 624 Church St. project, another residential development.

Parking for The Varsity: Public Commentary

Brad Moore introduced himself during public commentary time as the associate architect on The Varsity. He noted that the project had previously requested some spaces but had not requested enough of them – so they were now back to ask for a few more. He told the board that he was available to answer questions when the item was reached on the agenda.

Parking for The Varsity: Board Deliberations

When the item was reached on the agenda, Roger Hewitt asked Moore to come to the podium to answer questions. After reciting the history of the requests, Hewitt asked Moore what happened to the two physical spaces that were intended to be used for the car-sharing service. Moore explained that the deal with Zipcar had fallen through because Zipcar had wanted the spaces to be available to the general public – whereas The Varsity wanted the cars to be available just to residents of The Varsity.

What Hewitt wanted to know is what happened to the two physical spaces that prevented The Varsity from including them in its current count of parking spaces. Moore explained that the spaces are located on an adjacent property that is under the same ownership. However, because those two spaces are not a part of the project’s site plan, Moore indicated there was a problem in counting those spaces to satisfy the parking requirement. Newcombe Clark expressed some puzzlement that the spaces themselves could not count as one space apiece for the parking requirement, yet those same spots had been intended to count as four spaces apiece under the Zipcar arrangement.

Hewitt ventured that it might be possible to create some kind of an easement in perpetuity that would allow for the inclusion of those two spaces has part of the parking requirement tally for the project. John Splitt questioned whether the developer for The Varsity was even interested in pursuing such an easement. John Mouat expressed some skepticism about the idea of pursuing an easement, saying it seemed like an encumbrance on the adjoining property. Joan Lowenstein added that pursuing an easement could take several months.

Hewitt allowed that there was somewhat of a timing issue, and indicated that he would have preferred for The Varsity to have approached the DDA sooner. Still, Hewitt indicated that he would support allocating the permits. Sandi Smith added that the permits under the CIL program are purchased at a premium cost of an extra 20%. She characterized the permits as no different from any other permits. Clark questioned Smith’s characterization – venturing that the permits being granted to The Varsity would allow jumping to the front of the monthly permit line, or else would require reducing the amount of hourly parking available in the structure where the permits were being granted.

Hewitt responded to Clark by indicating his understanding was that The Varsity would need to have the permits in hand in order to receive its certificate of occupancy. Hewitt indicated that either The Varsity monthly permit requests would jump to the front of the monthly permit waitlist, if there were a list, or that the amount of hourly parking would decrease. He indicated that the waitlist turned over relatively quickly these days – but he noted that it depends on the structure. Given the small number of spaces and the hold-up it would mean for the development of a large building, Clark indicated that he would support the allocation of the spaces. However, he wanted to see the operations committee address the policy issue sooner rather than later.

Hewitt said that the operations committee is very focused on the issue of trying to rationalize needs within the system. He characterized the CIL program as stemming from an ordinance passed by the city council – saying it was not a DDA policy. However, the DDA has veto power if there are no spaces available in the system, and the DDA has the right to decide in which structure the spaces are allocated, Hewitt said. In this respect, the DDA is responding to a city ordinance, he said.

Clark asked if the developer would care if the parking permits were assigned to a structure further away from the building under construction. Moore replied that he figured the developer would prefer that the permits not be assigned to the most remote location. Clark ventured that if he were on the waitlist and he kept getting bumped for something like this, “I’d be frustrated.” Approaching the issue in a piecemeal fashion was not advisable, given the amount of construction that’s taking place downtown, Clark felt. Hewitt told Clark he agreed with him completely. He contended that demand in the public parking system is increasing at a significant rate and the DDA is trying to catch up with a very dynamic and changing system. But he agreed that the DDA needs a rational system for making the decision on permits.

Keith Orr indicated his agreement on the need for a policy so that decisions are not seemingly random. He indicated that he would be the “gadfly vote” and would vote against the allocation of permits to The Varsity just as a reminder that there needs to be a policy in place.

Outcome: The DDA board voted to allocate a total of seven monthly parking permits to The Varsity, over dissent from Keith Orr.

Routine Parking Reports

Delivering the parking report as usual was Roger Hewitt. The monthly parking report for March 2013 was up first. For that month, and he described overall revenues as up 7% compared to March 2012, although the number of hourly patrons was down by about 2%. He called 7% roughly the equivalent of the rate increase over the previous year. That translated to a flat performance on the revenue side. However, he offered some mitigating factors – one less business day, worse weather than last year, and the timing of the university’s spring break. And that accounted for the flat performance in revenue, he contended.

March was the last month of the third quarter. So Hewitt gave an update for the third quarter. For that three-month period, the number of hourly patrons was roughly flat, but revenue was up about 11%, which was above the level of the rate increases, he said. For the quarter, Hewitt characterized the parking system as having continued strong demand and good revenue growth. That was a trend that has persisted for about two years, he said.

Hewitt then reviewed the nine-month period year-to-date. Overall revenues are up 12%, though the number of hourly patrons is down a little bit, he noted. From that he concluded that people who are visiting downtown are staying longer. Revenue growth is above the level of the parking rate increases. The new Library Lane underground parking garage is showing stronger performance than had been anticipated – so it is almost to the point of starting a waitlist for monthly parking permits, Hewitt said. That’s good news and bad news, he said. It shows strong demand, but it is filling up faster in the DDA ever anticipated. And that forces the DDA to face problems down the road sooner than the DDA thought it would. John Mouat ventured that instead of “problems” they might be “opportunities.” Hewitt also indicated that downtown looks strong based on his own personal business. [Hewitt owns the Red Hawk restaurant on South State Street, and the revive + replenish grocery and cafe at Zaragon Place on East University.]

Also during his discussion of revisions to the current year’s budget, Hewitt had noted that parking revenues were higher than budgeted – attributable mostly to better-than-expected revenues from the Library Lane structure. Typically a new structure won’t generate a lot of revenue in the first couple of years, he said, because people take a while to find the structure and to change their habits. But people are changing their habits at a much more rapid pace than the DDA had anticipated, Hewitt said.

Mayor John Hieftje picked up on an earlier comment that Hewitt had made – that it might be necessary to create a waitlist for monthly parking permits for the Library Lane structure. Hewitt responded to Hieftje, saying that the challenge in coming up with a policy on that issue is that the DDA does not ask people on their way into a parking structure who they are and why they are here. Trying to balance monthly demands and hourly demands between workers and guests is not a simple thing. Clark ventured that nothing the DDA does is simple.

The following charts were generated by The Chronicle with data provided in regular monthly parking reports.

Ann Arbor public parking system total revenue.

Ann Arbor public parking system hourly patrons.

Ann Arbor public parking system surface lots.

Ann Arbor public parking system structures.

Ann Arbor public parking system total revenue by facility.

Ann Arbor public parking system. Number of hourly patrons by facility for selected facilities.

Communications, Committee Reports

The June 5 meeting included the usual range of reports from the board’s standing committees and the downtown citizens advisory council, as well as public commentary.

