The $103,005,127 budget for 2014 – which represents a slight decrease from the 2013 expenditures of $103,218,903 – includes putting a net total of 8.47 full-time-equivalent jobs on “hold vacant” status, as well as the net reduction of a 0.3 FTE position. The recommended budgets for the following years are $103,977,306 in 2015, $105,052,579 in 2016, and $106,590,681 in 2017. The budgets are based on an estimated 1% annual increase in property tax revenues. [.pdf of original draft budget summary] [.pdf of draft budget summary revised as of Nov. 20, 2013]

The vote was 7-1, with dissent by Ronnie Peterson (D-District 6) – though he cited three elements of the budget that he wanted to support: the community impact statements, outside agency funding, and position modifications. Rolland Sizemore Jr. (D-District 5) was absent. Dan Smith (R-District 2), who had dissented in the initial vote on Nov. 6, stated that he still had several concerns with the budget, but he voted for it because the budget supported many important activities throughout the county. He noted that although it spanned four years, the board is required to approve the budget each year, so “technically it’s a one-year budget.”

A budget amendment had been put forward on Nov. 6 by Dan Smith, with the board postponing action on it until Nov. 20. That amendment had proposed adjusting projections to increase revenues by $449,813 over the four-year period, and allocating $100,000 per year in additional funds to the sheriff’s office. Early during the Nov. 20 budget discussion, Smith withdrew the amendment without discussion.

Several new amendments were made during deliberations on Nov. 20. An amendment proposed by Conan Smith (D-District 9) directs the administration to conduct a study of county staff “to assess the capabilities of the organization to meet the community outcomes and processes.” Another amendment directs the administration to conduct a “citizens experience study” that would help inform board priorities.

Alicia Ping (R-District 3) proposed an amendment to shift $500,000 from the facilities operations fund to a contingency fund for parking. That contingency fund will serve as a placeholder as the county renegotiates parking contracts with the Ann Arbor Downtown Development Authority.

Most of the 8.47 FTEs that are proposed to be kept unfilled are in the sheriff’s office. On Nov. 6, sheriff Jerry Clayton had addressed the board, telling commissioners that his office can’t continue to absorb budget cuts without affecting services. On Nov. 20 he did not formally speak to the board, though he was in the building. After the meeting, board chair Yousef Rabhi (D-District 8) told The Chronicle that discussions are underway with the sheriff, and that there will be a budget amendment brought forward – likely in early 2014 – that will address some of the concerns raised by Clayton.

As he has on previous occasions, Peterson argued against the four-year budget approach, preferring to maintain the current two-year budget process. He said that if he’s re-elected in 2014, he’ll fight to overturn the four-year budget and institute a one- or two-year budget instead. The board’s leadership – including Rabhi and Felicia Brabec (D-District 4), chair of the board’s ways & means committee – believe a four-year budget will improve long-term planning and stability, and could be transformational to the way that the county does business.

They also want the board to be engaged in a continual process of monitoring the outcomes related to budget investments. To that end, on Nov. 20 the board also voted to adopt a set of “community outcomes” to guide that investment, as well as a framework for developing future budgets that reflect those desired outcomes. [.pdf of community outcomes resolution] Those outcomes are more detailed “impact statements” tied to budget priorities that the board approved on July 24, 2013. The budget priorities are:

• Ensure a community safety net through health and human services, inclusive of public safety;
• Increase economic opportunity and workforce development;
• Ensure mobility and civic infrastructure for Washtenaw County residents;
• Reduce environmental impact;
• Internal labor force sustainability and effectiveness.

By way of example, the five community impact statements for the priority of “ensure a community safety net” are:

• Children in Washtenaw County will have access to care, support, and developmental tools they need to be ready to ensure success throughout graduation, college, or employment.
• Washtenaw County residents will have ready and affordable access to health care in order to achieve optimal health and increase life expectancy for all residents.
• Washtenaw County residents will have affordable and safe housing and transportation options.
• Washtenaw County residents will be food secure and have ample access to healthy foods that are locally sourced.
• Washtenaw County residents will be safe and secure at home and in their community.

The revised budget document incorporates a summary of this “community impact investing.” It directs the county administrator to bring a recommendation for implementation, including details on staffing and a budget, by Jan. 22, 2014 for board approval. Peterson expressed concerns that the funding for this process wasn’t yet clear. At this point, no resources have been identified for that purpose.

County administrator Verna McDaniel had initially presented the budget at the board’s Oct. 2, 2013 meeting. A public hearing was held on Oct. 15, 2013 but it was held after midnight and no one spoke. A second hearing was held on Nov. 20, but no one spoke at that, either.

This brief was filed from the boardroom of the county administration building at 220 N. Main St. in Ann Arbor, where the board of commissioners holds its meetings. A more detailed report will follow: [link]

Parking sign at the new underground parking garage on South Fifth Avenue in downtown Ann Arbor. The view is looking to the southwest. (Photos by the writer.)

The DDA manages the city’s public parking system under a contract with the city of Ann Arbor – which stipulates that the city receives 17% of gross revenues from the system. The DDA in turn sub-contracts out the day-to-day parking operations to Republic Parking. The relationship between the DDA and Republic goes back to 2001. The contract ratified on July 2 is for five years through 2017, with two one-year options to renew.

For the first year of the contract with Republic, the DDA board will be led by Leah Gunn. She was elected board chair at the DDA’s annual meeting, which took place after the regular monthly meeting concluded. Outgoing chair Bob Guenzel, who will continue to serve on the board, was thanked for his service. Sandi Smith was elected vice chair.

One of the major tasks on the DDA’s work plan in the coming year will be to continue the Connecting William Street (CWS) planning effort. It’s a project the city council directed the DDA to undertake in early 2011 – to explore alternative uses for city-owned surface parking lots in the rectangle bounded by Division, William, Ashley and Liberty streets.

At its July 2 meeting, the DDA board got an update on that planning effort, which has reached the point of three draft scenarios for the five parcels in question. When the three draft scenarios are settled and shared with the public through an outreach process, a preferred scenario will be developed – not by selecting one of the three scenarios in its entirety, but in a “Mr. Potato Head” fashion, choosing features from each scenario on a parcel-by-parcel basis.

The study area of the CWS effort includes the top of the new underground parking garage, now dubbed the Library Lane parking structure – named after the new mid-block cut-through that connects Division Street and Fifth Avenue. [Despite the name, the Ann Arbor District Library does not own the garage or the lane.] The grand opening of the garage is set for Thursday, July 12 at 5 p.m. A significant number of the new spaces in the structure will likely be occupied by monthly permit holders who work for Barracuda Networks, a company that’s moving into the former Borders corporate offices on Maynard Street.

Also located in the CWS study area is the Ann Arbor Transportation Authority’s Blake Transit Center (BTC), which is set for reconstruction starting this fall. Michael Ford, CEO of the AATA, gave DDA board members an update on that construction project, which will see the center relocated from the Fourth Avenue side of the block to the Fifth Avenue side. Ford told the DDA board he hoped for a positive outcome on the BTC site plan at the city planning commission meeting on July 17, and at the city council’s Aug. 20 meeting. He hopes to break ground on the new BTC in September or October, with completion before the 2013 art fairs, which are held annually in July.

At its July 2 meeting, the board was also updated on some grant requests – one for a bike-sharing program and another for a transportation alternatives analysis study for the corridor starting at US-23 and Plymouth, extending southward to State and continuing to I-94. During public commentary, the board was also pitched the idea of supporting an online “tech bounty board” to match small technical projects with people who can do the work.

Parking

The Ann Arbor Downtown Development Authority manages the city’s public parking system under contract with the city of Ann Arbor. So almost every DDA board meeting includes parking as a major theme. This report also includes information from a June 28 meeting of the DDA board’s operations committee.

Parking: Renewal of Republic Contract

The board considered a resolution to renew the DDA’s contract with Republic Parking for management of day-to-day operations of the city’s public parking system.

The DDA has contracted with Republic Parking since 2001. The contract covers Republic’s costs, plus a $200,000 annual management incentive, of which $50,000 is discretionary. Over the last few years, the DDA board has consistently awarded $45,000 of that amount.

It’s the DDA that contracts with Republic, because the city of Ann Arbor and the DDA have an agreement under which the DDA assumes responsibility for managing the city’s public parking system. As part of that agreement, which was renegotiated in 2011, the city of Ann Arbor receives 17% of gross revenues from the public parking system. That amounts to roughly $3 million a year.

