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

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

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

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

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

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

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

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

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

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

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

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

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

DDA Ordinance Revisions

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

DDA Ordinance Revisions: Background

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

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

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

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

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

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

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

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

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

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

DDA Ordinance Revisions: Financial Impact

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

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

[.pdf of DDA 10-year planning document]

DDA Ordinance Revisions: Initial Communications

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

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

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

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

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

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

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

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

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

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

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

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

DDA Ordinance Revisions: Deliberations – Postponement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DDA Ordinance Revisions: Postponement – Politics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DDA Ordinance Revisions: Postponement – Calling the Question

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

Chuck Warpehoski (Ward 5).

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

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

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

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

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

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

DDA Ordinance Revisions: Postponement – More Deliberations

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

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

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

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

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

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

DDA Ordinance Revisions: Tabling

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

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

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

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

DDA Ordinance Revisions: Amendment – Delayed Enactment

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

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

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

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

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

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

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

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

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

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

DDA Ordinance Revisions: Disclosure

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

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

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

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

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

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

DDA Ordinance Revisions: Governance

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

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

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

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

DDA Ordinance Revisions: Amendment – Capital Budget

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

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

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

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

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

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

DDA Ordinance Revisions: Amendment – Term Limits

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

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

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

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

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

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

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

Stephen Kunselman (Ward 3).

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

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

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

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

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

DDA Ordinance Revisions: Denouement

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

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

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

April 15 Actions

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

Action: Wastewater Treatment Pumps

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

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

Action: Bridge Maintenance Program

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

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

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

Action: MDOT Application for 721 N. Main St.

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

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

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

Action: Land Purchase Near Ruthven Nature Area

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

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

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

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

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

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

Outcome: The council voted unanimously to purchase the parcel.

Action: Riverside Easement for DTE

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

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

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

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

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

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

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

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

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

Action/Postponement: Summit Townhomes

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

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

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

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

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

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

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

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

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

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

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

Postponement: Theta Delta Chi Site Plan

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

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

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

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

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

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

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

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

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

Postponement: Privacy Law

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

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

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

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

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

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

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

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

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

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

Postponement: 413 E. Huron

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

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

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

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

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

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

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

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

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

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

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

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

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

Postponement: Misc.

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

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

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

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

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Mayor John Hieftje (left) and DDA board member Roger Hewitt (right) head to their seats to start the DDA's board meeting. (Photos by the writer.)

Instead, the board received this news from the chair of its bricks and money committee: The city has raised the possibility that the DDA might need to return money to various taxing entities – including the city of Ann Arbor – from the taxes captured through the DDA’s tax increment finance district. The city communicated its concern to the DDA on Monday morning, the day of the noon meeting.

The issue concerns the DDA’s TIF plan, which was renewed in 2003, and language in the city’s ordinance establishing the DDA under the state’s enabling legislation. The TIF plan contains projections for the growth in taxable value of property (both real and personal) in the district. The city’s ordinance stipulates that if the actual “captured assessed valuation” grows at a rate faster than the expectation expressed in the TIF plan, then at least 50% of the additional amount must be returned proportionately to the taxing authorities from which the taxes were captured.

The vagueness of the ordinance language leaves several open questions that will require further review by the city attorney’s office and the DDA’s own legal counsel, as well as the financial staff from both organizations.

Those questions include: (1) What’s the relevant time period? (2) Which set of TIF plan estimates are applicable – the one labeled pessimistic, optimistic or realistic? (3) Who is the responsible party for adherence to the ordinance? (4) Does the ordinance language refer to real property only or also to personal property? (5) Do payments already made by the DDA to the city of Ann Arbor out of the TIF for the new municipal center count towards any sum that might need to be returned?

After hearing the news, the board decided to table the resolution on its agenda that would have ratified the DDA’s side of a new parking contract under which it would continue to manage the city’s parking system. [Previous Chronicle coverage: "Column: Ann Arbor Parking – Share THIS!"]

Board members recognized that it would likely be necessary to convene a special meeting of the board, given the city’s need to approve its budget on May 16. Later the same day, on the evening of May 2, the city council struck from its agenda the item that would have ratified the city’s side of the new parking contract. The city council has not yet weighed in on the text of the contract, but did express its view on the financial terms at its April 19 meeting.

