From left: Ann Arbor housing commission board members Christopher Geer, Ron Woods and Marta Manildi at the AAHC Jan. 15, 2014 meeting, held at Baker Commons. Not pictured here is Tim Colenback, the newest appointment to the AAHC board. Gloria Black, who represents AAHC residents, was absent. (Photos by the writer.)

At their first meeting of the year, commissioners were briefed about the impact and aftermath of a Jan. 8 fire at Green Baxter Court, a public housing complex on Green Road next to Baxter Park on the city’s east side. They heard from Joan Doughty, executive director of Community Action Network, which operates a community center at that complex under contract with the city. CAN staff are helping AAHC provide support for families who were displaced by the fire.

At their Jan. 15 meeting, board members authorized up to $9,000 in extra funds to help pay for that emergency work. CAN is also seeking additional donations from the community.

In separate action, the board amended Chapter 14 of its housing choice voucher administrative plan to include a preference for families that have been involuntarily displaced due to a fire, natural disaster or any other reason. The vouchers would be used to subsidize rental housing, if no units are available in the city’s public housing system.

The Jan. 15 meeting also included an update from Lori Harris, vice president with Norstar Development, on a major initiative to upgrade the city’s public housing units. Specifically, she presented Norstar’s recommendation for an equity partner to purchase low-income housing tax credits awarded by the state to AAHC late last year. The board approved the recommended firm, Red Stone Equity Partners.

Investors had responded positively to Norstar’s request for proposals, Harris said, with higher-than-expected offers. “You have a very, very good story here, and it’s played very, very well in this process,” she told the board. The tax-credit transaction will provide the majority of funding for renovating five public housing complexes: Miller Manor, South Maple, Baker Commons, Hikone and Green Baxter. These properties make up the majority of public housing units in the AAHC portfolio – 248 out of a total 326 units.

However, AAHC executive director Jennifer Hall told the board that additional funding will still be required. As part of that, the AAHC is requesting $600,000 from the Ann Arbor Downtown Development Authority. Hall said she expects the DDA board to make a decision on that by March or April. The DDA previously gave the housing commission a $300,000 grant for capital improvements at Baker Commons, which is located within the DDA district. That approval came in March of 2013. And in October 2012, the DDA had provided a $260,000 grant primarily for replacing the Baker Commons roof.

In other action, the AAHC board approved a 3% cost-of-living adjustment for Hall, in line with other COLA increases given to city employees. The board also authorized changing the way its minutes are kept in order to begin using the city’s online Legistar system. The new approach will be less detailed in reporting deliberations, and will primarily provide a report on the outcome of action items. Currently, AAHC board minutes and board packets aren’t part of Legistar, but are provided on the AAHC page of the city’s website. Minutes from the AAHC board meetings are also attached to the city council agenda as an item of communication.

And near the end of the meeting, commissioner Marta Manildi reported that she is not seeking reappointment. Her term ends this spring, but she has offered to step down early. She was praised for her work in helping lead the AAHC through a difficult transition several years ago. Speaking during public commentary, Doughty said Manildi “really led the charge for a turnaround that’s been amazing to witness.”

A week later, at the Ann Arbor city council’s Jan. 21 meeting, mayor John Hieftje nominated Daniel Lee to serve out the rest of Manildi’s term. A confirmation vote is expected at the council’s Feb. 3 meeting. Hieftje described Manildi’s service on the commission as profound and beneficial.

Aftermath of Green Baxter Court Fire

Commissioners were briefed on aftermath of a fire in the early morning of Jan. 8 at Green Baxter Court, a public housing complex on Green Road next to Baxter Park. They had also received a written update in their board packet for the meeting. [.pdf of Green Baxter fire update]

Jennifer Hall, AAHC’s executive director, reported that it started around 4 a.m. in one unit and spread to all but one of the six units in that building. In some units, almost everything was completely destroyed. Even in other units where some items are salvageable, she said, everything is damaged by smoke and water.

The fire department is investigating the cause of the fire, Hall said, but they haven’t yet indicated what they’ve found. She reported that the buildings are covered by the AAHC insurance policy, and will pay for either demolition and rebuilding or rehabilitation. The city’s building inspector will make a determination about whether the structure needs to be demolished. If it does need to come down, Hall hoped to do that as soon as possible so that it’s not a safety hazard. However, emergency demolition would require approval by the U.S. Dept. of Housing & Urban Development (HUD), which provides funding for AAHC.

None of the residents were seriously injured, Hall said. Almost everyone left the building in bare feet, because it was very early morning, so a couple of people got frostbite on their feet. At least one child had some problems with smoke inhalation. Everyone who needs medical attention is getting it, she said.

Hall noted that AAHC has partnered very closely with the nonprofit Community Action Network, which runs the community center for Green Baxter Court under contract with the city. The staff of CAN have spent many hours working with residents trying to help them rebuild their lives, Hall said, including 14 children – the youngest of whom is two years old. At this point, residents are staying at an extended stay hotel while AAHC works to find more permanent homes for them. That means reaching out to landlords in the area that accept Section 8 vouchers. AAHC hopes to find housing in that same neighborhood, Hall said, but it’s one of the city’s highest-cost areas, so there are very few places that fit within the AAHC budget.

Aftermath of Green Baxter Court Fire: Update from CAN

Joan Doughty, executive director of Community Action Network, attended the AAHC board meeting and gave an update on how CAN and others are helping to deal with the aftermath of the Jan. 8 fire. She had emailed an update earlier in the day to commissioners, the media, and other members of the community, which was later posted on CAN’s website.

Joan Doughty, executive director of the nonprofit Community Action Network, gave an update to Ann Arbor housing commissioners about the response to the Green Baxter Court fire.

“Obviously this was uncharted territory,” she said. Doughty described the initial response, and how one of the first things they did was to contact the traumatic events response network (TERN). Members of that group met that same day, she said, and included the fire marshal and Liz Margolis of the Ann Arbor Public Schools. CAN staff also spent the day getting clothing and footwear for the residents, most of whom had emerged from the building barefoot and in their pajamas. CAN also put together a “what you need to know” handout that was distributed to residents on Jan. 8 – a four-page list of answers to questions.

The Red Cross paid for three days of hotel rooms at the Hampton Inn on Green Road, and the AAHC is paying for extended stay accommodations at the Microtel on Plymouth Road. For residents, getting that information about housing “settled a lot of fears almost immediately,” Doughty said. People were also very concerned about getting their children to school. It was helpful to have Margolis there to assure residents that the schools would provide transportation, Doughty said, and that no matter where they moved, the children would be able to complete the academic year at the same school they’d been attending.

People were affected by the fire to different degrees, Doughty reported, both in terms of their physical possessions, but also in their ability to cope with the situation. Two of the households had renters insurance, she noted, but they didn’t know what it covered or how to deal with making claims. So CAN is helping with that.

Doughty described several other groups that helped with the aftermath. Volunteers came to remove items from the burnt building before things were even further damaged by the elements. The Rotary Club of Ann Arbor North, which she described as a “godparent” to Green Baxter Court, is paying for storage of items that could be salvaged from the apartments. Rotary North also offered to replace one toy per child.

An interior view of the aftermath of a Jan. 8, 2014 fire at Green Baxter Court. (Photo courtesy of Joan Doughty.)

The Kiwanis Club of Ann Arbor, which runs a thrift shop, is helping families replace furniture and household items. Aaron’s Restoration has offered free cleaning for one large trash bag of clothes per household. MLive’s Warm the Children program gave $90 vouchers for every affected child to get clothing at Target, and shoes were purchased with Payless Shoes gift cards that CAN had received.

Other work in the aftermath included replacing eyeglasses, prescription drugs and dealing with other medical needs. Home-cooked meals had been served every night at the Green Baxter community center, which CAN operates. It provides a place where people can come together and support each other, Doughty said. CAN also has tried to be respectful of cultural differences, she noted. For example, one family is from Somalia and eats halal foods, so they were given gift cards to go to restaurants that serve this kind of food.

It’s been amazing to see the generosity between residents, she added, and how much they’re supporting each other. She said that one of CAN’s slogans is that their services start where the ability of the client stops. So the staff will help out based on each resident’s needs. That includes things like helping people turn off their cable TV service and other utilities, and contacting caseworkers from the Dept. of Human Services.

Now, CAN is moving into the next phase, Doughty said, which is to help residents rebuild their lives. She’s been documenting the lessons they’ve learned in this process, so that if something similar happens again, they’ll be better prepared. “Of course I hope these lessons will never have to be used,” she added.

Jennifer Hall, AAHC executive director, praised CAN as well as Beth Yaroch, AAHC residency manager, who oversees the Green Baxter Court complex. Doughty thanked Ron Woods, president of the AAHC board, for coming out to the site and taking an interest in the situation. She also thanked commissioners who had made donations to support CAN’s response to this emergency.

Ron Woods, president of the Ann Arbor housing commission board.

Woods in turn praised everyone involved in the response, including the Ann Arbor fire department, the trauma team, and CAN staff for helping people see, even in the midst of trauma, that there is some way forward. He also thanked the residents, who he said have responded with resilience, hope and support for each other.

Woods asked Hall to explain the protocol that AAHC has put in place to deal with this kind of emergency. Hall replied that there is a 24-hour on-call staff member to respond to potential emergencies. Typically the calls are for things like a water pipe or toilet breaking. There’s also 24-hour on-call maintenance, she said. AAHC pays a call center to take calls at any hour from residents, and the call center then contacts the AAHC manager who’s on call. That person then decides how to respond, Hall explained. For the Jan. 8 fire, residency manager Reggie Dalton was on call and was the first to respond for AAHC.

In the case of a fire, which is extremely unusual, Hall said, the fire department is obviously the first emergency responder. In that case, AAHC’s role is to keep people away from the building and out of harm’s way. Red Cross came out to make sure tenants had short-term housing and food, while AAHC staff and CAN staff worked through what needed to happen next.

Christopher Geer asked if there’s ever been an emergency of this magnitude at a housing commission site. Hall replied that there are constant issues and tragedies with tenants – like shootings, medical emergencies or small cooking fires – but those typically just affect one person or household. Geer said he only asked because it seemed like CAN and AAHC staff were veterans at handling this emergency. He praised their professionalism. Hall said the staff is accustomed to responding to crisis every day, but not to such a large degree all at one time.

Marta Manildi said she’d recently read that fires are more common than people think, so Doughty’s efforts to document the response is a good idea.

Aftermath of Green Baxter Court Fire: AAHC Resolution – Emergency Voucher

A resolution added to the agenda at the start of the Jan. 15 meeting was to amend Chapter 14 of the AAHC housing choice voucher administrative plan to include a preference for families who have been involuntarily displaced due to a fire, natural disaster or any other reason. It also would amend the plan to enable the AAHC executive director to suspend the waitlist preference system in cases of a federally declared disaster or other emergencies.

Because AAHC doesn’t have available units of its own for families who are displaced by the Jan. 8 fire, the commission wants to use its housing choice vouchers to find rental units for these residents. However, HUD requires amending AAHC’s voucher administrative plan in order to do that. The amendment also would allow AAHC to use the voucher program for people who aren’t in the public housing system, if there’s an emergency.

Any change to the administrative plan requires a 30-day public comment period. So the changes would take effect on Feb. 15, 2014. [.pdf of resolution]

Hall said that for tenants who find housing before Feb. 15, AAHC would pay the rent until the voucher is in place.

There was no board discussion on this item.

Outcome: Commissioners unanimously approved the amendments to the housing choice voucher administrative plan.

Aftermath of Green Baxter Court Fire: AAHDC Resolution – CAN Funding

AAHC is currently undertaking a process to convert its public housing complexes to a public/private partnership. To facilitate that process, in  2012 a separate entity was created by the housing commission, called the Ann Arbor Housing Development Corp.  The board of the AAHDC consists of the AAHC board members, plus AAHC executive director Jennifer Hall. Its meetings are held immediately after the AAHC board meetings.

Only one resolution appeared on the Jan. 15 AAHDC meeting agenda – for $9,000 in emergency funding to CAN to offset the cost of extra staff time used to deal with the Green Baxter Court fire emergency.

CAN provided a breakdown of estimated expenses:

• $1,000: Assistance with insurance claims (estimated 40 hours at $25/hour)
• $6,000: Assistance in searching for permanent housing, completion of applications, applying for security deposits, arranging for replacement furniture, moving in assistance, completing paperwork related to the move. (estimated 360 hours at $16.50/hour)
• $500: Misc. expenses, including gas for transportation of children to and from hotels to after-school programs, and for residents to new housing and other locations.
• $500: Additional administrative costs, including progress reports, billings, tracking of donations and expenses, etc.

A memo from CAN executive director Joan Doughty indicates that CAN will seek about $5,000 in community donations for “extra psycho-social support and activities to the affected children,” as well as for food and dinners served at community centers for the displaced residents, and other activities.

Before the vote, Hall gave an update on AAHDC finances. [.pdf of AAHDC financial statement] The main expense for AAHDC so far has been to pay the law firm Dykema, which is working to establish 501(c)3 status for the organization. That status will better prepare AAHDC to access funding in the future, Hall said. The application has been submitted to the IRS, she reported, but it could take several months to get approval, and might not happen until 2015.

Hall reported AAHDC has a fund balance of $50,440. She was requesting authorization from the board to pay CAN up to $9,000 for its work with Green Baxter Court tenants, to offset whatever funding isn’t received from the community.

Outcome: The AAHDC board unanimously voted to authorize up to $9,000 for CAN’s work.

Aftermath of Green Baxter Court Fire: Next Steps

An email sent on Jan. 15 by CAN executive director Joan Doughty includes a section that describes how the community can help with additional support for the families displaced by the fire. From the email:

For those who would like to help the families cope with the constraints of hotel residency, gift cards to movie theaters, Jump City, Zapzone and Jungle Java would be very welcome donations.

As the Extended Stay hotel has only microwaves, and to continue to provide a healing place for families to come together, CAN is providing full meals in its community center for the displaced families Monday through Friday evenings. Restaurants or individuals willing to help with this are encouraged to contact CAN directly – at info@canannarbor.org.

Thank you to the Rotary Club North, Kiwanis, Ann Arbor Public Schools, Clague PTSO and King PTO, Payless shoes, MLive/Ann Arbor.com Warm the Children, Ann Arbor Thrift Store, Michigan Municipal League employees, and Java Jungle who have all provided some assistance to these families, and to Frita Batidos and Zingerman’s for promising to donate a meal.

Please spread the word that if people are moved to help, they can make a donation directly on CAN’s website at canannarbor.org and CAN will use the funds to help these families rebuild their lives. Donors should write “GBC Fire” in the memo line. The AAHC and CAN do not have the capacity to store household goods or clothing, please make those types of donations to Kiwanis or the Ann Arbor Thrift Shop so families can select the items they need from organizations that specialize in managing these types of donations.

Public Housing Conversion

Lori Harris, vice president with Norstar Development, attended the Jan. 15 meeting to give an update on a major initiative to upgrade the city’s public housing units. Specifically, she presented Norstar’s recommendation for an equity partner to purchase low-income housing tax credits that the state awarded to AAHC late last year. The recommended firm is Red Stone Equity Partners. The firm is a “syndicator,” managing this kind of investment on behalf of its clients.

Lori Harris, vice president with Norstar Development.