Roger Hewitt introduced the board resolution amid some minor confusion about whether there were two resolutions or just one – but there was only one. The new contract between the DDA and Republic is for five years through 2017, with an option to renew twice for a year each time. The renewal of the contract includes the purchase of roughly $1.5 million of new automated payment equipment.

Almost $1.3 million of the amount will be covered with a loan from Republic Parking to the DDA.

The new equipment will allow motorists to check themselves out and will allow the use of credit cards for payment. Structures where the equipment will be installed include the new underground “Library Lane” parking structure, which has a grand opening set for July 12. Fourth and Washington, Liberty Square, and possibly other structures will also have the automated payment equipment installed.

The period of the loan, Hewitt explained at the meeting, is a five-year period at 6% interest. There’s no penalty to the DDA for early repayment. The DDA is taking the approach of borrowing the money in order to conserve its fund balances in the context of completing construction on the new underground parking garage. [.pdf of equipment list and repayment schedule]

In response to a question from Newcombe Clark, Hewitt indicated that the equipment to be purchased is “the latest technology for now.” He indicated that in five years, there could be better technology available.

By way of background, some of the new equipment will allow for patrons to pay before exiting the parking structure – on the same level where their vehicles are parked – instead of waiting to pay until they reach the exit point. That’s expected to reduce wait time to get out of the structure.

In addition, Republic Parking is acquiring handheld credit card processing units, which will allow gate cashiers to accept credit cards. For events like the art fairs, where patrons pay one fixed price to enter the garage, that will eliminate the need to refuse entry to motorists who don’t have cash and who were expecting to pay with a credit card. In the past, Republic has staffed extra people, just to handle the logistics of backing people out of the queue when they’ve reached the gate cashier. So it’s expected that the experience for patrons will be more pleasant, and money will be saved on the extra staff.

Another technology effort that’s been discussed at recent operations committee meetings would select a vendor for processing online payments – made with smart phones – based on the identifying number of an on-street parking meter. Many of the on-street meters have already been replaced with e-park kiosks.

For those meters as well as for the traditional coin-operated meters that remain, the idea is to provide a way for patrons to pay for their space online. The move would require coordination with the city of Ann Arbor’s community standards enforcement program, because patrons who pay online for a traditionally-metered space will leave a meter that would, on visual inspection, appear to be expired. So the handheld units used by community standards would need to be able to tap the online payment information system, and enforcement would proceed on that basis.

Outcome: The board voted unanimously to approve the new contract with Republic Parking.

Parking: Monthly Report

Roger Hewitt gave the monthly parking report for the most recent month for which data was available – May 2012. He reminded his colleagues that for the previous month, April 2012, the number of hourly patrons was a bit down. However, for May 2012, the overall increasing trend had continued. Overall revenues were up 16%, he said. The rate increase accounted for only half that amount, he said. And hourly patrons are up 6%, despite the fact that two lots have closed, Hewitt said – at First & Washington, and the Fingerle lot.

The Forest structure was a particularly high performer, which he attributed to two University of Michigan construction projects – at East Quad and the Lawyers Club. Construction workers are probably using some of that parking, he said. It’s encouraging to see sustained growth in the system, Hewitt said.

Newcombe Clark asked for an estimate of reservations for monthly permits in the new Library Lane parking structure. Hewitt told Clark that permits are being issued only to people on the waiting list, or to people who have permits in either the Liberty Square or Maynard parking structures and who want to take advantage of a discounted rate the DDA is offering.

Clark inquired whether any spaces were being offered to Barracuda Networks – a computer network security company that recently announced it’s moving into the old corporate office space previously occupied by Borders. Hewitt noted that Barracuda will be a new business, and will likely need around 125-150 spaces – in the new Library Lane parking structure, not the Maynard structure. [The Maynard Street structure is actually closer to the new Barracuda location, at 317 Maynard St. But the DDA's program to incentivize use of the new underground structure applies to "new businesses that were not located in downtown before May 1, 2012."]

Hewitt noted that 150 spaces equals about 20% of the roughly 700 underground spaces in the Library Lane structure. [It's 30% of the spaces actually added to the parking system inventory – because the surface lot that was there previously offered roughly 200 spaces.]

Ann Arbor public parking revenue through May 2012.

Ann Arbor public parking system hourly patrons through May 2012.

Parking: Peak Usage Data

At its meeting on June 28, the DDA operations committee was presented with data for peak usage on some of its parking facilities.

Extracted from Ann Arbor public parking system color-coded peak occupancy chart.

The idea is to look at how much of a facility’s capacity is used on a given day and to log the maximum usage on that day in terms of percentage.

The percentages were then color-coded in one of four ways: light green (Sundays and holidays when there’s no charge to park); dark green (less than or equal to 60% peak occupancy); red (between 61% and 79%); and purple (greater than or equal to 80%).

A year’s worth of data was presented to the committee. The Chronicle has assembled that data into a single file: [.pdf of peak occupancy data]

The DDA is looking at this approach as a way to measure the impact of the opening of the new underground parking structure on the existing parking structures.

Parking: “Library Lane” Construction Update

John Splitt gave what was likely the final construction update on the underground garage. The last concrete pour had been completed the previous week, and the rest of the work involves finishing touches, he said. He expected everything would be ready for the grand opening on July 12.

Parking: “Library Lane” Time Capsule

The DDA board’s annual meeting was not scheduled to start until 1 p.m., and the board concluded the substance of its monthly meeting by around 12:40. DDA executive director Susan Pollay took the opportunity to announce that for the grand opening of the Library Lane parking structure, the public was invited to contribute items for a time capsule to be placed within the structure.

In addition to photos and written documents, she suggested that people bring “artifacts” – perhaps a Borders gift card. The suggestion had come from Ray Detter, Pollay said, who has an interest in helping the community remember the past. [Detter has been instrumental in the creation of the historic street exhibit program.] DDA staff will be writing up a description of the items on acid-free paper.

Parking: AirRide Parking Usage

As part of the Ann Arbor Transportation Authority’s new service between Ann Arbor and the Detroit Metro Airport, the DDA has offered parking in the Fourth & William structure for up to two weeks for just $2. The minimal charge for parking was considered an introductory rate. The basic standard fare for the bus service itself was also introduced at a promotional rate of $10 – which will increase to $12 after July 30.

At its June 28 meeting, the operations committee discussed the idea of increasing the rate to $2 per day. Based on data for a bit more than a month – between April 23 and May 29 – 80 patrons of the AirRide service parked an average of 5.5 days per use, generating $160 of revenue. The same patrons would have paid around $900 at the proposed $2/day rate. Most people used the service by starting on Friday.

AirRide parking patronage by weekday for the period from April 23 and May 29. Most people started their trip on a Friday, but many people also started on Wednesday or Thursday.

AirRide parking patronage by discrete use.

Downtown Planning

The Ann Arbor Transportation Authority also factored into the July 2 board meeting in the context of planning that’s taking place in the vicinity of the AATA’s downtown Blake Transit Center, near Fourth and William. The transit center is in the general area of the Connecting William Street planning effort.

Planning: Blake Transit Center

Michael Ford, CEO of the AATA, appeared at the board’s July 2 meeting to give board members a quick update on the Blake Transit Center (BTC) reconstruction project. He led off by congratulating the board on the new underground parking structure, which is right across South Fifth Avenue from the BTC. He drew laughs from the board when he assured them that the construction on the BTC will try to minimize the disruption to the area – as “disruption” came out as “destruction” on his first attempt.

Looking westward down Library Lane. The Fourth & William parking structure stands in the distance on the other side of Fourth Avenue. The AATA is hoping for an easement on land that's part of the Federal Building site, where the downtown post office and federal court are located. An easement would allow for a continuous pedestrian route along the left (south) side of Library Lane across Fifth and on to Fourth Avenue.

Ford reviewed the basics of the project, which many board members had been briefed on several times before. The current transit center was built in 1987; over 5,000 riders a day come through the BTC. Ford described the BTC as having outlived its useful life. The new BTC will move to the opposite side of the block – from Fourth Avenue to the Fifth Avenue side. It will still use the mid-block driveway, but bus traffic will go from Fourth to Fifth, eastward – instead of the current configuration, which has buses entering the drive from Fifth and exiting onto Fourth. Ford said that would make for a better traffic flow.