Comm/Comm: Economic Development Task Force

During her communications time, board chair Leah Gunn notified the rest of the board that the city council had passed a resolution establishing an economic development task force. [That action had come at the council's May 20, 2013 meeting. The task force, which includes membership from the city and Ann Arbor SPARK, as well as the Ann Arbor DDA, will consist of up to nine members. Three of the members will come from the Ann Arbor DDA board.] Gunn indicated that she was appointing board members John Mouat and Bob Guenzel, as well as executive director of the DDA Susan Pollay, to represent the DDA on the task force. [The city will be represented by city administrator Steve Powers, and city councilmembers Sally Peterson and Marcia Higgins.]

Reporting out from the partnerships committee, Joan Lowenstein said that Paul Krutko, CEO of Ann Arbor SPARK, had spoken to the committee. One thing he had stressed is the fact that “place making” matters. He’d said it’s important to “create place.” The idea is that nowadays people figure out a place they want to live and then find a job there, instead of the other way around, she said. There are a lot of businesses that SPARK talks to who want to locate downtown, but the right kind of space is not available for them, Krutko had also told the group, according to Lowenstein. And corporate leaders often raise the issue of the availability of hotel and meeting space in downtown Ann Arbor. He’d said it is a real obstacle, because other communities have the ability to host large conferences, and can then attract people who become aware of the community through their attendance at the conference.

Lowenstein cited Greenville, South Carolina, as an example of a city that has a lot of hotel and conference space downtown. A big automotive conference is hosted there, which was attended recently by six people from the University of Michigan, who spoke at the conference. It was in South Carolina, not here – where the auto industry is, Lowenstein said. Ann Arbor SPARK sees a lot of opportunity to partner with the DDA, Lowenstein said – on the topic of benchmarking against comparative communities and working to understand how places like Greenville are doing a better job than what Ann Arbor is doing, and to see what Ann Arbor can do better.

Ann Arbor SPARK has also made themselves available for RFP (request for proposals) processes like the one for the former Y property, so that SPARK can help look for appropriate businesses to locate there. Lowenstein characterized the partnerships committee session with Ann Arbor SPARK as beneficial. Sandi Smith pointed out that four councilmembers had been present at the partnerships committee meeting [Sabra Briere, Sally Petersen, Marcia Higgins, and Jane Lumm]. She described the councilmembers as engaged in the whole discussion, saying it was a very powerful meeting.

Comm/Comm: Sale of Former Y Lot

By way of background, on March 4, 2013 the city council had authorized the city administrator to issue an RFP (request for proposals) for brokerage services to sell the former Y property located at Fifth and William. It’s currently owned by the city, which it had purchased for $3.5 million. On Oct 15, 2012 the council had voted to allocate the net proceeds of the sale of the Y site to the city’s affordable housing trust fund.

During public commentary at the end of the DDA’s June 5 meeting, local developer Peter Allen reported that the bids for the RFP for brokerage services had been opened last Friday. There had been three bidders, he said: Jim Chaconas of Colliers International; Tim Guest with CB Richard Ellis Inc.; and Allen himself with his company, Peter Allen & Associates. The timetable is to interview in late June or early July, Allen said. A recommendation was supposed to go to the city council around Aug. 1, he continued.

Allen reported that he heard interest from boutique hotels and from grocery stores. Certainly ground-level retail is in demand, he said. He thought that a mix of uses would be very consistent with the connecting William Street (CWS) project – a recent planning effort that had been led by the DDA. From a market standpoint, he felt that the CWS recommendations are very solid, thorough and achievable. One of the implications for the DDA board to think about, he said, was the fact that the proceeds from the sale go to the city’s affordable housing trust fund. He felt that the market value of the parcel could be in the neighborhood of $5-$7 million, or more depending on how it is configured. The idea of adding air rights on top of the new Blake Transit Center is very feasible, Allen said. The topic of possibly updating the CWS study in the context of possible proceeds would be a suitable topic for a future meeting of the DDA, he said.

Comm/Comm: A2D2 Zoning Review

Ray Detter reported out from the previous evening’s meeting of the downtown area citizens advisory council. He noted that the DCAC had supported the passage of the A2D2 zoning and the downtown design guidelines two years ago. He recited a description of how the design guidelines provide a mandatory process, but only voluntary compliance with recommendations of the design review board.

Detter characterized the city council’s May 13, 2013 vote on the 413 E. Huron project as a 6-5 approval. But he said that the council’s opposition to the design, mass and scale of the building had been unanimous. The six members who voted for the project, Detter said, feared a possible lawsuit over a denial. From that episode, Detter concluded that there was something lacking in the city’s D1 zoning definition. [D1 is the city's zoning district that allows for the highest density development.] Detter highlighted other areas zoned D1 in the city that he felt warranted further review – including sites to the east of Sloan Plaza, and the former YMCA site at William between Fourth and Fifth avenues.

He characterized the problem as conflicts between the D1 zoning category and the nearby residential neighborhoods. He allowed that there had been a lot of public input throughout the earlier A2D2 process, but he said that the city needs to do a better job now at correcting areas where D1 zoning needs improvement. Detter then alluded to the city council’s resolution, approved on April 1, 2013, that directed the planning commission to conduct a review of D1 zoning.

The recommendations resulting from that review should not be left up to the planning commission’s ordinance revision’s committee, he said. He contended that a lot of people did not believe that floor area ratio (FAR) premiums should be provided for “things we don’t want as a community – student housing, for one thing.” [Currently, the D1 zoning category allows for 400% FAR by right, with additional by-right FAR provided for residential use.] Some people say that a moratorium is needed while the community makes up its mind about these things, Detter said. “We don’t want 413 [East Huron] to happen again,” Detter concluded.

He allowed that the council’s resolution directing the review set Oct. 1 as a deadline. But Detter contended that no real schedule had been set for getting it done.

Comm/Comm: July 3 Meeting Date

During communications time, board chair Leah Gunn raised the question of the board’s regular monthly meeting date in July – which this year falls on July 3. She offered the choice of changing the date or keeping it as it is: “What is your pleasure?” John Mouat indicated that he would not be able to attend. With no further comment from the board, by apparent mutual assent the established meeting date of July 3 remained unaltered.

During communications time Gunn also pointed out that no regular meeting was scheduled for the month of August, which is the board’s custom.

Comm/Comm: A2 Downtown Blooms Day

Nancy Stone, who handles communications for the public services area of the city of Ann Arbor, addressed the board during public commentary time to thank the DDA for its annual support of A2 Downtown Blooms Day. She highlighted the contrast between now and 25 years ago, when the annual volunteer date was called Downtown Cleanup Day. Whereas 25 years ago people were using brooms to sweep up litter, today it’s a festival of planting flowers and beautifying the city, she said. In addition to the DDA she thanked the merchant associations and Pizza House, which provided pizzas for the volunteers. She showed the board a video that had been created by 2|42 Kids Care Club assisting with the event last month.

Comm/Comm: Stipends for Street Performers?

