The extension – which would still need approval from the Michigan Economic Development Corporation – depends on establishing a relationship between the Ann Arbor-Ypsilanti SmartZone and some other “satellite” LDFA. So the Sept. 2 resolution designates Adrian/Tecumseh as that satellite and approves an agreement with Adrian/Tecumseh.

The council’s vote was 7-4 over dissent from Sumi Kailasapathy (Ward 1), Stephen Kunselman (Ward 3), Jack Eaton (Ward 4) and Mike Anglin (Ward 5). It followed a discussion that lasted over an hour, with questions from councilmembers fielded by city CFO Tom Crawford and LDFA board members Eric Jacobsen and Stephen Rapundalo, a former city councilmember.

The Ann Arbor-Ypsilanti LDFA – branded as one of about a dozen LDFA SmartZones statewide – is funded through capture of public school operating millages within the geographic areas of the Ann Arbor and Ypsilanti downtown development authority districts. However, no capture is made of the Ypsilanti school taxes.

The LDFA contracts with Ann Arbor SPARK to operate a business accelerator, which is meant to move start-up companies in the tech and biosciences sectors more quickly to a stage in their development when they are generating revenue from paying customers and adding jobs.

The city contracts separately with Ann Arbor SPARK for general business attraction and retention services. Also at its Sept. 2 meeting, the council voted to take SPARK’s $75,000 annual contract up off the table and consider it again, having tabled it three months ago. That contract won approval from the council.

The council’s Sept. 2 resolution on the LDFA extension specified the following as findings:

1. That the selection of the Adrian/Tecumseh LDFA as a satellite provides unique characteristics and specialties through its public and private resources including the location of Adrian College, Siena Heights University and Jackson College within its TIF District and the opportunities for research partnerships and student/young entrepreneur involvement. In addition partnership with another multi-jurisdictional LDFA provides opportunities for shared experiences.
2. That the selection of the Adrian/Tecumseh LDFA as a satellite provides regional cooperation and collaboration benefits to the LDFA and the Cities of Ann Arbor and Ypsilanti with joint focuses on technology (including expanding green technologies and agricultural technology) and entrepreneurial services.
3. That the selection of the Adrian/Tecumseh LDFA as a satellite provides value and support to the LDFA by strengthening existing collaboratives, making available a new/expanded technical assistance and support through its Innovation Center at Adrian College, and agricultural and manufacturing resources.

In connection with the extension, revisions to the Ann Arbor-Ypsilanti SmartZone TIF (tax increment financing) plan and development plan are being undertaken. Drafts of revisions are attached to the council’s Sept. 2 agenda item. Revisions appear to address concerns that have been raised about the current arrangement – to some extent by Ann Arbor city councilmembers.

Those concerns include the fact that TIF is not currently allowed to be spent outside the TIF district in the city of Ann Arbor; further, no TIF funds can currently be expended in Ypsilanti – inside or outside its TIF district – because no actual tax capture revenue is generated for the LDFA in that area. The revisions would allow TIF revenue to be expended anywhere in the entire cities of Ann Arbor or Ypsilanti.

In addition, the revisions specify in greater detail that TIF revenue can be used to pay for high-speed communications infrastructure. Specifically mentioned as eligible expenditures is the “installation of technology related infrastructure assets, i.e. fiber lines, nodes, or work spaces.”

The LDFA extension comes in the context of lingering questions about the impact on school funding of the LDFA tax capture. In FY 2013, the total amount captured by the Ann Arbor SmartZone LDFA was $1,546,577, and the current fiscal year forecast is for $2,017,835. About the same amount is forecast for FY 2015. The majority of councilmembers were convinced that the mechanism by which the state of Michigan funds public education means that the LDFA tax capture has no negative impact on  local schools funding.

Separate from the LDFA business acceleration contract with Ann Arbor SPARK, the city of Ann Arbor has historically engaged SPARK for business attraction and retention services. However, this year the $75,000 annual contract with SPARK was tabled by the council – in a vote taken at the council’s June 16, 2014 meeting.

It was taken back up off the table for consideration at the Sept. 2, 2014 meeting and approved on a 9-2 vote over dissent from Sumi Kailasapathy (Ward 1), Jack Eaton (Ward 4) and Mike Anglin (Ward 5)

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron.

Update: The board failed to reach a quorum, but received reports. The update on the jobs audit is that the audit firm Abraham & Gaffney will be planning to audit jobs figures in the Ann Arbor SPARK Salesforce database. The board also received an update on the formation of LDFA satellites in Adrian and Brighton. One of those satellites will be selected as a partner for the Ann Arbor/Ypsilanti SmartZone as it seeks a 15-year extension past its current 2018 end date. A city council work session on the topic of the LDFA expansion is currently planned for Sept. 8. A vote is is planned by the council in October. 

On the agenda is a year-end report from Ann Arbor SPARK, the LDFA’s vendor for entrepreneurial support services. The fiscal year ended June 30, 2014. Also on the agenda is an update on the effort to extend the term of the LDFA past its current end date in 2018.

The LDFA’s last meeting, on June 17, 2014, included discussion of the LDFA’s capture of the local school operating millage and whether those captured taxes are reimbursed to the state’s School Aid Fund. After that meeting, The Chronicle reported that communications staff at the state treasury and the Michigan Economic Development Corporation had confirmed that under the LDFA statute, that reimbursement is not required for the Ann Arbor/Ypsilanti SmartZone.

Listen live to the audio broadcast using the embedded live stream player below. The two text boxes are identical in content. They are used to provide notes to the listener during the live broadcast. The first box forces the view to the bottom of the file. The second one can be manually scrolled.

[.mp3 of July 15, 2014 LDFA board meeting]

Action came at the council’s June 2, 2014 meeting after about 20 minutes of deliberation that concluded just before 11 p.m. Carrie Leahy, chair of the LDFA board, and Ann Arbor SPARK CEO Paul Krutko were on hand to answer councilmember questions. The voice vote by the council passed over dissent from Sumi Kailasapathy (Ward 1).

Ann Arbor’s local development finance authority is funded through a tax increment finance (TIF) district, as a “certified technology park” described under Act 281 of 1986. The Michigan Economic Development Corp. (MEDC) solicited proposals for that designation back in 2000. The Ann Arbor/Ypsilanti “technology park” is one of 11 across the state of Michigan, which are branded by the MEDC as “SmartZones.”

The geography of the LDFA’s TIF district – in which taxes are captured from another taxing jurisdiction – is the union of the TIF districts for the Ann Arbor and the Ypsilanti downtown development authorities (DDAs). It’s worth noting that the Ypsilanti portion of the LDFA’s TIF district does not generate any actual tax capture.

The LDFA captures Ann Arbor Public Schools (AAPS) operating millage, but those captured taxes don’t diminish the school’s budget. That’s because in Michigan, local schools levy a millage, but the proceeds are not used directly by local districts. Rather, proceeds are first forwarded to the state of Michigan’s School Aid Fund, for redistribution among school districts statewide. That redistribution is based on a per-pupil formula as determined on a specified “count day.” And the state reimburses the School Aid Fund for the taxes captured by SmartZones throughout the state.

In FY 2013, the total amount captured by the LDFA was $1,546,577, and the current fiscal year forecast is for $2,017,835. About the same amount is forecast for FY 2015.

The extension of the LDFA is made possible by Public Act 290 of 2012, which amended the Local Development Financing Act to allow a SmartZone to capture school taxes for an additional five years or an additional 15 years. The staff memo accompanying the council resolution describes the five-year extension as possible “upon approval of the MEDC President and the State Treasurer, if the Ann Arbor/Ypsilanti SmartZone LDFA agrees to additional reporting requirements and the LDFA requests, and the city councils of Ann Arbor and Ypsilanti approve, the amendment of the LDFA tax increment financing (TIF) plan to include regional collaboration.” The current MEDC president is Michael Finney, former CEO of Ann Arbor SPARK.

A 15-year extension is possible, according to the memo, “if, in addition to the above requirements, Ann Arbor and Ypsilanti, as the municipalities that created the SmartZone, enter into an agreement with another LDFA [a "Satellite SmartZone"] that did not contain a certified technology park to designate a distinct geographic area, as allowed under Section 12b of the Act…”

The council’s resolution states that if the MEDC approves the extension, the city of Ann Arbor will work with the LDFA and the city of Ypsilanti to identify another LDFA – called the “Satellite SmartZone LDFA.” The arrangement will allow the Satellite SmartZone LDFA to capture local taxes in its own distinct geographic area for the maximum 15 years allowed by statute.

Responding to an emailed query from The Chronicle, Sally Petersen (Ward 2) – who sponsored the resolution on the agenda and serves as the council appointee to the LDFA board – wrote that possibilities for an LDFA satellite for Ann Arbor’s SmartZone include Adrian (Adrian College) or Brighton and Livingston County (with Cleary University).

Details on the council’s deliberations are provided in The Chronicle’s live updates filed during the meeting.

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron.

The meeting and the letter came after SPARK had declined several previous requests for its financial statements – from rank-and-file residents, journalists as well as elected officials. SPARK’s previous decision not to release past statements became moot when Ann Arbor resident Kai Petainen received the past records on request from the state of Michigan Attorney General’s office.

Ann Arbor SPARK contracts with the city’s local development finance authority – an entity that’s funded through tax increment financing (TIF) – to operate a business accelerator. SPARK also receives grants from several public bodies, including the city of Ann Arbor and Washtenaw County. [.pdf of SPARK's 2006-10 audited statements]

Based on Krutko’s letter, it now appears that SPARK will itself be providing past as well as future financial statements on its own website.

Krutko’s letter was included in a message that Rabhi sent to an online group – called “aa better local politix” – with a positive update on what he described as his efforts to increase SPARK’s financial transparency. Rabhi described the Nov. 25 SPARK board meeting as tense, but was positive about the nature of the board’s conversation and the outcome. From Rabhi’s message:

By the end of the meeting, staff were empowered by the board to develop a comprehensive recommendation on how to move forward and to begin with initial implementation. In my perception, staff actually seemed energized by the way in which I framed up the issue and the ensuing discussion at the board table.

Krutko’s letter to Rabhi and Powers cites specific steps that SPARK will now be taking:

• We have posted our most recent financials on our website.
• We are developing a “Frequently Asked Questions About SPARK” summary to be posted on our website.
• We are preparing to post our 2013 Financial Statements upon completion by our Auditors in Spring 2014.
• We are requesting your help in being placed on an upcoming Board of Commissioners and City Council agenda at that time to answer any questions in these public forums about our financial statements.
• We will develop a Use of Funds Quarterly Report to elected officials, on activities supported by public funding provided to SPARK.
• As we have done in the past, we will continue to respond to specific questions from elected officials at any time.

[.pdf of Dec. 4, 2013 letter from Ann Arbor SPARK's Paul Krutko] [.pdf of Dec. 4, 2013 message from Yousef Rabhi]

Extract from the marked-up version of revisions to the contract between Ann Arbor SPARK and the Local Development Finance Authority (LDFA).

Besides the usual housekeeping changes (like changing the year from 2012 to 2013), substantive revisions to the SPARK contract include the following: (1) eliminating support for angel investment groups; (2) adding licensed software to be provided by SPARK to incubator clients; and (3) adding a new talent-retention internship program.

Another significant deletion from the SPARK contract is $5,000 annually for maintenance of a web-based educational module for entrepreneurs, called Cantillon. According to an LDFA resolution from early this year, the LDFA had invested around $170,000 over the course of five years in the self-paced program, which integrates feedback from a mentor. The tool had been used by SPARK for its Entrepreneur Boot Camps and in other venues. However, a formal request for proposals to commercialize it – to license and market the software to a broader audience – did not result in a deal.

The initial RFP was issued last year, in August 2011, and elicited no responses. On re-issuance of the RFP, Kurt Riegger’s Business Engines was the only respondent. Riegger had been the developer of Cantillon. After negotiation, Riegger and the LDFA were not able to reach mutually agreeable terms. With the failure to reach an agreement, and the elimination of the item from the LDFA’s contract with SPARK, the Cantillon education module was characterized by city CFO Tom Crawford after the meeting as “on the shelf.” Cantillon will not be offered as a part of SPARK’s September 2012 Boot Camp.

In other business, the LDFA board approved SPARK’s marketing plan. A video that was presented to the board as part of that plan got a positive reaction from LDFA board member Stephen Rapundalo. He appreciated the fact that it focused on support for entrepreneurs, as opposed to enhancing SPARK’s efforts “across the board.” SPARK has a broader mission and other funding sources than just what’s expressed in its contract with the LDFA – but the contract is focused on supporting entrepreneurs in the development of new businesses. So Rapundalo wondered if it were possible for SPARK to put all of its LDFA-funded marketing budget towards that same entrepreneurial focus.

Skip Simms, SPARK’s vice president for entrepreneurial business development, told LDFA board members at their June 12 meeting that it’s possible he might be bringing them a proposal for a significant additional financial request. That request, Simms said, would be for an additional incubator that would provide Class A “wet lab” space. He said the amount he’d request would be consistent with the LDFA’s 15% fund balance reserve policy, and would only target the portion of the fund balance that exceeds the 15% level. For the recently approved FY 2013 LDFA budget, that works out to a maximum of around $157,000. Simms sits on the LDFA board as a non-voting ex officio member.