By way of background, in 2012 the city was accepted into a new rental assistance demonstration program, known as RAD, offered by the U.S. Dept. of Housing and Urban Development (HUD). The program allows residents in selected housing units to receive rental assistance through long-term Section 8 subsidy vouchers that are tied to the buildings, rather than individuals. The RAD program also enables entities like the AAHC to partner with private-sector developers on housing projects – something the AAHC couldn’t previously do. The Ann Arbor city council gave necessary approvals in connection with the RAD program at its June 3, 2013 meeting.

The approach allows public housing entities to tap private investment for new developments or rehab of existing public housing, by converting current public housing units into units that are owned by the public/private partnership.

The main source of funding to upgrade the housing units is through low-income housing tax credits (LIHTC), awarded through the Michigan State Housing Development Authority (MSHDA). Tax credits are awarded for projects, and are in turn sold to investors who provide funding for construction or renovation. The pricing on those credits depends on market conditions and other factors, but Norstar originally expected to get roughly 83 cents on the dollar.

The AAHC board took a significant step when it selected Buffalo, N.Y.-based Norstar as a co-developer for this overhaul in January of 2013. The board was briefed on Norstar’s progress at a June 19, 2013 meeting covered by The Chronicle.

Then in August of 2013, AAHC made two applications for the low-income housing tax credits. The credits covered five public housing properties in two groupings: Maple Towers Ann Arbor LLC for one group (the complexes of Miller Manor and South Maple); and River Run Ann Arbor LLC for the other group (the Baker Commons, Hikone and Green/Baxter complexes). These properties make up the majority of public housing units in the AAHC portfolio – 248 out of a total 326 units.

At the AAHC board’s Jan. 15, 2014 meeting, Harris reported that she had “very good news” about the process. Norstar solicited proposals from seven different potential equity partners that had shown some interest in this project. Out of the seven, five proposals were made from the following firms: Great Lakes Capital Fund, Hunt Capital Partners, RBC Capital, Stratford Capital Group, and Red Stone Equity Partners.

Norstar evaluated these proposals based primarily on three factors, Harris explained. First, how much were the entities offering per credit? The offers ranged from 84 cents to 90.5 cents, Harris reported. That’s the amount that the investors would pay for every credit given to AAHC by the state, she explained. Norstar had estimated that the amount would be 83 cents, so the offers were better than expected.

It’s important that they’ll be receiving more than originally projected, Harris said, because the renovation costs are also higher than projected. [AAHC executive director Jennifer Hall had originally estimated that Ann Arbor’s public housing stock would need about $40,000 per unit in repairs and renovations over the next 15 years.]

The second factor used to evaluate these proposals is the “guarantee structure.” This is the amount that the equity partner would require from AAHC to ensure that investors are financially protected. The third factor relates to operating reserves: How much is the equity partner requiring to be set aside during the term of their investment? This would ensure that investors are paid even if operating revenues aren’t as high as projected – for example, if a property isn’t generating enough rental revenue because its units aren’t filled.

Harris provided charts to compare the various elements of the proposals from different potential equity partners. [.pdf of chart for River Run] [.pdf of chart for Maple Towers]

Based on an evaluation of the proposals, Norstar recommended choosing Red Stone Equity Partners for both projects. Red Stone is offering $9,154,455 in total equity for River Run, and $12,168,966 for Maple Towers. That amount is based on 89.5 cents on the dollar for each of the tax credits held by AAHC.

Other aspects of Red Stone’s proposal for River Run includes:

• A pay-in of 8.33% at closing, 35% at completion of the renovations, 51.67% when the properties are converted, and 5% when the IRS issues Form 8609, which finalizes the tax credit cycle.
• A tax credit price of 89.5 cents on the dollar. Harris noted that Red Stone had increased its offer to match a competitive bid. That price will bring in $803,953 more than the amount that Norstar originally estimated, which had been based on 83 cents per dollar.
• Asset management fees of $5,000 per year, increasing 3% annually.
• A requirement to keep an operating reserve of $225,000.

Red Stone’s proposal for Maple Towers includes:

• A pay-in of 7.92% at closing, 35% at completion of the renovations, 52.08% when the properties are converted, and 5% when the IRS issues Form 8609, which finalizes the tax credit cycle.
• A tax credit price of 89.5 cents on the dollar. Harris noted that Red Stone had increased its offer to match a competitive bid. That price will bring in $1,046,071 more than the amount that Norstar originally estimated, which had been based on 83 cents per dollar.
• Asset management fees of $5,000 per year, increasing 3% annually.
• A requirement to keep an operating reserve of $275,000.

Harris said that even though the pricing is great, she thought the best part of Red Stone’s proposal is the guarantee structure. Normally, investors would ask Norstar and the AAHC to provide a significant guarantee – either money set aside in a bank, or a corporate guarantee – over the 15 years of the tax credits. For each of the two projects, Red Stone asked for a $3 million net worth guarantee, which Norstar will provide. That means that Norstar must maintain a corporate net worth of at least $3 million until the project is “stabilized,” she explained, in case something goes wrong before the project is completed. In addition, Red Stone wants a $1 million liquidity requirement, which Norstar will also provide.

Jennifer Hall, executive director of the Ann Arbor housing commission.

But after the projects are completed and have shown three months of positive cash flow, the only guarantee for the remainder of the 15 years is the amount of the AAHC developer fee. That means resources will be freed up for additional projects, Harris explained. “It allows you to play another day.”

The other important aspect of the deal is the requirement for operating reserves. Norstar is putting in an operating reserve equal to four months of expenses – which is an underwriting requirement from MSHDA. Red Stone isn’t requiring additional reserves, Harris said. Other proposals asked for additional amounts.

Based on all these factors, Norstar recommended the selection of Red Stone for both the Maple Towers and River Run projects. Harris noted that Norstar closed its last deal with Red Stone about six months ago – a family housing project in Watertown, N.Y. She described Red Stone as having very skilled asset managers. “I hold them in highest regard,” she said.

If the AAHC board approves the selection of Red Stone, then Norstar will update the budgets for these projects. Red Stone would then issue a letter of interest (LOI) that would be submitted to the AAHC board for approval.

AAHC executive director Jennifer Hall reported that the proposals were reviewed by Rochelle Lento, a real estate attorney with Dykema’s Detroit office who is working on this project. Lento agreed with the recommendation, Hall said.

Public Housing Conversion: Board Discussion

Christopher Geer clarified with Harris that Norstar is guaranteeing completion of these projects. The guarantees would cover a shortfall in tax credits or a “recapture event.” He asked about the level of risk involved.

Regarding a tax credit shortfall, Harris explained that MSHDA has committed the tax credits to these projects, but won’t actually provide the tax credits until they are earned through eligible costs that are expended on the projects. A shortfall would occur if the projected eligible costs weren’t as high as anticipated, and therefore the projects didn’t get the amount of tax credits that are in the budget. “I don’t see any risk in these projects,” she told commissioners. “These are very expensive rehabs, and we’ll have plenty of eligible costs.”

Ann Arbor housing commission board member Tim Colenback.

Harris also explained the “recapture event.” For example, if a resident was thought to be at 50% area median income, but was in fact at 120% AMI, then that person would be over-income for living in these complexes. If that mistake isn’t caught, it might result in the IRS taking back some of the tax credits that were awarded. For Maple Towers, the AAHC’s guarantee requirement to cover that possibility is limited to $450,000 over 15 years. For River Run, the amount is $330,000. “It’s that limit that’s making [Red Stone's offer] so attractive,” she said.

Geer clarified that the operating reserve is what needs to be kept on the balance sheet. Harris explained that there will be two operating reserve accounts: $275,000 for Maple Towers, and $225,000 for River Run. It could be used to cover costs if, for example, federal funding is delayed. The next step, Harris said, will be to negotiate the partnership agreement that describes “all the rules we’re going to live by.” That agreement will explicitly state the conditions under which the operating reserves can be tapped.

Geer wondered if the deal with Red Stone affects the existing development agreement between AAHC and Norstar. Harris replied that this new arrangement is consistent with the existing development agreement.

“I can’t stress enough how people have responded so well to your project,” Harris told commissioners.

Outcome: Commissioners voted unanimously to approve Red Stone Equity Partners as an equity partner.

Public Housing Conversion: Next Steps

After the vote, Geer noted that the board has been briefed previously about increased cost estimates. He wondered if the higher-than-anticipated tax credit offer helped offset those costs. “Absolutely,” Hall replied.

At this point, if AAHC had more funding, “we could do more,” Hall said. “We don’t have unlimited resources to do everything we want to do.” For example, it would be great to replace the flooring and cabinetry in every building, she said, but they don’t have the budget for that. Each housing unit is being evaluated to assess what needs to be done, on a ranking of 1 to 5. “We’re trying to be more frugal in figuring out where best to put our funds,” Hall told commissioners.

Ann Arbor housing commission board member Christopher Geer.

All structural deficiencies will definitely be addressed, she said. For example, Miller Manor needs an upgrade to its electrical system. If possible, energy efficiency upgrades will be completed as well. In terms of aesthetic, “quality of life” renovations, Hall acknowledged that residents care a lot about that and as much as possible will be done.

There’s still a gap between the renovation costs and the amount of funding that AAHC will receive through the tax credit investments. Hall said they’ll continue to work with the Federal Home Loan Bank, providing as much information as possible to secure $500,000 for Maple Towers. “That’s still on the table,” she said.

Hall also reported that she’d met with the Ann Arbor Downtown Development Authority staff and the DDA board’s partnerships committee that morning to request $600,000 for the projects. She didn’t think the DDA would make a decision on that until March or April.

If all of that funding comes through, then the gaps in funding would be filled, Hall said, with an anticipated closing for these first two projects in May of 2014. She cautioned that AAHC didn’t want to tap too many community resources for this first phase, because there will be other properties to renovate or rebuild in later phases. She said discussions are happening with the city about what AAHC will need for the next phase, similar to the kind of gap financing that the DDA might do for this first phase.

Marta Manildi asked whether the AAHC properties are located within the DDA district. Baker Commons, at Packard and South Main, is within the DDA boundaries, Hall replied. Miller Manor is within a quarter-mile of the DDA district – within that area, the DDA board allows investments in affordable housing, she said.

Next month, the AAHC board will receive a new revised scope for these two first-phase projects, Hall said.

For the second-phase projects, Hall said she hopes to apply for tax credits in August of 2014. It would be beneficial to have site plan approval from the city by then, so AAHC is working with architects and engineers to get ready for that process. There will be a citizen participation meeting for that soon, likely in early February, she said.

The second phase involves two AAHC complexes: (1) North Maple Estates at 701-739 North Maple – north of Dexter Avenue, on the west side of North Maple; and (2) 3451-3457 Platt – on the east side of Platt Road, north of Belvidere.

In a follow-up phone interview with The Chronicle, Harris said the second phase will result in 71 units, including 46 at North Maple Estates. Regarding the Platt Road properties, four single-family houses on the east side of Platt will be demolished, and replaced with structures totaling 21 units in a slightly different location on that site to avoid flooding issues. There’s also a strip of vacant city-owned land on the west side of Platt, north of Verle and south of Sharon. The land runs from Platt over to Springbrook. In that location, the plan calls for building four single-family homes.

The project’s team includes architect John Mouat of the Ann Arbor firm Mitchell & Mouat, and Scott Betzoldt of Midwestern Consulting. [Mouat serves on the board of the Ann Arbor Downtown Development Authority.] Harris said there’s not yet a firm estimate on the budget for this second phase – that is currently being developed. They hope to start the city’s site plan approval process in February.

A future phase will involved the housing commission’s Broadway Terrace at 504-1506 Broadway, as well as the building along Henry Street, between South State and White Street. The addresses are 1514 and 1520 White St., 1521 S. State St., and 701-719 Henry St.

Administrative Items

Two items on the Jan. 15 agenda related to administrative issues.

Administrative Items: Cost-of-Living Adjustment

One resolution authorized a 3% cost-of-living adjustment for AAHC executive director Jennifer Hall. Labor contracts include this increase for union employees. According to Hall, city administrator Steve Powers gave the same increase to non-union employees at the start of the current fiscal year, on July 1, 2013. Hall reported that she also gave her staff the same increase, but it requires board approval for the increase to apply to her own salary.

According to the city’s human resources staff, Hall’s base salary is $88,000.

Outcome: Commissioners unanimously approved the cost-of-living adjustment for Hall.

Administrative Items: Meeting Minutes

Hall asked for feedback on changing the way AAHC board minutes are kept, in order be consistent with the way minutes of other city commissions are kept in the city’s Legistar system. The approach would be less detailed in reporting deliberations, and primarily provide a report on the outcome of action items.

Margie Teall, a Ward 4 representative on city council, attended the Jan. 15 housing commission meeting. She serves as the council’s liaison to AAHC.

Currently, AAHC minutes and board packets aren’t part of Legistar, but are provided on the AAHC page of the city’s website. Minutes are attached to the city council agenda as an item of communication. Hall said her preference would be for more of a summary approach.

Tim Colenback felt it was important that the minutes are accessible to the public. Marta Manildi said she’d defer to Hall on this issue. But as a citizen, Manildi added, she’s always hated summary minutes, “because I feel like I have no idea what really happened.” So her own personal bias would be for more detailed minutes, Manildi said. Others might have a different view, she added. “I know Leigh Greden would!” [Greden is a former city councilmember who until last year served on the AAHC board.]

Christopher Geer said he came out on the opposite end of the spectrum from Manildi. Despite all the commentary that takes place during deliberations, he said, the impact ultimately comes from the decision that’s made, so that’s what is important. It can be a very subjective process to decide what to put in more detailed minutes, he noted. “That’s why most organizations just stick to the factual stuff that occurs during the meetings.”

Ron Woods felt that more detailed minutes provide a more complete understanding, and as a reader of minutes, he finds it helpful to see how decisions were made. However, he said he’d be quite comfortable to align with the rest of the city.

Outcome: Commissioners voted unanimously to switch the approach for taking minutes to an action-item format.

Changing Commission Membership

Near the end of the Jan. 15 meeting, commissioner Marta Manildi announced that it might be her last meeting before her term ends on the housing commission. Her term is ending, and she is not seeking reappointment. [A city council resolution that appointed her in 2010 states that her term ends on April 30, 2014. The AAHC website indicates that her term ends on May 5, 2014.]

Manildi said she’s told mayor John Hieftje that she’d be willing to step down earlier if he can find someone to fill the seat. Housing commission board members are nominated by the mayor, with a confirmation vote by the full city council. [At the city council's Jan. 21 meeting, Hieftje nominated Daniel Lee to serve the remainder of Manildi's term. Hieftje also said he expects to nominate Lee after that for a full term later this year. A confirmation vote by the city council is expected on Feb. 3.]

Manildi said she wanted to say that she’s felt very privileged to serve on the board. When she joined the board, “the housing commission was in quite serious trouble,” Manildi said. Through a lot of effort by many people, as well as some amount of luck, the commission has come far and that’s wonderful to see, she added.

Marta Manildi, a local attorney and an Ann Arbor housing commissioner whose term ends this spring. She is not seeking reappointment.

The relationship with the city is much stronger now, Manildi said, and that’s better for the housing commission. She’s learned a lot from the staff, from other commissioners, from AAHC partners and residents. The fire at Green Baxter Court was a terrible thing, she noted, but it’s also shown how effective the AAHC staff and partners are in handling a crisis.