During communications time toward the start of the meeting, mayor John Hieftje, who also sits on the DDA board, told other board members that he wanted to share an idea he had also discussed briefly at the downtown marketing task force the previous day. He described being at the farmers market a few weeks ago, when it was a beautiful sunny day, and he had gone over to Sculpture Plaza where a group of University of Michigan students were playing an interesting array of instruments – an accordion, an upright bass, and a saxophone. It was very nice music, he continued, and they were drawing a crowd. He characterized it as very pleasant.

Hieftje recalled a few summers ago being in Montreal and seeing some street performers. In talking to them afterwards, he said, they revealed that they had received a stipend for performing. So he wanted to see the DDA board explore the idea, which might amount to a few hundred dollars per occasion, to sponsor some “spontaneous” street performances – though he allowed they would not be exactly “spontaneous.” He ventured that such a program might cost $2,000 a year. That kind of thing might make it more interesting to be downtown, he said.

Present: Newcombe Clark, Bob Guenzel, Roger Hewitt, John Hieftje, John Splitt, Sandi Smith, Leah Gunn, Keith Orr, Joan Lowenstein, John Mouat.

Absent: Nader Nassif, Russ Collins.

Next board meeting: Noon on Wednesday, July 3, 2013, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date.]

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The decision came over dissent from two board members – John Mouat and Sandi Smith, who perceived the city council’s changes to the budget as arbitrary. They criticized the process – which is set forth by the state’s enabling legislation for downtown development authorities.

During the council’s debate on the city’s budget, of which the DDA is a component unit, councilmembers had argued about how to handle the additional tax increment finance (TIF) revenue that will be captured by the DDA this year. In the end, they modified the DDA’s budget by adding in the roughly $570,000 in additional TIF revenue – and by transferring $300,000 of that to the DDA’s housing fund. In its May 20 budget resolution, the council also recommended that the DDA spend $300,000 of TIF revenue on the replacement of light poles on Main Street.

Based on the DDA board’s discussion on June 5, little interest appears to exist on the DDA board for covering the difference between the $516,000 total estimated cost of the light pole replacement and the $268,000 left in the TIF fund after the $300,000 transfer to the housing fund. Based on the June 5 discussion, the DDA board feels that the city council should appropriate the difference out of the city’s general fund reserve.

Compared to the FY 2014 budget that the DDA originally submitted to the city, the TIF revenue now anticipated for FY 2014 is roughly $568,000 more – a total of $4,501,347. [.pdf of revised FY 2014 DDA budget]

At its meeting on June 3, 2013, the council passed a resolution encouraging the DDA board to consider allocating some of the discretionary funds in its FY 2014 budget to pay for three police officers to be assigned to the downtown area. Between the DDA’s TIF fund ($100,000) and the DDA’s parking fund ($300,000), the FY 2014 budget includes a total of $400,000 that’s labeled “discretionary.” The council’s resolution asked the DDA board consider that request for police funding at its “next regularly scheduled meeting” – which was June 5, 2013.

The board responded to the council’s request through a referral of the issue by board chair Leah Gunn to the DDA’s operations committee.

Also at its June 5 meeting, the DDA made final revisions to its current year’s budget to square it up with actual expenses and revenues to date. [.pdf of revised FY 2013 budget]

This brief was filed from the DDA offices at 150 S. Fifth Ave., Suite 301, where the DDA board holds its meetings. A more detailed report of the meeting will follow: [link]

For FY 2014, the DDA budget calls for $23.1 million in expenditures against $23.4 million in revenues. That would add about $300,000 to the total fund balance reserve, which is projected to end FY 2014 fiscal at around $5.5 million. The surplus from FY 2014 would be used in the FY 2015 budget, which calls for $23.8 million in expenditures against $23.5 in revenues, leaving the DDA with about $5.2 million in total fund balance reserve at the end of FY 2015.

The budget includes roughly $4 million in revenue from tax increment finance (TIF) capture, with the remainder coming from the public parking system. The DDA administers the public parking system under a contract with the city of Ann Arbor.

The FY 2014 budget includes $615,000 for alternative transportation, the bulk of which is allocated for subsidizing the cost of rides taken by holders of the getDowntown program’s go!pass. It also includes $250,000 to pay for downtown police patrols, if an arrangement can be reached with the city of Ann Arbor. The budget also includes $300,000 of capital improvements that might be used for patio dining on State Street, streetscape improvements on William Street, or alley improvements near the Bell Tower Hotel.

The budget approval came at the board’s Feb. 6, 2013 meeting, two days after Ann Arbor city councilmember Stephen Kunselman told his council colleagues at their Monday meeting that he would be continuing to press for changes to the city ordinance regulating the DDA’s TIF capture and governance. The change to the way that TIF is calculated would be based on a different interpretation of the existing language in the ordinance, but would result in several hundred thousand dollars a year less in TIF capture by the DDA. It’s the same proposal Kunselman made on May 21, 2012 – as a proposed amendment to the city budget last year. On that occasion, it received just three votes on the 11-member council; however, the current composition of the council includes three new councilmembers.

At the council’s Feb. 4 meeting, Kunselman also called for changes to DDA governance, which would include term limits on board members, a prohibition against elected officials serving on the board, a requirement that any TIF expenditures outside the city DDA district boundaries need the council’s approval, and a requirement that TIF “rebates” for projects require city council approval.

The DDA board did not discuss Kunselman’s remarks in its deliberations on the budget. For additional Chronicle coverage, see: “DDA Preps Budget for Transportation, Cops.”

[.pdf of draft DDA budgets FY 2014-15] [.pdf of FY 2013 six-month financial statements] [.pdf of monthly parking reports]

This brief was filed from the DDA offices on 150 S. Fifth Ave., Suite 301, where the DDA board holds its meetings. A more detailed report of the meeting will follow: [link]

The result of those changes leaves a budget with $22,237,924 in revenues against $26,339,555 in expenses for the year – which translates to a planned use of the DDA’s fund balance reserve of $4,101,632. That’s about half of the existing fund balance. The FY 2013 budget projects a fund balance at the end of FY 2013, on June 30, 2013, of $4,380,341. [.pdf of revised FY 2013 DDA budget]

The budget originally approved by the DDA board on March 7, 2012 showed revenues of $22,097,956 against $24,101,692 in expenditures – for an excess of expenditures over revenues of $2,003,736.

Much of the roughly $2 million in additional expenses in the adjusted budget is attributable to construction costs of the Library Lane underground parking structure, which was completed in July 2012. That money had been budgeted, but not spent in FY 2012. To account for Library Lane parking structure construction, the adjustments to this year’s budget show an additional $850,000 to be expended from the DDA’s tax increment finance (TIF) fund and $1,792,388 from the DDA’s parking fund. The DDA’s audited finances show that for FY 2012, the DDA spent about $2.5 million less than anticipated for that year – because the construction invoices were not all submitted to the DDA by the time books closed for the year.

This brief was filed from the DDA offices at 150 S. Fifth Ave., Suite 301 where the DDA board holds its meetings. A more detailed report of the meeting will follow: [link]

Excerpt from a Chronicle chart constructed with DDA parking data from the Ann Arbor public parking system. The vertical scale represents hourly patrons per parking space in a given parking facility. The lines correspond to four facilities in the system: Maynard, Liberty Square, Fourth & Washington, and Huron/Ashley. Pop quiz: Which line corresponds to which facility? Answer in the full report.