Reaction by LDFA board members to the wet lab incubator idea that Simms floated was extremely guarded. But they appeared to be open to being convinced – if they were to hear a clear business plan and case for the need for additional local wet lab resources for start-up companies.

It’s worth noting that the LDFA’s contract with SPARK is separate from the support that SPARK receives from the city of Ann Arbor, which has amounted to $75,000 annually for the last few years. The city’s $75,000 contract with SPARK for business support services is on next Monday’s June 18 city council agenda.

The full LDFA report begins with some brief background on the LDFA itself.

LDFA Background: Creature of the State

Ann Arbor’s local development finance authority is funded through a tax increment finance (TIF) district, as a “certified technology park” described under Act 281 of 1986. The Michigan Economic Development Corp. (MEDC) solicited proposals for that designation back in 2000. The Ann Arbor/Ypsilanti “technology park” is one of 11 across the state of Michigan, which are branded by the MEDC as “SmartZones.”

The geography of the LDFA’s TIF district – in which taxes are captured from another taxing jurisdiction – is the union of the TIF districts for the Ann Arbor and the Ypsilanti downtown development authorities (DDAs). It’s worth noting that the Ypsilanti portion of the LDFA’s TIF district does not generate any actual tax capture. The LDFA and the Ann Arbor DDA are similar – in having the same TIF capture funding mechanism, and having the same geographic area where taxes are captured. Yet the LDFA is different from the DDA in at least two significant ways.

That difference stems from the kind of taxes captured by the LDFA as opposed to the DDA. If a TIF-funded entity – like the LDFA or the DDA – did not exist, the taxes it captures would be collected anyway, and those monies would have some other “destiny.” In most cases, that destiny would be direct use by the municipal entity that levied the tax. By way of a concrete example, one of the kinds of taxes captured by the DDA is the city of Ann Arbor’s general operating millage. If the DDA did not exist, then a portion of city of Ann Arbor taxes currently captured by the DDA would go to the city’s general fund.

In the case of the LDFA, the story of an alternative destiny for its captured taxes has an extra wrinkle. That wrinkle is due to two things: (1) the kind of taxes the LDFA captures – Ann Arbor Public Schools (AAPS) operating millage; and (2) the way local schools are funded in Michigan. In Michigan, local schools levy a millage, but the proceeds are not used directly by local districts. Rather, proceeds are first forwarded to the state of Michigan’s School Aid Fund, for redistribution among school districts statewide. That redistribution is based on a per-pupil formula as determined on a specified “count day.”

If the LDFA did not exist, then the taxes captured by the LDFA would not be used directly by AAPS, but rather would flow into the statewide School Aid Fund. This is what underlies a standard explanation that local schools are not harmed by the existence of the LDFA. The idea is that the impact statewide is an inconsequential amount.

That’s why the TIF plan for the LDFA discusses the potential impact to local school funding as follows:

Based on current state law, this Plan shall have no direct impact upon the local school districts, as it has no direct impact upon the per pupil reimbursement from the State to the public schools. The impact to the State School Aid Fund will be approximately $24,000,000 over the 15 years of the LDFA plan. This translates to approximately $1,600,000 annually, or $0.79/student statewide.

So the LDFA board members are in one sense stewards of local tax dollars – because the money originates locally, and its amount is determined locally. But in another sense, board members are stewards of state funds – because the money would otherwise be distributed statewide.

Another way the LDFA is different from the DDA is that SmartZone status – given by the MEDC – is comparatively rare and limited in number. Only 11 such districts were created statewide. In contrast, the state statute enabling the formation of a downtown development authority (Act 197 of 1975) can be used statewide by any local entity that wishes to form a DDA in conformance with the statute. And that has resulted in the formation of over 130 DDAs across the state.

Ann Arbor SPARK Contract

Ann Arbor SPARK is a nonprofit focused on economic development. The LDFA hires SPARK to operate a business accelerator and perform activities related to it. The value of the contract for the 2013 fiscal year is about $1.5 million.

But SPARK has a broader mission than providing startup services to the LDFA. That’s reflected in its total operating budget in the range of $4.4 million (in 2011), of which the LDFA contract is a part. From SPARK’s mission statement:

Ann Arbor SPARK will advance the economy of the Ann Arbor Region by establishing the area as a desired place for business expansion and location … by identifying and meeting the needs of business at every stage, from those that are established to those working to successfully commercialize innovations.

Ann Arbor SPARK receives funding from area universities (most prominently the University of Michigan), local governmental units (including the city of Ann Arbor and Washtenaw County) and local businesses. The city of Ann Arbor’s support for SPARK has been at the level of $75,000 a year for the last few years.

At the June 12 meeting, LDFA board member Theresa Carroll reviewed a marked-up copy of the contract and scope of work that the contracts committee had produced. [.pdf scan of SPARK-LDFA marked-up contract]

From left: Theresa Carroll and Paula Sorrell at the LDFA board meeting.

Carroll described how the LDFA’s contracts committee and SPARK had exchanged comments on the new contract, which would be signed on July 1, 2012. She walked the rest of the board through the marked-up version of the document.

Carroll pointed to Article II 2.4, as having the intended effect of putting a control on a new internship program – by excluding that new program from a general but limited ability of SPARK to reallocate fees between categories. There is an addition under Article III 3.3 that Carroll described as not requiring more reporting by SPARK to the LDFA, but rather as clarifying what information is to be included in its already-required quarterly reports.

A significant deletion from the contract this year is removal of the $30,000 of support for angel investment groups. The previous contract had included support for a group “to build a robust angel network of investors interested in business accelerator clients.” No funds were to be spent for actual investment. Also struck from the agreement this year, Carroll continued, is $5,000 of support for the Cantillon web-based instruction module for entrepreneurs. That item was not discussed by the board in connection with the SPARK agreement – because Cantillon had a separate item on the agenda.

Added to the agreement is a section that covers a talent program, funded with $100,000, that is supposed to “create new programs that are designed to attract local talent, including and especially university graduates, and encourage them to stay and build a career in Ann Arbor.” The mechanism of the new program will be based in part on an internship program. And finally, Carroll said, there is a provision in the new contract for SPARK to be able to provide access to licensed software at the incubator. The amount specified in the agreement for that is $20,000.

Carroll characterized the changes as reflecting the budget, which the board had previously approved. Carroll described the next steps with the new contract as a vote by the board, to be followed by final review by the LDFA legal counsel, which is provided by Jerry Lax (a former Ann Arbor city attorney who’s now with the law firm Pear Sperling Eggan and Daniels). The MEDC will also be asked to review the agreement, she said.

Ann Arbor SPARK Contract: LDFA Board Deliberations

Stephen Rapundalo picked up on the new internship program. [The idea is that SPARK facilitates the hiring of interns by local companies – by funding the cost of the interns to the companies.] Rapundalo inquired what the allocation is for – does it go to SPARK’s administrative costs?

Skip Simms, SPARK’s vice president for entrepreneurial business development, responded to Rapundalo by distinguishing between the interns and the companies that hire them: “We’re paying the company, which we’re not really allowed to do in one sense of the language, but we’re actually contracting with the companies in this context.” The purpose of the internship piece of the initiative, Simms continued, is that when the company hires the intern, “the intern is our customer.”

SPARK is trying to introduce the interns to the startup, early-stage business community in Ann Arbor, and to introduce them to all the assets the city offers, Simms said. SPARK is trying to acquaint them with various aspects of working for a technology-based startup company. The idea is to encourage the students, as they enter the workforce, to put Ann Arbor on their list of places they want to live – along with New York or Chicago.

What SPARK offers, Simms continued, is a match to defray the cost of an intern to a company. The company pays $6,000 for a 12-week internship. SPARK then reimburses the company for half the cost of that internship. Simms described it as modeled on the Gani internship program at the University of Michigan.

It’s limited to one intern per company, Simms explained, so that SPARK is engaging as many companies as possible. The program is starting off with 10 interns. The program has launched and it’s going very well, Simms reported. If it’s successful, then SPARK wants to continue it through the end of the school year. Going back to Rapundalo’s question, Simms said that of the $100,000, around 15-20% would be for administration of the program.

Rapundalo worked through the arithmetic of $30,000 to pay the interns, another $15-20,000 for administration of it, for a total of around $45,000. To round out the LDFA’s $100,000, Simms said there are some other talent-related programs they’re “kicking around,” including the possibility that the internship program would be extended.

When it emerged in conversation with other board members that the first 10 interns had easily been placed and that there was a lot of demand, Rapundalo wanted to know why SPARK didn’t just expand the pool of current interns. The answer from SPARK’s business accelerator director – Bill Mayer, who was seated in the audience – was essentially that 10 was a number that was “containable” for now. Ned Staebler wanted to know what the program’s relationship is to the Intern in Michigan program.

LDFA board member Ned Staebler.

Mayer told Staebler that SPARK is undertaking its internship program independently of the Intern in Michigan program. Half of the program is allowing startup companies to afford an intern, but the other half is to stress the “quality of place.” Whether it’s a scavenger hunt or attending Top of the Park, SPARK has the interns visiting landmark Ann Arbor locations in partnership with other organizations like the Ann Arbor Convention and Visitors Bureau.

Staebler noted that Intern in Michigan can do that sort of thing, if you tell them: We need X number of interns that fit Y criteria. The Intern in Michigan program has thousands of resumes at this point, Staebler said. Mayer allowed that there could be an opportunity to look at it, but SPARK is handling the initial group “hands on” to ensure that the pilot goes well.

Rapundalo ventured that, based on his own experience, you end up doing a lot of things you didn’t plan on doing – like vetting, and other things that take a lot of time. The Intern in Michigan program is good for managing a large pool and perhaps narrowing it down to a smaller set, but would not necessarily be able to provide exactly the right person. And that’s what a company wants, Rapundalo said – for exactly the right person to just walk through the door and start doing something useful.

Mayer pointed out that the interns are still in college, and the goal is to reach them at that point, so that they can be retained here. Simms pointed out that SPARK is also inviting other companies who have interns, besides those subsidized by SPARK, to participate in social activities.

LDFA board treasurer Eric Jacobson wanted to know if the interns that SPARK is subsidizing are Ann Arbor natives. Simms explained that SPARK doesn’t care that much about where students come from, as long as they’re getting exposure to the career opportunities. So picking up on Simms’ earlier explanation that the interns were SPARK’s “customer,” not the company, Staebler wondered if SPARK wasn’t having it both ways: The intern is the customer, but the company has to be in the LDFA district.

Simms said that the company has to be in the district, because that’s where SPARK wants the interns showing up to work every day. Didn’t that mean that the company was SPARK’s customer? Staebler asked. Simms allowed that the company is a “beneficiary, for sure.” Staebler said he wasn’t against the program – he just felt it was actually the company who’s the customer: “I’m all for getting more smart people here!” he said.

Outcome: The board unanimously approved the contract with SPARK, subject to review by legal counsel.

SPARK Marketing Plan

Because Donna Doleman – Ann Arbor SPARK’s vice president of marketing, communications and talent – could not attend the LDFA board meeting, the marketing plan was reviewed by SPARK’s marketing coordinator, Andria Signore. Highlights of that plan include the SPARK website, various event sponsorships, a Google AdWords campaign, hosting SPARK’s own events, media relations, and tours. Goals of the marketing program include maintaining the pipeline of business accelerator clients and entrepreneur boot camp applicants, getting 2-3 online media mentions per month, and maintaining the SPARK Central incubator at 80% occupancy. [.pdf scan of SPARK marketing plan]

Signore presented the LDFA with two recently produced videos, one focusing on SPARK’s entrepreneurial services, and the other focusing on Ann Arbor as a sense of place, which is part of the Pure Michigan campaign. [Ann Arbor SPARK: Entrepreneurial Services] [Pure Michigan Business Attraction]

The first video includes SPARK CEO Paul Krutko posing the question: “Who’s the next Apple? Who’s the next Microsoft?” and then compares SPARK’s entrepreneurial services to “economic gardening,” focusing on the unique attributes of the Ann Arbor region that will identify the next new disruptive technology that will change the world. It features a quote from Steve Jobs: “Let’s make a dent in the universe.”

The Pure Michigan video also uses gardening imagery, as Menlo Innovations CEO Rich Sheridan compares the idea of Terroir – the characteristics of land that give food that’s grown there a unique character – to the kind of companies that emerge in the Ann Arbor area. The swelling music and heartfelt voiceovers (“Pure Michigan says, Welcome Home”) led to a quip at the LDFA board table: “Does anybody else need a tissue?”

Signore explained that the Pure Michigan video is part of a national campaign – to local and national bloggers and media. The entrepreneurial services video is being hosted on the SPARK website and all of SPARK’s social media channels, she said. They’re trying to reach out to all the local news outlets and will use it in presentations that SPARK gives, she said.

Stephen Rapundalo noted that in the past, the LDFA budget allocation for marketing was to some extent arguably something that enhanced SPARK’s efforts across-the-board. What SPARK had done with the first video was to put more emphasis on entrepreneurs, which he said “is a great thing.” It’s where he’s always wanted those dollars to go.