On that side of the block, there will also be a visual connection to the Ann Arbor District Library. It’s hoped that the federal government, which owns the building just to the north of the AATA parcel, will grant an easement to allow for a continuation of the walkway along Library Lane from Division to Fifth Avenue across Fifth and continuing on to Fourth. Ford said that the new BTC will be barrier-free and fully ADA accessible. It will house offices for getDowntown. The exterior materials will be durable and low maintenance. Heated sidewalks will help with snow removal, he said. The center will include other environmentally friendly features, including a green roof, he said.

Construction drawings have been submitted to the city of Ann Arbor, Ford reported. The site plan is supposed to go before the planning commission on July 17 with possible city council approval on Aug. 20, Ford said. The AATA wants to get construction done before art fairs in July of 2013, so the AATA is looking to break ground in September or possibly October 2012.

Ford noted that the AATA had taken the standard approach of seeking approvals from the planning commission and the city council, even though the AATA need not have done that as a public agency. But that meant there’s a very quick timeline, he said, so he’s looking to try to move the process forward.

After his presentation, Sandi Smith asked about the design of the foundational footings for the new BTC. Ford clarified that even though the current design is for a two-story building, the footings are being designed for possible expansion upward for a third and fourth story.

Newcombe Clark told Ford that taking the standard traditional route through the approval process is nice, but it creates a tight timeframe. Clark wondered if there were to be a delay, would the AATA just “pound it through.” Ford indicated that he felt the AATA had done enough outreach that he hoped there would not be a delay.

He allowed, however, that it might be necessary to “punt to Plan B.” He indicated that Plan B was not yet worked out. Clark told Ford he was just asking so that the DDA would know if next year there would be construction to deal with during the summer festivals – so that the DDA could help out with anything that it could.

Planning: Connecting William Street

Joan Lowenstein reported that the leadership outreach committee (LOC) for the Connecting William Street project had met twice in June. That project aims to find alternate uses for the surface parking lots in the area bounded by William, Ashley, Liberty and Division streets. That project is being undertaken by the DDA at the direction of the Ann Arbor city council, given last year on April 4, 2011.

Lowenstein reported that the committee had provided input on the development of three basic scenarios and was getting close to finalizing them. Based on the discussion at the LOC meetings attended by The Chronicle, the three scenarios that are being developed at this stage can be described as minimum, medium and maximum density – defined in terms of the D1 zoning code.

That translates into a minimum of two stories on the low end. The LOC, in conjunction with the lead consultant on the project – Cheryl Zuellig of SmithGroup JJR – felt that two stories would likely not be financially feasible, so the first scenario was developed based on three- to four-story buildings for each of the parcels. The second scenario tries for each parcel to come as close to the “by right” maximum of 400% floor area ratio (FAR) specified in the D1 zoning code. And the third scenario is intended to illustrate the 700% FAR that is available within the zoning code, if criteria are met that award premiums. Those criteria include residential uses, affordable housing units, pedestrian amenities, energy efficiency and the like.

July and August will be spent meeting with community members and stakeholder groups getting feedback on the scenarios in an effort eventually to develop a preferred scenario, Lowenstein told the board at its July 2 meeting. The idea is not to choose between the three scenarios, but rather to assemble the preferred scenario for each parcel and to assemble the overall preferred scenario in a way that the LOC has called a “Mr. Potato Head” style.

Officer Elections

Following its regular monthly meeting, the board of the Ann Arbor Downtown Development Authority held its annual meeting. It was a short meeting, and consisted mainly of board officer elections. The outcome of the elections: Leah Gunn, chair; Sandi Smith, vice chair; Keith Orr, secretary; Roger Hewitt, treasurer. The DDA thus followed its custom of electing its current vice chair to serve as chair for the next year.

From left: Board members Joan Lowenstein, Leah Gunn and Keith Orr.

The nomination and vote for treasurer was uneventful. Joan Lowenstein nominated Roger Hewitt, the current treasurer.

Outcome: The board voted unanimously to elect Hewitt as treasurer for the coming year.

The nomination for secretary followed the pattern of nominating the currently-serving board member for the office to continue in that same capacity. Leah Gunn nominated Keith Orr to serve as secretary.

Newcombe Clark then paused the proceedings by asking which board members are up for re-appointment. Susan Pollay, executive director of the DDA, told Clark that Roger Hewitt, Keith Orr and Sandi Smith had terms that end on July 31. Clark followed up by asking if any of the three were finishing their second terms at the end of July. Pollay clarified that Hewitt and Smith would be completing their second terms. [DDA board members are not subject to term limits.]

Smith responded to Clark’s line of inquiry by noting that DDA board members may continue to serve past the concluding date of their appointed terms – until a replacement is appointed. [From the DDA enabling statute, Act 197 of 1975: "A member shall hold office until the member's successor is appointed."]

Outcome: The vote for Orr as secretary was unanimous, but with Clark abstaining.

John Splitt nominated Sandi Smith to serve as vice chair. The board went to a vote without discussion.

Outcome: The vote for Smith as vice chair was unanimous, but with Clark abstaining.

Keith Orr nominated Leah Gunn as chair. [That follows the custom of electing the current vice chair to chair the board.]

Outcome: The vote for Gunn as chair was unanimous, and Clark did not abstain from that vote.

The board also established its two committees as essentially committees of the whole – a partnerships committee and the operations committee. The board formally voted to restore the name of the “operations committee” – because “bricks and money/transportation” committee had become somewhat unwieldy. On the restoration of the previous committee name, Sandi Smith offered: “What is old is new.”

Officer Elections: Background

Board member Newcombe Clark’s abstention on some officer votes this year marks the third year in a row that he has abstained from officer elections over the uncertainty of board appointments. The appointments are the responsibility of mayor John Hieftje to make. Hieftje serves on the DDA board, but did not attend the July 2 meeting.

Bob Guenzel had been elected to that post at the board’s Sept. 7, 2011 meeting – after the board originally had elected Gary Boren chair two months earlier at its July 6, 2011 meeting. Boren’s term on the DDA expired at the end of July 2011, however, and Hieftje chose not to nominate him for re-appointment. Nader Nassif later was appointed instead. Last year, Guenzel had already been elected vice chair, and thus was asked by his board colleagues to accept the chair’s role. And Gunn was elected vice chair to fill the vacancy left by Guenzel, which left the other board officer positions intact: Keith Orr, secretary; and Roger Hewitt, treasurer.

Officer Elections: Thanking Guenzel

Susan Pollay, executive director of the DDA, offered her thanks to the board for the work they’d accomplished over the last year. She reported that she’d given another tour of the underground parking garage that morning. She’d pointed out to the tour group she led [which included The Chronicle] how the Fifth and Division streetscape improvements interfaced with the underground garage: The sidewalk bump-out at the southwest corner of Liberty and Fifth prevents southbound traffic from inadvertently entering the speedramp into the underground garage. Pollay expressed appreciation on behalf of the DDA staff and the community that board members are so generous with their time.

Pollay thanked Guenzel for his wisdom, insights and mentorship.

Guenzel returned the thanks to the staff, saying that none of the work could be done without them. A volunteer board can only do so much, he said. [DDA board members serve without compensation.] Guenzel called serving on the board a pleasure and an honor. Of the many boards he serves on, Guenzel said that the DDA is special because its members work very hard. DDA board members are active board members and they’re also active in the community, he said.

Guenzel said he was looking forward to next year under Gunn’s leadership and to the opening of the new underground parking garage.

Pollay awarded Guenzel a brass plate engraved with his name – which will be affixed to a barstool at Arbor Brewing Company. He was also given a gift card to ABC.

Grant Faucet

At the DDA partnerships committee meeting, held the week before the July 2 board meeting, committee members in attendance were briefed on a couple of grant requests. The general reaction was cautious, as Roger Hewitt described the “grant faucet” as very difficult to turn off, once it has been turned on.

The grant requests were reviewed briefly at the board’s July 2 meeting.

Grant: Bike Sharing

John Mouat told the board that a bike-sharing program appears to be moving forward – sponsored by the Clean Energy Coalition. The University of Michigan has stepped forward as the main financial supporter, he said. The DDA had previously been asked to provide in-kind staff support. Now, however, the CEC is also interested in receiving a small grant. Mouat told the board there’s no urgency at this point. But the feeling on the part of the committee is that it’d be best to wait until October before the DDA starts responding to various grant requests.