On the TIF side, the board first adopted a formal policy to guide its allocation of grants to new private developments. The board then acted to authorize a $650,000 TIF-capture-based grant to the 618 S. Main project. The policy applies to developments that are seeking to leverage support from the state’s brownfield and Community Revitalization Program, or other matching programs.

Highlights of that policy include a priority ranking of benefits that a development must offer. At the top of that list: A requirement that the project fills a gap in the existing market. The DDA board concluded that the 618 S. Main project filled such a gap – by targeting residential space for young professionals. The $650,000 would be distributed over four years, with the amount in any one year not to exceed the estimated $250,000 in TIF capture that would ordinarily be retained by the DDA as a result of the completed construction.

The board was interested in achieving a unanimous vote of support for the 618 S. Main grant, and not all board members agreed with covering bank carrying costs and the full amount of streetscape improvements. So the $650,000 reflected a reduction from a $725,000 grant in the original resolution before the board.

On the parking side of the DDA’s responsibilities, routine business was mixed with issues involving the imminent opening of a new underground parking garage on South Fifth Avenue. In the routine category was the board’s authorization of three-year leases for two properties from companies controlled by First Martin Corp., which the DDA manages as surface parking lots – at Huron/Ashley and Huron/First. Per space, the Huron/Ashley lot generates more revenue per month than any of the other public parking facilities in the city.

The board was also presented with a demand-management strategy for encouraging the use of the new underground parking garage on South Fifth Avenue, which is scheduled to open in mid-July. Highlights of that strategy include a reduced rate for monthly permits of $95/month – a $50/month savings over the $145/month rate set to take effect in September this year, and a $60 savings over the extra increase that the DDA is planning for two structures. The special $95/month permits are available only to current holders of permits in two other parking structures in the system: Liberty Square and Maynard Street. The DDA wants to free up spaces in those two structures for people who do not hold permits, and pay the hourly rate instead.

The DDA board also heard public commentary from advocates for some kind of public park to be constructed on top of the new underground parking structure – instead of using the space for additional surface parking, with the eventual possibility of allowing development of a significantly-sized building there.

In the board’s final action item, routine adjustments were made to the current fiscal year’s budget in order to assure that actual expenses did not exceed budgeted revenues for any of the DDA’s four funds. Last year, the routine adjustment did not adequately cover construction invoices that arrived after the final budget adjustment, something that was pointed out in the DDA’s audit for that year.

Brownfield Grants: Policy

In 2008, the DDA discontinued its partnerships grant program, because the board believed that development interest in downtown Ann Arbor was strong enough that such grants were no longer needed to help spur investment. [.pdf of March 5, 2008 DDA board resolution]

However, the board was approached recently by Dan Ketelaar, developer of the 618 S. Main St. project, with a request for support for the project based on the TIF (tax increment finance) revenue it would generate. The support would count as the local match expected as part of the state’s brownfield program. Ketelaar made his initial presentation to the DDA board on Feb. 1, 2012 after having won a recommendation of approval for his project from the city planning commission on Jan. 19, 2012.

One of the concerns that was expressed by board members through the months-long discussion over the course of several partnerships committee meetings – some of them added to the calendar as special sessions – was the absence of any formal brownfield grant policy. So the policy was developed during these discussions.

Sandi Smith introduced the policy by noting that the DDA’s partnerships committee has struggled with the discussion for several months. She reminded her board colleagues that a draft policy had been presented to them at their May 2, 2012 meeting. She felt that not many of the changes made since then were substantive. The cap was changed, she noted. Another significant change was to try to make the evaluation criteria objective. She noted that the criteria in the policy reflect the priorities and values of the DDA in order of importance:

1. Addresses a documented gap in the marketplace or underserved markets of commerce.
2. Will act as a catalyst for additional revitalization of the area in which it is located.
3. Is “connected” to the adjacent sidewalk with uses on the first floor that are showcased using large transparent windows and doorways to give pedestrians a point of interest to look at as they walk by the project.
4. Creates a large office floor plate.
5. Will facilitate the creation of a large number of new permanent jobs.
6. Is a mixed use development, that will encourage activity in the daytime, evening, and weekend, such as a development with a mix of commercial and residential.
7. Adds to downtown’s residential density.
8. Reuses vacant buildings, reuses historical buildings, and/or redevelops blighted property.
9. Number of affordable housing units created on site or funded by the project elsewhere in the community, which are beyond what is required by the City.
10. Environmental design exceeds City requirements.
11. Architecturally significant building or project design.
12. Strengthens Ann Arbor’s national visibility.

Newcombe Clark suggested adding a clause that stated: “Grant approval will also be contingent on DDA review and approval of any subsequent substantial changes made prior to or during construction, which must be fully disclosed on an on-going basis.”

Clark described the added clause as matching up closely to how things are handled at the city with development agreements, when they’re approved by the city council and then must be reviewed for possible approval at the administrative level or by the council itself.

Nathan Voght – Washtenaw County’s brownfield program coordinator who works in the county’s office of community and economic development – was asked to comment on Clark’s amendment. Voght indicated he felt it was fine – because it would put the developer on notice that the DDA is to be kept abreast of any changes. Smith took the opportunity to acknowledge the work that Voght had done to help with the formulation of the policy, as well as that of Matt Naud, the city of Ann Arbor’s environmental coordinator.

Clark then offered an additional amendment to add a specific item to the list that an applicant must submit as part of the financial pro forma [added language in italics]:

The Developer making a grant application to the DDA must submit a full financial pro forma, including purchase cost and construction cost breakdown, sources and uses including any equity positions that constitute managing member position, rental income or condo sale prices, tax assumptions, and recurring expenses, etc.

Clark’s amendments were accepted as “friendly” and thus did not require a vote.

Roger Hewitt thanked the partnerships committee for the enormous amount of work they’d done. He agreed with the concept of using TIF money to support state brownfield grant money. He supported that, he said. He had hoped that the policy would remove the subjectivity from the evaluation and make it essentially an administrative action. He understood the need to balance what the market wants and what the DDA would like to see – which can be a challenge.

Having gone through the process when the DDA previously had a TIF grant program, Hewitt felt it could lead to long endless discussions and to subjective decisions that will leave some people unhappy. Speaking to the 12 criteria, he said he did not think there’s a developer born who doesn’t think they qualify for some of those. He would have been happier supporting something more administrative and objective.

Responding to Hewitt, Smith ventured that something as objective as he had described might leave the DDA in a position that forces the board to approve a project. She did not want to be hemmed into something so rigid that the board has to automatically approve a project.

John Mouat suggested that it might be worth looking at needed streetscape and infrastructure improvements that could be undertaken, without needing to undergo a brownfield grant application process.

Outcome: The board voted unanimously to approve the brownfield grant policy. [.pdf of brownfield policy as adopted]

Brownfield Grants: 618 S. Main

After approval of the grant policy, Sandi Smith moved into the reason for having such a policy: The DDA had received a request for the kind of support outlined in the new policy – for the 618 S. Main project.