But some marketing dollars still go to the “bigger picture,” he noted. What’s stopping SPARK from focusing the entire marketing budget from the LDFA on the entrepreneurial aspect? Rapundalo wondered. He stressed that he was a proponent of the idea that everything the LDFA paid for should relate directly to the services that SPARK provides under its contract – the entrepreneurial services, period.

SPARK’s Skip Simms replied by saying that as an organization, SPARK serves existing big companies as well as entrepreneurial enterprises – because SPARK serves all of the growth companies, the “driving industries,” he said, from Toyoto to Terumo. The entrepreneurial component of the marketing effort, he continued, is more than half of overall marketing and he didn’t see SPARK letting up.

SPARK has increased somewhat its activity in the area of attracting businesses to Ann Arbor, Simms said. When the LDFA started helping to fund the marketing efforts of SPARK, he said, the part that was aimed only at the city of Ann Arbor was around 33% of the marketing budget. In the current agreement, he said, that’s been cut to 30% – because they were trying to be reasonable and fair.

Paula Sorrell, an ex-officio LDFA board member who works for the MEDC, ventured that a marketing budget has a mix of the specific technical part and brand development [which Rapundalo had described as SPARK's "big picture" efforts]. Ultimately, the success of the marketing effort, she said, is: “Did it put butts in seats? Did it get people through the door?” She felt that the way to approach it was to look at the actual results – how many new companies were started or located here – and not to ask if the mix of branding and specific message was right. It should all be tied back to metrics, she said.

LDFA board member Dick Beedon.

Rapundalo said he agreed with Sorrell, but still looked at it from the point of view that the program gets funded by the LDFA. He drew a distinction between that LDFA funding for marketing, and the separate allocation given by the city of Ann Arbor [$75,000 annually]. The Ann Arbor city contribution, he continued, was generally understood to go to support the brand and the broader activity of SPARK. He took the perspective that the LDFA-funded marketing should be related back to the specific activities of the LDFA. He wanted to see the use of LDFA money used on the “branding out of the entrepreneurial services.”

Sorrell said she didn’t disagree with Rapundalo, but said, “If you’re going to police it, police it on the results.” Dick Beedon ventured that the results were metrics, so he wondered what the specific metrics were. Simms told Beedon that the metrics are in the reports that SPARK submits to the LDFA quarterly – data like how many entrepreneurs SPARK served, how many startup companies SPARK served, and the like. How that’s tied back to a click-through from a Google ad or if it resulted from someone who stumbled across their video – Simms did not know.

Rapundalo came back to the fact that the one video focuses solely on entrepreneurial services, and it ties directly back to what the LDFA does. That’s very visible and very tangible. The fact that we have the video and we didn’t have the video before was, to Rapundalo, an “outcome.” He’d like to see more of that. He said he could easily justify to anybody who asked: Where is this money going?

Beedon indicated that some of the metrics included in the presentation were things like 6,000 Facebook “likes.” He felt that metrics are important and the metrics are related to the audience. A CEO who could move his company, Beedon said, is one audience. But employees who might potentially stay in the area are another audience, he said. It’s difficult to allocate marketing resources to different audiences, Beedon said.

Ned Staebler picked up on the idea of audience, and noted that Signore had presented a list of 20 different targeted audiences. How can you craft targeted messages to each of those audiences? he asked. So Staebler asked which of the audiences were the top priority and what messages are being sent to those? Signore told Staebler that the priorities are the entrepreneurs, decision-makers, talent and investors. “Decision-makers where?” asked Staebler. “My wife is a decision-maker.” Signore indicate that it’s “decision-makers in the sense of someone who can move their company to the Ann Arbor area or not.”

Simms added that a lot of what SPARK does by way of marketing doesn’t cost cash – but rather time and resources. SPARK doesn’t spend a lot of money on ads per se, he said, because they try to maximize what they can get done for free.

Outcome: The board unanimously approved SPARK’s marketing plan.

City of Ann Arbor Administrative Services Agreement

The LDFA board considered the new administrative services agreement with the city of Ann Arbor. It included a municipal service charge of roughly $13,125 and a charge for direct services from city of Ann Arbor financial specialist Ken Bogan for around $15,225 – for total of $28,350.

City of Ann Arbor CFO Tom Crawford gave a brief description of that agreement. [.pdf scan of city of Ann Arbor-LDFA administrative services agreement]

Outcome: The board gave unanimous approval to the administrative services agreement with the city of Ann Arbor.

Cantillon Education for Entrepreneurs

The board was briefed on the ultimate inability to commercialize Cantillon.

Cantillon: Background

By way of background, Cantillon is a self-paced web-hosted educational program (courseware) that entrepreneurs can use in concert with a mentor, who can also log on to the program to review and provide feedback on work that the entrepreneur has done. Cantillon is hosted on the University of Michigan MEonline platform. Cantillon includes video presentations from local business leaders like Tom Kinnear and Roger Newton, among many others.

Cantillon was developed incrementally, adding different sections, over the last five or more years. The course takes the user through the process of developing specific elements for building a business: executive summary, financial plan, marketing plan, product roadmap, and business model. For some LDFA board members, the Cantillon program was seen as a way of creating a tangible asset from an activity that the LDFA wanted to fund anyway – the education of entrepreneurs.

In a telephone interview with The Chronicle, Kurt Riegger – who was paid to develop Cantillon for the LDFA – described the courseware as relying crucially on a mentor, and he stressed the fact that it’s not an academic exercise. That is, the Cantillon course is meant to help entrepreneurs develop, say, an actual financial plan for an actual business they are trying to start. It’s also a cost-effective way to train entrepreneurs, he said, because they are to some extent using the tool to educate themselves, and they can make the most efficient use of a mentor’s time.

In the past, Cantillon has been offered as a supplemental tool for participants in SPARK’s Entrepreneur Boot Camp, a two-day course offered by SPARK each year (full-price tuition is $1,500 per “camper”). Part of SPARK’s pitch to potential Boot Camp participants is to “hone your sprawling corporate narrative into a lean, mean call for venture capital.”

Cantillon has received positive reviews from Boot Camp participants, according to SPARK’s April-June 2009 quarterly report to the LDFA:

A satisfaction survey of the Entrepreneurs Boot Camp participants was conducted immediately after camp. One question focused on the value of the Cantillon Executive Summary unit and its impact. For the Camps in 2007 – April 2009, the Cantillon average score was 5.90 on a scale of 1 to 7 where 7 is Excellent and the impact of the Executive Summary averaged 5.71. From a survey of mentors who have engaged with Entrepreneurs to use the course at Camp, they had a similar high rating and opinion.

Cantillon is configured so that it’s possible to monitor how much time a user is spending on various sections. SPARK’s October-December 2008 quarterly report includes some examples of the more detailed analysis of user activity. The set of users is described in the report as “mostly attendees of the November Boot Camp and focused on Unit 2 ‘The Executive Summary.’”

Last Login: December 22,2007, 2:32 PM
Total Login Time: 14 hours, 0 minutes
Excellent activity – 24 plan reviews taken

Last Login: October 14, 2008, 9:00 PM
Total Login Time: 4 minutes
Limited activity – downloads

In August of 2011, the LDFA issued a request for proposals (RFP) soliciting offers to commercialize Cantillon. [.pdf of August 2011 Cantillon RFP] There were no respondents by the time the RFP deadline. However, after the RFP had closed in October, Riegger made a proposal.

The LDFA board draft minutes for its Jan. 24, 2012 meeting show that at least some board members were not favorably inclined towards Riegger’s proposal. Part of the objection stemmed from the fact that Riegger had been paid to develop Cantillon and that he had not responded to the first RFP.

Cantillon (moved up on agenda from Other Business): [Phil] Tepley asked the record reflect his objection to selling Cantillon back to the developer at 10 cents on the dollar. [Mark] Maynard noted that the proposal by Kurt Riegger was made after the RFP closed. [Dick] Beedon agrees on the record, with Tepley, that the LDFA should not be involved in software development. After discussion, the Board requested that the Cantillon Committee draft a resolution, to be considered at the next meeting, based on the Committee’s recommendation to sell Cantillon to Kurt Riegger.

The sentiment that a formal RFP process should be followed resulted in a re-issuance of the Cantillon RFP (twice, on March 16 and April 10). The subsequent re-issuances of the RFP were identical to the original issuance, with the exception of a set of requirements that included a dollar amount:

1. Proposing party will bear all responsibility and costs for content maintenance and end-user support.
2. The LDFA will retain the right to market and provide Cantillon to entrepreneurs in the LDFA region at no cost to the LDFA.
3. Proposing party will pay to the LDFA fair market value of not less than a reasonable royalty or lump sum payment of not less than $25,000.

The June 12 resolution that the board passed on Cantillon pegged the LDFA’s investment in Cantillon over the last five years at around $170,000. The resolution also pegged the actual usage of Cantillon as low, and attributed most of the usage to University of Michigan students:

Whereas, while over 500 entrepreneurs, including 250-300 boot camp attendees, have registered to use Cantillon, activity reports provided to the Cantillon Committee by the provider did not show evidence that more than a small percentage made substantive use of it;

Whereas, it was apparent that the subset of users that received the most value were University of Michigan students who used Cantillon as part of a business and finance class and through a venture capital club;

Whereas, while these University of Michigan students technically fall within the TIF district and are therefore eligible users, it is the opinion of the Cantillon Committee that it is not the intention of the LDFA to fund programs utilized primarily by university students;

In a phone interview with The Chronicle, Riegger objected to the way the resolution discounts UM students as users of Cantillon – because it seemed to him inconsistent with MEDC’s rationale for choosing Ann Arbor as a SmartZone location. It’s the presence of the University of Michigan that made Ann Arbor a logical place to enable an LDFA here – as opposed to Bad Axe, or some other Michigan city, he said.

Riegger also questioned the merits of the conclusion that only a small percentage of Boot Camp participants made substantive use of Cantillon. It’s possible to assess Cantillon’s use in terms of the relative strength of the teams who participate in Boot Camp, he contends. [The Chronicle confirmed with SPARK that an evaluation is done of Boot Camp participants to assess their performance – and a Best of Boot Camp designation is given to one of the teams.] Riegger contends that if you divide Boot Camp participants into thirds, based on the strength of the teams who participate, then it’s the top third that actually get the most benefit from Cantillon. That is, the strongest entrepreneurs are those who are able to “roll up their sleeves” and get benefit out of Cantillon’s instruction.

In any event, Riegger was the only respondent to the RFP, and negotiations commenced between Riegger and the LDFA.

Based on an email chain between Riegger and LDFA board member Theresa Carroll, negotiations appear to have foundered on the amount of the royalty and whether the $25,000 would take the form of cash or in value provided through support. An email from Riegger on May 2, 2012:

Hi Theresa,
The answer to a cash upfront payment is no. To a commitment to provide support valued at $25K over 2.5 years, the answer is yes.

Did you or the committee have some comparables that suggest a 20% royalty is market pricing and a 5% is not?

Cantillon: Board Discussion

At the June 12 LDFA board meeting, Theresa Carroll reported to the board that the committee had negotiated with the one respondent to the RFP – Kurt Riegger. They’d gone back and forth, and “just couldn’t get there on terms,” she said. That had been a month or so ago, she reported [early May 2012]. She said she’d just received an email the previous day with a message from Riegger, but had not had a chance to assess it. Not all board members had seen the email, so a portion was read aloud. The compete text sent from Riegger:

Hi Theresa,

I wanted to toss out another idea that might solve our mutual problems. If a department within the University of Michigan were willing to pay a $1 to have the rights to Cantillon, would you be able to license the content to them? They would continue to offer it for free to the LDFA region.

Board members seemed generally receptive to the idea of licensing the content to UM, or some educational entity. But there was some question about what the appropriate process would be to do that, if indeed UM wanted to do that. The idea of issuing yet another RFP was not met with enthusiasm by the board.

City CFO Tom Crawford, who sits on the LDFA board as an ex officio non-voting member, said he’d just seen the email. But his initial impression is that the university really should respond through an RFP process. Crawford pointed out that the university was certainly aware that the previous RFP was out there.

Dick Beedon felt that if nothing went forward, it would not be a big loss. Crawford offered the view that the LDFA had established the value of Cantillon [in terms of the cash someone is willing to pay] as essentially nothing, which Beedon agreed with. Crawford said the LDFA board could bat around ideas all day, but he would not advise spending a lot of additional time on it.

Carroll asked if it made sense for her to speak with Riegger about the email. The board’s response was essentially that the ball is in the university’s court, if it were interested in pursuing it. The board felt that whoever Riegger might have talked to at UM – and Riegger seemed to indicate from the audience at the meeting that he’s talked to someone – could contact either Carroll or Beedon.

In any case, according to Jennifer Cornell, public relations consultant for SPARK, Cantillon will not be offered to Entrepreneur Boot Camp participants this fall.

Outcome: This was a point of information and did not result in a vote.

Wet Lab Space?

In an item added to the agenda at the meeting, Skip Simms alerted the board to the possibility of a possible “significant ask” of the LDFA in the future. Simms is SPARK’s vice president for entrepreneurial business development and sits on the LDFA board as an ex officio, non-voting member.