By way of additional background, Mouat had briefed the board on the in-kind support for the bike-sharing program requested by the Clean Energy Coalition at the DDA’s Dec. 7, 2011 meeting. The bike-sharing program would work on analogy to car-sharing programs like Zipcar. The initial request only for an in-kind contribution from the DDA was based on the hope that a grant award from the Federal Transit Administration’s Congestion Mitigation and Air Quality Improvement (CMAQ) would cover both capital costs and operations. But it turns out that the FTA has limited the program to capital costs only.

At the partnerships committee meeting of June 27, the grant request by the CEC to the DDA was described as $5,000 in calendar year 2012 and $10,000 annually for the three years from 2013-2015. Other organizations that had been asked to contribute financially include: the Ann Arbor Transportation Authority ($18,000 this year and $40,000 annually for three years); city of Ann Arbor ($15,000 this year and $40,000 annually for three years; and University of Michigan ($66,000 this year and $200,000 annually for three years). University of Michigan was described as contributing the lion’s share because UM is interested in controlling the advertising component of the program.

At the partnerships committee meeting, Mouat described Stephen Dolen – UM executive director of parking and transportation services – as publicly supporting the bike-sharing program for the UM campus. Mouat also described city of Ann Arbor transportation program manager Eli Cooper as supportive of the program. Hewitt was not terribly sanguine about contemplating any grant requests, saying he imagined there will be lots of requests for money. Hewitt noted that there’s still not final reconciliation on the cost of the new underground parking structure. Until all those construction costs have been reconciled, Hewitt said, he wanted to put off all grant requests. He did not want to open up the “grant faucet” again.

The Clean Energy Coalition was hoping for a response by August, but the committee seemed reluctant to move any quicker than possibly October or later. At the partnerships committee meeting, DDA executive director Susan Pollay noted that there will be competing priorities. As an example, she cited a request from mayor John Hieftje that sidewalk improvements be made in the State Street area [from Liberty southward].

Grant: Connector Study

At the board’s July 2 meeting, John Mouat also apprised his board colleagues of a financial request to support the next phase of a connector study – the alternatives analysis phase for a study of the corridor running from US-23 and Plymouth southward along Plymouth to State Street and further south to I-94.

By way of additional background, Michael Ford, CEO of the Ann Arbor Transportation Authority, included in his written report to the AATA board in advance of its June 21, 2012 meeting an update on the connector study. His report indicated that the funding for the alternatives analysis study was essentially in place. Pending the signing of a memorandum of understanding with the city of Ann Arbor and the University of Michigan, the AATA will be moving ahead with an alternatives analysis portion of the connector study. The alternatives analysis phase will result in a preferred choice of technology for the corridor (e.g., bus rapid transit, light rail, etc.) and identification of stations and stops.

That study will move forward, based on a total of $300,000 of local funding that has been identified to provide the required match for a $1.2 million federal grant awarded last year for the alternatives analysis phase. The breakdown of local support is: $60,000 from the city of Ann Arbor; $150,000 from the University of Michigan; and $90,000 from the AATA.

A feasibility study costing $640,000 has already been completed. That study was also funded through a partnership with the city of Ann Arbor, the Ann Arbor DDA, UM and the AATA. Chronicle coverage of that feasibility study includes: “Transit Connector Study: Initial Analysis“; “AATA: Transit Study, Planning Updates“; and “Washtenaw Transit Talks in Flux.”

A total of $1.5 million for the connector alternatives analysis study – of which $1.2 million is a federal grant – is included in the AATA’s capital and categorical grant program, on which the AATA held a public hearing at its June 21 meeting. In November 2011, Ford had updated the AATA board on the possible timeline for the alternatives analysis, saying that phase would take around 16 months.

At the DDA partnerships committee meeting on June 27, Susan Pollay – executive director of the DDA – indicated that the DDA had been asked “in a friendly way” to help fund the city’s $60,000 portion as a “sign of Kumbayah.”

At the July 2 DDA board meeting, Mouat indicated a preference to hold off consideration of grant requests until after the final reconciliation of the underground parking garage.

Keith Orr drew out from Roger Hewitt that this second phase of the study should result in a “locally preferred alternative” of technology – and that this is part of the federal grant funding requirements to get federal matching funds. Mouat ventured that cable cars are the newest kind of technology for applications in contexts like these.

Grant: Tech Bounty Board

During public commentary at the start of the meeting, Ryan Bonner of Brightline Technologies addressed the board to get a feel for how receptive board members might be to a request to help financially support a “tech bounty board.” Bonner described such a “bounty board” as addressing the following kind of problem: A business has a specific technical need but no one in-house who can do the job. Currently, he said, the business could contract out, perhaps try Craigslist, or hire somebody. Getting those smaller projects done, Bonner said, can derail longer-term projects.

The idea, Bonner said, would be to set up an online bounty board where smaller and medium-sized businesses can post a technical need they have. The amounts for projects would under $5,000 – because the board would not trying to compete with existing businesses. The goal right now is to feel out possible demand and need for such an online board.

Bonner reported having spoken with Rich Sheridan (president) and Bob Simms (chief financial officer) at Menlo Innovations about the tech bounty board idea. They’d suggested that it’s something that would be supported best in the form of sponsorships. Bonner figured it would maybe take $5,000 to build the website. Bu it would need a critical mass of people who need things done. Bonner told the board that he was there to assess whether this is something that the DDA would be interested in hearing about.

A bit later in the meeting, Newcombe Clark advised Bonner that the best way to approach it would be to talk to executive director Susan Pollay about using the DDA’s committee process.

Communications, Committee Reports

The board’s meeting included the usual range of reports, which included one from the the downtown citizens advisory council.

Comm/Comm: 618 S. Main Coda

In his report from the downtown citizens advisory council, Ray Detter said he was very pleased with city council’s approval of the 618 S. Main site plan and brownfield plan. [See Chronicle coverage of the council's June 18, 2012 meeting.] Detter noted that the project had a broad range of support – from the design review board, the Old West Side Association, the planning staff and the planning commission. He stated that the project couldn’t have happened without the hard work of the DDA partnerships committee, led by Sandi Smith, which had developed the brownfield policy. Detter said he looked forward to welcoming the residents of the 618 S. Main project as new neighbors. He hoped when it’s built that there will be someone from the building on the downtown citizens advisory council.

Comm/Comm: Fair Housing – E. Huron

In his report from the downtown citizens advisory council, Detter also noted that he hoped the new owners of the property on the north side of E. Huron Street near Division will learn something from the recent projects that have been proposed and approved in the downtown area. Detter’s understanding is that the new owners are planning to build additional student housing. Detter observed that the D1 zoning for the E. Huron character district allows a maximum height of 150 feet. [Most of downtown has a limit of 180 feet, but the political compromises associated with the A2D2 rezoning of downtown Ann Arbor resulted, among other things, in maintaining the E. Huron area as D1, but reducing the maximum height by 30 feet.] Detter stated that he hoped that whatever is built doesn’t have a negative impact on Sloan Plaza, also located on E. Huron. Detter said he’s heard that there’s an increasing number of people who want to live downtown who are not students, and indicated a preference that the project for the E. Huron site not be built to be marketed to students.

Later in the meeting, Newcombe Clark responded to Detter’s remarks by noting that the downtown seems to be pushing into another multi-family construction phase. He stressed that it’s impossible to dictate what projects are built, based on people’s jobs or age. The Fair Housing Act removes those factors as possible considerations, Clark said, and they can’t be included in any of the DDA’s policies.

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

Absent: Nader Nassif, John Hieftje, Russ Collins

Next board meeting: Noon on Wednesday, Sept 5, 2012, at the DDA offices, 150 S. Fifth Ave., Suite 301. Note that the August DDA board meeting has been cancelled. [confirm date]

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

The DDA has contracted with Republic Parking since 2001. The contract covers Republic’s costs, plus a $200,000 annual management incentive, of which $50,000 is discretionary. Over the last few years, the DDA board has consistently awarded $45,000 of that amount.

It’s the DDA that contracts with Republic, because the city of Ann Arbor and the DDA have an agreement under which the DDA assumes responsibility for managing the city’s public parking system. As part of that agreement, which was renegotiated in 2011, the city of Ann Arbor receives 17% of gross revenues from the public parking system. That amounts to roughly $3 million a year.