Brownfield Grants: 618 S. Main – Commentary

Dick Carlisle of Carlisle/Wortman Associates spoke at the start of the meeting on behalf of Bill Kinley. They’re partners and tenants of South Main Market, located across the street from 618 S. Main. Since their acquisition of the South Main Market about seven years ago, he said, they’ve made investments to keep the retail space alive and have worked closely with tenants. As a result, the market is now 100% occupied – a total of 14,000 square feet. He said they feel very fortunate, but they also worked very hard to make that happen. He did not want to speak specifically to the 618 S. Main project, but said he was very happy to see private investment being made in that area of South Main Street. All the improvements that are made will be helpful to everyone, if the entrance to downtown Ann Arbor is improved.

His message, Carlisle said, is quite simple: please consider allocating funding for streetscape improvements on both sides of the street [which would include the South Main Market side]. He noted that there’s a lot of pedestrian activity, especially on University of Michigan football game days. There also have been significant traffic issues, he said, due to his own property’s businesses and the gas station on the corner, which generates a lot of traffic. He asked the DDA board to consider allocating funds to make that area more pedestrian friendly.

Ray Detter, during his report from the downtown area citizens advisory council, called 618 S. Main an excellent first use of the policy.

Brownfield Grants: 618 S. Main – Board Deliberations

Based on the criteria in the policy, Smith said, the partnerships committee had concluded that the project addresses a gap in the rental market, that it act as a catalyst for the South Main area, that it will add to the downtown density, and that it has environmental features exceeding the city’s requirements.

The grant that the board was asked to consider included the following line items, for a total of $725,000:

Recommended DDA Brownfield Grant for 618 S. Main Street
$135,000 Streetscape costs (sidewalk adjacent to project on Mosley/Main
$384,500 Streetscape costs (sidewalk on west side of Main north of project)
$100,000 Rain garden to infiltrate storm water, rather than detain and release
$ 80,500 Upsizing the water main under Ashley Street to a 12” pipe
$ 25,000 Bank carrying costs
$725,000 TOTAL

-

The amount of the grant was proposed to be disbursed over four years in the following amounts: $100,000, $225,000, $225,000, and $175,000.

Mayor John Hieftje weighed in with a number of concerns. In the course of conversation with Smith and DDA executive director Susan Pollay, Hieftje drew out the fact that the dialogue about the detail in the streetscape improvements is now starting. Hieftje said he was concerned that the developer be required to actually build to the detailed specifications that are agreed upon. He made an apparent allusion to the Corner Lofts building at State and Washington as an example of a building that was ugly – due to the failure of the developer to build it to the approved specifications.

Another concern Hieftje had was about the bank carrying costs – because he did not feel the DDA should bear that cost. John Mouat ventured that one way to reduce the carrying costs would be for the DDA to front-load its support on the first years of the four-year period. [The board would be constrained in that option by the policy, which states that "the amount released will at no point be greater than the amount of new TIF paid by the developer of the new project."]

Outcome on amendment: The board voted unanimously to eliminate the $25,000 for bank carrying costs from the grant award.

Left to right: DDA board members John Hieftje, Leah Gunn, Nader Nassif.

Hieftje also confirmed that the $135,000 line item for streetscape improvement costs did not include a specific breakdown of those costs for the ordinary work that is required of a developer to perform as part of a project.

So Hieftje put forward an amendment to eliminate the $135,000. Roger Hewitt suggested that there’s a base amount for the sidewalk improvements immediately adjacent to the project that should be the developer’s expense. But he could support improvements that go beyond the city’s minimum requirement. The DDA could support the differential, he said.

Leah Gunn asked Pollay to comment on the sidewalk improvement design. Pollay clarified that the developer, Dan Ketelaar, is planning to do more than what is required by code. She described it as an enhanced planting scheme that’s more than what’s required. Newcombe Clark questioned whether it made sense to talk about what was actually required – because the project has not yet received approval from the city council.

DDA board chair Bob Guenzel asked Nathan Voght how the Michigan Economic Development Corporation brownfield program might view the reduction in local support – which would result from eliminating the $135,000. Voght said the state wants to see a significant contribution.

At the $725,000 level, Voght felt the MEDC was feeling positive about the 618 S. Main application. Gunn said it bothered her that the state won’t just say how much the DDA needs to contribute. Nader Nassif also asked if there were an exact dollar figure that the MEDC was looking for.

Voght ventured that if the amount is still “in the ballpark,” he felt it would be okay. But he stressed that the MEDC has not formally considered the application. He also noted that the state has two programs – a brownfield redevelopment program and the new community revitalization program. Voght said the state is still figuring out the community revitalization program.

Clark ventured that based on his own experience, it’s the amount of enthusiasm from the local authorities that matters, as opposed to the dollar figure. The state doesn’t want to tie its hands so that only the “haves” get the money.

Sandi Smith proposed coming up with a number – some percentage of $135,000 – and encouraging the best-looking streetscape. She didn’t want to leave the amount shy of what was necessary to get a good streetscape.

DDA board member Newcombe Clark.

Gunn offered an amendment to Hieftje’s proposal to eliminate the $135,000, instead cutting the amount to $100,000. She was concerned there could be a “tipping point” past which the state would not consider the local match to be sufficient. Hieftje indicated a preference to go down to $85,000. Clark ventured that for the state of Michigan, a unanimous vote would be more interesting than an additional $15,000.

Outcome on amendment to grant $100,000 instead of $135,000 for sidewalk improvements: It failed with only 10 members present and four members voting against it – Hieftje, Hewitt, Mouat and Clark. It needed seven votes to pass.

So Gunn tried again, this time offering an amendment to make the amount of support $85,000.

Outcome on amendment for $85,000 instead of $135,000 for sidewalk improvements: It passed unanimously.

With the reduction in the grant award now resulting in a $650,000 award, Hieftje returned to the topic of the rain garden. Smith explained that under the city code, detention is required, which could be achieved at a cost of around $100,000. That approach detains stormwater in a tank, then releases the water into the stormwater system pipes. The benefit offered by a rain garden with infiltration is that it keeps the stormwater out of the pipe. It’s not about the visual aesthetics of the rain garden. The cost of the rain garden would be around $850,000, so the DDA was supporting something that went $750,000 beyond what was required, she said.

Outcome: The board unanimously approved the $650,000 grant to the 618 S. Main project.

Parking System

The DDA operates the public parking system under a contract with the city of Ann Arbor. Under terms of the contract, the city receives 17% of gross parking revenues from the system. So the public parking system, which is mostly located within the Ann Arbor DDA TIF (tax increment finance) district, is a topic at nearly every DDA board meeting.

Parking System: Monthly Report – Break in Trend

A standard part of a DDA board meeting is an update on the monthly parking report, looking at the most recent month for which data has been analyzed. At the June 4 meeting, board members discussed data from April 2012. In giving an overview, Roger Hewitt noted that for April, the revenue to the system was up compared to April 2011, but it had not increased as much (on a year-over-year basis) as in previous months. He also noted that there’d been a decline in the number of hourly patrons. So he’d asked Republic Parking to take a closer look at that, he said. Republic Parking handles day-to-day parking operations under a contract with the DDA.