He noted that SPARK has been running an incubator in downtown Ann Arbor for several years that is fairly traditional – with office space. There could be an opportunity for an incubator that offers space to startup companies that need “wet lab” space. It would be primarily for life science companies, Simms said, or perhaps for alternative energy companies. Class A wet lab space for incubation companies in the city of Ann Arbor doesn’t really exist, Simms said. He thinks there may be a need, as well as an opportunity for SPARK to provide that Class A wet lab space.

As with any incubator, Simms continued, it would need to be subsidized. Simms said SPARK was in very early discussions with some parties – in the city, but not in the LDFA district – to create such an incubator, if the need did arise. He felt that the timeframe would be within the next year – so not imminent, but still relatively soon.

Simms said that SPARK would come back to the LDFA for a formal request to amend the contract for a new program, modeled on the contract SPARK has with the LDFA for the current business incubator. For example, SPARK would charge rent, and would manage the facility and provide business accelerator assistance for any of the tenants.

Simms indicated that the amount of financial support that SPARK would need could require the LDFA to approve tapping its reserves. Currently there’s a policy of maintaining reserves at 15% of revenues. He said that the request for support for the wet lab space would not require dropping below that. [For the recently approved fiscal year 2013 LDFA budget, the fund balance reflects a 25% reserve, and the difference of 10 points works out to a maximum of around $157,000 for the request.]

Simms said he did not know what the dollar figure would be of SPARK’s request to the LDFA, but that it would “not be insignificant.” Simms stated that SPARK believes the wet lab incubator fits clearly within the LDFA mission. He wanted to get a feel for the board’s reaction to the idea.

Board chair Dick Beedon asked if SPARK had done any research on the need for such a facility. Simms replied that it’s not an ongoing process. SPARK learns about a need by the number of entrepreneurs who contact the organization, Simms said. The need comes from research institutions – as life science companies are spun out of an existing research institution. Primarily that’s the University of Michigan, he said. So SPARK is in constant communication with University of Michigan Tech Transfer, which has its own incubator. [LDFA board member Mark Maynard is marketing manager for UM Tech Transfer, but he was not able to attend the June 12 meeting.]

UM Tech Transfer is restricted in hosting only companies that are using university-licensed technology, Simms said. The question, he added, is where those companies go after Tech Transfer’s incubator. That’s were the need is for Class A space, he said, as opposed to somebody’s kitchen.

Simms also described some companies started by people who left Pfizer who need wet lab space – working on drug development, for example. Simms felt there was a consistent flow of consistent demand – large enough to pay attention to. The state of Michigan chose life sciences as one area of focus back in 2000, Simms said, and he felt it’d be a shame to give up on it at this point.

Stephen Rapundalo said he’d like to see some kind of quantification of the demand. He raised the issue of rates you can charge tenants in a Class A wet lab incubator. Simms indicated that would be laid out for the LDFA in any plan that were brought forward.

Rapundalo wondered if the wet lab incubator would be scalable: Say you build a six-company-sized incubator, and it turns out there’s demand for another six. That would be a factor in discussions with the potential developer and landlord, Simms answered.

LDFA board member Phil Tepley.

Phil Tepley wanted to know how it would affect the community – because it could be seen as a subsidy for PhDs who want to join up with venture capitalists. Responding to Simms’ statement that we shouldn’t give up on the life sciences, Tepley quipped, “Cover your ears, Steve [Rapundalo], but maybe we should [give up on life sciences.]” [Tepley was referring to the fact that Rapundalo is CEO of MichBio, a trade association of life sciences companies.]

Tepley also wanted to know what the return-on-investment is for such incubators around the state: How does that translate into jobs in the community?

Tom Crawford, the city’s CFO, wanted to know what companies do now if they need that kind of wet lab space. Simms indicated that SPARK currently operates a wet lab incubator in Plymouth, so people are referred there. There’s also one on the south side of town, outside the city – SPARK refers people there, too.

The question was raised about what exactly Class A space includes. Rapundalo indicated that the old Pfizer labs are Class A. Simms described hoods, air-handling, tanks, hoses and connections, waste control and positive pressure. Tepley wanted to know what kind of businesses need Class A facilities. Rapundalo ventured that drug companies would be one example, or companies in the cell-culture business. Other companies needing such space would include those making research products and devices.

Ned Staebler asked about the availability of other wet lab space – whether it’s private or public. He wanted to include the wet lab assets of a broader region in the assessment, not just in the city of Ann Arbor. Managing such a facility can turn into a “pain in the butt,” he said, or can also become a “real estate play,” which is a distraction to providing business accelerator services. He’d want to be convinced there’s a need before going into that kind of wet lab incubator business, Staebler concluded.

Beedon ventured it would be fair to say the board would be open to discussion of Simms’ idea, assuming it had an appropriate business plan to support it. Rapundalo agreed with Staebler. Rapundalo felt that no one had done an asset assessment of Class A space – what’s available and what the demand is.

On the cost issue, Tepley stated that if the LDFA has a rule of maintaining at least a 15% fund reserve, then he did not want to maintain anything above that. He wanted anything above that 15% put to use. He did not know if a wet lab incubator was the right use. But if Simms could present a case that gives a positive return on investment, that’s better than letting it sitting in the bank, Tepley concluded.

Outcome: This was not a voting item for the LDFA board.

Present: Eric Jacobson, Christopher Taylor (Ann Arbor city council), Paula Sorrell (MEDC, ex officio), Theresa Carroll, Tom Crawford (city of Ann Arbor CFO, ex officio), Richard Beedon, Skip Simms (representative of Ann Arbor SPARK business accelerator, ex officio), Stephen Rapundalo, Ned Staebler, Phil Tepley.

Absent: Mark Maynard, Vince Chmielewski.

Next meeting: July 24, 2012 from 8:15-10:15 a.m. in the second-floor city council chambers at city hall, 301 E. Huron St.

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

Of the positions on the 9-member LDFA board, the city of Ann Arbor appoints six and the city of Ypsilanti appoints three. One of the six Ann Arbor spots is for a member of the Ann Arbor city council, which had been held by Rapundalo, until he was defeated in the Nov. 8 general election by Jane Lumm (Ward 2). Taylor is thus replacing Rapundalo as the city council representative. Rapundalo’s appointment is to fill an existing additional vacancy on the board. Jacobson was also appointed to the LDFA to fill a vacancy on the board.

The local development finance authority is funded through a tax increment finance (TIF) mechanism for the same geographic district as the Ann Arbor and Ypsilanti downtown development authorities. The LDFA currently receives no revenue from the Ypsilanti portion of its district. The taxes on which the increment is captured are local school taxes. The impact of the LDFA tax capture is spread across school districts statewide, due to the way that local school taxes are pooled by the state of Michigan and redistributed to local districts.

Based on data available through A2OpenBook, in fiscal year 2011, the LDFA generated $1.475 million in tax capture. The LDFA contracts with Ann Arbor SPARK to operate a business accelerator.

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

Margie Teall (Ward 4) with Heritage Row and City Place developer Jeff Helminski. (Photos by the writer.)

At the time of their votes – on the matter-of-right City Place and the planned unit development Heritage Row – councilmembers knew that one set of actions would become moot. Only one of the projects, located on the same site, would be built. A few days after the meeting, news emerged that Heritage Row is now off the table and that City Place will move forward, with construction planned to start sometime this fall.

That meant that the council’s action last Monday, to give initial approval to the Heritage Row project, will ultimately have no effect. Developer Jeff Helminski requested that the item be pulled from the council’s Oct. 24 meeting – a meeting that had been added to the council’s calendar specifically to take a second and final vote on the Heritage Row project.

At their Oct. 17 meeting, the council took two actions on the already-approved City Place project – one to allow flexible application of the city’s new landscape ordinance, and a second to approve additional windows on the upper stories and to change the siding. That added to an Oct. 3 decision by the council to allow greater flexibility in the sequencing of City Place construction.

Also on Monday, the council confirmed two appointments to the city’s zoning board of appeals. The ZBA is a body that has purview to hear any challenges to city decisions about the correct application of city ordinances and the appropriateness of administrative decisions, including those associated with matter-of-right projects like City Place.

In other real estate development news out of Monday’s meeting, the council approved changes to the elevations for City Apartments, a residential project at First and Washington scheduled to start construction yet this season. The council is expected to authorize the sale of the city-owned parcel at its Nov. 10 meeting.

The council approved the annexation into the city of a township parcel where Biercamp Artisan Sausage & Jerky has set up shop. A tax abatement for Arbor Networks, a computer network security firm, was also approved by the council.

Another significant item on the council’s agenda was the appropriation of $25,000 from the city’s general fund reserve to keep the warming center open this year, which is operated by the Shelter Association of Washtenaw County in the Delonis Center on Huron Street.

The council also approved a resolution of intent on the use of sidewalk and street millage funds, which voters will be asked to approve at the polls on Nov. 8. The resolution was amended to clarify how funding will work for sidewalk repair adjacent to commercial properties inside the Ann Arbor Downtown Development Authority district.

City Place, Heritage Row

On Monday’s agenda were three items related to two different proposed developments at the same site on South Fifth Avenue just south of William Street: City Place and Heritage Row.

The council was asked to give initial approval for the Heritage Row proposal, which was to receive a second and final vote at a council meeting scheduled for Oct. 24. Later in the week, however, the developer withdrew the item from the agenda for Oct. 24.

The plan for the matter-of-right project called City Place would demolish seven houses and construct two apartment buildings separated by a parking lot. The two City Place buildings would comprise 144 bedrooms in 24 6-bedroom units.

As revised from an earlier proposal rejected by the council 14 months ago, the planned unit development (PUD) Heritage Row project would provide for some manner of reconstruction of the seven existing houses, and construct three additional buildings behind the houses. The project, as revised, would not be required to provide any on-site parking for a total of 85 dwelling units containing up to 180 bedrooms on the 1.23-acre property. The previous proposal would have constructed underground parking, for a total of 60 spaces on site.

For City Place, at their Oct. 17 meeting, the council was asked to approve a request from the developer to waive a landscape buffer requirement that was introduced through an ordinance change made after the project was initially approved in 2009. Also for City Place, the council was asked to approve a request for changes to the buildings that included a new window on the upper floors of the north and south-facing sides, and a change from horizontal siding to simulated shingle siding on the dormer.

The Heritage Row project has a long and controversial history dating back four years. The city council voted at its Oct. 3 meeting to reconsider the project, which it had previously rejected around 14 months ago. The council then voted to postpone a decision on the project so that negotiations could take place between the developer, city staff and councilmembers about  possible revisions. By offering concessions that could make the project more financially viable, the council hoped to induce the developer to divert from his imminent intent to construct City Place. City Place is regarded by most observers as an inferior project to Heritage Row.

At the council’s Oct. 3 meeting, a letter was discussed which councilmembers had received from the developer, Jeff Helminski. That letter outlined his requirements for concessions that he would need in order to build Heritage Row instead of City Place. At the Oct. 3 meeting, councilmembers expressed clear dissatisfaction with elements of Helminski’s letter. However, the key points from the letter appeared to have been incorporated into the revised proposal.

[.pdf of marked up Heritage Row supplemental regulations as presented on Oct. 17][.pdf of comparison chart between original Heritage Row and revised proposal as presented on Oct. 17] [.pdf of Oct. 3 letter from developer]

Heritage Row: Council Deliberations

Carsten Hohnke (Ward 5) led off deliberations by acknowledging the accelerated timeline and the unusual action. He reminded the council that the last version of the Heritage Row project (which the council rejected) was not felt by the current developer to be financially viable. [The project ownership changed hands.] So the council was continuing to look for alternatives to the matter-of-right City Place project. Appealing to a baseball analogy, Hohnke said they hadn’t seen the last out – that’s a positive and they were still on the field.

From left: Sandi Smith (Ward 1), Carsten Hohnke (Ward 5) and Margie Teall (Ward 4) during a recess in the Oct. 17 meeting.

Hohnke said the proposal before the council was not a perfect solution to the problem. He’d like to see less density, stronger commitment to rehabilitation of the existing seven houses, and a unit mix that doesn’t have as many 4-5 bedroom units. It’s worth noting, he said, that the physical characteristics of the project have changed changed very little – the setback, height and streetscape is proposed to be maintained.

Hohnke described the affordable housing component as a significant public benefit. He said that was a serious point of negotiation and a tough negotiating point. [Compared to the June 2010 version of Heritage Row, the Oct. 17, 2011 version offered percentage-wise less affordable housing benefit. The June 2010 version required 18% of 82 units (14.76) while the Oct. 17 version required 17% of 85 units (14.45). An earlier, Oct. 3 version would have required just 15% of 85 units (12.75).]

Sabra Briere (Ward 1) asked the city attorney if the initial vote needed eight votes or if only the second and final vote needed eight. Assistant city attorney Kevin McDonald indicated it was the second vote that required the eight-vote majority.

Stephen Kunselman (Ward 3) wondered how it was possible for the council to be considering issues involving two different projects on the same parcel – is that legal? McDonald allowed that the city does not usually entertain multiple petitions for approval on the same parcel. But he said that City Place is an already-approved project. So the items on the council’s agenda for City Place are for an already-approved project. What was right then in front of the council was the Heritage Row PUD. If the City Place items were approved and Heritage Row is approved later, the City Place items would be moot, McDonald said.