The new contract between the DDA and Republic Parking includes a provision under which Republic will acquire and install new automated payment equipment in some of the city’s parking structures. The new equipment will allow motorists to check themselves out and will allow the use of credit cards for payment. Structures where the equipment will be installed include the new underground “Library Lane” parking structure, which has a grand opening set for July 12. Fourth and Washington, Liberty Square, and possibly other structures will also have the automated payment equipment installed.

The purchase of the equipment will be made with a $1.5 million loan from Republic to the DDA – for a five-year period at 6% interest. There’s no penalty to the DDA for early repayment. The DDA is taking the approach of borrowing the money in order to conserve its fund balances in the context of completing construction on the new underground parking garage.

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

Deanna Relyea spoke to the Ann Arbor DDA board at the Nov. 2 public hearing on behalf of the Kerrytown District Association. (Photos by the writer.)

The hearing will continue at the board’s Dec. 7 meeting, after a Nov. 14 joint working session with the Ann Arbor city council, when the two bodies will discuss proposed increases. A vote by the DDA board on the rate increases would not come until January.

Around a half dozen people spoke at the initial opportunity for public comment on the proposed rate increases, most either downtown merchants or representatives of merchant associations. They were uniformly in support of one feature of the proposal – no extension of meter enforcement past 6 p.m. Extension of enforcement hours has been actively on the table for at least two years. Based on board discussion at Wednesday’s meeting, evening enforcement could eventually be implemented – but not for the current rate increase cycle.

Those who spoke at the initial part of the hearing were generally opposed to increasing rates, but also acknowledged the financial decisions the DDA faces. And some speakers put part of the blame for that situation on the city of Ann Arbor. Under a new contract, the city of Ann Arbor now receives 17% of gross public parking revenues, which could otherwise be put back into the parking system, reducing the pressure to raise rates. Under the contract, the DDA operates the system, and is responsible for ongoing maintenance. Rates are controlled by the DDA in consultation with the city council.

The details of proposed parking rate increases were first announced towards the end of last week, most of which would be implemented starting in September 2012. Some increases would be implemented starting in February. [.pdf of DDA proposed parking rate changes]

Highlights of the changes to be enacted in September 2012 include predominantly $.10/hour increases: hourly structure parking rates would increase from $1.10/hour to $1.20/hour; hourly parking lot rates would increase from $1.30 ($1.50 after 3 hours) to $1.40 ($1.60 after 3 hours;) hourly parking meter rates would increase from $1.40/hour to $1.50/hour; monthly parking permit rates would increase from $140/month to $145/month.

The board’s meeting included the usual range of reports, including the quarterly financial numbers and parking report, and updates on the Fifth Avenue underground parking garage construction as well as the most recent development in the Nov. 8 sidewalk millage ballot proposal.

At the city council’s Oct. 17 meeting, the council passed a resolution clarifying how the millage proceeds would be used inside the DDA’s geographic district. And at the DDA’s Wednesday meeting, mayor John Hieftje gave the clearest public indication to date that he does not want to take a position on the sidewalk millage, saying that residents would have to “figure it out for themselves.”

The board also held a closed session, under the provision of the Michigan Open Meetings Act that allows such a session to discuss the meaning of legal advice contained in a written document protected under attorney-client privilege. 

Parking Rate Public Hearing

The main focus of the board meeting was the public hearing on parking rates and the associated discussion by DDA board members. Remarks included not just comments on the rate increases, but also questions about the need to build the underground parking garage, which is currently under construction on the so-called Library Lot on South Fifth Avenue, between Liberty and William streets. Speakers also complained that revenue from the parking system was being used to backstop the city of Ann Arbor’s general fund.

Terms of the new contract (ratified in May 2011) under which the DDA operates the city’s public parking system include a provision whereby 17% of gross revenues are paid directly to the city of Ann Arbor. The payments are made quarterly, by the end of the month after the quarter ends. So the first of those payments was made on Oct. 31. The 17% figure came to $662,471.

Parking Rate Public Hearing: Introduction

The contract between the city and the DDA, under which the DDA manages Ann Arbor’s public parking system, provides for a mechanism the DDA must use in order to implement rate increases. It involves three separate board meetings: one to announce an intent to raise rates, another to hold a public hearing, and a third for a vote.

… DDA shall not implement any increase in the Municipal Parking System’s hours of meter operation or parking rates intended to persist for more than three (3) months without first:
(i) announcing, and providing written communication regarding, the details of such increase at a meeting of the DDA Board;
(ii) providing all members of the public an opportunity to speak in a manner similar to a public hearing before the DDA Board at its next regularly scheduled meeting on the subject of the proposed increase (“Public Hearing”); and
(iii) postponing any vote on the proposed increase until at least the regularly scheduled meeting of the DDA Board after the Public Hearing.

The DDA board completed the first step of the process at its Wednesday meeting and opened the public hearing early, so that it could receive input from the public before its Nov. 14 work session with the city council.

Bob Guenzel opened the hearing by noting that the recently signed contract with the city of Ann Arbor requires that a hearing be held. Some of the rate changes are proposed to take effect in September 2012, while others are proposed for February, he said. However, the public hearing would welcome comments on both sets of changes.

Guenzel noted that the DDA board would be meeting with the city council on Nov. 14 to talk about the modifications. Guenzel went on to explain that the public hearing would be adjourned and then re-opened at the Dec. 7 DDA board meeting, so there would be time both before and after the city council work session to hear from the public. Unlike working sessions for the Washtenaw County board of commissioners, the city council work sessions have historically not provided time for public commentary.

Parking Rate Public Hearing: Public – Round 1

Maura Thomson, executive director of the Main Street Area Association (MSAA), began by asking if she needed to give her home address as Guenzel had indicated. Quipped Guenzel, “No, we know where to find you!” Thomson thanked the board and staff for their work and for their thoughtfulness in arriving at their recommendations. She said she understood the complexities the board faces. Specifically, the board needs to satisfy its financial obligations, she said, as well as the needs of the board’s “customers.”

As “customers” Thomson identified the public and downtown businesses. She called satisfying both sets of customers a “tall order.” She noted that many business were opposed to extending evening enforcement hours. She said she really appreciated the fact that the board had elected not to extend hours of enforcement. She said felt encouraged that the board had really listened to concerns of members of the MSAA and really heard them.

Maggie Ladd, director of the South University Area Association, told the board she echoed Thomson’s remarks and said she appreciated the fact that extension of enforcement of meters would not be recommended. She also said that she had no objection to the increases for parking during Ann Arbor’s art fairs. [That increase is proposed to go from $10 to $12 for entrance into the downtown parking structures. Ladd is director of the South University Art Fair, one of four fairs that take place each summer in downtown Ann Arbor.]

Ali Ramlawi introduced himself as the owner of the Jerusalem Garden restaurant on Fifth Avenue and resident of Ann Arbor. He described the construction of the underground parking garage, which is taking place immediately adjacent to his restaurant, as the “nightmare on Fifth.” He said he’d been watching actions of the board and its decisions, and the steps it’s taking. As a business owner and community resident, he said he believed that the board’s set of recent steps and decisions are “choking off” downtown. The effect of continued increase rate increases and increased complexity of the pricing structure is to choke off businesses, he said. Other than night clubs and restaurants, businesses are struggling to stay alive, he said. Extended hours of parking meter enforcement would have been the nail in the coffin.

DDA board member Keith Orr makes a point during board deliberations. Visible in the background is the mission statement of the DDA: “The mission of the Ann Arbor Downtown Development Authority (DDA) is to undertake public improvements that have the greatest impact in strengthening the downtown area and attracting new private investments. “

Ramlawi went on to describe the relationship between the city and the DDA as uncomfortable. The mission statement of the DDA is not to balance the city’s budget, he said. It’s a “weird relationship,” he said, that includes the DDA paying the city $2 million that wasn’t required under its contract, then the forgiveness of excess TIF funds captured by the DDA. He described the situation as the “lines are getting blurred.” The DDA should get back to focusing on the needs of the downtown. People need to live within their own means, he said – that’s what we all have to do as businesses and as citizens. If the city keeps “going back to the well” of the DDA, the well is going to run dry, he cautioned. He allowed that the DDA does not have an easy job, but concluded by saying that continued parking rate increases are harming business downtown.