Manildi also praised the effort to renovate the AAHC properties, which she said is key to providing better, sustainable housing to low-income residents. “It’s really promising, and everybody involved deserves a tremendous amount of credit.”

She received a round of applause from staff and other commissioners. Ron Woods said they’ll miss her unique skill set and institutional knowledge. She is the longest-serving current commissioner, initially appointed in June of 2009.

Joan Doughty of the nonprofit Community Action Network also praised Manildi during public commentary. “When Marta first started, it was a very difficult place to work and it was a dark day for the housing commission,” Doughty said. “She has been very modest in not taking credit for the turnaround. At some point she was the only member standing. She was incredibly brave and passionate and compassionate in making sure that the housing commission started being much more responsive and responsible. She’s really led the charge for a turnaround that’s been amazing to witness.”

By way of background, at its May 18, 2009 meeting, the Ann Arbor city council approved $117,040 to hire the consulting firm Schumaker & Company to conduct a needs assessment of the housing commission. The outcome of that work was presented to the city council by consultant Kerry Laycock at its Jan. 11, 2010 working session. [See Chronicle coverage: "Housing Commission Reorganizes" – a .pdf file of the Schumaker report is downloadable here.]

The Schumaker report described the housing commission as “an agency that is chronically underfunded, focused on crisis management, offering poorly maintained and outdated housing, and insufficient supportive services for a population with significant life challenges.”

A confidential five-page memo to councilmembers from city administrator Roger Fraser – dated Feb. 27, 2010, and obtained by The Chronicle in response to a FOIA request – maintained that board members at the time had failed to address the commission’s chronic problems, and were mishandling the selection process of a permanent executive director. The memo did not explicitly call for the removal of board members, but it seemed clearly designed to lay the groundwork for that move.

A resolution to remove the board and appoint new members was approved by the city council council at its March 15, 2010 meeting. New members included Jayne Miller, a former senior administrator with the city, and Mark McDonald, a property manager for large multifamily residences. Only two members of the previous board were reappointed: Manildi, who is an attorney with Hooper Hathaway; and Deborah Gibson, a resident of the city’s public housing who was reappointed only to a one-month term. Gibson resigned the following day.

Soon after, the council appointed two additional board members: Ron Woods, an Eastern Michigan University professor, and Sasha Womble, a resident commissioner to replace Gibson. Woods and Manildi are the only remaining board members from 2010. Others who have been appointed but are no longer on the commission include Andy LaBarre, who resigned after winning an election for Washtenaw County commissioner in 2012, and former city councilmember Leigh Greden, who was not re-appointed when his first term on AAHC expired last year.

There has also been turnover in the executive director’s position. Betsy Lindsley retired in the summer of 2009 and was replaced by Marge Novak – first as interim director, then as the permanent replacement. However, Novak resigned in July of 2011.

Jennifer Hall has served as executive director since she was hired in the fall of 2011. Hall previously was housing manager for the Washtenaw County office of community development.

Housing commissioners present: Tim Colenback, Christopher Geer, Marta Manildi, Ron Woods (president). Also: AAHC executive director Jennifer Hall.

Absent: Gloria Black.

Next board meeting: Tuesday, Feb. 25 at 6 p.m. at Miller Manor, 727 Miller Ave, Ann Arbor.

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Lori Harris, Norstar Development senior project manager, describes a potential site plan for redeveloping the Ann Arbor housing commission’s North Maple complex. Harris and Norstar president Rick Higgins attended the AAHC board’s June 19, 2013 meeting. (Photos by the writer.)

Norstar Development president Rick Higgins and Lori Harris, the firm’s senior project manager, briefed commissioners at the board’s June 19, 2013 meeting. The board had selected Norstar as a co-developer for this overhaul in January.

Norstar’s presentation included a review of the two low-income housing tax credit applications that the AAHC plans to make in August to the state of Michigan. The applications will cover a total of five public housing properties: Miller Manor, South Maple, Baker Commons, Hikone and Green/Baxter complexes. These properties make up the bulk of public housing units in the AAHC portfolio – 248 out of a total 326 units.

If approved, the tax credits would provide a large funding source for renovating those properties. It’s part of Norstar’s effort to help AAHC convert Ann Arbor’s public housing units into public/private partnerships through a new rental assistance demonstration program, known as RAD, offered by the U.S. Dept. of Housing and Urban Development (HUD). AAHC was accepted into the program late last year. The goal is to allow AAHC to use private financing for capital improvements in its existing housing stock, which is decades-old and in need of major upgrades.

The Ann Arbor city council signed off on this process by unanimously passing a slate of resolutions at its June 3, 2013 meeting. One of the most crucial actions was approval of an ownership transfer for public housing properties – from the city of Ann Arbor to the housing commission. AAHC has managed, but does not own the properties.

As part of the tax credit application review process, Norstar representatives described the financing and legal structure to be used in renovating these first five properties. Among the challenges is the potential need for significant asbestos abatement at most of the locations, as well as major HVAC infrastructure upgrades at Miller Manor. Higgins indicated that he’s somewhat worried about the budget for these renovations, and thought it might be necessary to seek additional funding from the city and other sources.

In addition to the five initial properties that will be renovated, Norstar also is developing site plans – working with AAHC and the city’s planning staff – for four AAHC complexes that will likely be demolished and, with some exceptions, rebuilt: North Maple Estates, Platt Road, White/State/Henry, and Broadway Terrace. Redevelopment of these sites, particularly at North Maple Estates and on Platt Road, is expected to add 26 new units to the city’s low-income housing stock.

Related to this conversion process, no action was taken by the AAHC board on June 19 . Jennifer Hall, AAHC executive director, told commissioners that she plans to bring forward a voting item for them at their July 17 meeting – related to amending the city’s RAD application. The original application covered only about 80% of AAHC properties, but now the goal is to include all properties in the RAD conversion. Hall noted that because Norstar representatives were in town on the date of the June 19 board meeting, she’d asked them to brief commissioners on the redevelopment efforts so far.

Tax Credit Financing Update

Rick Higgins, Norstar’s president, began by focusing on the tax credit application that the AAHC plans to make in August. The AAHC is applying to the state’s low-income housing tax credit (LIHTC) program. “That’s key, because that will be our biggest source of funding,” he said. The federal program is administered by the Michigan State Housing Development Authority (MSHDA). Tax credits are awarded for projects, and are in turn sold to investors who provide funding for construction or renovation. Pricing for those credits varies, depending on market conditions and other factors. For this project, Norstar expects to get roughly 83 cents on the dollar.

Originally, Norstar had planned to package the city’s two mid-rise public housing projects – Miller Manor and Baker Commons – into one application, Higgins said, with a second application to include the group of Hikone, Green/Baxter and South Maple townhouse complexes. But for a variety of reasons, including the way that points are scored for the LIHTC program, Norstar decided to group the five properties in a different way. For example, an application gets more points if 10% of the units have barrier-free access. It’s not possible to reach that target with a rehab of South Maple, Higgins said. “It would cost an exorbitant amount of money to try to do that for the townhouses.” However, by combining South Maple with one of the larger mid-rise complexes, which can more easily be made barrier-free, Norstar can reach that 10% target of total barrier-free units in its application.

Rick Higgins, president of Norstar Development.

Higgins told commissioners that the LIHTC program is very competitive. He estimated that only about 30-40% of applications are actually funded. There’s no point in applying if you don’t have competitive scores, he added. “So we have to continually look at what we’re doing and how we’re doing it, so we can get those points. If we don’t get those points, we have nothing.”

Lori Harris, Norstar Development senior project manager, noted that Norstar has been trying to rearrange these five properties into ways that will yield the highest scores. The reason they had originally grouped the two mid-rises together was that those properties are very similar, she explained, and they thought it might be easier for investors to understand. But when they looked closer, they decided it made more sense from a scoring perspective to group each mid-rise with one or more townhouse complexes. “It’s really about how we’re going to package the plan,” she said. Harris noted that AAHC can only make two applications to MSHDA per round. The hope is that both applications made in August will be funded.

The two applications are: (1) for Miller Manor (103 units) and South Maple (29 units); and (2) for Baker Commons (64 units), Hikone (29 units) and Green/Baxter (23 units). That combination was most advantageous for scoring, Higgins said. These five properties also make up the bulk of public housing units in the AAHC portfolio, he noted – 248 out of the total 326 units.

Hall added that this approach doesn’t change the overall scope of work for redeveloping the AAHC properties.

Higgins reported that in addition to these five properties in the first phase, Norstar has evaluated other AAHC properties as well, including North Maple, Broadway, lower Platt, and White/State/Henry. “We think those are very difficult to rehab,” he said. The property at 504-1506 Broadway in particular was a challenge, he said. “It’s not well built, it’s terribly designed. It’s built into a hill – I don’t even know how you’d fix it.” Though they haven’t yet made a final recommendation, Higgins said they’re leaning toward tearing down the housing at all of those sites and rebuilding, rather than trying to rehab. In the case of Broadway, Higgins questioned whether anything should be rebuilt there, given the topography.

He also criticized the units at lower Platt, where there are four houses, each with five bedrooms. He said he’s been doing this kind of work for 20 years, and can walk into a building and quickly determine if it can be saved. He didn’t think the Platt property could be rehabbed.

The goal is to end up with more public housing units than the AAHC now has, Higgins said. At North Maple, for example, Norstar believes the site can be configured to get more units there. [North Maple Estates consists of 20 single-family homes with a total of 85 bedrooms. In that same complex, there are two three-bedroom duplexes, for a total of 12 bedrooms.]

Harris explained that Norstar’s presentation to the AAHC at that June 19 meeting was to assure commissioners – so that commissioners could in turn assure city councilmembers – that there would be at least as many public housing units after converting to RAD as there are now.

In response to a query from Gloria Black – the commissioner representing AAHC tenants – Higgins explained that if a property is torn down and rebuilt, during the construction phase the tenants will be temporarily relocated to other housing. It usually involves relocating to vacant units within other AAHC complexes, or giving tenants housing vouchers for rental property. When the new units are finished, the tenants previously housed there will have a “right of return,” as long as they’re in good standing with AAHC.

Norstar is focusing on the first five properties – Miller Manor, South Maple, Baker Commons, Hikone and Green/Baxter – for the funding round in August 2013. Norstar’s June 19 presentation to AAHC board members included an overview of financing for those conversions. The remainder of the AAHC properties will be handled in subsequent applications in February and August of 2014, Higgins said.

Legal Structure, Financing

Rick Higgins of Norstar briefed commissioners on the legal and financial aspects of the first phase of RAD conversion, with two applications for low-income housing tax credits and two separate ownership structures: (1) Miller Manor and South Maple; and (2) Baker Commons, Hikone and Green/Baxter.

He noted that the city of Ann Arbor, which owns the properties, has agreed to transfer ownership to AAHC. [That action was approved unanimously at the city council's June 3, 2013 meeting. However, the ownership change won't occur until the AAHC is ready to bring in investors.] By owning the properties, AAHC will be able to enter into a long-term ground lease – likely 60 years or more – with the low-income tax credit partnership.

For the Miller Manor and South Maple properties, for example, the ground lease would be held by an entity called Maple Tower Limited Dividend Housing Association. That entity would be owned by the investors Great Lakes Capital Fund Limited Partner (with a 99.99% ownership stake) and Maple Tower LLC (with an 0.01% ownership). Maple Tower LLC would be owned by the Ann Arbor Housing Development Corp., which in turn is owned by the AAHC.

Chart provided to the AAHC by Norstar showing the ownership structure for Miller Manor and South Maple public housing properties.

Higgins said he’s talked to potential investors in great detail about the ownership structure, and he believes the AAHC will be able to achieve its goal by being the sole general partner, without any ownership participation by Norstar. The investor will be a limited partner, but have 99.99% ownership of the company that will hold the ground lease with AAHC. AAHC will continue to manage the properties, under a management agreement with the partnership that holds the long-term ground lease. That agreement will outline the fees paid to AAHC for its management activities.

So ultimately, Higgins said, the ownership and management structure won’t change, though AAHC will have to account for it differently. But as a practical matter regarding day-to-day operations, “it won’t really change at all,” he said.

Norstar will be a turnkey developer on these projects. As part of that, the company offers certain guarantees, he said. The biggest one is the guarantee that the project will be built – and that’s what the banks, investors and others will be looking for from Norstar, Higgins said, because AAHC “doesn’t have the wherewithal to be able to do that.” Norstar will also run the job, with all the financing flowing through the firm. They’ll manage the books and oversee the general contractor, subject to AAHC’s approval.

Marta Manildi, board member of the Ann Arbor housing commission.

However, AAHC will be responsible for certain operating guarantees, Higgins noted. For example, AAHC will need to guarantee to cover operating deficits – possibly $300,000 or more – for these projects, in needed. AAHC will also be responsible for complying with conditions of the tax credits. It means making sure residents meet the income requirements that qualify the project for tax credits. Initially, Higgins explained, AAHC will enter into an oversight agreement with an experienced tax credit management company, which will allow AAHC to earn points with MSHDA when it evaluates the tax credit application.

Commissioner Marta Manildi asked Hall if all of these elements have already been incorporated into AAHC’s future operational plans. Who will staff the task of monitoring tax credit compliance, for example?

Hall replied that the AAHC staff won’t change. All of the staff will need to be trained on these requirements, however. MSHDA requires a certain amount of experience handling these tax credit regulations, Hall noted, and right now, AAHC staff doesn’t have that experience. That’s why a management company is needed as a partner. So instead of dealing with public housing regulations, Hall said, the AAHC staff will deal with tax credit regulations and vouchers. “The rules aren’t that different,” she added.

In response to another question from Manildi, Hall noted that the status of AAHC employees was clarified at the city council’s June 3, 2013 meeting. [The council approved a resolution stating that current employees of the housing commission are city employees and will continue to be city employees – even after the conversion of AAHC properties to project-based vouchers.]

Higgins added that none of the new ownership entities will have any employees. The employees of the AAHC will provide services to the other entities under a management agreement. The ownership entity for the tax credit financing will be primarily a legal and accounting entity only, he said.

Manildi also wanted to know what mechanism the AAHC would have for auditing or evaluating issues that Norstar is taking care of on AAHC’s behalf. Higgins replied that Norstar has to provide a “cost certification” report to AAHC, MSHDA and others involved in this process. It’s prepared by an accountant, and includes a list of all costs for developing a property. Higgins said he would also make a detailed report to the AAHC board at the end of the project.

Responding to a query from commissioner Gloria Black, Higgins said that part of the reason AAHC hired Norstar is that banks will lend to Norstar, and investors rely on Norstar for these kinds of tax credit deals. “We have the financial wherewithal to stand by our guarantees – that’s one of the reasons you brought us to the table,” he said. Norstar will continue to provide AAHC with updated financial statements throughout this process, he added.