Marcia Higgins (Ward 4) wanted to know if there was a reason why the City Place amendment was not put on the agenda for the following week, given that the council had added an extra meeting for Oct. 24. McDonald deferred to planning manager Wendy Rampson, who said that the timing was requested by the developer. He’s working on parallel tracks to prepare for construction planning, and putting it off to Oct. 24 would mean a delay of one week.

Higgins wanted to know how much movement there’d been on the part of the developer since the Oct. 3 letter. Was the version before the council the final offer, or was there room for negotiation? Rampson said the developer was still evaluating the costs and this was the closest he could come. By Friday, Rampson said, the developer was hoping to have it costed out to make sure it’s feasible.

Assistant city attorney Kevin McDonald, left, and chief financial officer Tom Crawford.

Higgins asked Helminski if there were changes from the Oct. 3 proposal. Helminski said there were changes – some had to do with affordable housing. He asked for Rampson’s help in enumerating other changes. [Substantive changes included the ability to place solar panels on the new construction and the incremental increase in affordable housing units.] Higgins said she wanted to see a third column in the chart of comparisons, so that she could see the June 2010 proposal compared against the Oct. 3 and the Oct. 17, 2011 proposals.

Higgins asked when the council would know the final offer the developer was making that he felt was feasible. Helminski said he had a call scheduled on Friday with the whole team. Helminski said the mutual commitment he’s made to the council and the staff was that if at any point there’s a deal killer, both sides would communicate that immediately.

[At the Oct. 3 council meeting, it was indicated that the final best offer would be on the table at the Oct. 17 meeting. The fact that it apparently was not ready by then and the fact that an attorney for the development team, Scott Munzel, did not appear for the slot he'd reserved during public commentary on Oct. 17, may have foreshadowed the announcement later in the week that the project would be withdrawn. Scott Munzel, an attorney for the former owner of the Fifth Avenue property where one of the two projects will be built, did not arrive at the meeting in time for the slot he'd reserved for his public commentary on his own behalf on Oct. 17.]

Sandi Smith (Ward 1) asked about the Society of Environmentally Responsible Facilities. That organization is specified as providing the environmental standards that the new construction would meet – the previous proposal would have met the Leadership in Energy and Environmental Design (LEED) standard. Helminski described SERF as a relatively new organization. With LEED, he contended that the certification process has become more important than the building components. Administratively, he said, SERF is a better experience. Smith asked if there was a SERF rating system of levels similar to LEED. Helminski said no, it’s either SERF-certified or not.

Mike Anglin (Ward 5) thanked Helminski for negotiating again with the city on the project. He described the project as unique because of its location. He wanted to know how Helminski wanted to receive additional suggestions. Helminski suggested the usual communication channels: over coffee, texting, email or phone calls.

Kunselman noted that the revised proposal has no off-street on-site parking requirement – would the developer be seeking to create an agreement with the Ann Arbor Downtown Development Authority to obtain parking permits at city parking structures? Helminski described the conversations with DDA executive director Susan Pollay as going well, but no agreement had yet been reached.

Kunselman asked if the spaces would be provided for free. Helminski quipped that he did not think that’s the way it’ll shake out in the end – tenants would pay market rate. Kunselman told Helminski that he was getting a significant break and would realize a significant savings by not having to construct underground parking.

Kunselman then addressed the issue of affordable housing. Affordable housing had not actually been built in the city as part of a PUD since Ashley Mews, a development located at Main & Packard. Since that time developers had made payments in lieu, he said. Kunselman contended that it would be primarily students who lived in Heritage Row and that a payment in lieu was the most likely scenario – that puts the burden on the city to construct the affordable housing. Helminski replied that he wouldn’t expect Heritage Row tenants to be primarily students. He said he was meeting with the county/city office of community development housing manager Jennifer L. Hall to discuss whether it’s better to build affordable housing on site or do payments in lieu. Sometimes the city prefers payments in lieu, he said.

Stephen Rapundalo (Ward 2) said he appreciated the fact that the issue of parking had been brought up – that had been a concern of his. He was worried about the overall capacity of the parking system. He’d assumed that Helminski would primarily be pursuing parking in the new underground garage for his residents, but it sounded like that might not be absolute. Rapundalo said he’d be interested to see the impact of Heritage Row tenant parking on availability of public parking.

Hohnke responded to some of his colleagues’ comments by saying that parking spaces will be a part of the development agreement. He also pointed out that the revised version of the proposal sets a date certain for reconstruction of the houses on Fifth Avenue. [The revised proposal allowed the project to be constructed in two phases, which essentially meant that the new construction of the three buildings could receive certificates of occupancy, before the seven existing houses were reconstructed.]

Hohnke then asked Jennifer L. Hall to the podium to discuss Kunselman’s question about the benefit to the city of payments in lieu versus construction of affordable units as a part of a development. Hall traced the history from the early 2000s when the city’s policy view was that including affordable units on site was the best option. Over time, she said, she and others have come to believe that inclusion of affordable units as part of a development that includes market rate units doesn’t necessarily result in the kind of units the city is looking for. [Hall was recently selected to head the Ann Arbor Housing Commission.]

As an example, Hall gave Corner House Lofts – three affordable units were constructed there. The building is occupied completely with students. The city can’t guarantee that the student occupants of the affordable units are from historically low-income households. But Hall said that 90% of students are eligible to rent the affordable units and they can’t be excluded. Hall described how money that’s paid in lieu of construction of affordable housing can then be leveraged as matching funds for federal and state grants. Hohnke was satisfied that a payment in lieu for affordable housing would provide a public benefit.

Outcome: The council gave initial approval to the revised Heritage Row proposal, with dissent from Briere, Kunselman and Higgins. The expected second and final vote would have taken place on Oct. 24. However, on Oct. 21 the developer pulled the project from that meeting’s agenda.

City Place: Landscape Buffer – Council Deliberations

Tony Derezinski (Ward 2) asked city planning manager Wendy Rampson to explain the issue before the council. After the new area, height and placement (AHP) revisions were put in place, Rampson explained, the planning commission had been asked to look at additional buffering requirements between multiple-family buildings. That resulted in a change to the landscape ordinance. And that had an unintended consequence in areas zoned R4C (multi-family residential). It’s problematic to apply the ordinance, she said, because often the setback is smaller than the buffer requirement – R4C areas are also largely already developed, she said. Rampson supported the modification to City Place and is working on it with the planning commission’s ordinance revision committee to revise the ordinance to accommodate existing conditions in R4C areas.

In the meantime, the landscape ordinance provides for flexible application. [The planning commission handled three such cases of flexible application of that ordinance at its Oct. 18 meeting.]

Chapter 62
5:608 Modifications
(2) Flexibility in the application of the landscaping or screening requirements of Sections 5:602, 5:603, 5:604 or 5:606 may be allowed if each of the following conditions are met:
(a) The modifications are consistent with the intent of this chapter (Section 5:600(1)); and
(b) The modifications are included on a site plan and in a motion approved by City Planning Commission or City Council; and
(c) The modifications are associated with 1 or more of the following site conditions:
…
(vii)
Landscape elements which are a part of a previously approved site plan may be maintained and continued as nonconforming provided no alterations of the existing landscape elements are proposed.

Marcia Higgins (Ward 4) noted that City Place was approved before the area, height and placement work was done – before the landscape ordinance was revised. She wanted to know if the council normally went back and applied a revised ordinance to a project that had already been approved. Rampson confirmed that because the developer is making minor administrative changes, that triggers the application of the new code. Higgins wondered if the request could go before the zoning board of appeals. Rampson confirmed it could.

Sabra Briere (Ward 1) questioned why the change was not postponed until the council’s Oct. 24 meeting. She said she recognized the parallel tracks on which the developer was proceeding – the developer would like to break ground at a specific time. But neither of the City Place requests before the council that night required a change to be made before groundbreaking, she contended. Either the landscaping requirements or the revised elevations could be dealt with after Heritage Row is defeated, she said, if it’s in fact defeated. Briere then moved to postpone the measure.

Developer Jeff Helminski.

Margie Teall (Ward 4) asked developer Jeff Helminski to speak to the issue. Helminski said there was a tremendous amount of effort going into both City Place and Heritage Row simultaneously. If Heritage Row doesn’t work out, he said, his team needs all elements of City Place in place. It’s not an easy task to move Heritage Row forward, he said. His continued desire to do that is based on seeing good faith efforts by the city. If the City Place requests were postponed, he said, it would send a clear message to his team and it would impact the future of Heritage Row. Based on Helminski’s remarks, Teall said she wouldn’t support postponement.

Higgins said that before the council had started its conversation about Heritage Row, she was very concerned. However, she could understand the developer’s viewpoint. Next week, she continued, the council will make a decision one way or another. Even though she’d heard the city attorney’s office say that actions related to City Place would be moot, if Heritage Row were approved, Higgins still wanted to see City Place resolutions rescinded. She said she wouldn’t support postponement.

Tony Derezinski (Ward 2) agreed with Higgins’ unwillingness to postpone. Stephen Kunselman (Ward 3) said he supported postponement. Approving the resolution would send the wrong message about the city council. The City Place project has been approved for two years, he said. He did not know why the developer couldn’t wait a week.

Christopher Taylor (Ward 3) said he was opposed to postponement, because the council needed to match the good faith effort of the developer. However he shared his colleagues’ view that it makes more logical sense to look at City Place after voting up or down on Heritage Row.

Teall said she was having a tough time with Kunselman’s description of “bending over backwards” for the developer. It was the council that had gone back to the development team and asked them to look at Heritage Row again.

Outcome on postponement: The motion to postpone the landscaping issue for City Place failed, with only Briere and Kunselman voting for it.

Outcome on City Place landscaping: The council approved the resolution over dissent from Briere.

City Place: Revised Elevations – Council Deliberations

Tony Derezinski (Ward 2) introduced the resolution by saying that it was the second of the pair of resolutions that had been requested by the developer. Planning manager Wendy Rampson described how the changes included additional windows on gable ends and new materials on upper parts of the building. She said that planning staff recommended approval, because the changes are relatively minor and provide additional architectural interest.

Noting the additional windows are on the fourth floor, Stephen Kunselman (Ward 3) asked if that floor was for tenant occupancy. Rampson explained that it would be a common area or loft area for third-floor units. Kunselman wanted to know how fire escape is being addressed. Developer Jeff Helminski said that the architect Brad Moore had addressed those issues appropriately.

Back-and-forth between Kunselman and Helminski revealed that the intent is to treat the third-level units in parallel fashion with the other units of the building, which are two-level units. Namely, they’d all have two different, separated common areas. With six people sharing a unit, Helminski said, two common areas would allow residents to engage in different activities – say, watching TV and playing games.

Responding to a request from Briere for additional clarity about the internal configuration of the units, Helminski described a spiral staircase and a vaulted ceiling configured in a townhome style.

Outcome: The council voted unanimously to approve the changes to the City Place elevations.

Zoning Board of Appeals Appointments

The council was asked to consider confirmation of the reappointments of Wendy Carman and David Gregorka for three-year terms to the city’s zoning board of appeals (ZBA). The nine-member ZBA enjoys fairly broad authority, including the power [from the city code]: “To hear and decide appeals where it is alleged by the appellant that there is error in any order, requirement, permit, decision, or refusal made by the Building Official or any other administrative official in enforcing any provision of this Chapter.”

Outcome: The council voted to confirm the reappointments to the ZBA.

Stopgap Funding to Warming Center

On the agenda was a resolution to authorize $25,000 to support the Shelter Association of Washtenaw County‘s warming center. The money will come from the city’s general fund reserve balance. It will make up the gap between the roughly $56,000 in private donations that SAWC has been able to raise for the warming center and its $81,000 annual operating budget.

Of that operating budget, $600 is spent on utilities for laundry, and the rest compensates shift workers paid $12.57 per hour, and a half-time case worker, who is paid $15.96 per hour.

The warming center, located in the Delonis Center on Huron Street on the western edge of downtown Ann Arbor, can accommodate up to 50 individuals. It is open December through April, or any time the temperature (or wind chill) falls below 35 F degrees.

Closure of the warming center was part of the Shelter Association’s strategy to remain financially solvent in the face of funding cuts from Washtenaw County, the state and federal government.

A number of specific negative impacts have been cited by Shelter Association staff that would result from a closure of the warming center: more police calls; increasing frustration among business owners; increased vandalism; backlash against homeless people; increased crime by desperate people; untreated mental health problems; increased use of emergency rooms for non-emergency care; and overcrowding of jails and the court system.

The $25,000 allocated this year could be analyzed as follow-through on recent previous investments made by the Ann Arbor city council in the specific mission of the warming center.

For example, at its Nov. 5, 2009 meeting, the council passed a resolution that awarded a $30,500 contract with the Shelter Association and a $129,000 contract with Interfaith Hospitality Network, which operates a family shelter. The money was to provide case management and staff support for 25 additional beds at the Delonis Center and 25 additional beds in the rotating shelter program, as well as housing vouchers for eight families.

The council had received a presentation on the homelessness crisis at its Oct. 19, 2009 meeting from Mary Jo Callan, head of the county/city office of community development. She had alerted them to the likelihood that a funding request would be coming to them at a subsequent meeting.