Ann Arbor public parking system: Total revenue

Ann Arbor public parking system: Hourly patrons

One factor contributing to the decline, Hewitt reported, is that there was one fewer business day in April this year – 25 compared to 26. In addition, there were two fewer “weekend days” [Friday and Saturday] – 8 compared to 10. Another wrinkle was that this year, the University of Michigan held graduation on four days, all in April. Last year there were only three days of graduation, and one had been in May, Hewitt reported. And the parking pattern for graduation attendees, he said, is that they enter the structure as hourly patrons, but stay almost the whole day. So the number of patrons is depressed, even though the revenue is the same.

Hewitt noted that revenues were still up 9%, which he characterized as a solid increase – more than the 6-7% range for the rate increases.

Parking System: Demand Management – Maynard, Liberty Square

Hewitt gave the board an update on the parking demand management system that the DDA’s operations committee has been working on, in connection with the completion and opening of the new underground parking garage on South Fifth Avenue. The board had given the committee direction to undertake development of the program at its May 2, 2012 meeting.

In broad strokes, the DDA would like to reduce the number of spaces taken up by monthly permit holders in the parking structures nearest to the high-demand University of Michigan campus. The DDA would also like to ensure usage of its new underground parking garage.

Hewitt summarized the approach as establishing prices for parking based on the demand in a particular area – higher demand areas have higher prices and the lower demand areas should have the lowest prices. Integrated into the concept is a component for alternative transportation, he said.

The DDA has asked the getDowntown program to do a transportation audit for the State Street and South University Avenue businesses. The DDA has also asked that getDowntown do some targeted marketing and communication to those businesses. Further, the getDowntown program has been asked to encourage businesses to adopt a “transportation stipend” program, instead of just providing a monthly parking permit. The stipend would allow employees to realize the savings that would result from opting to take public transportation, instead of claiming an employer-provided monthly parking permit. The Zipcar car-sharing program would be expanded in the Maynard Street parking structure, Hewitt reported. In-street bike racks will also be added to the State Street area.

From experience, Hewitt reported, the Maynard Street structure does fill up in the middle of the day, and people have to wait to get in. Liberty Square, Hewitt said, is also near capacity. Hewitt then unveiled the details of what he described as a two-year pilot program – based on the DDA’s experience in opening a new parking structure. A new structure doesn’t get used much for the first couple of years, Hewitt said. It takes the public a couple of years to find it and to start using it routinely.

So the idea is to “jump start” that process, Hewitt said. Currently, based on rate increases approved by the DDA board earlier this year, monthly permit rates are scheduled to increase from $140 to $145 per month on Sept. 1, 2012. Hewitt announced that for the Maynard Street and Liberty Square structures – the two highest demand structures in the system – rates would now be raised even higher, to $155 per month. Hewitt said there are around 700 monthly parking permits in the roughly 1,400 total spaces in those two structures, so the idea is to move those monthly permit holders to the new underground garage.

Ann Arbor public parking system: Patrons per space. To give an idea of the maximum usage in the system – measured in terms of patrons per space in a facility – this chart includes the Huron/Ashley/First surface lot (light green). None of those surface lot spaces are used for monthly permits. To give an idea of the maximum usage in a parking structure that allows no monthly permit parking, the chart includes the Washington/Fourth structure (light orange). The two structures that are the target of the incentive program – to move monthly parking permits from there to the new underground structure – are Maynard Street (blue) and Liberty Square (red). Chart by The Chronicle, using data from the DDA. One way to observe the effect of the demand management pricing will be to track whether the red and blue lines increase. (Links to larger image)

By way of background, the contract between the DDA and the city of Ann Arbor, under which the DDA operates the city’s parking system, was revised in May 2011 to give the DDA the unilateral authority to adjust rates, without approval by the Ann Arbor city council. However, the contract requires the DDA to announce intended rate increases at a board meeting, hold a public hearing at a subsequent board meeting, and not vote on rate increases before a third board meeting.

The rate increases triggering the public announcement and hearing process are described in the contract as “any increase in the Municipal Parking System’s hours of meter operation or parking rates intended to persist for more than three (3) months.” Based on a telephone interview with DDA staff, the DDA is interpreting the clause to apply to parking meter rates, not monthly permit rates.

The rate changes are meant to be revenue neutral, because the increase in rates for the two high-demand structures are expected to be balanced against the decrease in monthly permit costs for the new underground garage.

The monthly permit rate increases were characterized by Hewitt as the “stick part” of the plan. The “carrot part” is an offer of cheaper monthly permits to current permit holders in the Liberty Square or Maynard Street structures – if they move to the new underground garage. It would be a $60 savings compared to the monthly permit rate they’d pay if they stay in their current structure. The rate of $95 per month in the new underground structure would be good for two years. Any new users of the system would also be offered the $95 per month rate.

Hewitt characterized the plan as the first real substantive experience with differential rates in parking structures. “We’ll see what happens,” he said. Even though the spaces they’re offering in the new garage will be cheaper, the DDA expects that those are spaces that would otherwise be empty – because the DDA is not expecting a lot of underground parking garage use in the first few years. Hewitt felt that by opening up Liberty Square and Maynard Street to more hourly patrons, the enormous demand could be met for that kind of parking. The new rates, as well as the incentives for parking permits, will be implemented Sept. 1, Hewitt said.

Nader Nassif thought the incentive system is a great idea. He reported that based on his hard-hat tour of the new underground garage, he felt it’s actually a very well-designed, beautiful structure. It’s impressive to see natural light from several levels underground, he said.

John Mouat stressed the need to use getDowntown to help get the word out. Board chair Bob Guenzel thanked the DDA staff for their hard work putting together the incentives.

Outcome: This was not a voting item. The board had given direction at its previous meeting to the operations committee to develop the demand management pricing.

Surface Lot Leases

The board considered lease agreements for two surface parking lots in downtown Ann Arbor. One lot is known as the Brown Block, bounded by Huron, Ashley, Liberty Washington and First streets. The other is located on the southeast corner of Huron Street and South Fifth Avenue. The new leases extend for a period of three years.

Surface Lot Leases: Background

The DDA manages the two lots as part of Ann Arbor’s public parking system. The leases, which have been in place for several years, are between the DDA and two limited liability companies owned by the local real estate development firm First Martin Corp. Those two companies are Huron Ashley LLC and City Hall LLC. The lease for the Brown Block had been with the city of Ann Arbor, but this year it’s with the DDA – due to the fact that the city and the DDA signed a new contract last year, under which the DDA operates the city’s public parking system.

The monthly rents paid to First Martin under terms of the leases are stipulated at $28,333/month and $2,122/month, respectively. Based on arithmetic done by The Chronicle on DDA revenue data, the monthly revenues for the two lots since July 2009 have averaged around $61,000 and $9,500, respectively. There is a provision in the leases for the rent paid to the DDA to increase based on the consumer price index (CPI).

Ann Arbor public parking system: Revenue per space by selected facility. Surface parking lots, like the Huron/Ashley/First lot, show the highest revenue per space. The lowest revenue per space is derived from metered on-street parking. Structures show varying amounts of revenue per space, based in part on the number of monthly parking permits they allow.