Higgins reviewed the initial development budgets and operating budgets for a 15-year period. From a private sector point of view, he said, the expenses are very high, but from a public sector perspective, the expenses aren’t out of line. “That’s what we’re buying into – it is what it is,” he said. [.pdf of Norstar-prepared budgets]

He noted that public housing properties have a very high expense-to-income ratio – so there’s not a lot of surplus. Investors require a 15-year scenario, allowing for a 2% income increase every year and a 3% annual increase in expenses. Investors want to assess the worst-case scenario, he said, if expenses increase more than income. Unfortunately, he added, because of the high expense-to-income ratio, in the 15th year of this trending scenario, the cash flow is negative. Because of that, Higgins said he can’t borrow as much as he normally would for this kind of project.

Norstar is now estimating debt of $500,000 for the 132-unit Miller/Maple project and $1.6 million for the Baker/Green/Hikone project, with 116 units. Those debt levels are achievable, he said.

Ann Arbor housing commissioner Christopher Geer.

Given those amounts that can be borrowed, Higgins said the next step is to look at other possible funding. Luckily, he said, the city of Ann Arbor and Washtenaw County are very supportive of affordable housing. In addition, AAHC is applying for $500,000 loans for each of these two projects from the Federal Home Loan Bank. That’s also factored into the budgets that Norstar has prepared, he said. Lori Harris noted that Avalon Housing, an Ann Arbor nonprofit focused on affordable housing projects, had done a good job in helping with that FHLB application, as a consultant on the project.

Higgins then explained that the AAHC properties have been appraised, so that the value of those buildings can be transferred into the new partnership. It’s possible to obtain tax credits on the value of those buildings, he said, so it’s important for those appraisals to be as high as possible. [In the budgets, these appraisals are listed in the "structures" line item: $1.04 million for Baker/Green/Hikone, and $1.64 million for Miller Manor/South Maple.] As an example, Higgins said he could generate an additional $250,000 for the Baker/Green/Hikone project by using this strategy.

Hall observed that the value of the buildings might seem very low, but it’s not based on market rates. Harris explained that the appraisals are based on the fact that the buildings are rent-restricted, and on the assumption that they’ll be part of the RAD program.

The bottom line, Higgins said, is that Norstar can generate nearly $52,000 per unit for the Miller Manor/South Maple project, and about $37,000 per unit for the Baker/Green/Hikone project. These estimates reflect the hard costs for the work that will go into these buildings, he said.

Now, Norstar is working with a raft of contractors to look at the cost of redevelopment. [.pdf of consultants chart] One of the biggest challenges is asbestos, Higgins said. It’s likely that asbestos is in the joint compound tape of every building in the first phase of this RAD conversion, except for Baker Commons. Most of the buildings were constructed in the late 1960s and early 1970s, when asbestos was commonly used. If asbestos is determined to be in these buildings, then removing drywall and certain other construction activity would have to be handled by an asbestos removal company, to protect the construction workers. It’s possible that the asbestos removal alone could cost as much as $10,000 per unit. Higgins stressed that there’s no safety risk for residents, but the health issue concerns workers who’ll be removing materials that might contain asbestos.

The other challenge relates to Miller Manor. Higgins reported that there’s no air-conditioning in the bedrooms, which impacts quality of life. The plan is to put new windows into the bedrooms, and new HVAC units outside on the balconies, with ducts leading into the bedrooms. That’s an expensive project, he said, especially considering the asbestos issue. These renovations also must meet certain energy efficiency standards in order to be considered for funding, he said, which adds to the expense.

Another problem relates to the sewage systems in these developments, which need to be addressed. All of these things add to the cost of the redevelopment, Higgins said. So the question is how much money will be left after that.

Right now, Norstar is evaluating all the costs and all the aspects of the project that will be required. They’re still talking about other possible elements, like adding geothermal energy or solar arrays. There are many moving parts, he said.

Ron Woods, president of the Ann Arbor housing commission board.

Gloria Black asked how tenants will be affected by all this. Hall replied that the residents won’t see much change, because most of it will be happening administratively. The same AAHC staff will still be working with residents, and residents will need to meet the same income requirements that are in place now.

Christopher Geer clarified that in the Baker/Green/Hikone estimated development cost of $9.941 million, about $6 million in funding will come from the low-income housing tax credits. But that funding from investors won’t come in until after construction, so Norstar plans to take out a $5.25 million construction loan at an estimated 3.5% interest. Other sources of construction funding include possibly $300,000 from the Ann Arbor Downtown Development Authority, a $500,000 loan from the Federal Home Loan Bank, and $750,000 in equity.

For the Miller Manor/South Maple $13.293 million redevelopment, the construction funds include a $9.4 million construction loan, a $500,000 loan from the Federal Home Loan Bank, $200,000 from the Ann Arbor housing trust fund, and $950,000 in equity.

Higgins said he’s worried about the budget, but noted that Hall “keeps saying she can go with her hand out some more” to get additional funds from city sources. That might be necessary, he said.

Hall noted that if the rents weren’t restricted, it would be possible to borrow more upfront and therefore do a broader rehab. So the challenge will be in determining how much can be done with the resources available, she said.

Demolition & Redevelopment

As part of the June 19 presentation to the housing commission, Norstar’s Rick Higgins and Lori Harris also presented preliminary site plans for redevelopment of four AAHC complexes that believe should be demolished and, with some exceptions, rebuilt: North Maple, lower Platt, White/State/Henry, and Broadway Terrace.

Demolition & Redevelopment: North Maple Estates

The current AAHC complex at 701-739 North Maple – north of Dexter Avenue, on the west side of North Maple – consists of 19 single-family homes with a total of 85 bedrooms, as well as two three-bedroom duplexes with a total of 12 bedrooms.  AAHC executive director Jennifer Hall noted that it’s the busiest of AAHC’s properties.

Higgins described it as the site with the most exciting potential for improvement. The housing was built at the lowest portions of the site, he noted, while an asphalt basketball court is at the highest point. The current configuration does not make sense from the perspective of drainage and stormwater management, he said.

Harris reported that AAHC staff have met with the city’s planning staff to get a sense of what kind of development would be possible. The site plan has gone through a couple of iterations so far, she noted.

Draft site plan for redevelopment of North Maple Estates public housing complex. North Maple is the road running north to south on the east (right) side of this aerial view.

An earlier site plan had larger buildings, Harris said, but the current plan calls for smaller buildings, to be respectful of the types of housing in the surrounding neighborhood. A community center would be centrally located on the west side of the site, and parking will be located adjacent to each of the buildings.

Currently, the drive coming off of North Maple Road dead-ends in the complex, Harris noted. In addition to that entrance, the new plan calls for a drive to connect to Vine Street on the north end, with another drive to the south exiting onto Dexter Avenue. Hall noted that she has talked with city fire department officials, and current standards would not allow for a dead-end like the one that currently exists in this complex.

Ann Arbor housing commissioner Gloria Black.

Harris said there’s a great opportunity for improving the site, from a quality of life perspective for residents. New construction would improve accessibility and “visitability,” she said. Visitability means that guests with disabilities would have access to the first floor of a resident’s living area. That’s something that most AAHC properties don’t have, she noted.

All the new units would be built to be energy efficient and modern, Higgins said.

Commissioner Gloria Black described the current North Maple complex as a “hodge-podge of buildings.” She wondered if the new units would be less vulnerable to damage caused by tenants. Harris replied that some Norstar projects include “high-abuse” drywall. Those are design details that need to be worked out, she said. Harris also pointed out that if a unit has 4-5 bedrooms but only one bathroom – as is the case with the North Maple units – then “that’s a very high-abuse bathroom.” So by designing units that will better fit the needs of families, she said, those units will fare better in terms of wear and tear. Higgins added that new five-bedroom units will have 2.5 bathrooms, and four-bedroom units will have two bathrooms.

Higgins noted that the North Maple buildings have vinyl siding. He reported that in other Norstar projects, they typically use brick or other durable material for entryways or porches, which are high-traffic areas.

These site plans are more conceptual, with many of the details – including building materials and other design issues – to be worked out as the projects move forward.

The proposed redevelopment on North Maple would increase the number of units from 23 to 41. Hall noted that the two duplexes on the site won’t be torn down, but rather will be rehabbed. The duplexes were built in the early 1980s and aren’t in as bad of shape as the single-family homes, which were built in the late 1960s.

Demolition & Redevelopment: Lower Platt

The AAHC property described as lower Platt is located at 3451-3457 Platt – on the east side of Platt Road, north of Belvidere. Currently, there are four single-family houses at that site, each with five bedrooms. Three of those houses are in the floodway, Hall noted, and the water table is higher than the basements. When it rains, the properties flood. The plan is to tear down the existing buildings, and rebuild 12 new townhomes further north on the same site, on land that’s currently vacant.

Draft site plan for Ann Arbor Housing Commission’s Lower Platt redevelopment, on the east side of Platt Road, north of Belvidere.

In addition, there’s a strip of vacant city-owned land on the west side of Platt, north of Verle and south of Sharon. The land runs from Platt over to Springbrook. Norstar’s development plan calls for building four duplexes there – a total of eight units – with two duplexes accessed from Platt, and the other two accessed from Springbrook.

Draft site plan for redevelopment of city-owned vacant land between Platt Road and Springbrook, south of Sharon. In this image, Platt is the north-south road on the east (right) side.

Gloria Black asked whether these projects would address the site’s drainage issues. Higgins replied that new construction must meet city code, regarding drainage and all other code requirements.

Demolition & Redevelopment: White/State/Henry

Currently, AAHC has 28 units in a building along Henry Street, between South State and White Street. The addresses are 1514 and 1520 White St., 1521 S. State St., and 701-719 Henry St. The proposal calls for tearing down the existing building.

Draft site plan for Ann Arbor Housing Commission building on Henry Street, between South State and White streets.

This was the site that the city planning staff had the most trepidation about, Harris said. The city staff want the layout to fit better into the neighborhood’s streetscape. So Harris reported that this particular site plan is being put on the back burner for now. The goal is for the new construction to keep the same number of units (28).

Higgins called the current layout a security and maintenance nightmare. Norstar is trying to come up with a design that gives every unit its own door, to eliminate common space in the building. It helps security and makes for better quality of life for residents, he said.

Regarding parking, Harris said the site would need a parking variance from the city. Hall added that the new site plan has more parking than currently exists at that location, but she noted that for the city planning staff, parking “seemed to be the least of their concerns.” The city is moving toward alternative transportation, she said, and isn’t as car-centered. There’s a lot of on-street parking in that location, she added.

The new units would be ADA compliant, Hall noted. That’s something that could not be done by simply rehabbing the existing units.

In a follow-up phone interview with The Chronicle, Hall said another possibility for that site is to gut the existing building and do a complete internal rehab.

Demolition & Redevelopment: Broadway Terrace

The Broadway Terrace property, 20 units located at 1504-1506 Broadway, has serious challenges, according to Norstar. Higgins joked that in a few years, parts of it could simply fall down a cliff.

Draft site plan for Broadway Terrace at 1504-1506 Broadway. The street is located at the top left corner of this image.

Harris said the proposed site plan includes 14 units, but a lot more due diligence must be done to ensure that rebuilding on the site is feasible. Higgins added that the amount of earthwork that’s needed is formidable, and 20-30 foot retaining walls would probably be necessary. The cost of that might be prohibitive, he said. The current construction, with the buildings abutting the hill, “is a disaster waiting to happen.” Norstar isn’t yet ready to make a recommendation, Higgins added.

Another factor relates to cost caps that MSHDA implemented about a year ago, Harris explained. For every type of project, there’s an upper limit of total development cost per square foot. The current limit is $173 per square foot for new construction. The cap is different for rehabs or historic preservation. “It’s really been squeezing projects that are in urban locations,” Harris said.

Higgins put it this way: “There’s no way this project [on Broadway] will come in at those cost caps.” Even North Maple will be a challenge, because of the earthwork involved. The buildings that Norstar is proposing aren’t cheap, either, he said. Duplexes are more expensive than buildings with multiple units, he said. But the site plans are good, he added, so it’s Norstar’s job to figure out how to make it work for AAHC, the community and investors.

Jennifer Hall, executive director of the Ann Arbor housing commission.

Gloria Black suggested using the Broadway property as green space. Higgins replied that if Norstar recommends demolishing those units and not rebuilding, then it’s up to the AAHC and city to decide what to do with the property.

Marta Manildi asked if MSHDA could waive the development caps. Harris explained that the caps are punitive. That is, if the project goes above the cap, then MSHDA gives the project’s funding application negative points in that category. If the project is below the cap, then it’s awarded positive points.

Higgins noted that there are ways to work around it. For example, if the city contributed $500,o00 to demolish the existing buildings and regrade the site, then that amount doesn’t need to be included in the budget that’s presented to MSHDA – which makes the development costs lower, for the purpose of getting funded through MSHDA. Regardless of funding considerations, the site presents a serious challenge, he said.

Hall told commissioners that she knew it was a challenging site. But her direction to Norstar was to push it. “In the end, we can’t have less units than we started out with,” she said. “Politically, it would be extremely difficult for me to go to city council and say ‘We’re getting rid of 20 units.’”

Harris explained that Norstar is working to relocate those units at other sites. Higgins added that when Norstar gets a final estimate for redeveloping Broadway, it will be AAHC’s decision about whether to move forward.

In a related comment, Hall said that commissioners will need to look at AAHC’s entire portfolio, which is not within Norstar’s scope of work. Several properties won’t be eligible for tax-credit financing because they’re so small, she said. Those include Upper Platt, Oakwood, Malletts, Hillside, and South Seventh. The goal for this group of properties is to renovate those smaller sites with existing capital funds as well as AAHC reserves, Hall said. That work will likely be done in November 2013.

In addition, Hall said, the plan would be to sell the public housing properties at 909 Evelyn Court and 805-807 W. Washington, as well as the AAHC lease-to-own site at 2072 Garden Circle. These moves would reduce the number of AAHC units by three, and would need to be replaced at other locations.

For additional background on the Ann Arbor housing commission’s conversion process, see Chronicle coverage: “Housing Commission Eyes Major Transition” (December 2012); “Housing Commission Selects Co-Developer” (January 2013); and “Round 3 FY 2014: Housing Commission” (February 2013).

Housing commissioners present: Gloria Black, Christopher Geer, Marta Manildi, Ron Woods (president).

Absent: Leigh Greden.

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Stephen Kunselman (Ward 3) and Ann Arbor Housing Commission executive director Jennifer Hall. (Photos by the writer.)

On the housing side, a unanimous vote of the council approved the transfer of ownership for city properties managed by the Ann Arbor Housing Commission (AAHC) to the commission itself – an arrangement that’s actually more common across housing commissions in other cities. That step will allow conversion of the AAHC’s 355 public housing units to a project-based voucher system under HUD’s Rental Assistance Demonstration (RAD) program. AAHC will then be pursuing low-income housing tax credits through a ground lease of the properties to a private/public limited partnership. The tax credits are intended to fund several million dollars in needed capital improvements to the existing properties, as well as build 20-30 new units.

Other unanimous votes related to the AAHC’s plan included: a resolution to approve a payment in lieu of taxes (PILOT) for the properties now owned by AAHC – so that no property taxes will be owed; a resolution declaring that AAHC employees are and will remain city employees; and a $200,000 allocation from the city’s affordable housing trust fund to support improvements to Miller Manor.

On the transportation side, the council unanimously authorized membership of the city of Ypsilanti in the Ann Arbor Transportation Authority, by approving changes to the articles of incorporation for the AATA. The number of board seats is expanded from seven to nine, with one of the seats to be appointed by the city of Ypsilanti. The transportation authority will go by the name Ann Arbor Area Transportation Authority. The board of the AATA and the city of Ypsilanti also will need to formally approve the new articles, but are expected to do that in a straightforward fashion.