Andrea David spoke on behalf of Herb David Guitar Studio, located on the corner of Fifth and Liberty, a few parcels down from the ongoing construction of the underground parking garage. She said she appreciated that the extension of enforcement hours into the evening was not part of the proposal. But she told the board that the construction activity had practically killed the studio, and the restaurants Jerusalem Garden and Earthen Jar. Students who take lessons at the studio can’t find parking. She asked the board to consider raising the rates only after the underground parking structure is open, not before.

J.C. Potts of Pangea Piercing told the board in a friendly drawl that everything the board does makes it unattractive to drive downtown. He allowed that it would be nice to be able to get around only as pedestrians or cyclists, but said that the No. 1 complaint he hears is about parking. It’s not the cost or lack of parking, but rather the aggressive enforcement.

Potts said that in a time of limited resources, the city seems to have a whole army of officers who are assigned to enforce parking regulations. He regularly receives tickets, he said. Pangea Piercing is expanding its business, he said, but not in Ann Arbor. They’ve chosen Pittsfield and Ypsilanti, because the parking situation is easier there. He cautioned the board that the goose with the golden eggs can be killed.

Herb David, owner of Herb David Guitar Studio, said he endorsed what everybody else had said. If the goal of the construction of the underground parking garage was to make the downtown more vital, it had in fact de-vitalized long-time businesses.

David alluded to an old blues song by Huddie Ledbetter (Leadbelly) called “Bourgeois Blues” which includes a lyric: “I tell all the colored folks to listen to me/Don’t try to find you no home in Washington, D.C./’Cause it’s a bourgeois town.” Washington D.C. might be a bourgeois town, David said, but Ann Arbor is becoming a franchise town.

He told the board that the Herb David Guitar Studio is threatened, and might go out of business. Long-time customers don’t want to deal with the construction zone situation. He told the board they’d done a lot of good things. But after 50 years in business, where each year it would increase 4-5%, now it was down 40-45%. Sunday, he said, is better than the rest of the week, because you can get free parking. “We can’t pay our bills,” he told the board. For the first time in 50 years, the store had been broken into. He attributed the break-in as caused in part by a dark alley resulting from a missing street light. They’d been given a string of Christmas lights, but that didn’t help.

Deanna Relyea spoke on behalf of the Kerrytown District Association. She thanked the DDA board for the improvements that had been made to downtown over the years. She echoed Thomson’s remarks, telling board members she was sorry that they, as the DDA board, had to deal with city of Ann Arbor’s shortfall. There were plans for the Fifth Avenue streetscape improvements [involving additional brickwork in the area of Detroit Street] that had to get axed.

Relyea told the board that raising parking rates and aggressive enforcement go together to make Kerrytown customers think twice about coming to Ann Arbor. She noted that Kerrytown has a somewhat different character from other downtown districts – it’s a destination, and people come and stay for hours. She said that merchants don’t necessarily mind rate increases, they just need to know that parking will remain convenient. She noted that the DDA mentions cities that have higher rates, like Grand Rapids and Lansing. But Ann Arbor is not like those cities, she said, and shouldn’t aspire to be that way.

Ray Detter reported to the board that the Downtown Citizens Advisory Council had gone over each recommendation for rate changes and fully supported them. No no one wants to raise rates in a time of economic hardship, he said. But the increases were necessary in order to keep the parking structures in good repair and meet the DDA’s financial obligations. He reminded the board that the parking system didn’t always pay for itself. When the DDA took over the parking system in 1992, some of the structures were falling apart. With the city council’s approval, the DDA had taken responsibility for repairing and rehabbing structures and has made the system financially self-sufficient, he said.

Parking is only a small part of the full range of the transportation options that the DDA promotes, in concert with the University of Michigan and the Ann Arbor Transportation Authority, Detter said. The analysis of that entire transportation system, he said, had led the DDA to build the underground parking garage. The nature of that construction has caused problems for neighboring businesses, he acknowledged, calling that unfortunate. The whole system has more people using it than before. He passed around some articles taken from the Ann Arbor District Library archives from 1938. There’s a photo of a woman who had a sign that read: “Keep parking meters out.” It illustrated that parking rates had always been a point of controversy. [AADL Old News: Parking]

Andrea of Pangea Piercing said she wanted to argue the point that downtown was vital. There were four stores going out of business, she said. Trying to imagine Ann Arbor without Herb David Guitar Studio made her want to cry, she said. Ann Arbor doesn’t want a CVS and a Starbucks on every corner. “We don’t want a cookie-cutter city,” she said, with a chain store everywhere. She reiterated Potts’ point that Pangea’s is opening another location, but in another city, because people don’t want to come to downtown Ann Arbor.

Parking Rate Public Hearing: DDA Board Commentary

Responding to some of the remarks made during the public hearing, mayor John Hieftje said that a speaker’s suggestion that parking meter rates not be raised until after the underground structure is open is a good idea. He noted that September 2012 is after the underground parking garage is expected to be open (it’s scheduled to open in the spring of 2012). And September 2012 is when the majority of increases affecting the average parker are proposed to be implemented.

Newcombe Clark responded to the comments during the public hearing by saying that the board was aware of all the data, and the revenue needs. “We’ve all known this was coming,” he said, noting that the board has listened to the feedback it’s heard. Not having enough parking and having parking that’s too expensive are both problems. While it’s true that the board needs the revenue, this is a function of choices the board has made, he pointed out.

Clark talked about the parking policy choices driven by “best practice or best politics.” He said the board should try to err on the side of best practices. The parking rate increases the board is proposing take a first stab at revenue generation, Clark said. As the board thinks about parking policy, the best-practices-based plan calls for evening enforcement. So that may have to come back on the table, he said. Even though evening enforcement was a best practice, it’s not best politics. Clark noted that MyBuys, which employs Clark as a manager of business development associates, has 80 downtown employees, and sees no benefit to a lack of evening enforcement. But there’s no advocate for that position. Regarding the DDA board, he noted, “We’ll be yelled at no matter what we do.”

Parking Rate Public Comment: Public – Round 2

During the time allotted for regular public commentary at all DDA board meetings, Ali Ramlawi of Jerusalem Garden reprised the sentiments he’d expressed at the public hearing. He said he wanted to reinforce the thought that the DDA is a separate agency, and needs to act independently of the city’s financial woes. He told the board to focus on their mission statement. The DDA does not exist in order to fund gaps in the city budget, he said. Ramlawi said he respected Ray Detter, but as rates increase 10, 20, 30, 70 cents, you get to a point of no return.

Ramlawi noted that people compare Ann Arbor to other cities – the fact of the matter is that Ann Arbor is a university town. The university keeps the city afloat and keeps Ann Arbor from facing some of the same problems that other cities face, he said. Ann Arbor’s success is due to the University of Michigan. For his restaurant, business is off 30-40%. [Although Ramlawi didn't make the point explicitly that he appeared to be headed for, on other occasions he's mentioned that the catering part of his business, for which UM is a client, has helped stabilize the business.]

Ramlawi said that Fifth Avenue was originally supposed to be open in time for the art fairs in the summer of 2011, but it’s still closed. [During his construction activity update later in the meeting, DDA board member John Splitt indicated that the goal is to reopen the street by early 2012.] Ramlawi said he had a feeling that some of the need for rate increases are due to previous financial irresponsibility that has “caught up with today’s balance sheet.” He repeated the point that Ann Arbor is a successful city because it has one of the best university’s in the world in its backyard. It’s time to live within our means, he said.

Andrea David of Herb David Guitar Studio also returned to the podium. She said that the city has to move forward, but she told the board to do that with caution. The DDA built the underground parking structure, but doesn’t know if you can fill it. That’s prime parking not far from Liberty Street.

Pangea Piercing’s Liberty Street location, east of Sam’s and Sole Sisters,  is near an alley entrance where parking is prohibited. 

J.C. Potts of Pangea Piercing returned to the podium, too. He took up Clark’s point, by acknowledging that people will yell at the board no matter what they do. He said he recognized the need to build more parking. But he suggested easing enforcement or keeping rates the same as a goodwill gesture. He suggested that parking could be a “loss leader.” Now, people worry about coming to park in downtown Ann Arbor, because they think they’ll get a ticket and get “harassed by five bums.” The idea would be to take less from each downtown visitor, but if there are more visitors, the city can get more revenue. Ann Arbor needs to get people to come to downtown and “see the freak show,” Potts said.

Herb David, in his second turn at the podium, asked the board if they would be facing the same problem tomorrow. Based on the projected population growth in the next 50 years, he said, no one thinks the underground parking garage would be justified. He suggested building an atrium next to the downtown library as a replacement space for artists who previously worked out of space in the collection of buildings where the new Y was built on West Washington.