As DDA board members absorbed the news about the TIF question, they heard their usual set of reports from their committees and wrapped up the meeting is less than an hour – they had no further business to transact. Board member Russ Collins, who was prepared to call in to the meeting from Detroit, where he’d been summoned for federal jury duty, did not need to do that. 

TIF Question

To understand the news from the DDA’s meeting, it’s useful to start with some basic background.

TIF Question: Background

Ann Arbor’s Downtown Development Authority is established under the state’s enabling statute, which governs how such entities may be formed by local governments. [.pdf of state enabling legislation: Act 197 of 1975]. A DDA uses a tax increment finance (TIF) district as a way of focusing investment of tax revenues on a specific geographic area – the TIF district.

The DDA itself does not levy taxes within the district. Instead, a DDA “captures” property taxes that are already levied by other taxing entities. In the case of Ann Arbor’s DDA, the other taxing entities whose revenues are captured inside the district include: the city of Ann Arbor, Washtenaw County, the Ann Arbor Transportation Authority (AATA), Washtenaw Community College (WCC), and the Ann Arbor District Library.

For DDAs formed after 1994, other taxing authorities have had a chance to opt out of allowing their taxes to be captured. From the state statute:

125.1653 Sec. 3 (3) Not more than 60 days after a public hearing held after February 15, 1994, the governing body of a taxing jurisdiction levying ad valorem property taxes that would otherwise be subject to capture may exempt its taxes from capture by adopting a resolution to that effect and filing a copy with the clerk of the municipality proposing to create the authority.

Ann Arbor’s DDA was formed in 1982 for a 30-year period, but was renewed in 2003 to extend through 2033.

A standard part of any TIF capture, including that of Ann Arbor’s DDA, is that the tax capture is limited to those taxes on the difference between existing value of a property and a newly constructed property. This difference is the increment in “tax increment finance.”

Ann Arbor’s TIF capture is somewhat different from simple TIF in two ways, both of which have the effect of limiting the amount of taxes captured.

First, once the increment is determined for the initial year of a newly constructed property, that increment stays constant for purposes of future capture. In other words, after a property is built and continues to appreciate in value over time, the taxes on additional value due to that appreciation are not captured by the Ann Arbor DDA. This is a point that DDA board member Leah Gunn reliably makes whenever the DDA’s TIF capture is discussed, and Monday’s meeting was no different.

The second way that Ann Arbor DDA TIF capture is different from simple TIF relates to projections that are included in the TIF plan for the DDA. A TIF plan is an element described in the state statute:

125.1664 Tax increment financing plan; preparation and contents; limitation; definition; public hearing; fiscal and economic implications; recommendations; agreements; modification of plan. Sec. 14. (1) When the authority determines that it is necessary for the achievement of the purposes of this act, the authority shall prepare and submit a tax increment financing plan to the governing body of the municipality …

The complete Ann Arbor DDA TIF plan is available on the DDA’s website. The TIF plan includes estimates of the year-to-year increase in new taxable value in the district.

Here’s how the DDA’s TIF capture is limited by the TIF plan: If the growth rate of the TIF capture exceeds the amount estimated in the plan, then the excess is supposed to be returned to the various taxing authorities. From the city’s DDA ordinance:

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

TIF Question: Breaking the News

The 50%-return condition specified in the city’s DDA ordinance is the issue that was raised at the DDA’s Monday meeting. It was Roger Hewitt who announced at the meeting that the question had been identified by the city of Ann Arbor. [The growth in TIF capture does, in fact, appear to have outpaced the growth anticipated in the plan.] Leah Gunn, who is the longest-serving member of the board, elicited from Hewitt that he’d received a rather concerned phone call from deputy DDA director, Joe Morehouse, at about 9:30 a.m. [The meeting started at noon.]

Mayor John Hieftje – who sits on the DDA board, serving a slot designated in the state enabling legislation – said the city had become aware of the issue late Friday, April 30. He said the city’s legal staff had worked over the weekend on the issue and would need additional time, working with the DDA, to sort things out. It was interesting that the language had been sitting there for some time, he said, and had not been addressed. He allowed that the language of the ordinance was not very clear.