While the amendment of the articles of incorporation changes only the governance of the AAATA, the intent is to provide the potential for increased transportation funding. The AAATA could, with voter approval, levy a uniform millage on all member jurisdictions of the authority – now the cities of Ann Arbor and Ypsilanti. It’s a right the current AATA already has, but has never exercised. Each city itself already levies a transit millage, and transmits the proceeds of those taxes to the AATA. For Ypsilanti, the advantage of a transit authority millage is that it would not count against the state constitutional 20-mill cap that a city can levy – a cap that Ypsilanti has already reached.

Deliberations on those two agenda items – housing and transportation – did not begin until after 11 p.m.

Taking an hour of the council’s time before that was a debate on a change to the city’s public art ordinance. The council unanimously supported eliminating the requirement of an automatic 1% set-aside for public art in the budget for every capital project – known as Percent for Art. But lengthy deliberations unfolded about an additional change: A provision that would allow for the return of previous years’ public art allocations to their funds of origin.

The ordinance revision that had already been given initial approval by the council allowed for such a return just for the FY 2014 public art set-asides. In the end, the council opted for an ordinance change that did not provide for a return of previous years’ public art allocations. That leaves roughly $845,000 in funds that can be used for the public art program as defined in the revised ordinance – one that places the onus on city staff to identify capital improvement projects that might be suitable for incorporating public art.

Another significant item on the council’s June 3 agenda was a resolution encouraging the Ann Arbor Downtown Development Authority to allocate funding for three police officers. That resolution passed on an 8-2 vote. The council also gave final approval to utility rate increases (an annual item) and a reduction in utility improvement charges imposed on first-time connections.

Other business included final approval of rezoning requests for Parkway Place and State Street Center. The Parkway Place rezoning – at 490 Huron Parkway – was from R3 (townhouse dwelling district) to R1B (single-family dwelling district). The State Street Center rezoning, near the intersection of South State and Ellsworth, was from O (office district) to C3 (fringe commercial district).

In anticipation of the upcoming July 4 holiday, the council took initial action on an ordinance that would restrict use of fireworks to the hours of 8 a.m. to midnight.

During public commentary, the topic of Pizza in the Park was reprised as a theme from the council’s previous meeting. Advocates for the homeless community lobbied for a written commitment from the city that a parks and recreation fee would not be imposed on a church that distributes food and other aid at Liberty Plaza, a downtown city park.

Public Housing Conversion

The council was asked to take significant steps to convert the city’s public housing stock to a public/private system in a effort to address a roughly $520,000 deficit in capital improvements funding each year for the next 15 years. Key among those steps was a transfer of ownership from the city of Ann Arbor to the Ann Arbor Housing Commission, which currently manages but does not own the 355 units of public housing in the city.

AAHC executive director Jennifer Hall had briefed the council on the issue at a Feb. 11, 2013 work session.

A total of five resolutions affecting the AAHC originally appeared on the agenda. One of them was removed from the agenda before the meeting started. All were related to the proposed conversion of public housing managed by AAHC to a public/private partnership that would fund the units through project-based vouchers. The conversion would take place under HUD’s Rental Assistance Demonstration (RAD) program. Several million dollars worth of capital improvements will be financed through low-income housing tax credits.

The first resolution was to transfer ownership of the city-owned properties, currently managed by the AAHC, to the AAHC itself. As a land transaction, it required eight votes to pass. Postponement wasn’t a feasible option, because the AAHC’s first grant application is due June 15 – and that grant application needs to demonstrate “site control.”

The AAHC’s original plan was eventually to transfer ownership to a public/private partnership to facilitate the low-income housing tax credit financing. The AAHC selected a co-developer earlier this year at its Jan. 10, 2013 meeting. However, the current plan is for the AAHC to own the land and the buildings, and to convey them through a ground lease to the limited partnership. That’s feasible because a long-term ground lease will satisfy the IRS’s requirement that the limited partnership have an ownership interest in the property.

After the land transfer, next on the council’s agenda was a resolution stating that the current employees of the housing commission are city employees and will continue to be city employees – after the conversion of AAHC properties to project-based vouchers. The third resolution considered by the council was a payment in lieu of taxes for properties in Phase 1 of the planned conversion: 106 Packard Road, 727 Miller, 1701-1747 Green Road, 2742 Packard, and 800-890 South Maple. That will exempt the AAHC from paying property taxes on the properties.

Ann Arbor Housing Commission properties. Color coding indicates phase: Phase 1 (red); Phase 2 (orange); Phase 3 (blue), Phase 4 (green). Image links to dynamic map.

The fourth resolution asked for a $200,000 appropriation from the city’s affordable housing trust fund to support a loan application for improvements at 727 Miller (Miller Manor) and 800-890 South Maple.

The final item was removed from the agenda before the meeting started, at the request of AAHC executive director Jennifer Hall. It had been a request from the city’s general fund to backstop anticipated deficits – even if the AAHC converted all its units to project-based vouchers. The resolution had asked for at least $124,000 – based on “Scenario 3″ described in the council’s information packet – or up to $461,000 if HUD did not allow AAHC to convert its units all in one go (before all financing is formally secured). The request to change the rules had been made by AAHC of HUD in order to lessen the impacts of federal sequestration. But according to Hall, HUD didn’t agree to AAHC’s request to do that. So it’s the $461,000 figure cited in the council’s resolution that would likely come out of the general fund reserve for the three fiscal years FY 2014-16. That item will likely come back to the council for consideration at a future meeting.

The need to rethink the funding and maintenance strategy for Ann Arbor public housing is based on a capital needs assessment conducted in 2009, which determined that AAHC had $40,337 per unit in capital needs over the next 15 years. But at current HUD funding rates, AAHC would receive only $18,000 per unit – which is a $22,000 per unit shortfall in capital repair funding. Without some other funding strategy for its 355 units, AAHC would face roughly $7.8 million or about $520,000 per year in unmet capital needs.

Public Housing Conversion: Public Commentary

Julie Steiner of the Washtenaw Housing Alliance addressed the council on the topic of the transfer of city-owned properties to the Ann Arbor Housing Commission. She pointed out that it’s unusual for a municipality to own the properties managed by the housing commission. More typically, a housing commission owns the properties it manages. So it’s a natural step for the city council to transfer the properties to the housing commission. She allowed that the proposed RAD conversion sounds complicated, but she called it a win-win for everybody. It would allow renovations that could not be done with just the regular federal HUD funding. She warned that the properties could fall into a disastrous state of affairs, if this option is not pursued. Even Albert Berriz has been taking this approach to capital improvements of low-income housing in Florida and Texas for a number of years, she said. [Berriz is CEO of McKinley Inc., a real estate management firm based in Ann Arbor.]

Public Housing Conversion: Council Deliberations

Jennifer Hall, executive director of the Ann Arbor Housing Commission, was asked to the podium by Sabra Briere (Ward 1) to give an overview.

From left: Sabra Briere (Ward 1) and Sally Petersen (Ward 2).

Hall explained that many of the problems associated with the public housing stock are due to a lack of investment by the federal government. Tenant rent is a small part of the budget, she noted. What’s being proposed is a transition from supporting Ann Arbor’s low-income housing as public housing to a project-based vouchers approach. Both of the approaches to subsidizing low-income housing are provided through the U.S. Dept. of Housing & Urban Development (HUD). Ann Arbor doesn’t have large, 500-600 unit housing projects, she pointed out. The RAD program allows for the transition from HUD’s public housing line item to its voucher program, which is projected to be better funded in the future. AAHC already administers vouchers – over 1,500 of them, Hall said.

The transition to a project-based voucher system also will allow AAHC to apply for other funding support. One of the biggest sources is low-income housing tax credits. AAHC has been approved by HUD for RAD, Hall noted. And for the last six months AAHC has been doing due diligence and a feasibility study – which includes inspection of buildings by contractors and architects.

The first grant application by AAHC, for $1 million, is due by June 15, 2013. It’s being made to a Federal Home Loan Bank for two properties. To be eligible for the grant, the AAHC must show site control of the properties. That’s why the city council was being asked to transfer ownership from the city of Ann Arbor to the AAHC.

Hall explained that there’s been a change from the original plan that was presented to the city council. That original plan would have transferred the properties again – from AAHC to a new public/private partnership. But the new plan is for the AAHC to retain ownership of the land and the buildings, and to lease the improvements (buildings) through a ground lease to the limited partnership. A long-term ground lease will satisfy the IRS requirement that the limited partnership have an ownership interest in the property.

Sumi Kailasapathy (Ward 1) wanted to know if the city would still have any controls over the properties after the transfer of ownership. As one way to control what the AAHC does with the properties, Hall noted that the city council appoints the AAHC board. Kailasapathy wanted to have some clarity on issues like rights of first refusal. Assistant city attorney Kevin McDonald explained that there’s a deed restriction that will provide an extra control. He reiterated Hall’s point that the city council still appoints the members of the AAHC board. The council has the ability to remove members of the AAHC board, and McDonald continued by noting that the council has exercised that option before. [Current AAHC board members are Leigh Greden, Christopher Geer, Marta Manildi, Gloria Black and Ronald Woods.]

McDonald also pointed out that HUD controls the properties. If the properties were being mismanaged, HUD could step in, he said.

From left: Sumi Kailasapathy (Ward 1) and Rochelle Lento, a Dykema attorney who’s doing work for the Ann Arbor public housing commission in connection with the RAD conversion.

Kailasapathy asked about the change from the transfer to a public/private partnership to the idea of a ground lease. Hall explained that after 15 years, the properties come back to the AAHC. Kailasapathy raised the specter of an accident that results in a legal liability – venturing that governmental immunity might not apply to a public/private partnership.

Rochelle Lento, who is legal consultant for the AAHC on the RAD conversion, attempted to provide some assurance to Kailasapathy. She noted that HUD’s Hope 6 program uses ground leases as a mechanism. McDonald stated that nothing that’s being proposed is outside the scope of what housing commissions can do.

Stephen Kunselman (Ward 3) wanted to know why the city can’t just lease the properties to the AAHC with a sublease to the public/private partnership. Lento could not say that can’t be done, but told Kunselman she has never seen it done that way.

Kunselman ventured that there must be a valid reason why the city of Ann Arbor currently owns the properties. He thought it might be related to the reason that the Ann Arbor Downtown Development Authority doesn’t own properties – that it’s important to the community to have direct control by the elected body.

Kunselman felt that a five-member board of political appointees – the AAHC board – might not be the best property managers. Kunselman, who said he’d be voting no on the proposal when the council was briefed on it in February, engaged in extended back and forth with Hall, Lento, and McDonald. He asked which properties are proposed to be demolished and rebuilt. Hall told Kunselman that those properties include the North Maple site, four units on Platt, Broadway, and possibly the White/State/Henry location.

Sally Petersen (Ward 2) asked for a description of the limited liability partners and wondered if AAHC has one lined up. Lento indicated that the Great Lakes Capital Fund is interested in AAHC. She described GLCF as an active player in Michigan. She felt the AAHC’s ability to acquire an equity partner is good.

Christopher Taylor (Ward 3) brought up the shortfall in needed capital improvements. Hall responded that it would be burying her head in the sand to think that there will be more funding for public housing at the federal level.

Sally Petersen (Ward 2) and Christopher Taylor (Ward 3).

Taylor asked for the reasonable expectation of the available investment that this proposal would create. Hall described AAHC’s plan to package Miller Manor with South Maple – which will have a $13 million rehabilitation cost. The low-income housing tax credits will generate about $8-9 million for that particular project. She also described using the city’s PACE program to fund some of the cost. The operating pro forma also indicates that those properties should be able to carry $1.6 million in debt. Lento explained that other grant money might be available from the state of Michigan, and a Federal Home Loan Grant program. Sources of funding are often leveraged against each other, she explained.

Alluding to Hall’s previous remark, Jane Lumm (Ward 2) thanked Hall for not sticking her head in the sand, characterizing the situation as complicated and difficult. Lumm acknowledged that something dramatic needs to be done, and the approach Hall was proposing made sense. She noted that federal sequestration complicates the issue. But Lumm called it a clear choice. It’s not consistent with Ann Arbor’s values to do nothing and let the properties continue to deteriorate and eventually disappear, Lumm said, along with the services the properties provide.

Briere observed that it’s easy to lose sight of the fact that there are people involved, who live in the properties – when all the discussion is about just the properties. Prompted by Briere, Hall described a situation at Broadway, involving a stormwater drain. Another building on Platt Road has continuing problems with water in the basement, because it was built in the floodplain. She described sewer backups at one property. Briere asked what happens to the people who live in the properties if some of them are demolished as planned by the AAHC. Hall explained that AAHC has to follow the HUD protocols as far as finding alternate locations for people to live.

Hall described how some of the AAHC properties could support more units than they currently have – with a possible net increase of 20-30 units citywide.

After some back-and-forth with Kunselman, McDonald suggested adding a resolved clause to the council resolution. The additional resolved clause would make the transfer of the city property conditional on review of the proposed ground lease to the public/private partnership. Kunselman asked if the deed restriction could include a requirement that the housing be accessible to those with incomes less than 30% AMI (area median income). McDonald wasn’t sure if HUD will accept the imposition of a more stringent requirement than HUD’s 50% AMI requirement. Hall described the advantage of setting the rents at 50% – because vouchers make up the difference between income and the rent. If rent is set lower, that makes the subsidy lower.

The council took a brief recess so that McDonald could finalize and transmit the wording of the additional resolved clause to councilmembers.

RESOLVED, That each transfer be contingent on the closing of all financing for each transaction in conjunction with the Housing Commission entering into a ground lease with its partners; and …

Outcome on amendment: The council voted unanimously to add the resolved clause.

Kunselman said he’s been “very, very hesitant to go this direction.” He feared unforeseen consequences. He feared it will push out the “poorest of the poor.” On the other hand, there’s a sense that there’s really no other option, he said. The council has spent the last 10 years talking about affordable housing without talking about the Ann Arbor Housing Commission, he said. The 350 units of public housing managed by the AAHC had not received the council’s attention. But Kunselman said he’d support the proposal because of the uncertain future.

Mayor John Hieftje allowed there are some unknowns. But he felt that federal funding is going to go down. If the council did nothing, he felt things would get worse.

Before it went to a vote, Taylor questioned the wording of the added resolution, wondering if the choice of “all” in “all financing” might be too strong. Lento confirmed for Taylor that she was confident “all” could be achieved.

Outcome: On a 10-0 vote, including Kunselman, the council voted to transfer the city-owned public housing properties to AAHC. Chuck Warpehoski (Ward 5) was absent.

Public Housing Conversion: Ancillary Resolutions

Without deliberation, the council acted on the second and third resolutions associated with the RAD conversion.

Outcome: The council approved the confirmation of AAHC-assigned employees as city employees.

Outcome: The council unanimously approved the payment in lieu of taxes (PILOT) for AAHC properties.

On the resolution about allocating $200,000 to the city’s affordable housing trust fund for Miller Manor improvements, councilmembers made some brief remarks. Briere mentioned that the $200,000 appropriation from the city’s affordable housing trust fund was recommended by the housing and human services advisory board (HHSAB) some time ago. Lumm indicated support for the resolution, saying that’s what the money in the affordable housing trust fund is for.