Ann Arbor public parking system: Huron/Ashley/Liberty. Revenue on the surface lot shows the same kind of upward trend as the rest of the system.

Although the two parcels are not zoned for parking use, First Martin Corp. could itself choose to use the surface parking lots for commercial parking – as a pre-existing, non-conforming use, according to city planning manager Wendy Rampson’s response to an emailed query from The Chronicle. The lot on the Brown Block is used by the DDA for hourly parking, paid to an attendant in a booth. The other lot, across the street from Ann Arbor’s city hall and new Justice Center, is used for monthly permit parking.

Surface Lot Leases: Board Deliberations

Newcombe Clark was keen to establish that the new lease amounts for the two lots did not reflect any more than a simple CPI increase from the previous amounts.

Outcome: The board unanimously approved the two lease agreements for the surface parking lots.

Library Lot

John Splitt gave an update on the construction of the underground parking garage, which is nearing completion. South Fifth Avenue between Liberty and William had been expected to reopen by the end of May, but that re-opening was delayed. At the June 4 meeting, Splitt gave June 18 as the new date for probable re-opening of the street, and July 12 as the date of the opening of the structure.

The Library Lot, as the parcel is called due to its proximity to the downtown library, is part of the area of study for the DDA’s Connecting William Street project, which aims to find alternate uses for the surface parking lots in the area bounded by William, Ashley, Liberty and Division streets. That project is being undertaken by the DDA at the direction of the Ann Arbor city council, given last year on April 4, 2011. As the opening of the underground structure draws closer, advocacy for construction of a park on top of the lot has become more vocal.

Library Lot – Public Commentary

Commentary by Will Hathaway and Eric Lipson focused on the future of the top of the new underground parking garage, which is due to be completed in mid-July. By way of brief background, a request for proposals (RFP) process that could have led to the selection of a development project on top of the underground parking structure was terminated by the Ann Arbor city council on April 4, 2011. The proposal in play at that point was for a conference center. The parking structure includes reinforced footings designed to support future development on the site. Among the proposals that were rejected in the earlier phases of the RFP review process were two that envisioned the use of the area as primarily open space – some kind of park.

Lipson essentially ceded his time to Hathaway, who reprised many of the points he’d made at the DDA board’s meeting the previous month, on May 2, 2012. He told the board that his group was working to promote the idea of a park of some kind on the Library Lot. [It's called the Library Lot, but the Ann Arbor District Library does not own the parcel.] He’d put together a slide show to promote that, he said.

He began by saying that Ann Arbor lacks public space downtown for people who work and live. Ann Arbor previously had a town square, he said, in the form of the lawn at the old 1878 Washtenaw County courthouse, which had stood on the block of Huron and Main.

Hathaway suggested that the top of the underground parking garage is a place in the middle of Ann Arbor that could be a missing “Central Park,” bounded by Fifth Avenue, William, Division and Liberty streets. He described the block as anchored by the downtown location of the Ann Arbor District Library. But he also noted that the area is home to organizations like the Center for the Education of Women, the Christian Science reading room, the University of Michigan Credit Union and the Inter-cooperative Council. Small businesses in the area include Jerusalem Garden, Earthen Jar, Seva, Comedy Showcase and Herb David guitar studio.

Hathaway described Liberty Plaza on the northeast corner of the block as the only park in downtown Ann Arbor – a modest open space connected by a ramp and footpath to the Library Lot. Hathaway pointed out that the Library Lot was formerly a surface parking lot, that’s been transformed by the new underground parking garage. So the question is how to use the top of the new parking garage, he said.

The Calthorpe study from the mid-2000s recommended a “town square” on that site, Hathaway said. A hotel/conference center was proposed and rejected, as were two proposals for parks – because the RFP review committee contended that they would not create adequate economic benefit. So Hathaway ticked through other examples of park-like spaces that had generated economic benefit: Campus Martius and River Walk in Detroit; Post Office Square in Boston; Millenium Park in Chicago; the High Line Park on an abandoned rail line in New York City; and Discovery Green in Houston. All those parks generate economic benefits through “place making,” he said. That happens in several ways, Hathaway continued: revitalization of an existing building, new construction, more customers, and increased tax revenue.

Liberty Plaza is the only green space in the downtown, Hathaway said, and creating a pedestrian link to the Library Lot would essentially create Ann Arbor’s downtown Diag [a reference to the University of Michigan campus landmark]. He suggested that the Ann Arbor District Library could extend itself in connection with an adjacent park. Outdoor features that might be constructed on the Library Lot space, he said, include ice skating, interactive sculptures (like the Wave Field or The Cube), a sculpture plaza, or a town square gazebo.

The current plan is to put around 40 surface parking spaces temporarily on the top of the parking garage. So Hathaway concluded by saying that the choice is between a park or a parking lot. On July 14, after the grand opening of the new garage, his group has permission to host an event on top of the parking garage. It will be an afternoon for celebration of the end of construction and the businesses nearby who’ve endured the turmoil. It will be an opportunity to envision what a park on that spot might look like.

Library Lot – Board Response

Sandi Smith responded to the slide show presented by Hathaway by saying she appreciated the passion of his group, but said she found it “slightly disingenuous” when the location of the underground parking garage is bordered for the most part by historic districts. What’s displayed on the slides, she contended, is not feasible to achieve in the center of Ann Arbor.

From left: DDA board members Newcombe Clark, John Mouat and Sandi Smith.

Every example that Hathaway had given, she said, has high-rise buildings all the way around – extreme density. In Ann Arbor, she said, there are not even 5,000 people living downtown yet. She wanted the Connecting William Street process to unfold and she wanted Hathaway and his group to participate in it. Smith said it’s important to keep in mind that “we’re not Houston, we’re not New York City. We just don’t have the possibility of creating what was presented to us today.” She concluded her remarks by saying it’s important to keep in mind what is possible.

Mayor John Hieftje, who sits on the DDA board in a position created by the organization’s state enabling statute, agreed with Smith, saying that it’s “a little bit disingenuous” to say Liberty Plaza is the only green space in downtown Ann Arbor. Hieftje then went on to describe the University of Michigan Diag as a public park that is populated by students, people of Ann Arbor, and families having picnics. It’s a “state of Michigan park,” he said, that is “open and available to all of us.” Hieftje also pointed to an area near the new North Quad residence hall at State and Huron as an additional park. All those spots on University of Michigan property should also be shown as green space on the map in Hathaway’s presentation, Hieftje contended.

Regarding Liberty Plaza, Hieftje said he and Ward 1 councilmember Sabra Briere – along with city parks and recreation manager Colin Smith and park planner Amy Kuras – had taken a look at Liberty Plaza. Hieftje said there may be a possibility to redesign Liberty Plaza and there might be some grant money available.

Hieftje also said it might be possible to use some parks capital improvements millage money for Liberty Plaza work. A request might also come to the DDA. He said he did not want improvements to Liberty Plaza to be construed as opposition to a significant park on the Library Lot. He then went on to describe how in his time as mayor, he’d been very active in adding parkland to the city.