The immediate consequence of the news was that the board did not vote on the new parking contract under which the DDA would continue to operate the public parking system. The proposed contract called for the city of Ann Arbor to receive 17% of gross parking revenues and would provide the DDA with the authority to set rates, without the possibility of a city council veto – the council currently has the power of veto. Hewitt said he felt it was imprudent to discuss the parking contract, when the potential financial impact on the DDA  – due to the TIF issue raised by the city – would be significant but uncertain.

Hieftje was keen to see the item formally moved and then formally tabled, to make clear what the status of the agenda item was.

Outcome: The board voted unanimously to table the resolution ratifying the parking contract.

TIF Question: Board Reaction

Sandi Smith, who serves on the Ann Arbor city council as well as the DDA board, was effusive in thanking the other members of the DDA’s “mutually beneficial” committee – Roger Hewitt, Russ Collins and Gary Boren – for their hard work on trying to reach an agreement on the new parking contract. They’ve been working for well over a year on the agreement. She noted that DDA board members are all volunteers who could be doing things other than holding 7 a.m. meetings.

Board members Sandi Smith and Keith Orr before the start of the DDA's May 2 board meeting.

[Smith was implicitly contrasting DDA board members with city councilmembers, who receive an annual salary of just under $16,000. She was referring to the early Monday morning meetings the two committees from the council and the DDA board have held over the last few months.]

DDA board chair Joan Lowenstein pointed out that the DDA has a current contract under which it manages the public parking system – the contract runs through 2015, and can be extended at the DDA’s option through 2018. That contract would allow the city of Ann Arbor to withdraw about $2 million less per year from the public parking system revenues than the contract that was on the DDA’s agenda for consideration.

Newcombe Clark wanted some clarification about the DDA’s May 2010 resolution that approved a transfer of $2 million to the city of Ann Arbor from the public parking system –  a transfer that was not required under the terms of the current parking contract. He wanted to know if the DDA would be able to meet the time frame specified in that resolution for completing a new parking contract.

At Smith’s urging, the exact language of that resolution was located not much later in the meeting. In relevant part, it reads:

RESOLVED, The DDA authorizes providing the City with $2 million in fiscal year 2010/11 with the following expectations:

• The DDA and City representatives who have developed the preliminary terms will continue to meet at least once a month to complete work on an agreement that will go to the DDA and City Council for approval, and these meetings will be open to the public.
• The DDA and City representatives will aim to conclude their work by October 31, 2010, but certainly no later than the end of the fiscal year 2010/11. [.pdf of DDA resolution of May 5, 2010 authorizing payment of $2 million to city of Ann Arbor]

Lowenstein concluded that if the DDA board reached a new agreement with the city on parking revenues by June 30, the end of FY 2011, the board would be abiding by the terms of its resolution.

Lowenstein suggested that once the legal interpretation of the ordinance was agreed on by the DDA and the city, there should be an independent audit to determine the amount of any money that needed to be divided up.

Leah Gunn noted that the DDA’s legal counsel, Jerry Lax with Bodman, would be unavailable beginning the next day, so she hoped the attorneys on the DDA board would be able to pitch in – they include Lownenstein, Bob Guenzel, and Gary Boren.

Smith asked for a proportionate breakdown of the TIF taxing entities. Hewitt said that the DDA’s TIF revenue is roughly 60% from the city of Ann Arbor and the remaining 40% from the Ann Arbor Transportation Authority, Washtenaw Community College, Washtenaw County and the Ann Arbor District Library. Josie Parker, director of the AADL, attended the meeting – she often attends meetings of the DDA board and its committees.

Hewitt noted that given the city’s need to have its budget approved by May 16, he expected the DDA board would need to convene a special meeting sometime before then. The city’s budget assumes roughly $2 million more in revenue from the public parking system than the current contract specifies.

TIF Question: Material Issues

In connection with the city’s DDA ordinance, which stipulates the minimum 50% return of TIF capture in excess of TIF plan estimates, an immediate question is whether the TIF capture has, in fact, outpaced the plan’s estimates.