The Ann Arbor Downtown Development Authority, at its Nov. 4, 2009 meeting, had authorized $20,000 to cover the “hard costs” – i.e., the actual beds – in connection with the initiative, which was seen as a short-term solution in the face of approaching winter weather.

Although it was not earmarked specifically for the warming center, on Oct. 6, 2010 the DDA authorized a $218,050 grant from its housing fund to the Shelter Association for improvements at the Delonis Center. The money paid for new washers and dryers, lockers and chairs, an emergency generator, energy conservation measures, medical equipment and software.

Warming Center: Update

At the beginning of the Oct. 17 meeting, Ellen Schulmeister, executive director of the Shelter Association of Washtenaw County, and Washtenaw Housing Alliance executive director Julie Steiner gave the council an update on the funding situation.

Schulmeister thanked the council for current and past support. The shelter and the city had been partners for a long time, she said. Now is a very hard time – both for people who need help and those organizations who support them.

The shelter had lost $400,000 in funding while costs continue go up, she said.

The shelter has had to cut staffing to two vital programs: the warming center and the rotating shelter. The shelter had tried to use volunteers for the warming center, but was unable to get volunteers who could be awake all night. The Washtenaw Housing Alliance asked the Shelter Association to operate the warming center one more year, so later in the evening, the council would be asked to provide some support so that the warming center can continue through the winter of 2011-12. She said that over the next year the Shelter Association would work diligently to identify longer-term solutions.

Tony Derezinski (Ward 2) and executive director of the Washtenaw Housing Alliance Julie Steiner get on the same page before the meeting.

Steiner told the council that the shelter’s warming center and rotating shelter are doing the community a huge favor. In Washtenaw County, she said, they work hard to make sure that shelters are not just mission shelters – “three hots and a cot.” The goal has been to provide case managers and services too.

As the Shelter Association looks at how to address the funding problems over the next couple of months, Steiner hoped councilmembers would help. She told them they’d been leaders around this issue. She noted that a copy of the Blueprint to End Homelessness Progress Report had been distributed to councilmembers. [.pdf of progress report] It traces progress from the creation of the blueprint in 2004. Steiner noted that the world is different from the way it was in 2004. She said the Washtenaw Housing Alliance will sponsor a series of community conversations to address the situation – as a whole, not just the warming center – in a world of shrinking resources.

Sandi Smith (Ward 1) wanted to know if Washtenaw County was matching any of the $25,000 that the city was being asked to contribute. Schulmeister told Smith that no funding for the warming center’s current need was coming from the county general fund. The other private funding – from an unnamed organization that Schulmeister expected would provide it – has not yet been approved by that organization’s board, she said. It’s an organization that involves the county but is not the county.

Mayor John Hieftje noted that Washtenaw County is proposing deep cuts in human services funding as part of its proposed 2012-2013 budget. Hieftje said the city looks at the Delonis Center as a partnership with the county. The city has been holding up its end of the partnership and the city is asking the county to hold up their end, he said. [Chronicle coverage: "Proposed County Budget Brings Cuts." The proposed county budget, if unchanged, would cut funding to the Shelter Association from $160,000 in 2011 to $25,000 in 2012 and 2013. On Oct. 19, the county board voted to reallocate another $26,230 to the Shelter Association in both 2012 and 2013, though it was not earmarked for the warming center.]

Hieftje invited councilmembers to ask any questions immediately following the remarks by Schulmeister and Steiner at the beginning of the meeting, so that they did not have to stay until the council reached the item on the agenda. Schulmeister told the mayor she was planning to stay anyway.

Warming Center: Public Comment

Lily Au expressed concern about the amount of administrative costs for the office of community development and the United Way. She noted the county’s proposed reduction in support for the Delonis Center from $160,000 to $25,000. She told the council that if they approve the money that’s asked of them, next month people will come again, saying the homeless are cold and hungry. The whole community needs to wake up and donate directly to organizations they want to help, she said.

Warming Center: Council Deliberations

Sabra Briere (Ward 1) led off council deliberations by giving some context for the request being made to the council for the $25,000. She’d heard news earlier in the year about the impact that reduced funds from the federal, state and county level would have on the Delonis Center’s ability to perform services.

Of the reduced services, Briere said she was particularly concerned that the warming center would be closed, because of the potential impact on the city of its closing. She cited the various expenses that would accrue across various parts of the community – from law enforcement to medical care providers – if people had no place to stay warm. The city would be wiser to spend money on prevention than reaction, Briere said. She said she’d spoken with the mayor and then the mayor had spoken with Schulmeister. In their conversations, the city had said they would not provide 100% of support and that the Shelter Association would need to find other support to match the city’s contribution. She encouraged her council colleagues to support the contribution.

Sandi Smith (Ward 1) noted that the program the city was providing money for is something that the city had asked the Shelter Association to provide, citing a contract from 2009. It’s important that the warming center continue, she said, and the need is even greater now. Hiefjte then described how back in the 1970s there were people living on the street. This is this generation’s depression, he said.

Hieftje reiterated remarks he’d made immediately following Schulmeister’s comments at the start of the meeting, saying that Washtenaw County is a partner in the Delonis Center. However, the county has proposed a budget that dramatically decreases funding to the center. The city needs to watch that closely, Hiefjte said. The county has some tough budget hurdles and the county board will have to make some tough decisions, he said. Those decisions will impact Ann Arbor, Hieftje concluded.

Outcome: The council voted unanimously to authorize funding for the warming center.

City Apartments Elevation Revisions

The council was asked to approved modifications to Village Green’s already-approved City Apartments planned unit development (PUD) at First and Washington. [This should not be confused with the similarly named City Place matter-of-right proposal by a different developer on South Fifth Avenue].

The changes include increasing the height of the structure from 94 to 104 feet (to lift the base of the building out of the water table), adding an entrance on First Street, modifying the window type and size on the residential portion of the building, and adding ventilation screens on the east side (alley) of the building.

The City Apartments project was given PUD zoning and site plan approval by the council on Nov. 6, 2008. The nine-story building will include 156 dwelling units and 244 parking spaces on the first two floors. The site is currently a city-owned property functioning as a surface parking lot with 64 spaces, after the parking structure there had to be demolished due to its poor structural condition. The new parking deck, which will offer spaces to the general public as well as to residents, is being financed by the Ann Arbor Downtown Development Authority.

The sale of the property, for a little over $3 million, is part of the city of Ann Arbor’s financing plan for construction of the new municipal center, which houses the police department and the 15th District Court. The council has extended the purchase option on the First and Washington property several times, most recently on Aug. 4, 2011.

At one of the DDA board’s late August committee meetings, news of a pending deal and imminent construction was relayed to committee members. The council is expected to authorize the closing on the deal at its Nov. 10, 2011 meeting. Signs at the First and Washington parking lot warn patrons of the lot’s imminent closure.

During his communications to the council, Mike Anglin (Ward 5) reminded his colleagues that he’d brought up the issue up a few months ago of environmental studies in connection with the First and Washington site. The foundation had been elevated another 10 feet, he said, which is an accomplishment. But there were other environmental engineering studies that could be of value.

So Anglin has requested in an open letter to staff that any studies related to this property be made available. When a different parcel (at First and William) was being considered as the site of a parking structure, there were studies done and soil samples taken, he said. So he requested that if there is information out there, that it be made available to the council.

Outcome: The council voted without discussion to approve the change in elevations for City Apartments.

Biercamp Parcel Annexation

On the council’s agenda was an item regarding the annexation 1643 and 1645 S. State St. into the city of Ann Arbor from Ann Arbor Township. A new business, Biercamp Artisan Sausage and Jerky, is located on one of the parcels.

During the public hearing on annexation, Thomas Partridge complained that the resolution has no language about a requirement for affordable housing. The council should table the resolution and consider it in detail, he said. The council should consider the impact on the township and the loss of taxes to the township.

Outcome: The council voted without discussion to approve the annexation of the 1643-45 S. State St. parcels.

Now that the annexation has been approved, action by the city council on a rezoning request will be scheduled. The owners of Biercamp would like for the city to approve the parcel for C3 (fringe commercial district) zoning. It would allow the business to sell a greater variety of products beyond those that it produces on the premises.

The planning commission voted unanimously to deny C3 zoning for the parcels at its Sept. 8, 2011 meeting. The rezoning request will be the second one considered recently in the general area of State Street and Stimson. On Oct. 3, 2011 the council rejected a request to rezone the parcel where Treecity Health Collective is located – from O (office) to C1 (local business).

The two rezoning requests have prompted discussion by the planning commission and the city council about the need for a study of the South State Street corridor, so that the parcels in question can be considered in a larger context. At an Oct. 11 working session, the planning commission was updated on city planning staff’s in-house effort to conduct a study of the State Street corridor. Previously, the intent was to hire a consultant to do that work.

Arbor Networks Tax Abatement

Before the council for its consideration was a tax abatement for Arbor Networks, a computer network security company. The abatement is on $883,527 of real property improvements and $7,790,454 of new personal property and equipment.

Lon Lowen of Arbor Networks.

According to a staff memo accompanying the resolution, Arbor Networks was granted a tax abatement in 2008. The abatement agreement in 2008 required Arbor Networks to move 74 jobs to their Ann Arbor facility and add at least eight jobs. However, as of December of 2010 there were only 74 jobs at this location.

The staff memo on the current request for a tax abatement states that the digital information business is continually changing with new and faster technology. Arbor Networks needs new test equipment and digital equipment, and according to the memo, anticipates adding 20 new employees to the Ann Arbor facility.

During the public hearing, Lon Lowen, quality assurance director with Arbor Networks, introduced the council to the company, which was founded in 2000 and has maintained a research and development facility in this area since its founding. The company makes software to fend off threats to computer network security, he said. The equipment on which the tax abatement is requested, he explained, is needed to expand the research and development facility. It reflects an investment of over $8 million by December 2012. As a result of that investment, the company expects to add 20 new jobs by December 2013, he said.

Thomas Partridge also spoke at the public hearing, and called on the council to fully inform the public on the resolution as to the details and rationale for placing the item on the agenda. He complained that these questions are decided in advance and usually passed unanimously by voice vote without discussion of the reasoning. He questioned the need for this resolution without requirements of equal opportunity employment. He questioned whether the company had exhausted other financing options.

Outcome: The council voted unanimously, without discussion, to approve the tax abatement.

Local Development Finance Authority

The council was asked to appoint Ned Staebler to fill an open four-year term on the local development finance authority (LDFA) board. The term will end June 30, 2015. The position previously was held by Michael Korybalski. That term expired on June 30, 2011 but had not yet been filled.

The LDFA is funded through TIF (tax increment financing) capture in a geographic district comprising the Ann Arbor Downtown Development Authority and the Ypsilanti Downtown Development Authority districts. However, TIF revenue for the LDFA is generated only in the Ann Arbor DDA district. The principal activity of the LDFA is a business accelerator. The LDFA contracts with Ann Arbor SPARK to manage the accelerator.

Staebler took a position starting in the summer of 2011 as vice president of economic development for Wayne State University, after previously serving with the Michigan Economic Development Corp.

Staebler currently serves on the city’s Housing and Human Services Advisory Board, which was established in 2007 to replace two other bodies: the Community Development Block Grant (CDBG) executive committee and the city’s housing policy board. The function of the HHSAB is to make recommendations on policies and programs to address the needs of low-income residents, to monitor the implementation of Ann Arbor’s housing policy and the creation of a city housing coordinator.

Staebler lost a close Democratic primary race for District 53 state representative against Jeff Irwin, who was elected to that position in November 2010.

During the brief city council deliberations, Stephen Rapundalo (Ward 2), who serves as the city council’s representative to the LDFA board, noted that Staebler is known to the council and has familiarity with economic development. He had also held an ex officio position on the board when he worked for the Michigan Economic Development Corp. Staebler is a perfect fit for the LDFA board, Rapundalo concluded.

Outcome: The council voted unanimously to approve Staebler’s appointment to the LDFA board.

Intent on Street/Sidewalk Tax Use

At the Oct. 17 meeting, the council considered a resolution of intent for the use of proceeds from a street/sidewalk repair millage that will be on the Nov. 8 ballot. The council had considered the resolution of intent at its Oct. 3 meeting and before that at its Sept. 19 meeting.

Voters will be asked to approve two separate proposals: (1) a 5-year renewal of a 2.0 mill tax to support street repair projects; and (2) a 0.125 mill tax to pay for sidewalk repair.

The resolution of intent specifies that the street repair millage will pay for the following activities: resurfacing or reconstruction of existing paved city streets and bridges, including on-street bicycle lanes and street intersections; construction of pedestrian refuge islands; reconstruction and construction of accessible street crossings and corner ramps; and preventive pavement maintenance (PPM) measures, including pavement crack sealing. [.pdf of unamended Oct 3, 2011 version of resolution of intent]

At its Oct. 3 meeting, councilmembers had questions about the need to have any resolution of intent, as well as the status of millage revenue use inside the geographic area of the Ann Arbor Downtown Development Authority.

The resolution of intent had originally stipulated that sidewalk repairs inside the Ann Arbor DDA district would not be funded by the sidewalk repair millage, except when the sidewalks are adjacent to single- and two-family houses. A recent meeting of the DDA’s operations committee revealed a measure of discontent on the DDA’s part about the intended restriction inside the DDA district and the lack of communication from the city of Ann Arbor to the DDA about that issue.