Outcome: The council unanimously approved the grant for improvements at Miller Manor.

Ypsilanti Membership in AATA

The council was asked to approve changes to Ann Arbor Transportation Authority’s articles of incorporation in a way that would admit the city of Ypsilanti as a member of the AATA. The AATA board and the Ypsilanti city council will also need to approve the document. Given the unanimous vote of the Ypsilanti city council requesting membership – and the AATA board’s generally positive response to the request – it’s expected those two bodies will also vote to approve the revised articles of incorporation. [.pdf of proposed AAATA articles of incorporation][.pdf of existing AATA articles of incorporation]

Ypsilanti’s request for membership came in the context of a demised attempt in 2012 to expand the AATA to all of Washtenaw County. Since then, conversations have continued among a smaller cluster of communities geographically closer to Ann Arbor.

From left: AATA outside legal counsel Jerry Lax and AATA staff members Bill De Groot and Mary Stasiak.

In addition to admitting the city of Ypsilanti as a member, the revised articles expand the size of the board from seven to nine members. One of the new seats will be appointed by the city of Ypsilanti. [Previous Chronicle coverage: "Ypsi Waits at Bus Stop, Other Riders Unclear."]

While the change to the articles will affect the governance of the AATA, the goal of the governance change is to provide a way to generate additional funding for transportation. The AATA could, with voter approval, levy a uniform property tax on the entire geographic area of its membership – but the AATA does not currently do that. The cities of Ann Arbor and Ypsilanti currently levy their own millages, which are transmitted to the AATA. However, Ypsilanti is at its 20-mill state constitutional limit. A millage levied by the AATA would not count against that 20-mill cap.

A millage proposal would require voter approval. There’s an outside chance for the AATA to place a millage on the November 2013 ballot – if the change to the articles of incorporation are also approved in straightforward fashion by the AATA board and the Ypsilanti city council. Any decision to place a millage request on the November ballot would need to be made by late August. [Ballot language needs to be certified to the county clerk by Aug. 27, 2013.] But the practicalities of mounting a successful millage campaign mean that a decision to make a millage request would likely need to come sooner than that.

The change in the articles of incorporation also calls for a name change – to the Ann Arbor Area Transportation Authority (AAATA). Customary pronunciation of the current name is to sound out each letter: A-A-T-A. One possibility that’s been suggested is to pronounce the new letter sequence Triple-A-T-A.

The council’s June 3 resolution on the AATA articles of incorporation was co-sponsored by mayor John Hieftje, Sabra Briere (Ward 1) and Stephen Kunselman (Ward 3). Along with Sally Petersen (Ward 2) and Chuck Warpehoski (Ward 5), the three have participated in ongoing meetings among the “urban core” communities. The next such meeting is scheduled for June 27 at Pittsfield Township hall, starting at 4 p.m.

Ypsilanti Membership in AATA: Council Deliberations

Sabra Briere (Ward 1) introduced the proposal.

Stephen Kunselman (Ward 3). In the background is his wardmate, Christopher Taylor.

Stephen Kunselman (Ward 3) added his support to the proposal, but called it a small step. He wondered if it’s appropriate for the Ann Arbor city council to take action before the AATA board takes action. His concern was that to add other members – like Ypsilanti Township or Pittsfield Township – it might require amending the articles of incorporation again within a short time frame. There’s a strong connection of the communities to the east of Ann Arbor, so they need a voice at the table, Kunselman said, and this step that the council is being asked to take will help to do that.

Mike Anglin (Ward 5) asked for someone from the AATA to explain the proposal to the public. Responding to Anglin’s request, Jerry Lax, AATA’s outside legal counsel, went to the podium. Joining Lax were Bill De Groot and Mary Stasiak, staff with the AATA. Lax explained that the city of Ypsilanti has explicitly requested membership. The document in front of the council resulted from a discussion between the city of Ann Arbor, AATA, and the city of Ypsilanti, Lax said. He noted that this step the council is being asked to take does not itself create new funding. But it creates a mechanism by which voters could approve new funding.

Responding to a question from Anglin, Lax described the benefit to residents of Ann Arbor as allowing for a more coherent approach to providing transportation. Mayor John Hieftje described the background of the “urban core” meetings. Sally Petersen (Ward 2) stated that her own notion of “urban core” is Ann Arbor and Ypsilanti. She asked if that’s also the AATA’s view. Lax ventured that two townships – Pittsfield and Ypsilanti – might also be considered a rational part of the system.

Petersen expressed some concern about renaming the authority as the Ann Arbor Area Transportation Authority. She suggested calling it the Ann Arbor Ypsilanti Transportation Authority. Lax told Petersen that some initial drafts did include AAYT as a possibility. But he didn’t feel that the name change was the major accomplishment – something that Petersen agreed with. Kunselman ventured that naming it as Petersen suggested would result in a shortening that he seemed to indicate wouldn’t be optimal: “Ypsi-Arbor Transportation Authority.”

In support of the addition of Ypsilanti to the AATA and the relationship of Ypsilanti to Ann Arbor, Hieftje suggested looking at where high school graduates are attending school. Many Ann Arbor high school grads attend Eastern Michigan University in Ypsilanti, he said.

Hieftje also noted that Ypsilanti has already set up a dedicated funding mechanism for transit with its voter-approved millage. He wanted the Ann Arbor city council to be able to affirm the action that the Ypsilanti city council had taken when it requested membership. He said he was impressed with the AATA’s ability to account for where the various millage dollars were going. Hieftje indicated that he wouldn’t have a problem in “bleed-over” from the city of Ann Arbor funding for Routes #4 and #5 between Ann Arbor and Ypsilanti.

Jane Lumm (Ward 2) thanked staff for providing answers to her questions earlier in the day. She recited much of the recent history of efforts to expand transportation in the county. She complained that information on Ypsilanti’s financial commitment was only provided in response to councilmembers who had requested it. She lamented the fact that there’s not a framework for adding additional members beyond Ypsilanti. But Lumm said that Ypsilanti is Ann Arbor’s most natural partner in transportation, so she’d support the proposal.

Sumi Kailasapathy (Ward 1) drew out the fact that a new AAATA millage would be levied uniformly in the entire geographic area of the transportation authority. That is, if the combined votes in the cities of Ann Arbor and Ypsilanti were in favor of an additional transit millage, then that additional millage would apply at the same rate in both cities.

Outcome: The council unanimously approved adding the city of Ypsilanti to the AATA.

Future of Public Art Program

On the council’s agenda was the final vote on a change to the city’s public art ordinance, so that capital improvement projects are no longer required to set aside 1% of their budgets for public art – a funding mechanism known as the Percent for Art. The council had given initial approval to the ordinance change at its May 13, 2013 session.

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

At the council’s April 1, 2013 meeting, a vote was taken to extend a moratorium on spending of public art funds – through May 31. The council had originally enacted the moratorium on spending at its Dec. 3, 2012 meeting.

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

In two other separate agenda items on June 3, the council was asked to return to their funds of origin some of the money that had previously been set aside for public art.

Both proposals were to change the council’s budget, which under the city charter means that an eight-vote majority was required on the 11-member council.

The first resolution, sponsored by Jane Lumm (Ward 2) and Sumi Kailasapathy (Ward 1), would have returned monies to their funds of origin that had been set aside for public art in previous years under the ordinance. It was limited to those funds that have not yet been allocated to specific art projects.

However, the changes to the public art ordinance, as proposed for a final vote on June 3, allowed the council to return only the FY 2014 set-asides to their funds of origin. So the deliberations on the return of set-asides from previous years were primed for inclusion in deliberations on the ordinance itself – because a further amendment was necessary in order to vote on the Lumm/Kailasapathy amendment later in the agenda.

Returning public art set-asides from previous years would have shifted the following amounts for a total of $845,029:

• 002-Energy: $3,112
• 0042-Water Supply System: $61,358
• 0043-Sewage Disposal System: $451,956
• 0048-Airport: $6,416
• 0069-Stormwater: $20,844
• 0062-Street Millage: $237,314
• 0071-Parks Millage: $28,492
• 0072-Solid Waste: $35,529

The second fund-return resolution – sponsored by members of the council’s public art task force, Margie Teall (Ward 4), Stephen Kunselman (Ward 3), Christopher Taylor (Ward 3), Sally Petersen (Ward 2) and Sabra Briere (Ward 1) – proposed to return just the money set aside in the FY 2014 budget, which was approved by the council on May 20, 2013. This second resolution proposed to return the following amounts to various funds, for a total of $326,464:

• 0042-Water Supply System: $113,500
• 0043-Sewage Disposal System $50,050
• 0069-Stormwater: $33,500
• 0062-Street Millage: $120,700
• 0071-Parks Millage: $8,714

The council had already included explicit language in the public art ordinance amendment allowing for the return of money to the funds of origin that had been set aside in the FY 2014 budget for public art.

Future of Public Art Program: Public Comment

The council heard support for public art during public commentary reserved time. Mark Tucker quipped that his name, spelled “Turner” on the agenda, “has been misspelled worse.” He spoke in support of public art. And he noted that the newly-proposed ordinance changes included language acknowledging the positive impact that government can have in supporting the arts. He spoke specifically in favor of episodic and temporary public art. [Tucker is co-founder of the annual FestiFools parade in downtown Ann Arbor.] Tucker hoped that the revised ordinance signals the beginning of a dialogue.

Bob Miller, chair of the Ann Arbor Public Art Commission, addressed the council speaking on behalf of himself. He suggested that the council add to the ordinance a requirement that private construction contribute to a public art fund.

Thomas Partridge spoke at several of the public hearings offered at the meeting, including the one on the public art ordinance change. He was generally critical of the public art program and in particular the Dreiseitl water sculpture in front of city hall – funded by the public art program.

Also speaking at the public hearing on the public art ordinance was John Kotarski. He disagreed with Partridge’s assessment on the merits of the Dreiseitl work. Kotarski – a member of the city’s public art commission – thought the proposed ordinance amendments will strengthen the public art program. He argued that the “baking in” of public art into capital projects would result in more public art. He told the council and the city administrator that he’s ready to help.

Future of Public Art Program: Council Deliberations

Margie Teall (Ward 4) led off deliberations by thanking everyone, highlighting the work of Sabra Briere (Ward 1), who did much of the work on the council’s task force. Teall didn’t think it’s now a perfect ordinance. She highlighted the portion of the ordinance that she’d added, which Mark Tucker had noted during public commentary – about the government playing a role in supporting art.

By way of specific background, the language cited by Teall and Tucker reflects a softening from the original ordinance, which indicated a responsibility of the government to foster the arts [added language in italics; deleted language in strike-through].

City Council recognizes the role that government can play and the support that government can offer to foster the development of culture and the arts.
City Council recognizes the responsibility of government to foster the development of culture and the arts.

Briere also thanked everyone, including the staff. She noted that the task force didn’t have solutions for some things. She gave an example of a problem that the council did not have a solution for: How to pay for public art administration, and what to do with currently pooled public art funds.

Craig Hupy, the city’s public services area administrator, came to the podium, quipping that he’d give the council an engineer’s version of finance. Financing the administration of the public art program is a challenge, he said. Using the city’s municipal service charge wouldn’t be feasible, he said, because that charge is assessed “looking backwards.” Hupy indicated that it would be possible to craft a program supported by the general fund for an interim period, until the new program becomes fully functional.

CFO Tom Crawford came to the podium and explained that his recommendation for funding public art administration was for the council to use the existing pooled funds that are set aside for public art to get the program through the next two years. Sumi Kailasapathy (Ward 1) questioned the legal basis on which the pooled funds could be used for administration. The basis of her concern was the restriction on the use of public funds that requires a thematic link between the purpose of the fund (e.g., water fund) and the work of art.

Jane Lumm (Ward 2) and Christopher Taylor (Ward 3).

Christopher Taylor (Ward 3) ventured that what’s needed is not administrative support for specific projects, but for those that might be considered as a part of a specific capital improvements project. He gave the example of a parks capital improvements project, where the question might arise as to whether it would be appropriate to incorporate public art into the project. It might be the case that a determination is made that a particular parks project wasn’t suitable for incorporation, he said. But that would be part of the administrative cost of the public art program, and would be allowed to be funded out of the parks millage set-aside, under the same reasoning that planning for the parks project itself is fundable from the parks millage. And if no art were incorporated into that parks capital project, he continued, it would be the same as if the question had been weighed: Should another basketball court be added? Even if the answer were no, the administrative activity associated with the weighing of that question would be fundable from the parks capital improvement millage.

Jane Lumm (Ward 2) noted that the total of uncommitted funds that have been set aside in the public art fund is around $845,000. She suggested that maybe 10% of it could be retained as transition money to the new program. Crawford indicated that if money were pulled from the pooled funds, it would be done proportionally from the respective funds of origin.

Future of Public Art: Council Deliberations – Additional Amendment

Lumm then proposed an additional amendment to the ordinance to allow the return of funds set aside in previous years to their funds of origin. This was an additional ordinance change that would be necessary in order to implement Lumm’s resolution later on the agenda, which actually returned the funds. Lumm’s proposed added language was as follows:

(8) City Council may, at its discretion, amend the Fiscal Year 2014 budget or any subsequent budget to return to their respective funds of origin some or all uncommitted funds allocated for art prior to Fiscal Year 2014 under the prior Section 1:833, including funds that have been pooled in accordance with Section 1:834.

Briere and Teall both weighed in against this amendment. The task force had considered this option but chose not to pursue it. Teall said that the public art program needs a full-time administrator. Based on that financial need, she argued, the money should stay in the public art fund.

Kunselman indicated he wouldn’t support Lumm’s further amendment to the ordinance. He worked on the council’s public art task force, he noted, and there was a lot of compromise involved. Lumm responded to Kunselman by saying that he could support her amendment but then keep some of the money as transition money. Lumm returned to the fact that there’s roughly $845,000 of uncommitted money in the art fund. She called for a “clean break” from the Percent for Art program. She wanted to know what specific art that uncommitted money would be used for – instead of sewer and street improvements, for example.

Kailasapathy indicated that she wouldn’t support using restricted funds for general art administration. Assistant city attorney Abigail Elias confirmed that this amendment of Lumm’s would be necessary for the Lumm-Kailasapathy resolution later in the meeting, which would actually return public art money from prior years to the funds of origin. Briere drew out the fact that the current amount in the art administration fund will be zero by the end of this fiscal year on June 30, 2013.

From left: Jane Lumm (Ward 2) and Sumi Kailasapathy (Ward 1).

Petersen ventured that even the administration costs have a “nexus” issue – which means that the money set-aside for public art must be spent in a way that is thematically linked to the fund from which the money was taken. Kailasapathy noted that the public art administration fund came from an 8% allocation initially. That initial 8% has now been spent down, so to take another 8% from the set-aside for additional administration would essentially be double-dipping, she said.

Hupy pointed out that to implement the recommendation for a full-time instead of a part-time administrator, it will cost more. [The current public art administrator, Aaron Seagraves, serves in a part-time position.] Taylor described how the work of the public art administrator in the future will involve how to bake in art to various capital projects. If the administrator is thinking about incorporating art into streets, then that’s an adequate thematic link to streets to fund the art administrator’s work. As long as the administrator allocates time proportionally among the source funds, there shouldn’t be a problem, Taylor contended.