An initial look at the numbers indicates that the taxable values subject to capture have increased faster than the TIF plan projections. Here’s a snapshot of numbers since the 2003 renewal of the Ann Arbor DDA. [Close-of-roll numbers in the left column come from the city of Ann Arbor treasurer's office. Estimates in columns 2-4 are from the DDA TIF plan Appendix C]

                                TIF PLAN ESTIMATES
Actual Valuation        "Realistic" "Optimistic"  "Pessimistic" 

2004    $76,955,174     $71,836,326  $72,658,263  $71,021,758
2005    $78,671,971     $73,937,930  $75,209,080  $72,683,949
2006    $81,877,369     $76,101,112  $77,849,585  $74,385,101
2007    $92,998,789     $78,327,678  $80,582,937  $76,126,129
2008    $92,204,889     $80,619,488  $83,412,404  $77,907,969
2009   $113,460,032     $82,978,457  $86,341,373  $79,731,579
2010   $140,612,435     $85,406,555  $89,373,346  $81,597,939
2011   $137,800,186     $87,905,812  $92,511,951  $83,508,054

-

In FY 2010, the amount of taxes generated for the DDA’s TIF district – based on the actual valuation – was $3,537,939. The DDA has budgeted $3,935,790 in TIF revenue for the current fiscal year, FY 2011. But currently the DDA anticipates this number to be closer to $3.7 million.

Given the apparent excess valuation compared to the TIF plan – even on the “optimistic” estimates – several questions arise when it comes to calculating a possible return of TIF capture to various taxing entities under the city’s DDA ordinance. Some of these questions were floated at the DDA’s board meeting. Others were identified in subsequent conversations between board members and The Chronicle:

1. What’s the relevant time period? The ordinance identifies the “rate” of growth, which entails comparing valuations over some period of time. Interpretation A would be that each year when the tax rolls are closed (after the Board of Review has handled all appeals), that year’s valuation is compared with the previous year’s, and the percentage difference is calculated. That percentage is compared with the percentage growth forecast by the TIF plan between those two years. Interpretation B would compare a given year’s valuation against the valuation in the first year of the plan (not the previous year) and compute the percentage difference between them. That percentage difference would then be compared against the percentage growth forecast by the TIF plan from the beginning of the plan to the current year.
2. Which set of TIF plan estimates are applicable – the one labeled pessimistic, optimistic or realistic? The ordinance language refers to “anticipated” growth, without specifying whether that means the “realistic,” “optimistic,” or “pessimistic” estimates. Arguments for either the “optimistic” estimate or the “pessimistic” estimate would be susceptible to the criticism it is not “realistic.” Initial ballpark calculations done by the city have been based on the “realistic” estimates.
3. Who is the responsible party for adherence to the ordinance? The taxes captured by the DDA’s TIF district are administered not by the DDA staff, but rather by the city assessor’s office, just as they are for all taxing entities. The city receives an administrative fee for this work equal to 1% of the tax bill – it’s labeled ADMIN FEE on the bill. [When the city council passed last year's budget, Stephen Kunselman (Ward 3) proposed a budget amendment to reduce the administrative fee, but it received little traction and did not pass.] So it’s the city that transfers the DDA’s TIF taxes to the DDA. For other taxing entities, like the Ann Arbor District Library, it’s not completely clear what their avenue of complaint is, if they are owed money that was erroneously captured – through the city of Ann Arbor or through the DDA?
4. Does the ordinance language refer to real property only, or also to personal property? The valuations included in this article lump together valuations of real property and personal property. Real property refers to building and land. Personal property refers to pieces of equipment. A specific example of personal property [but from outside the DDA TIF district] would be the planned acquisition by Sakti3 of battery cycling equipment and thermal chambers as a part of the firm’s expanded operations. Based on the DDA TIF plan, through 2003 personal property in the DDA district accounted for roughly 25% of TIF capture.
5. Do payments already made by the DDA to the city of Ann Arbor out of the TIF for the new municipal center count towards any sum that might need to be returned? In May 2008, the DDA board pledged up to $540,000 annually from its TIF capture to help finance the city’s new municipal center. [.pdf of May 7, 2008 DDA board meeting minutes] If it’s determined that too much money has been transferred to the DDA for its TIF capture, then the DDA might point to the money pledged as a part of the municipal center finance plan as covering any amount owed to the city of Ann Arbor.