Parking Rates: Board Response, Discussion

Responding in more detail to remarks made at the public hearing, Roger Hewitt said there were some misstatements he wanted to correct. Responding to the idea that Ann Arbor is being taken over by chain stores due to decisions made by the DDA board, he pointed out that many members of the board are independent business owners in the downtown. They’re acutely aware of the challenges faced by independent businesses. The board is not associated with franchises of chains, he said. [Hewitt owns the Red Hawk Bar & Grill and Revive + Replenish downtown.]

Responding to the suggestion that enforcement activities should be eased off, Hewitt pointed out that the city of Ann Arbor handles enforcement of parking regulations. As part of the new parking contract, Hewitt said, the DDA and the city’s enforcement staff now have a monthly staff meeting to coordinate the city and the DDA’s thinking on the issue of enforcement. Hewitt stressed that it’s not the DDA who writes the tickets. Hewitt also noted that with the set of proposals the DDA has made about rate increases, there’s not currently a plan to begin enforcement of parking meters in the evenings.

Hewitt said the biggest concern they’ve heard is not that people don’t want to pay – it’s the concern that if people receive parking tickets, it will send an unpleasant message. Hewitt alluded to technological advances in the parking industry that might allow fees to be charged for on-street meters without risk of parking tickets. [Hewitt was alluding to "hockey puck" sensors that would be installed in the pavement under a space and could monitor when an automobile is in the space. Patrons would pay for the time they used.] But evening enforcement is not part of the proposal for the coming year, Hewitt said.

Hewitt then ticked through each of the proposed increases. [.pdf of DDA proposed parking rate changes]

The break-even point for the parking system, Hewitt said, is roughly $16 million a year – that includes debt service as well as the cost of maintaining the structures. Hewitt said he appreciated that Detter had pointed out that the parking structures were in very bad repair when the DDA assumed responsibility for the city’s parking structures in 1992. Hewitt called Ann Arbor’s public parking system one of the best maintained municipal parking systems in the country. The maintenance costs for that system run about $2 million a year, he said. In contemplating the rate increases, the DDA is trying to balance its fiduciary responsibility to maintain the system against the issues that the speakers had identified during the public hearing.

With respect to the need to build an underground parking garage, Hewitt said that beginning about five years ago, it was noted that the parking system was reaching capacity. But measured in terms of “hourly patrons,” use of the parking system continues to grow. Hewitt clarified that an hourly patron is someone who pays hourly either at a lot or a structure.

Here’s a summary of parking revenue and hourly patronage trends over the last two years, compiled by The Chronicle from DDA monthly year-over-year comparisons:

DDA parking revenue. The red revenue line for the most recent year shows an overall pattern of slight increases compared to the blue bars of the previous year. (Image links to higher resolution file. Any errors are the responsibility of The Chronicle.)

DDA hourly parking patrons. The red parking patrons line for the most recent year shows an early pattern of slight decreases with slight increases more recently, compared to the blue bars of the previous year. (Image links to higher resolution file. Any errors are the responsibility of The Chronicle.)

Compared to five years ago, there are 450,000 more hourly patrons a year, reported Hewitt. [For the most recent year, there were roughly 2.2 million hourly patrons.] For the current monthly parking report [September 2011 versus 2010], Hewitt said, the number of hourly patrons has gone up 6%. Use of the system is now growing steadily, Hewitt said, after experiencing a somewhat flat period starting with the 2008 economic downtown. Without adding a new parking structure, Hewitt said, business couldn’t grow.

Sandi Smith said the board had heard a lot about parking demand management – which involves different pricing of parking options based on demand. She said it appeared, based on the proposed rate increases, that the DDA had stepped away from any implementation of that.

Hewitt told Smith that a “stepped approach” had been considered for off-street meters, but one barrier to that is that ePark stations had not yet been installed throughout the downtown. [The ePark stations are wirelessly-connected payment kiosks that allow different rates to be set for different geographic areas and different times of day, and to be easily adjusted. The capital expenditure of the stations has been put on hold in light of the need to meet the condition of the 17% gross revenue payment to the city of Ann Arbor, under the requirements of the new contract.]

South Ashley looking north. Meters along that section are half the cost of other meters in the city of Ann Arbor – $0.70 compared with $1.40 an hour. Those meters also allow for 10-hour parking. Most other meters allow only 2-hour parking. (Image links to .pdf file of map with current meter and rate locations.) 

Hewitt noted that on the fringes of the metered areas, the DDA wanted to establish “park and walk” meters, which are 10-hour meters that are half price. That’s consistent with the parking demand management approach. Hewitt’s comment prompted Russ Collins to recall a joke made by Geoff Larcom, director of Eastern Michigan University media relations, who says EMU doesn’t have a parking problem, it has a walking problem.

DDA executive director Susan Pollay noted that there are locations where such meters are already in place, on North Ashley, North First, and South Division. These meters would be branded, Pollay said, as part of the effort to expand use throughout the system. As the rates are increased in September 2012, Pollay said, the half-price meters would increase as well. [Later that day, Republic Parking employees were observed adding signs to the half-price meters.]

Mayor John Hieftje expressed his astonishment at the 450,000 figure Hewitt had given on the increase in the number of yearly hourly patrons compared to five years ago. He noted that there were also a lot more people using the go!pass and concluded that this reflected a lot more visits to the downtown.

Newcombe Clark wanted to know what the revenue implications are: How much money would the parking rate increase bring in? Hewitt told Clark he did not have the numbers in front of him. He said the DDA is in the process of revising its 10-year budget plan.

Sandi Smith wanted to know if historical decreases in parking system use correlated to rate increases. Hewitt told Smith he hadn’t seen use go down during the seven years he’s served on the board, though he allowed it’s been flat at times. In 2009-2010, things were flat for a little while, he said. Russ Collins recalled some history back when Main Street was dying due to the opening of Briarwood Mall, in the mid-1970s. If there was a desperate time, then that was it, he said. At that time there was an economic downturn and parking rates were doubled. Collins then quipped that WEMU’s reporter, Andrew Cluley, was not taking notes about his remarks, so it was obviously not important.

John Mouat said the message about the opening of the new underground structure should be: “We’ve got parking!” The board needs to remember that it’s a great thing to be able say that to people who’ve been trying to come downtown for years. The capacity of the new underground structure will also allow various kinds of growth, Mouat said, including allowing more downtown residents. Mouat looked forward to the time when the bonds are paid off and the DDA would be able to manage costs. He said the board has to keep in mind the future – 10-20 years from now.

Building off of Mouat’s remarks, Collins said as far as long-term vision, it would be great if the parking system were used less 30-40 years from now. When the Maynard parking structure can’t be maintained any longer, he said, it could be removed and replaced with commercial space. Building the new parking spaces underground is the right place to build them, he said. Collins said he was in complete sympathy with businesses affected by the underground parking garage construction. He quipped that he always blames architects. [Mouat, seated to Collins' right, is an architect.]

Hieftje added that it’s important to remember that the parking system is close to capacity and that some of the parking might disappear due to development. He pointed out that the Brown Block could be developed. [The entire block –bounded by Huron, Ashley, Washington and First – is a surface parking lot on land owned by First Martin Corp. and leased to the DDA.] Business owners who have been severely impacted by the underground parking garage construction obviously have grievances, he said. He recalled the lawsuit some of them had brought against the city before the project started. Hieftje then echoed the same sentiment that Hewitt had expressed – that the DDA board includes small business owners among its members. Others of the board work downtown, he said. The DDA is in every respect reflective of the small business community, Hieftje concluded.

Parking Rates: Board Response – Downtown Climate

John Splitt noted that the 2010 census indicates a 30% increase in the number of downtown residents in the last 10 years, which translates to 1,000 more people.

Reporting on transportation issues later in the meeting, John Mouat offered some anecdotal evidence of a change in the dynamics of downtown. Nancy Shore, director of the getDowntown program, had related how some employees at Google say they rarely leave downtown, and don’t own a car. Mouat said some things that people have talked about for a long time are beginning to happen.

Also later in the meeting, mayor John Hieftje cited some anecdotal evidence he’d heard at a neighborhood association meeting off of Hill Street, to the effect that there was a change in climate near downtown. One attendee, said Hieftje, described how there were now homes coming on the market that aren’t being snapped up by investors. The attendee had described it as the “steamroller” having been stopped, and attributed it to more students living downtown.