Mike Anglin (Ward 5) and Stephen Kunselman (Ward 3) have stated in the course of their re-election campaigns that they only reluctantly support the sidewalk repair millage. Stephen Rapundalo (Ward 2) has characterized the sidewalk millage as simply offering voters a choice. Though not up for re-election this year, mayor John Hieftje stated at the DDA’s Oct. 5 board meeting that he did not think councilmembers are out in the community saying that the city absolutely needs the sidewalk millage or that it’s essential. Like Rapundalo, the mayor characterizes the sidewalk millage as offering residents a choice of having the city take over the responsibility for sidewalk repair.

Intent on Street/Sidewalk Tax Use: Public Commentary

Karen Sidney stated that the resolution has many unanswered questions. There’s $30 million currently in the street millage fund, she said. [This appears to be based on the FY 2010 Comprehensive Annual Financial Report of the city, which gives a snapshot of the fund balance on June 30, 2010.] Of that, $7 million is needed for the East Stadium bridge project, Sidney said. [Although the city has received federal and state funding for a large part of the project, the city still has a local share.] What streets will be fixed with the remaining $23 million? she asked.

What streets will be fixed with the $45-50 million the millage will generate over its 5-year lifetime? So far, Sidney said, she’s seen only five streets named – surely there would be more? [The fact sheet prepared by the city specifies these five projects for 2012 constructions: Packard (Platt to US-23), Hill St. (Forest to Washtenaw), E. Stadium (Packard to Washtenaw), Pontiac Trail (Skydale to M-14), and Dexter Road (Maple to Huron)] Sidney also wanted to know if priority would be given to roads that serve new building projects, like the proposed Fuller Road Station.

With respect to the $500,000 that the sidewalk repair millage is expected to generate, Sidney wanted to know how much will be consumed through administration costs. The city has estimated that those administration costs will be $160,000. That’s 27% of the additional tax, she noted. She also wanted to know why the city is saying it can repair sidewalks cheaper than residents can, when five years ago the city said that residents could have the work performed for 40% less than it would cost the city.

Residents along her street, Sidney said, had paid to fix their sidewalks, but now those same slabs are being replaced as a part of a street resurfacing project. She wanted to know what steps will be taken to improve coordination. She noted that the city is taking over the cost of sidewalk repair now, “when there’s nothing left to do,” after administering a sidewalk replacement program for five years. What happens after five more years, she wondered. Will residents be asked to pay again?

Intent on Street/Sidewalk Tax Use: Council Deliberations

Council deliberations were led off by an amendment offered by Stephen Rapundalo (Ward 2) concerning how the millage would be used in the DDA district. He said the amendment would address an inequity identified by commercial property owners under the original language – they’d be included in the repair millage but excluded from the benefits. Rapundalo’s amendment added the following language

3. Notwithstanding the provisions of Paragraph II.2, if the City and the Downtown Development Authority (“DDA”) execute an agreement whereby (i) the DDA agrees to perform sidewalk repair within the Downtown Development District (“DDD”) adjacent to all properties against which the City levies property taxes; and (ii) the City agrees to transmit to the DDA annually 1/8th mill for parcels located within the DDD and not otherwise captured by the DDA; then the 2012 Street and Bridge Resurfacing and Reconstruction and Sidewalk Repair millage may be used for sidewalk repair within the Downtown Development District adjacent to all properties against which the City levies property taxes. The 1/8th mill shall be subject to the Headlee rollback. [.pdf of complete resolution of intent as amended on Oct. 17, 2011]

The original version of the resolution of intent had assumed that the DDA would repair the sidewalks within the district that are adjacent to commercial properties, based on the incremental tax capture in the DDA district for the millage. The impact of the amendment is to provide the entire millage amount to the DDA (not just the captured increment), but only if the DDA agrees to take responsibility for sidewalk repair inside the DDA district.

Tony Derezinski (Ward 2) questioned the inclusion of the phrase “shall be subject to the Headlee rollback.” He wondered if that is a restatement of the law. City attorney Stephen Postema indicated that assistant city attorney Abigail Elias had prepared the language, and that he assumed it’s a restatement.

Sabra Briere (Ward 1) confirmed with Postema that the entire millage is subject to the Headlee rollback. Sandi Smith (Ward 1) said she absolutely supported the amendment. She was glad the council took the time to pause and come up with a healthy solution.

Christopher Taylor (Ward 3) said it’s a fair and fine balancing of two competing interests.

Homayoon Pirooz, head of project management for the city, was asked to respond to comments made by Karen Sidney during public commentary about the amount of money in the fund balance for street repair. The fund balance does not distinguish committed funds for contracts on projects that were previously done, he said. As an example, he gave a West Liberty Street construction project from 10 years ago. As another example, for the West Stadium Boulevard project, he said, the city also still owes money to the state, that will need to be paid when the city is invoiced.

The fund balance also does not distinguish money that is earmarked for all the projects the city is planning to do, like Dexter-Ann Arbor Road and Packard Road next year – those projects will need a large sum of local dollars that are not labeled in the fund balance. Once you subtract the committed dollars and planned-for dollars, he said, the amount in the fund balance is much smaller. Without the new millage, he said, the funds will be used up by the end of 2012.

Discussion related to the sidewalk repair millage also arose earlier in the meeting as a part of the consent agenda, when the council approved moving delinquent water utility, board up, clean up, vacant property and housing inspection fees to the December 2011 city tax roll.

The current sidewalk repair program was supposed to result in residents being charged a fee for replacing sidewalk slabs, if they are cited by the city and decline to have the work performed themselves. Stephen Kunselman (Ward 3) said that in two years nothing has come through as delinquent charges. City treasurer Matt Horning confirmed for Kunselman that in this current tax roll there aren’t any delinquent sidewalk repair charges.

Kunselman wanted an explanation – in the past he’d seen those charges come through. Sue McCormick, public services area administrator, indicated that this year the city has been working with a contractor completing outstanding sidewalk repairs. Those bills will go out and the council would see them in the next round, she said.

Outcome: The council voted unanimously to approve the resolution of intent on use of the sidewalk/street millage.

Stadium Bridges Project

The council was asked to authorize the execution of a standard contract between the city and the Michigan Dept. of Transportation (MDOT) for the East Stadium Boulevard bridges reconstruction project. The project will result in the closure of East Stadium Boulevard in both directions for about a year, starting around Nov. 28, just after the University of Michigan’s last home football game of the year.

Dan’s Excavating Inc. was awarded the bid – at $13,910,334.77, it was the lowest qualified construction bid. The staff memo accompanying the council resolution put the current estimate for the total project cost – including all prior expenses, but excluding contingencies for the future construction – at $22,776,700. The city received a total of $13.9 million in TIGER II federal grant funding to pay for the project, as well as $2.87 million in state funds.

The project website, which includes detour maps and timelines, is annarborbridges.org.

During council deliberations, Margie Teall (Ward 4) and Sabra Briere (Ward 1) elicited from city staff some of the planned architectural details related to the stairways from Stadium Boulevard down to South State Street. They’ll have bicycle grooves to allow cyclists to walk their bicycles up and down the stairs more easily. And snow clearance will be achieved through radiant heating built into the steps, powered by the same circuit as streetlights, which in this case are owned by the city, not DTE.

Outcome: The council voted to authorize execution of the MDOT contract.

Labor Union Benefits

The council was asked to give initial approval to revisions to the ordinances that govern the retirement and health care plans for two of its unions: the Ann Arbor Police Officers Association (AAPOA) and the American Federation of State, County and Municipal Employees (AFSCME).

The revisions to the ordinances resulted from a collective bargaining agreement with AFSCME and a binding arbitration under Act 312 with AAPOA. The changes are similar to ordinance changes already enacted for non-union city workers.

The pension contribution for AAPOA and AFSCME workers will rise from 5% on a post-tax basis to 6% on a pre-tax basis. The vesting period for new hires will increase from 5 years to 10 years. Also for new hires, the final average compensation (FAC) calculation will be increased to a five-year period. The previous FAC was based on a three-year period.

On the health care side, the AFSCME and AAPOA employees would have the same access-only retiree health plan as non-union employees have. Like all ordinance changes, the city council will need to give these revisions a second and final approval no sooner than its next regular meeting.

Outcome: The council voted without discussion to approve the union labor pension and retirement health benefits.

Taxicab Law

Before the council for its consideration was initial approval of changes in the taxicab ordinance. The changes make explicit how long a taxicab company license is valid (10 years) and spell out some additional conditions on revocation or suspension of the company license.

The revisions also add reasons that can be used for suspending an individual taxicab driver’s license, which include a city administrator’s view that a driver “has acted in an unprofessional, harassing or threatening manner to passengers, or others.”

Like all ordinance revisions, the taxicab licensing revision will need a second and final approval from the council in order to take effect.

Stephen Kunselman (Ward 3) told the council that as the council’s representative to the taxicab board, ordinance amendments are needed. He asked chief financial officer Tom Crawford, who also sits on the taxicab board, to explain the changes and the concerns that are addressed by the changes.

Crawford characterized the changes as falling in three areas. In the first area, related to licensing, Crawford said that in the past the city had seasonal operators who would want to come in and work the football season and then disappear. The ordinance is being changed so that if a company ceases operation for 45 days, the city can revoke the license. Crawford explained that a healthy taxicab industry needs stability and this is a mechanism to help guard against companies frequently coming in and out of the market.

Another area of change has to do with solicitations and how the companies represent themselves. Several companies advertise themselves as taxis, but they’re in fact limousines. Crawford characterized it as a safety issue for someone who believes a vehicle is a taxi, but it’s in fact a limo. [A taxi is per code "... accepting passengers for hire within the boundaries of the city as directed by the passenger." A limousine is pre-booked.] If a company they hold itself out as a taxi, they have to be licensed as a taxicab, Crawford said. [The city's taxicab code already prohibits advertising in the reverse direction – it prohibits taxicabs from holding themselves out as limousines.]

Outcome: The council voted to give the taxicab ordinance initial approval.

Communications and Comment

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

Comm/Comm: Crime

Christopher Taylor (Ward 3) said that he’d attended a neighborhood meeting recently where many people had expressed a perception that there’s a crime problem in Ann Arbor. He said it was perhaps fueled by increased access to information about crime data that a perception had resulted that crime was on the uptick. He asked deputy chief Greg Bazick how the police see things.

City clerk Jackie Beaudry and deputy chief of police Greg Bazick before the start of the Oct. 17, 2011 city council meeting.

Bazick said they’re not seeing an upswing in reported crime. He noted that crimmapping.com allows for real-time access to what’s reported on a daily basis. There have certainly been incidents that have raised concern in the community [including a series of sexual assaults]. But there’s nothing to indicate an upswing or a crime wave, he said.

Mayor John Hieftje said he gets the stats on crime every week before he meets with the police chief and that this year crime has shown a double-digit decrease.

Among the points Bazick made was the size of a law enforcement agency is never the sole indicator of crime. He also cautioned that the crimes categorized as “Part 1″ by the FBI are the kind of crimes that are almost always reported by victims and are not typically identified as a result of police-initiated enforcement activity. On the other hand, “Part 2″ crimes might show an increase based just on a police-initiated enforcement effort.

Comm/Comm: Police Hiring

Hieftje reminded the council that on the last day of May, when the council had approved the budget, he’d said the goal should be that there would be no further cuts in the police department. He said he’d been working with staff and with councilmember Stephen Rapundalo (Ward 2) on that issue. Hieftje said the department will see some retirements, and the Ann Arbor Police Officers Association also has new contract. Cuts are projected to be necessary at part of the FY 2013 forecast, but he felt that some replacements could be hired starting on Jan. 1, 2013.

Rapundalo commented that all along the council has repeatedly talked about its commitment to public safety. The council had to make a difficult decision last year [to lay off some police officers], but now that the city has an agreement with AAPOA, he said, there are opportunities to sustain and increase the police officer ranks.

[Rapundalo is facing a strong re-election challenge in Ward 2 from independent Jane Lumm, whose campaign includes criticism of the reduced numbers of police officers employed by the city of Ann Arbor.]

Comm/Comm: Energy Farms

Kermit Schlansker described the potential benefits of energy farms, which can include gasifiers that turn hard biomass into fuel. He also described solar arrays that could be used to concentrate the sun’s energy to create solar steam.

Alan Haber (left) and councilmember Mike Anglin (Ward 5).

Comm/Comm: Library Lot

Alan Haber said he was glad to hear about Schlansker’s energy farm. He told the council he was there again to talk about the space above the underground parking garage on South Fifth Avenue. He noted there’s a process going on to invite as much of the public as possible to figure out what to do there. He contended the land can be used maximally as a public gathering space. Citizens would adopt the library green without the use of city funds, he said, and they could program the space. Citizens need the opportunity to do that.

Is the city going to pave the surface, or will the council give citizens the opportunity to develop the surface? Haber wondered. It’s counterintuitive to have a surface lot above the underground lot, Haber said, if you want to encourage people to use the underground parking lot. Ann Arbor needs a heart in the center of town, and the space above the underground parking garage could serve that function, he said. It could be combined with a building as a practical solution, he said.