Given the various open questions about the calculations, it’s not possible to say with great precision how much money might be at stake. Back-of-the napkin calculations by The Chronicle indicate since 2004, on the high side it could be in the range of $3 million total that may have been erroneously transferred to the DDA. Of that amount, the city of Ann Arbor’s share would be a bit less than $2 million. After the city council meeting on May 2, Tom Crawford, the city’s CFO, told The Chronicle that the city’s preliminary estimate was a bit lower – more in the range of $2 million total.

Communications, Committee Reports, Commentary

The board’s meeting included the usual range of reports from its standing committees and the Downtown Citizens Advisory Council. Every board meeting also includes two opportunities for public commentary – one near the start of the meeting and the other at its conclusion.

Comm/Comm: Bricks and Money Committee – Third Quarter

Roger Hewitt gave an update on the third-quarter financials for the DDA’s 2011 fiscal year. The TIF revenue drew some discussion. The DDA had budgeted $3,935,790 in TIF revenue, but now anticipates that revenues will be closer to $3.7 million. The difference was attributed to the overall loss in commercial property value, which balanced out the addition of new projects.

Sandi Smith said the newest figures she’d seen showed another 2% loss.

Parking revenues are a part of every report out from the bricks and money committee. Hewitt noted that revenues were up, but not by as high a percent as the rate increase that had been implemented.

John Hieftje asked for someone to explain the jump in hourly parking patrons in March. Hewitt indicated that it’s a “slippery” number – it indicates people who park, but who don’t have monthly passes. There’s no accounting for the length of time they stayed. Hieftje pressed again, asking if there had been a big promotion or something during the month.

By way of partial explanation, Joan Lowenstein noted that last year, construction workers who had been working on the University of Michigan North Quad dormitory had been parking at the Maynard Street structure – using permits. Their spaces are now used by hourly patrons. The number was up by 13,000, said Hieftje, which is about one-third – it’s a big jump and it had caught his eye, he said. Hewitt said it takes a while for people to realize that the spaces are available again.

Comm/Comm: Bricks and Money Committee – Construction

Reporting out from the “bricks” part of the bricks and money committee, John Splitt gave an update on the Fifth and Division streetscape improvement project. He reported that Eastlund Concrete would be starting up work again very shortly, if they have not already started. Leah Gunn chimed in to say that the construction barrels have been set out.

DDA board members Leah Gunn and Keith Orr.

On the Fifth Avenue underground parking garage, Splitt reported that progress continues on the east leg near Division Street – walls are being poured in that part of the garage. The decks in the east leg are already poured. He reported that SME, the company that designed the earth retention system, has finished inspections of the earth retention system on the north side of the site and have moved to the west side. All necessary repairs have been accomplished on the north side.

[The inspections and repairs came as a result of a breach in the earth retention system that took place in late March.] Splitt said he’s hoping to schedule a tour of the site for the next meeting of the bricks and money committee. He indicated that a staircase on the east side of the garage will likely be completed by then. Details will be firmed up by the time of the next committee meeting.

Comm/Comm: Economic Development

Reporting out from the DDA’s communications and economic development committee, Joan Lowenstein said that Ann Arbor SPARK‘s director for research and business information, Donna Shirilla, had briefed the committee at its last meeting. Shirilla had said it’s clear that the IT sector is a prevalent part of the Ann Arbor downtown mix of businesses. One-third of the downtown businesses are in the IT sector, and 15% of the county’s IT employment is downtown. Small businesses like the atmosphere of downtown – the ambiance of downtown is what they’re looking for.

Shirilla said that higher rents don’t seem to be a deterrent to smaller IT businesses. Life sciences and the automotive industry are also represented, but they would typically need a larger floorplate. Once they reach a certain size, they leave. Downtown Ann Arbor offers lots of small spaces, but not much in the way of larger spaces, Shirilla reported.

Lowenstein said that in discussing possible DDA-SPARK collaboration, one idea the committee floated would be to jointly host a roundtable discussion with IT firms about available space and talent. The committee discussed information on housing and other amenities that would help SPARK recruit companies. The committee also talked about improvements to the DDA website. They decided they would not go to the time and expense of a complete redesign, but talked about reorganization of the information that’s presented on the website.

Comm/Comm: Partnerships Committee – Energy

Reporting out from the partnerships committee, Sandi Smith quipped that the co-chair of the committee, Russ Collins, goes to great lengths to avoid giving the report – he’d been called for jury duty in federal court in Detroit. [Another board member, Keith Orr, had been called for jury duty in the 15th District Court, but it turned out that no trial needed to be held in Judge Chris Easthope's court that day.]