Briere asked what the “fall back position” is for the city – if all the money is returned to the funds of origin. Crawford explained that if all the pooled art money is returned to the funds of origin, then the only option he saw for funding the administration of the public art program was to use general fund reserve money.

Lumm returned to her idea simply to leave a small portion of the uncommitted art funds to pay for administration. She stressed that the sewer fund contributed the majority of the money that was currently in the public art fund. Petersen argued that if the amendment were approved, it gives the council some flexibility in the future. She was implying that the restoration of that money to its funds of origin need not be settled that night. The flexibility would help the council deal with some unknowns she identified, which included: (1) How much money is needed? (2) What’s the art administrator’s job description?

Hieftje indicated he wouldn’t support Lumm’s amendment. He contended that when the conversation about changing the public art program was started, many councilmembers had expressed their comfort with leaving the existing funds in the public art fund. He linked public art with economic development.

Outcome: The amendment proposed by Lumm failed, with support only from Kailasapathy, Petersen and Lumm.

Future of Public Art: Council Deliberations – Continued

When the council returned to the main question, Kunselman talked about working together and compromising. His concern had always been about the legality of the program, he said. The task force had done a lot compromise coming to an agreement. In that spirit, he said, he wouldn’t be asking for a state attorney general opinion on the legality of the program – which he’d previously said he would. He allowed that he’d voted for the program in 2007, unaware of the implications of the Percent for Art funding mechanism. And he hoped that the community could find funds for other kinds of art besides capital improvements. He indicated a preference for gatherings of people having a good time, rather than monumental art. He supported the ordinance change.

Lumm thanked the task force. She supported the part of the ordinance change that eliminates the automatic 1% set-aside. If any community could fund public art with private sources, it’s Ann Arbor, she contended.

But Lumm was still concerned that the structure of the program leaves in place a mechanism that takes money from capital improvement projects. She expressed disappointment that her amendment was not approved. She returned to the point of the $845,000 that remains uncommitted in the public art fund. She re-argued the case for her amendment that would have allowed the council to restore uncommitted public art money from all previous years to their funds of origin. She indicated a grudging support for the ordinance change.

Taylor said he was delighted and proud to have participated in the task force. He called the ordinance revision an improvement – but he felt there’s some uncertainty. Public art will compete with other priorities and find its proper level of support, he felt.

Briere summarized the task force work as the result of councilmembers approaching the topic from their individual peculiar attitudes toward public art. Thinking through all the implications had been hard, she said. She didn’t think everything has been solved. How it’ll play out in the next three years remains to be seen, she said. The council will be determining how much public art there is and where – based on advice from the staff about which projects should have art incorporated in them, she explained.

Kailasapathy indicated support for the ordinance revision, but still had reservations about leaving the money in the art fund balance. She allowed she’s not a legal expert, but felt it was on shaky legal grounds.

Responding to a question from Kunselman, Hupy allowed that he couldn’t imagine that $845,000 could be spent on public art administration in two years. Crawford indicated that that amount could be used for administration but also on art projects.

Kunselman urged councilmembers to stop looking back and to start looking forward. It was tough for him to disagree with Lumm and Kailasapathy, but he wanted to focus on looking forward.

Marcia Higgins (Ward 4) asked about the resolution later on the agenda that restored funding that had been set aside for public art in FY 2014 just recently: How was that different? Crawford explained that particular resolution applied just for FY 2014. There was a second resolution that would return money from previous years – which Lumm’s amendment to the ordinance was meant to facilitate.

Outcome: The council gave unanimous final approval to the changes to the public art ordinance.

Future of Public Art: Return of Funds Prior to FY 2014

Deliberations on the proposed return of public art money to its funds of origin for years prior to FY 2014 were scant. That’s because the ordinance amendment that would have facilitated the fund transfer earlier in the evening did not pass.

Outcome: Lumm withdrew the resolution, given that her attempt to amend the ordinance – in a way that was necessary for the resolution to be considered – failed earlier in the meeting.

Future of Public Art: Return of Funds Just for FY 2014

Briere introduced this resolution to return public art set-asides in FY 2014 to their funds of origin.

Lumm indicated she supported the resolution. But she again complained that the council didn’t act to amend the ordinance to allow the return of previous years’ allocations to their funds of origin.

Outcome: The council voted to return the FY 2014 public art set-asides to their funds of origin.

DDA Funding of Downtown Police

On the agenda was a formal resolution encouraging the Ann Arbor Downtown Development Authority to consider paying for three police officers to be assigned to the downtown. The total annual cost would be about $270,000.

DDA Funding of Downtown Police: Background

The resolution came in the context of the council’s vote on May 20, 2013 that set the city’s FY 2014 budget – during a debate that ultimately rejected funding for three additional police officers. The proposed budget amendment, which failed on a 5-6 vote, had been brought forward by Jane Lumm (Ward 2). The amendment would have reduced the budget of the 15th District Court by $270,000.

The council’s June 3 resolution was brought forward by Lumm and Sumi Kailasapathy (Ward 1), who both supported the unsuccessful attempt to reduce the 15th District Court budget to fund police. The June 3 resolution came partly in response to sentiments expressed during the FY 2014 budget debate, when some councilmembers on the prevailing side had said they’d prefer for additional police to be paid for by the DDA.

The DDA itself has designated $300,000 in its parking fund budget for the next year as “discretionary” and has previously discussed allocating that money to a “clean and safe” initiative – which could include funding police officers. However, sentiments on the DDA board have been mixed about the exact nature of the staffing that the DDA would like to pay for. Some DDA board members have indicated a preference for hiring staff who would act as “ambassadors” – not police.

DDA Funding for Downtown Police: Council Deliberations

Jane Lumm (Ward 2) introduced the resolution, which she co-sponsored with Sumi Kailasapathy (Ward 1) and Sally Petersen (Ward 2). Stephen Kunselman (Ward 3) indicated he would support the resolution. His understanding was that the DDA likes direction from the city council in the form of resolutions.

Christopher Taylor (Ward 3) allowed that it would not be irrational for the DDA to review this question. But he indicated that he didn’t think the resolution helped to rebuild a relationship of trust with the DDA. He pointed out that the DDA had already included an option in its budget to fund public safety. So he’d be voting against the resolution.

Sabra Briere (Ward 1) alluded to the council’s December 2012 retreat priorities on public safety. She indicated that her support for the resolution was based on the fact that it’s advisory. But she noted that the work plan developed by the city administrator, Steve Powers – in response to the council’s priority on public safety – includes a lot of elements that don’t depend on a count of officers. [.pdf of draft work plans for FY 2014-15 for all service areas] But the resolution is only about a number of police officers, Briere said. She wanted to move the discussion beyond numbers, to talk about policy.

Kailasapathy stressed that the funds in the DDA’s budget are undesignated. That’s part of the basis on which she supported the resolution. Petersen described the perception of public safety as high until someone has a problem – and police downtown might be able to prevent problems before they happen. Her mention of the perception of safety was an allusion to the inclusion in the council’s definition of success of Ann Arbor being perceived as safe.

Mike Anglin (Ward 5) indicated he’d support the resolution. He allowed that just having more police officers doesn’t automatically make a safer city, but more police officers means that the city is able to respond when someone calls for help.

Marcia Higgins (Ward 4) expressed appreciation for the fact that the resolution was brought forward. But she also expressed some reservations about specifying the exact number of officers. She raised the possibility of making an amendment to the resolution to make it nonspecific with respect to the number of officers. Lumm indicated a preference for her original version, specifying three officers.

Briere then asked police chief John Seto to come to the podium. She asked how many officers are dedicated to the DDA area. Seto says none are assigned to the DDA specifically. It’s part of the “Adam” district – bounded by Huron, Main, Stadium and Packard – and 12-14 officers are assigned to that area. Briere wanted to know if three officers were added, how the staffing would be adjusted. Seto answered that the additional three officers would be additional bodies that would be assigned to the “Adam” district. The officers assigned to other areas of the city would remain the same, he says.

Mayor John Hieftje stated that Ann Arbor is one of the safest cities in the nation. Most of the literature indicates that adding police doesn’t reduce crime, he said. His interest was in reducing nuisance issues. Hieftje noted that the DDA board [on which he sits] has discussed the possibility of funding ambassadors who would have direct communication with the police. Hieftje indicated agreement with Taylor’s remarks.

Hieftje felt the context of the council’s consideration of revising the ordinance governing DDA TIF (tax increment finance) capture was relevant. [The council is considering clarifying the existing language in the ordinance that describes a cap in TIF revenue to the DDA, calibrated to the amount of anticipated revenue in the TIF plan, a foundational document of the DDA.] Hieftje expressed concern that the funding for police staffing, if they’re to be added as staff, needs to be sustainable.

Hieftje said he couldn’t predict how the DDA would perceive the resolution. He wanted councilmembers to be prepared for a range of reactions from the DDA board. He felt it would be a worthy discussion at the DDA. [At the DDA's June 5, 2013 meeting, the council's resolution was referred to the operations committee.]

Outcome: The council voted 8-2 to encourage the DDA to consider funding three police officers to be deployed in the downtown. Dissent came from Christopher Taylor (Ward 3) and Margie Teall (Ward 4). For a Chronicle op-ed on this general topic, see: “Counting on the DDA to Fund Police?“

Sidewalk Definition Change

The council considered initial approval of a change to the definition of “sidewalk” in the city’s code.

The new definition of “sidewalk” would expand the existing definition to include non-motorized paths that are [emphasis added] “designed particularly for pedestrian, bicycle, or other nonmotorized travel and that is constructed (1) in the public right of way or (2) within or upon an easement or strip of land taken or accepted by the city or dedicated to and accepted by the city for public use by pedestrians, bicycles, or other nonmotorized travel, …”

When the ordinance change comes to the council for a second and final approval, an additional resolution will be voted on, which would accept certain sidewalks for public use.

Impacts from this change include funding for repair and maintenance of such facilities and responsibility for snow clearance. The changed definition will allow the city to use sidewalk millage money to repair and maintain the facilities. However, it will also place responsibility on the abutting property owner for snow clearance during the winter.

City staff have identified 33 cross-lot sidewalks that would be affected by the ordinance change. A notice is supposed to be sent to all property owners abutting those sidewalks, informing them that a formal resolution accepting those sidewalks for public use is pending. According to the staff memo accompanying the council’s agenda item, a question and answer session is scheduled for June 27 from 5-7 p.m. in the basement conference room at city hall.

During the brief deliberations, Sabra Briere (Ward 1) indicated she would support the ordinance to move it to a second reading, but she had some questions she’d want answered when it comes back to the council for final approval. Her concern stemmed from sidewalks in the city that don’t run along streets but rather between groups of houses to connect one area to another. She noted that the city’s recently approved sidewalk maintenance millage relieved property owners from having to maintain and repair the sidewalks that adjoined their property. But that meant that a different question became important: Who’s responsible for shoveling snow off the sidewalks during the winter? Depending on the neighborhood, this could be a burden, she said. Briere felt the council will want to look carefully at the definition change.

Outcome: The council gave unanimous initial approval to the change in the definition of “sidewalk.”

Mack Pool Roof Replacement

The council considered an item to approve replacement of the roof on Mack indoor pool, located within the Ann Arbor Open school near the corner of Miller and Brooks.

At its May 21, 2013 meeting, the Ann Arbor park advisory commission had recommended awarding a contract to Pranam GlobalTech Inc. for $193,000 to cover the roof replacement and painting refurbishment. A 10% construction contingency brings the project’s budget to $212,300.

Pranam provided the lowest of two bids. The other bidder was Wm. Molnar Roofing Co. Inc., which bid $271,319 for the work. Pranam was previously selected to replace the roof at Veterans Memorial Park Ice Arena. The contract for that project was approved by the city council at its May 20, 2013 meeting.

According to parks staff, the existing roof from the early 1990s was expected to last just 15 years. There are leaks and rusted steel lintels and joists, which need to be replaced. The project also includes removing rust and painting the pool ceiling and joists.

Funding for the project is available from two sources: (1) $186,088 from the fund balance of the parks maintenance and capital improvements millage; and (2) $26,212 from the Ann Arbor Public Schools, which pays annually into a capital facilities escrow account earmarked for Mack Pool.

The work will be done in June and July, while school is out of session. The pool is not open during the summer months.

Outcome: Without deliberation, the Mack Pool roof contract was unanimously approved.

Pension Ordinance Change

The council considered final approval of a change to the city’s pension ordinance. The change would potentially affect a single person – a former city dispatcher.

When dispatch operations for the city were contracted out to the Washtenaw County sheriff’s office, the pension benefit change was negotiated as part of the consolidation with the Ann Arbor Police Officers Association, which represented the city dispatchers. The amendment allows a former dispatcher to collect city pension benefits at the same time they would have if they’d remained employees with the city.

Outcome: Without discussion, the council gave unanimous final approval to the change to the pension ordinance.

Distribution of Non-Motorized Plan

The council was asked to take another step toward incorporating an update to the city’s non-motorized transportation plan into the city’s master plan.

The specific action requested of the council was to approve distribution of the plan to adjoining jurisdictions and stakeholders, including the Washtenaw County board of commissioners, DTE Energy, the University of Michigan, the Ann Arbor Transportation Authority, and the Ann Arbor Public Schools. These entities will have 42 days to submit comments.

A recommendation to distribute the city of Ann Arbor’s draft non-motorized transportation plan update had been unanimously approved by the city’s planning commission at its April 16, 2013 meeting. [.pdf of staff report and draft non-motorized plan]

This is an update of a plan that was initially approved in 2007. It makes policy recommendations as well as specific project proposals, primarily related to pedestrian and bicycle travel. Planning commissioners had been briefed on the draft update by Eli Cooper, the city’s transportation program manager, at a March 12 working session.

Outcome: On a unanimous vote without deliberation, the council authorized the distribution of the draft non-motorized plan.

Appointments

Several issues involving appointments were on the council’s agenda.

Appointments: Greenbelt – Fike

The council was asked to confirm Jennifer Fike as a member of Ann Arbor’s greenbelt advisory commission. She had been nominated at the council’s meeting on May 20, 2013. Fike, who is finance director of the Huron River Watershed Council, is replacing Laura Rubin, HRWC’s executive director. Rubin’s term on the commission ends in June.

Fike had attended the April 4, 2013 meeting of the commission to introduce herself and express her interest in serving.

By way of background, nominations for GAC are made by the city council, not by the mayor. The procedure followed by the council is to place on the agenda a resolution making the appointment at one council meeting, but to postpone it until the following meeting. For mayoral nominations, the names are placed before the council at a meeting as a communications item – on which no council vote is required. The confirmation vote takes place at a subsequent meeting.

Christopher Taylor (Ward 3), who serves as the city council appointee to the greenbelt advisory commission, briefly described Fike’s background and thanked Rubin for her service on GAC.

Outcome: The council voted unanimously to confirm Fike’s appointment to GAC.

Appointments – Misc.

The one mayoral nomination from the previous meeting was Lloyd E. Shelton for the city’s commission on disability issues.

Outcome: Shelton’s appointment to the city’s commission on disability issues was unanimously confirmed.