Stefan Trendov told the council he’d done some drawings to illustrate what Haber was describing – the building would be light and see-through and inviting. He said he’d recently designed a project for the Sultan of Oman. He wanted cranes to come in and start building in Ann Arbor – we need to see more cranes, he said.

Comm/Comm: End Discrimination

Thomas Partridge told the council he was there to address them about the importance of ending discrimination of all forms and working to stop government corruption of all forms, including corrupt acts by Ann Arbor government employees, police officers and businesses in the entire region. They need to bring about a true democratic party, attitudes, mindset and practices, he said, and he called on voters to recall regressive Republicans.

At the public comment period at the end of the meeting, Partridge also spoke. He described himself as an advocate for those who can’t attend public meetings, and those who are the most worthy of services. He called for public access to polling places through public transportation and transportation for the disabled, polling stations that actually work for handicapped people, and better-trained poll workers.

Present: Stephen Rapundalo, Mike Anglin, Margie Teall, Sabra Briere, Sandi Smith, Tony Derezinski, Stephen Kunselman, Marcia Higgins, John Hieftje, Christopher Taylor, Carsten Hohnke.

Next council meeting: Oct. 24, 2011 at 7 p.m. in the council chambers at 301 E. Huron. [confirm date]

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

Under the change to the agreement approved by the city council, the city council representative to the LDFA board would cease to be a member of the LDFA immediately when that person ceases to be a member of the city council. The change addresses the fact that appointments to the LDFA board are for four years, while councilmembers are elected to just two-year terms on the council.

To take effect, the change must still be approved by the Ypsilanti city council, and then the LDFA board must change its bylaws to be consistent with the agreement.

The change was previously discussed at the council’s July 18, 2011 meeting, when Stephen Rapundalo (Ward 2) was appointed by his council colleagues to a four-year term on the LDFA. Rapundalo, a Democrat, faces a challenge in the Nov. 8 general election from Jane Lumm, who is running as an independent. Lumm has assembled a long list of endorsements from prominent Democrats and Republicans.

The LDFA is funded through tax-increment financing (TIF) in a manner similar to the way the Ann Arbor Downtown Development Authority is supported. A TIF district allows authorities like the LDFA and the DDA to “capture” some of the property taxes that are levied by other municipal entities in the district. The LDFA contracts with the economic development agency Ann Arbor SPARK for various business development services. [For more background on the LDFA, see Chronicle coverage: "Budget Round 5: Economic Development"]

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

As part of their look to the future, LDFA board members placed their sticky notes identifying the purpose of the LDFA to a giant poster on the wall. (Image links to high resolution image of entire poster.)

It was not anything personal, said Stephen Rapundalo to Skip Simms, who was sitting across the U-shaped configuration of tables from Rapundalo. He had just voted against Simms’ appointment to the Local Development Finance Authority board.

But over Rapundalo’s objection, shared also by his colleague on the board, Rob Risser, the body voted to add an ex-officio, non-voting seat to the LDFA board, which was filled by Simms. The occasion of the vote on Tuesday morning, held at the SPARK Central Incubator on Liberty Street, was the LDFA board’s regular meeting, which was also billed as a retreat – a facilitator was on hand to lead the group through an exercise to reflect on the organization’s purpose.

As Rapundalo’s assurance to Simms reflected, the new seat on the board was not created for Simms personally, but rather was specified as the designee of “the accelerator’s CEO,” who in this case was Michael Finney of Ann Arbor SPARK. Finney had designated Simms. SPARK contracts with the LDFA to provide services to high-tech start-up companies, and Simms is SPARK’s managing director of business acceleration as well as manager of the Michigan Pre-Seed Capital Fund.

Simms already had a seat at the physical board table when the board’s deliberations took place on the creation of the ex-officio position. So why were Rapundalo and Risser opposed to the expansion of the board in this way?

Who Else Was at the Table?

We begin by setting a bit more of the scene on Tuesday morning, which began at 7:30 a.m. over breakfast. Others who were technically in the audience at Tuesday’s meeting, but who sat at the physical table, included Greg Fronizer, SPARK’s director of finance, and Kurt Riegger, a consultant for SPARK and currently managing partner of Business Engines, as well as a board member of Great Lakes Entrepreneur’s Quest and Ann Arbor Angels.

The LDFA is currently contemplating funding the administrative costs for Ann Arbor Angels, a point scrutinized by Ann Arbor city councilmember Marcia Higgins at council’s last meeting. The occasion of Higgins’ scrutiny was the presentation to council of the LDFA’s annual report by board chair Richard King.

Deliberations on Board Appointment

The dissenting board members to the new board appointment – Stephen Rapundalo, president of MichBio, and Rob Risser, CFO of Advanced Photonix, Inc. – cited the potential conflict of interest created by having a contractor with the LDFA board also sitting on the board. Any potential conflict, however, seems embedded in the 2002 agreement between the cities of Ann Arbor and Ypsilanti, which was required in order to create the LDFA under the SmartZone enabling legislation. It’s worth noting that the Washtenaw County board of commissioners needed to sign off on the SmartZone as well. On Tuesday morning, the  agreement between the cities was cited by board chair Richard King as the legal basis for the board appointment:

The Board shall appoint two (2) ex-officio non-voting members consisting of a representative of the MEDC and a representative from the Accelerator. In addition, the Board may appoint other ex-officio non-voting members of the Board.

In this case, “the Accelerator” seems not to be defined within the document outlining the agreement. However, the term would be understood in the context of the 2002 application to the Michigan Economic Development Corporation (MEDC) by the Ann Arbor-Ypsilanti SmartZone for $.5 million in funding as a part of the MEDC’s business accelerator program. In the council resolution supporting that application, it’s the Ann Arbor ITZone – which eventually merged with Ann Arbor SPARK – that is identified as the energy behind the accelerator program. And it was the ITZone’s Kurt Riegger who directed the accelerator program. Now in 2009, it’s thus Ann Arbor SPARK’s business accelerator that would be understood as the referent of “the Accelerator” in the agreement between the two cities.

Board members who argued for the appointment cited the new position’s non-voting status as ameliorating the potential for the conflict of interest. Board member Lisa Kurek, managing partner of Biotechnology Business Consultants, also argued that it was important for people with information relevant to the board’s deliberations to be able to convey that information to the board in a timely fashion.

Later in the meeting, Rapundalo would illustrate a possible parliamentary mechanism by which non-board audience members can contribute relevant information, by noting its lack of application. Riegger, an audience member seated at the board’s table, began speaking without his participation having been solicited by a board member, as required by Robert’s Rules of order, and this was met by Rapundalo with: “Mr. Chairman, a point of order!” King then quickly called on Riegger to speak.

Outcome: The position was created and Simms was accepted as a participating but non-voting member of the LDFA board.

SPARK and Reflecting on the LDFA Purpose

After the board was expanded, the group then heard a presentation from SPARK team members on its activities. The presentation included an explication of how high-tech companies grow, an overview of other organizations involved in various economic development activities, and how the University of Michigan fits into the picture. It also included  a rough breakdown of SPARK’s core budget of around $2.8 million, 38% of which the LDFA funds. Elizabeth Parkinson, manager of marketing and public relations for SPARK, gave an overview of the marketing efforts on behalf of the Ann Arbor region, and pointed to the recent article in the Detroit Free Press identifying Ann Arbor as a great place in Michigan for entrepeneurs. Parkinson put the value on an advertising purchase of comparable value to the Detroit Free Press article at around $50,000.

The board then turned to the meeting’s main event, which began with  the exercise of writing down individual thoughts about the purpose of the LDFA and posting them on a common sheet on the wall labeled “Purpose.”

We provide below rough approximations of what each board member said about their yellow sticky notes as they posted them on the wall.

Tom Crawford: (i) provide resources to achieve the unique community needed to protect growth, and (ii) utilize community experts on the LDFA board to guide economic development efforts.

Standing is Richard King. Seated are Kurt Riegger (left) and Stephen Rapundalo (right).

Stephen Rapundalo: (i) provide supporting services and resources to high-tech start-up ventures, (ii) show a demonstrated return of investment of tax dollars in the form of enhanced economic development, and (iii) enhance infrastructure, whether that is capital or other kinds of infrastructure (roads, sewers, internet conduits).

Rob Risser: (i) acceleration and growth of high-tech companies, (ii) education about the process in the community, as well as among entrepreneurs – it’s not a marketing push, it’s a technology push, (iii) networking  infrastructure – people,  (iv) infrastructure – meeting rooms, incubators, organizations that provide specific services, and (v) oversight for taxpayer investment.

Richard Beedon: (i) oversight, adherence to charter in spending of money, (ii) come up with new ways to develop programs that work – best practices for creation of high-tech companies, and  (iii) analyze effectiveness of programs.

Darryl Daniels: (i) determine priorities for using the money, (ii) monitor effectiveness and efficiency of money that is spent, (iii) identify and support a service provider that supports early-stage technology businesses with counsel and coaching, (iv) identify a service provider that integrates the multiple resources for the benefit of entrepreneurs, (v) encourage early-stage high-growth potential businesses that aren’t in Ann Arbor to re-locate to Ann Arbor, and (vi)  market the SmartZone – put a marketing “sizzle” to it: you want to be in Ann Arbor, if you want to be where business development is happening.

Richard King: (i) work with and fund the economic development service provider, and (ii) provide  strategic direction and oversight.

Lisa Kurek: (i) provide management and oversight to protect investment, (ii) facilitate the growth of the technology-based economy, and (iii) get positive economic outcome from that tech-based economy.

Theresa Carroll: (i) foster strategic economic development in the SmartZone, and (ii) ensure appropriate use of taxpayer funds.

Mark Maynard: (i) contribute toward a culture of entrepreneurship that’s attractive to graduating students, (ii) create an infrastructure able to sustain university start-ups, and (iii) encourage risk-taking generally.

LDFA board member Roselyn Zator was initially handed a yellow Sharpie to write on yellow sticky notes (background), but negotiated successfully for a green pen. Michael Korybalski drew an analogy to green golf balls that drew a laugh.

Skip Simms: (i) make the connection to the university, (ii) capital development [three keys to developing business: good idea, talent, and capital] possibly by adding a microloan fund; investments for sustainable source of capital when TIF revenue flattens out, (iii) talent attraction [C-level activity  "I'd rather have an A-team and a B-product, than an A-product and a B-team." "Technology follows talent."] and (iv) sales development training.

Michael Korybalski: (i) facilitate business acceleration, (ii) facilitate development of companies in multiple ways – stage I, stage II, stage III, and (iii) provide incubation space to small companies, a space to network.

Roselyn Zator: (i) identify how to implement support of business incubation, (ii) implement a cluster of high-tech activity, and (iii) identify how to measure effectiveness of the implementation.

The Chronicle left the meeting as the final sticky notes were posted on the wall and lunch was getting delivered. The board’s early afternoon task was to thrash the individual ideas into categories and prioritize them.

Misc: Why People Are on the Board, or Not

Although we identified Stephen Rapundalo as president of MichBio at the beginning of this article, his name will be more familiar to many Chronicle readers as a Ward 2 representative to Ann Arbor city council. In fact it’s his presence on the LDFA that satisfies the requirement – per the agreement between the city of Ann Arbor and the city of Ypsilanti, which allowed the creation of the LDFA – that one of the six positions afforded the city of Ann Arbor on the LDFA board must be a member of Ann Arbor city council.

Previously, the Ann Arbor city council slot had been filled by Mike Reid, who also continued to serve on the LDFA after leaving council, until he resigned in early October of last year, citing in his resignation letter:

… dissent over recent LDFA board decisions to refuse to demand immediate repayment [by Ann Arbor SPARK] for known instances of over-billing, instances where contemporaneous time records were never kept at all, and instances where employees or family members of employees were paid to consult for their own companies.

Richard Beedon was appointed to fill the vacancy left by Reid.

Rapundalo had joined Reid at the LDFA’s September 2008 meeting in opposing a resolution on a memorandum of understanding that did not require immediate repayment by Ann Arbor SPARK for cases of over-billing.

Based on minutes from the LDFA’s April 2, 2009 board meeting, Rapundalo has continued since September 2008 to push for active attention by the LDFA board to the possible perception of ethical issues:

Note for the following resolution: A conflict of interest issue was raised, the matter was discussed and the Board determined there was no conflict of interest and decided to move forward. [Mark] Maynard moved, seconded by Kurek to authorize expenditure up to $6,500 from the Cantillon Web Based Education Development budget to obtain the usage data needed to evaluate Cantillon usage to date. Motion approved unanimously.

Though the minutes don’t reflect who raised the question, in a followup phone conversation with LDFA board member Mark Maynard, he clarified that the conflict of interest issue was, in fact, raised by Rapundalo. The question was based on the fact that the $6,500 was a contract awarded to the University of Michigan, Maynard’s employer.

Maynard is marketing manager for the University of Michigan Tech Transfer Office, which is headed by Ken Nisbet, member of the SPARK board of directors.

Maynard was put on the LDFA board last fall by Ypsilanti city council, which makes three of the LDFA’s board appointments. The geographic area of the Ann Arbor-Ypsilanti SmartZone LDFA comprises the area of the two cities’ respective Downtown Development Authority districts. Currently the only taxes captured by the joint district come from Ann Arbor, which totaled $1.1 million for fiscal year 2008.