Smith began by giving an update on the DDA’s energy saving grant program – it pays for energy audits and then matches business owner investments up to a cap of $20,000. She characterized the $650,000 spent on the program to date as a remarkable investment in buildings. It’s a good example of the DDA leveraging its investments to encourage private investment. Smith indicated that the next committee meeting will include a discussion about how to allocate a smaller amount annually [$100,000 compared to $200,000]. Strategies include making the grants smaller, focusing on just audits or possibly focusing just on matching grants. Another question, Smith said, is whether to focus on smaller or larger businesses.

Responding to comments made by Smith, mayor John Hieftje continued a theme he’s begun in connection with the reduction in funding the DDA has needed to make in the energy saving grant program because of increased financial pressure. That theme is to highlight the city’s PACE (property assessed clean energy) program, which is being funded with a federal grant. Hieftje indicated that the city has hired a staff person to work on PACE, and part of her mission is to engage with other groups. Most of the pieces of the program are in place, he said. It would help if the DDA would help roll out PACE.

Smith noted that PACE is designed for much bigger property owners. The beneficiaries of the DDA’s energy saving grant program, like Vicki’s Wash and Wear Haircuts, are small businesses. For the re-lamping project that owner Vicki Honeyman had undertaken, the matching grant was a huge factor in allowing her to do that, Smith said.

Comm/Comm: Partnerships Committee – RFP Processes

Smith reported that the committee had had an interesting discussion with David di Rita of the Roxbury Group, which had served as the consultant for the Library Lot RFP (request for proposals) process. That process was terminated by the city council at its April 4, 2011 meeting. Di Rita had told the committee that some RFP processes he’d been involved with have worked well and others have not. The key is to have a vision and be clear in your RFP, he said. RFPs that are obscure and cast a wide net don’t typically go anywhere. Something that reflects a clear community vision tends to do better, he told the committee. [For Chronicle coverage that mentions that partnerships committee meeting: "Balancing Ann Arbor, Detroit and a Vision"]

Smith noted that in the city of Ann Arbor, RFPs are issued that are not clear and then people are surprised when proposals come back and it’s not what they want. Smith noted that Jesse Bernstein (chair of the Ann Arbor Transportation Authority board) and Josie Parker (director of the Ann Arbor District Library) also attended the committee meeting. The two had talked about long-term visioning – not just five or 10 years, but 30 years.

Comm/Comm: Transportation Committee

John Mouat reported out on the spring walk-around by the transportation committee. They’d looked at outskirt areas where people enter the downtown, he said. They’d considered what can be done in the short term with limited dollars. Areas they’d identified were on the west side where roads cross the railroad tracks. There are trip hazards near Main Street. Near Kerrytown they identified sidewalk improvements that could be undertaken. Other categories identified include: downtown bike sharrows – the new markings have been added by the city, but there are gaps in their placement, he said.

The committee took a look at countdown pedestrian signals – do they help or hurt? Mouat said there’d been a good response to the plantings added around the parking structures. The next step will be to put prices on items to make decisions on where to focus investment.

Comm/Comm: Scheduling – DCAC

For the first time in The Chronicle’s memory, Ray Detter did not deliver a report to the DDA board on the downtown citizens advisory council’s most recent meeting, which is typically held the Tuesday evening before the Wednesday when the DDA board meets. The board meeting had been shifted to Monday, in order to facilitate greater board member attendance for an anticipated parking contract vote.

During the board meeting, Detter was leading one of several tours of the downtown historical markers. The tours have been spotted in the wild on two occasions in the last week. [Occasion 1] [Occasion 2]

Comm/Comm: Scheduling – Open Meetings

Given the shifted scheduling of the meeting, at the start of the meeting Sandi Smith asked for confirmation that it had been properly noticed to the public. Joe Morehouse, deputy director of the DDA, indicated that the paper notice had been posted at the city hall building and at the DDA offices, and that it had been included in the city’s Legistar scheduling system.

Comm/Comm: Comment

No one addressed the board during either of the times on the agenda set aside for public commentary.

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

Absent: Russ Collins

Next regular board meeting: Noon on Wednesday, June 1, at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]