Nominations put before the council for consideration at its next meeting included the re-appointments to the planning commission of Bonnie Bona and Tony Derezinski. Also among the nominations was LuAnne Bullington to the taxicab board.

In addition, members of the downtown area citizens advisory council were re-nominated at the June 3 meeting, having first appeared on the council’s May 13, 2013 meeting agenda for re-appointment. The names had not been presented to the council for confirmation on May 20. The terms of all the members had expired. The council will need to vote to confirm these re-appointments at a future meeting.

Street Improvements

The council was asked to approve a couple of items related to street improvements.

Street Improvements: West Madison

One street-related item was a $2,283,524 contract with Pamar Enterprises Inc. for work on West Madison Street – from South Seventh Street to South Main Street. The total cost of the project is $3,162,000. It’s being paid for with a combination of street funds, water funds and stormwater funds. It includes water main replacement and stormwater improvements.

Stephen Kunselman (Ward 3) recalled when that section of Madison was repaved years ago and it had been in pretty good shape for a short period of time. He felt that the buses seemed to impact the pavement and it kept sloughing down the hill. He wondered if the base of the road would be beefed up to prevent the sloughing of the pavement. Public services area administrator Craig Hupy introduced project manager Igor Kotlyar at the podium.

Left to right: Public services area administrator Craig Hupy and Mike Anglin (Ward 5).

Kotlyar assured Kunselman that the project would entail a full reconstruction of the street, including stormwater improvements with proper cross section and thickness of pavement for buses. Responding to a question from Kunselman, Kotlyar indicated that the construction would last, saying he didn’t want to come back to do repairs.

Mike Anglin (Ward 5) asked for an explanation of the stormwater features. Kotlyar described how the project would use a range of techniques, based on the soil composition along different sections of the road – including rain gardens and plans for infiltration on the uphill portions of the street. And in lower parts of the project, where soils aren’t suitable for infiltration, oversized piping would serve as a temporary detention system, he explained.

Outcome: The West Madison Street improvements contract was unanimously approved.

Street Improvements: Stone School Road Design

Also related to street improvements was a request for approval of a $101,140 contract for design work with Northwest Consultants Inc. (NCI) for the Stone School Road reconstruction between I-94 and Ellsworth Road. The staff memo explained why a stormwater engineer was being consulted on the project:

A portion of the project includes alternatives for addressing the existing, failed, Mallett’s Creek culvert located under Old Stone School Road near the I-94 pedestrian overpass, as well as stream bank stability issues associated with the existing culvert located under Stone School Road and other storm water quality and quantity issues associated with Stone School Road itself.

Stephen Kunselman (Ward 3) said he’s looking forward to this project. He’s personally seen the failed culvert, but added, “don’t ask why.” He reported that a former city employee – who owns property adjacent to the site – had pointed out the failed culvert. Responding to a question from Kunselman, city engineer Nick Hutchinson told Kunselman that construction is expected in 2014.

Jane Lumm (Ward 2) said that as a member of the Malletts Creek coordinating committee, she was grateful that the project would be addressing Malletts Creek issues.

Outcome: The Stone School Road design work contract was unanimously approved by the council.

Time Limitation on Fireworks

The council was asked to take initial action to revise the city’s local ordinance on the use of fireworks.

The change would mean that it wouldn’t be possible to explode fireworks for the continuous 72-hour period from July 3-5. Instead, people would have to confine their use of fireworks to the period between 8 a.m. and midnight on those days.

The local ordinance change depends on state legislation that’s yet to be enacted. But a bill already approved by the Michigan House, and expected to be ratified by the Senate and signed into law by July 4 this year, would give local municipalities the ability to regulate the hours during which fireworks can be exploded.

State law currently prohibits local municipalities from regulating the use of fireworks on the day preceding, the day of, and the day after a national holiday. The bill that’s working its way through the state legislature would allow local municipalities to impose restrictions on those days – but only by regulating the hours – to 8 a.m. through midnight. For New Year’s Day, local municipalities could regulate the use of fireworks by allowing them from 8 a.m. through 1 a.m., which would allow for midnight fireworks celebrations.

Briere recalled the loud July 4 last year and the complaints about fireworks that had come on July 5. She described rockets found in yards the next day. While the number of complaints might not have been great, those that were heard were dramatic, she said. That resulted from a change in state law that allows residents to use “more exciting” fireworks.

Briere said the state legislature had received a lot of complaints. She gave an update on the legislative activity in the House. She noted it lacked Senate approval and hadn’t been signed into law. But the initial approval by the council that night would set up the council to give final approval of the local ordinance before July 4, if “with any luck” the state law as actually changed, she said. If the legislature did not act, Briere noted that Ann Arbor’s local law needed to be revised in any case to update some obsolete references.

Jane Lumm (Ward 2) asked for clarification about the impact of the local ordinance change. Briere assured Lumm that it was only display fireworks that required a permit, but that consumer fireworks did not.

Outcome: The council gave unanimous initial approval to the change in the fireworks ordinance. The second reading will come before the council on June 17.

Utility Improvement Charges

The council was asked to give final approval to changes in the way utility improvement charges are calculated.

The initial approval was given on May 13, 2013 at a meeting that had started on May 6. The improvement charges will be calculated in a way that significantly reduces the rates for the next two years. That would give the city time to hire a consultant to give a more comprehensive review to the charges.

The charges are due when a single- or two-family property connects to water and sewer for the first time. The charges are paid by either the contractor/developer or the property owner, depending on who makes the request for a connection. [.pdf of connection charge comparison]

The action on improvement charges came after the council had debated proposed increases to the charges at its Jan. 22, 2013 meeting, and ultimately rejected the increase for this year.

The charges, which could be as high as $40,000, were seen as an obstacle to in-fill development of vacant lots in the city.

Sabra Briere (Ward 1) led off deliberations by announcing that the city attorney’s office had recommended a change to the amendment. She read aloud the change and allowed that “it’s not entirely enlightening.” The change related to property outside a development, adding the following language:

(13) For a residential property outside a benefited development that connects during the period July 1, 2013 through June 30, 2015, to a water main or sanitary sewer improvement or identified portion thereof that was built as provided in this section 1:277, including water main or sanitary sewer improvements constructed both before and after January 20, 2004, the improvement charge that is imposed at the time of connection shall be:

Improvement Charge = (N)(4)(Y)(CC)

For purposes of this calculation, “N,” “Y” and “CC” shall have the same meaning as in subsections 1:277(3) and (5), and the value of Y shall be 19.

The change was accepted in a friendly way, which meant that the council did not vote on the added language. Jane Lumm (Ward 2) thanked sponsors of the ordinance – Briere, Stephen Kunselman (Ward 3) and Sumi Kailasapathy (Ward 1). She also thanked the staff for their work and expressed her support for the ordinance change.

Outcome: The council gave unanimous final approval to the change in the utility improvement charges.

Ann Arbor Utility Rate Increases

The council was asked to give final approval to water, sewer and stormwater rate increases.

In terms of revenue generated to the city, the rate increases are expected to generate 3.55% more for drinking water ($739,244), 4.25% more for the sanitary sewer ($955,531), and 4% more for stormwater ($233,811). [.pdf of complete utility rate changes as proposed]

According to the city, the rate increases are needed to maintain debt service coverage and to maintain funding for required capital improvements. The city estimates that the impact on an average customer will be a $20.66 per year increase in total utility charges.

The city’s drinking water charges are based on a “unit” of 100 cubic feet – 748 gallons. Charges for residential customers are divided into tiers, based on usage. For example, the first seven units of water for residential customers have been charged at a rate of $1.31 per unit and will now be increased to $1.35 per unit. Since 2004 the city has used four tiers of rates, based on usage. For this year, however, the amount charged for the top tier – for usage over 45 units – is proposed to be identical with the next lower tier. Currently the top tier is charged at $6.78, but is proposed to drop to the third tier rate of $4.88.

Sewer rates are charged as a function of water usage. The commodity rate is proposed to increase from $3.48 to $3.65.

The city’s stormwater rates are based on the amount of impervious area on a parcel and are billed quarterly. For example, the lowest tier – for impervious area less than 2,187 square feet – has been $13.68 per quarter. Under the new rate structure, that increases to $14.20.

Water usage for Ann Arbor city residents is available on the city’s website. [You'll need your account number to access information.]

The council had given initial approval to the utility rate changes at its May 20, 2013 meeting.

Outcome: Without further deliberation, the council gave unanimous final approval to the utility rate increases.

State Street Center Rezoning

The council was asked to give final approval to a rezoning request for State Street Center, near the intersection of State and Ellsworth. The rezoning had been given initial approval by the council at its May 13, 2013 meeting. A site plan for the project has not yet received council action.

The rezoning request – from O (office) to C3 (fringe commercial) – stems from an incorrectly recording of the zoning designation in the city’s documents. The development is located adjacent to a new Tim Hortons restaurant, which opened last year.

The project calls for demolishing a vacant 840-square-foot house on this site. In its place, the developer plans a one-story, 1,700-square-foot drive-thru Jimmy John’s restaurant facing South State Street. A one-story, 6,790-square-foot retail building will be built behind the restaurant. The driveway off South State Street would be relocated and widened. The site would include 39 parking spaces, as well as covered bicycle parking between the buildings.

The project is estimated to cost $900,000. The property, which is located in Ward 4, is owned by Jack Schwarcz of Oak Park, Mich.

The site plan approval would be contingent on dedicating a 50-foot South State Street right-of-way to the city prior to any permits being issued.

The project was approved by the city planning commission at its April 2, 2013 meeting. It had originally been on the commission’s March 19, 2013 agenda. At that time, the city’s planning staff recommended postponement after discovering that the city’s official zoning map had been incorrectly labeled. It showed the site as zoned C3 (fringe commercial). The developer had made plans based on that erroneous labeling. But during background research for this proposal, planning staff discovered that the site actually had been zoned as O (office) in 2003.

Outcome: Without discussion, the council unanimously approved the State Street Center rezoning.

490 Huron Parkway Rezoning: Final OK

The council was asked to give final approval to a rezoning request for 490 Huron Parkway, from R3 (townhouse district) to R1B (single-family dwelling). Initial approval had been given at the council’s May 13, 2013 meeting.

The Parkway Place proposal had not won approval from the city planning commission at its Dec. 18, 2012 meeting. At that meeting, planning commissioner Bonnie Bona said she couldn’t support the rezoning. With 70,000 people commuting into Ann Arbor each day, it didn’t make sense to build single-family homes in that area, she said. The 5-1 planning commission vote meant that the project did not get the six votes it needed for a recommendation of approval.

The rezoning will allow the currently vacant 1.22-acre site, located north of Ruthven Park, to be divided into three separate lots. City planning staff had recommended the rezoning, and noted that the adjacent parcel at 500 Huron Parkway is also zoned R1B.

During the brief deliberations, Jane Lumm (Ward 2) thanked staff for their response to a question about unstable soils. Staff had inspected the site and confirmed that the soils were stable, she said.

Sabra Briere (Ward 1), who serves as the city council appointee to the planning commission, explained that the recommendation of denial from the planning commission resulted from the attendance of only six of nine commissioners. The objection was based on the contention that the project, however worthy, didn’t fit the master plan for the area. She noted the rationale for those commissioners voting for it: They thought it would be an improvement to the area.

Outcome: The council unanimously approved the 490 Huron Parkway rezoning.

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. Here are some highlights.

Comm/Comm: D1 Zoning Review

During public commentary reserved time, councilmembers heard from residents disappointed with the council’s May 13, 2013 decision to approve the 413 E. Huron development. The planning commission is now supposed to implement the direction given by the council, at its April 1, 2013 meeting, to review the D1 (downtown core) zoning by Oct. 1. Speakers encouraged the council to look at specific issues related to that zoning review.

Jeffrey Crockett congratulated the winners of the historic district commission awards that were announced at the start of the meeting. He thanked city planner Jill Thacher for her staff support of the historic district commission. He criticized the provision for “mitigation” of landmark trees in the zoning code. He concluded there is no meaningful protection for landmark trees in the D1 zoning code. The 413 E. Huron project involved mitigation of landmark trees.

Peter Nagourney also commented on the 413 E. Huron project. He criticized the council’s decision to approve the project, based on the threat of a lawsuit.

Steve Kaplan called the 413 E. Huron project emblematic of problems to come. He focused on the possible traffic issues that the project could cause.

Comm/Comm: Sophistication of DDA

During communications time, Christopher Taylor (Ward 3) referred to a 2008 email cited at the council’s previous meeting in which Ann Arbor Downtown Development executive director Susan Pollay described the financing of the Library Lane underground parking structure. She indicated in that email that tax dollars would not be used to finance it, but rather parking system revenue would fund that project. That approach proved not to be the one that the DDA took, using tax increment finance (TIF) funds to pay for part of the cost. Taylor portrayed Pollay’s statement not as reflecting a lack of competence on the DDA’s part, but rather of changing plans when reality changes. The part that had changed, according to Taylor, was the DDA’s willingness to change the terms of the contract under which the DDA operates the public parking system.

Comm/Comm: Pizza in the Park

At a previous council meeting – on May 20, 2013 – several people had spoken in opposition to the imposition of a fee that was apparently charged to the Vineyard Church of Ann Arbor as part of its Friday evening homelessness ministry, which the church conducts at Liberty Plaza. The plaza at the southwest corner of Division and Liberty is part of the city’s parks & recreation system.

At the June 3 meeting, there was some follow-up during public commentary reserved time, as there was an interest in thanking city officials for their efforts to ensure the event could continue, as well as an interest in getting some kind of written commitment from the city.

Seth Best asked everyone in the audience to stand who was attending the council meeting to support Pizza in the Park, and a couple dozen people stood up. He thanked the mayor and staff for their efforts to ensure that the program, sponsored by the Vineyard Church, can continue. The program distributes food and other aid to the homeless community in Liberty Plaza. He hoped for something in writing. Nicholas Goodman described an increased police presence deployed in the city, which he perceived as designed to break up tent communities.

Antonio Benton also thanked the mayor and the council for agreeing to allow the Pizza in the Park to continue. He described himself as a full-time student, but also homeless. Pizza in the Park is the one meal that many in the homeless community get, he said.

After public comment, mayor John Hieftje explained what happened to cause a misunderstanding concerning Pizza in the Park. It involved a vehicle being parked in a private driveway. He gave an assurance that Pizza in the Park will be allowed to continue. From the audience, Caleb Poirer asked Hieftje if some kind of written commitment could be provided affirming that. Hieftje indicated he didn’t think there was a legal basis for not being able to continue that event.

During public commentary at the conclusion of the meeting, Poirer addressed the council asking for a binding, written agreement indicating that humanitarian aid providers will not be charged a parks and recreation fee. And Best echoed Poirer’s sentiments. He was concerned that a policy might be applied that requires a permit if you advertise a gathering in a public space that could draw more than 50 people.

Comm/Comm: Thomas Partridge

During public commentary reserved time and during several of the nine public hearings held on various topics, Thomas Partridge addressed the council – to advance the cause of human rights and civil rights, affordable housing, and public transportation for all residents, especially those with disabilities and seniors.

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

Absent: Chuck Warpehoski.

Next council meeting: Monday, June 17, 2013 at 7 p.m. in the council chambers at city hall, 301 E. Huron. [Check Chronicle event listings to confirm date]

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