Library Lot: Public Commentary – Reprise

At the conclusion of the meeting, Nancy Kaplan addressed the board on the future of the Library Lot. [Kaplan serves on the Ann Arbor District Library board.] She asked the board to consider the results of a survey that the DDA had done. The responses showed support for green space in the Connecting William Street study area. She said that although Liberty Plaza has failed as a park, its existence shows that the city was willing to have a green space.

In the area where the Library Lot is located, Kaplan said there’s a need for respite from stone and hardscape. She asked the board to do something, at least temporarily, that would allow for a use of the top of the underground structure that is different from surface parking. She suggested using tree plantings. She encouraged the board to try it as a pilot program. Kaplan said the area has a lot of unattractive buildings and needs some respite from that.

Kitty Kahn told the board she totally agreed with Kaplan. She asked why a green roof on top of the underground garage couldn’t be tried. She contended that there is plenty of parking and that more is not needed. She urged the board to give the idea of some green space a try.

Annual Budget Adjustment

The DDA board considered amendments to its previously approved fiscal year FY 2012 budget (ending in three weeks, on June 30). It is an annual exercise undertaken to ensure that the actual expenses incurred are allowed for in the budget.

An example of a major difference between the already authorized budget and the amended version is an adjustment upward from $1,017,847 – for capital construction costs from the TIF (tax increment finance) fund – to $3,480,701. Those costs are construction invoices related to the new South Fifth Avenue underground parking garage, which is expected to open in mid-July. The budget adjustment is conservative, in that it assumes the parking garage will be completed and invoices will be submitted by the end of June, although that’s not likely. [.pdf of FY 2012 budget revision]

DDA board member Roger Hewitt.

Last year, the DDA received construction invoices after its final regular budget adjustment that resulted in an excess in expenditures over budgeted revenues for the fiscal year ending June 30, 2011. The overage was identified in the regular audit that was done by Abraham & Gaffney, P.C. as inconsistent with Michigan’s Uniform Budgeting and Accounting Act (UBAA) of 1968. DDA staff attributed the $337,478 overage to the submission of a bill forwarded to the DDA in June by its construction management consultant, Park Avenue Consultants Inc. The bill was for the underground parking garage and streetscape improvement projects that are currently under construction.

This year an additional effort was made to ensure that the final budget adjustment allowed for additional construction invoices that might be submitted between now and the end of the fiscal year.

South Fifth Avenue between Liberty and William is expected to reopen in mid-June, although it was most recently expected to open by the end of May.

Roger Hewitt introduced the item to the board and gave the background, noting that a city councilmember had been sharply critical of the DDA in connection with this issue in the past. [He was alluding to Stephen Kunselman, who represents Ward 3.]

Aside from some lighthearted commentary about a line item for the graffiti-removal product Elephant Snot, and more serious inquiry about the inclusion of the cost of surface lot leases in the direct parking expenses category, there was not a lot of board deliberation on the budget adjustments.

Outcome: The board unanimously approved the adjustments to its FY 2012 budget.

Communications, Committee Reports

The board’s meeting included the usual range of reports from its standing committees and the downtown citizens advisory council.

Comm/Comm: State Street

During public commentary, Frances Todoro addressed the DDA board as a member of the State Street Area Association board. She noted that the State Street area currently has some challenges with respect to retail space – frequently turnover, for example, and the opportunity for the former Borders space. As a board, the SSAA has expressed a desire to learn more about opportunities, what is possible in the community. Specifically, she described an interest in having a retail location analysis done, that would encompass the entire downtown. It would be something that landlords, merchant associations, everyone who wants to understand the potential for downtown Ann Arbor could participate in. Questions such a study might answer include: Who wants to be in Ann Arbor? What demographic would make a retailer successful?

Todoro said the SSAA is interested in partnering with the DA to make the study happen.

During his remarks near the beginning of the meeting, mayor John Hieftje mentioned an improvement he’d like to see in the State Street area – widened sidewalks through bumpouts. It would enhance the outdoor dining possibilities, he said, making it more like Main Street. The sidewalk currently is too narrow there, he said. The idea of bumping out the sidewalks on State Street in downtown is something he said he did not want to fall off the radar screen. [Hieftje had begun talking about that idea around a year and a half ago.]

Responding to Hieftje’s suggestion to increase opportunities for outside dining on State Street, Roger Hewitt quipped that he supported Hieftje’s comments strongly. [Hewitt owns the Red Hawk Bar & Grill on State Street, which would benefit from that kind of streetscape improvement.]

Comm/Comm: R4C Zoning Review

Ray Detter, during his report from the downtown area citizens advisory council, said that the CAC had asked mayor John Hieftje to support the report from the R4C/R2A review committee. He characterized the work of that committee as reflecting an overwhelming desire to preserve streetscapes in the R4C/R2A area and to curb development patterns that depend on the accumulation of lots so that larger projects can be built. [See Chronicle coverage: "Planning Group Weighs R4C/R2A Report."]

Comm/Comm: Near North

Mayor John Hieftje gave an update on the latest report from Avalon Housing’s Near North affordable housing project. The DDA board had voted on Sept. 7, 2011 to extend a $500,000 grant that it had previously awarded. At that time, the closing on the deal had been thought to be imminent. At the June 4, 2012 meeting, Hieftje reported that financing was now expected to be finalized at the end of June. Demolition of the vacant houses, he said, would be expected to begin in July.

Present: Nader Nassif, Newcombe Clark, Bob Guenzel, Roger Hewitt, John Hieftje, John Splitt, Sandi Smith, Leah Gunn, Russ Collins, John Mouat.

Absent: Keith Orr, Joan Lowenstein.

Next board meeting: Noon on Monday, July 2, 2012, at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]

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An example of a major difference between the already authorized budget and the amended version is an adjustment upward from $1,017,847 – for capital construction costs from the TIF fund – to $3,480,701. Those costs are construction invoices related to the new South Fifth Avenue underground parking garage, which is expected to open in mid-July. The budget adjustments are conservative, in that it assumes the parking garage will be completed and invoices will be submitted by the end of June, although that’s not likely. [.pdf of FY 2012 budget revision]

Last year, the DDA received construction invoices after its final regular budget adjustment that resulted in an excess in expenditures over budgeted revenues for the fiscal year ending June 30, 2011. The overage was identified in the regular audit that was done by Abraham & Gaffney, P.C.  as inconsistent with Michigan’s Uniform Budgeting and Accounting Act (UBAA) of 1968. DDA staff attributed the $337,478 overage to the submission of a bill forwarded to the DDA in June by its construction management consultant, Park Avenue Consultants Inc. The bill was for the underground parking garage and streetscape improvement projects that are currently under construction.

This year an additional effort was made to ensure that the final budget adjustment allowed for additional construction invoices that might be submitted between now and the end of the fiscal year.

South Fifth Avenue between Liberty and William is expected to reopen in mid-June, although it was most recently expected to open by the end of May.

This brief was filed from the DDA offices at 150 S. Fifth Ave., Suite 301, where the board holds its meetings. A detailed report of the meeting will follow: [link]