Communications, Committee Reports

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

Comm/Comm: Quarterly Financial Report

Highlights from the first-quarter financials called out by Roger Hewitt included the dramatically lower capital expenses, because invoices for the Fifth and Division streetscape improvements haven’t been received yet. Maintenance expenses are high, because part of the underground parking structure is being paid out of maintenance, but will be reimbursed out of the bond sale.

Hewitt said he doesn’t anticipate the DDA will be paying out the $500,000 grant this year, which it made to the nonprofit Avalon Housing for the Near North housing project, due to delays in that project.

Comm/Comm: Construction Update – Underground Parking Garage

John Splitt reported that for the dogleg on the east side of the construction site, sidewalks exist and Library Lane now exists. Splitt said you can get a great look at it from behind the credit union building. The plaza-level slab was to be poured soon in a large 1,000-cubic-yard pour.

Library Lane looking east towards Division Street. The Ann Arbor District Library’s downtown building is located south of Library Lane.

The speed ramp on Division Street was being poured that day, Splitt said. He reported discussions with the design team and Christman Company (the construction manager) to get Fifth Avenue open as soon as possible. Weather does present a challenge, he said. Splitt noted that it’s possible to pour concrete in the middle of January, but it’s expensive and cost prohibitive. At minimum, Splitt said, the sidewalk on the east side of Fifth Avenue should be finished in December or January.

Comm/Comm: Construction Update – Fifth/Division Streetscape

Trees are being planted on the 200 block of South Fifth, John Splitt reported. The punch list for the streetscape project is 80% complete. He also noted that 11 sidewalk ramps were completed this year in connection with ADA compliance. By next year, they will all be complete, he said.

Comm/Comm: Sidewalk Millage

Reporting on transportation issues, John Mouat noted that on Nov. 8, city voters will be asked to vote on a 0.125 mill tax to support sidewalk repair. He reviewed the city council’s decision on its resolution of intent for use of the sidewalk repair millage.

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

Over the last five years, the city has conducted a sidewalk repair program that has included systematic inspections of sidewalks, and citations given to property owners who had sidewalk slabs adjacent to their property in need of repair. Property owners then had a choice of hiring contractors to do the work themselves or waiting for the city to do the work and getting a bill from the city. The five-year cycle took different sections of the city in turn, so that over the five-year period, the entire city was covered once with the inspection program.

At the Oct. 17 city council meeting, councilmembers considered a resolution of intent for the use of proceeds from a street/sidewalk repair millage. The council had previously considered the resolution of intent at its Oct. 3 meeting and before that at its Sept. 19 meeting.

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

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

The resolution of intent had originally stipulated that sidewalk repairs inside the Ann Arbor DDA district would not be funded by the sidewalk repair millage, except when the sidewalks are adjacent to single- and two-family houses. A Sept. 28 meeting of the DDA’s operations committee revealed a measure of discontent on the DDA’s part about the intended restriction inside the DDA district and the lack of communication from the city of Ann Arbor to the DDA about that issue.

At its Oct. 17 meeting, the council took up the inequity identified by commercial property owners under the original language – they’d be included in the repair millage but excluded from the benefits. An amendment added the following language:

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

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

City councilmembers Mike Anglin (Ward 5) and Stephen Kunselman (Ward 3) have stated in the course of their re-election campaigns that they only reluctantly support the sidewalk repair millage. Stephen Rapundalo (Ward 2) has characterized the sidewalk millage as simply offering voters a choice.

Though not up for re-election this year, mayor John Hieftje stated at the DDA’s Oct. 5 board meeting that he did not think councilmembers are out in the community saying that the city absolutely needs the sidewalk millage or that it’s essential. Like Rapundalo, the mayor characterized the sidewalk millage as offering residents a choice of having the city take over the responsibility for sidewalk repair.

At the DDA board’s Nov. 2, 2011 meeting, Hieftje was somewhat more emphatic in his lack of a position on the sidewalk millage. He said that overall, he doesn’t have a particular position on the issue and said people would need to figure it out for themselves. He allowed that it would be a new tax, but the city would be taking on a new task.

Comm/Comm: Percent for Art

In his report from the Downtown Citizens Advisory Council meeting the previous night, Ray Detter said that there’d been a lot of discussion of the city’s Percent for Art program. The city council’s Nov. 14 work session will include Percent for Art as a focus, he noted. The CAC expressed its continued support of the program, he said, adding that the recent dedication of the Dreiseitl sculpture shows the program has achieved some success.

The previous day, Detter had met with other members of the task force that is working on selecting three additional pieces of art for the new municipal center. Three artists had been selected from over 100 applicants. Detter acknowledged that some in the community had expressed continued interest in selecting local artists for the city’s Percent for Art projects. Detter said that only 15 of the 100 artists who applied to create art for the interior of the municipal center were local. Those (non-local) artists who were selected were really top notch, he said. He concluded that portions of his remarks by contending that the Percent for Art program is working.

Comm/Comm: Village Green, City Apartments

Also during his report from the Downtown Citizens Advisory Council, Ray Detter addressed a future development on the western edge of downtown. Expected to be on the city council’s Thursday, Nov. 10 agenda, Detter said, would be an item to approve the sale of the city-owned parcel at First and Washington to Village Green, to build the City Apartments project. It’s a high-density project in the downtown, and would add 150 units–  a portion of which will be offered at rents affordable to tenants earning 60% of the area median income.  The project has not been easy, Detter said, but the developer made necessary design and parking adjustments and sought out input from neighboring property owners. It’s taken a long time and overcome various setbacks, he said.

Comm/Comm: Revenge of the Electric Car

John Mouat, reporting out on transportation issues, noted that there would be a screening of “Revenge of the Electric Car” at the Michigan Theater on Nov. 11-13. For two of the showings, the filmmaker Chris Paine will be there for a post-screening Q & A.

Comm/Comm: Graffiti

As part of her report from the partnerships committee, Sandi Smith said that chief of police Barnett Jones and deputy chief John Seto attended the committee’s meeting. They’d tried to give the committee a feel for what’s actually happening, compared to the perception. Smith noted that she’d heard mayor John Hieftje say that crime is going down, but incidents in graffiti and panhandling have created the perception that crime is up.

Up to now, graffiti has been been complaint-driven, but it will no longer be just a function of complaints, as the city is now planning to step up enforcement efforts. Smith noted that Anderson Paint and Fingerle Lumber are a source for a product called Elephant Snot, which is provided to downtown property owners at no cost through a DDA grant. The process works as follows:

1. A downtown building or business owner finds their building or sign tagged with graffiti.
2. They visit one of the following businesses to obtain free anti-graffiti supplies:
Anderson Paint, 2386 W. Stadium Blvd | (734) 995-4411
Fingerle Lumber, 617 S. Fifth Ave | (734) 663-0581
3. Necessary information includes business name and address to ensure the location is within the DDA boundary, and thus eligible under the grant program. (DDA boundaries)
4. Graffiti is removed or covered up in accordance with the city ordinance.

Comm/Comm: City-Owned Surface Lot Redevelopment

Sandi Smith said the partnerships committee had received a review of a meeting of the leadership and outreach committee, which is working on a public engagement process for thinking about alternative uses of city-owned surface parking lots in the downtown area. [The city council had given direction to the DDA to undertake that work, after long wrangling that included the negotiation of the parking contract under which the DDA operates the city's public parking system.]

Smith described the committee as a bunch of people not typically around the table. In response to some of the proposed public engagement events, Smith said, some of the group had responded by saying, “My friends wouldn’t come to this.” That group had immediately challenged the DDA with a fresh perspective, Smith said.

Comm/Comm: Regional Rail

Mayor John Hiefjte reported that he’d attended a meeting sponsored by the Michigan Environmental Council (MEC), which had included Michigan Gov. Rick Snyder, assistant secretary of the U.S. Dept. of Transportation John Porcari and administrator of the Federal Railroad Administration Joseph Szabo, as well as chief executive officer of the Michigan Chamber of Commerce Rich Studley. [The president of the MEC is Chris Kolb, a former Ann Arbor city councilmember and former state representative for District 53.]

Hieftje characterized it as an interesting bipartisan mix of people. He said now is the best chance in the last 100 years that Michigan has had to improve its rail system. He reported that Snyder had said Ann Arbor’s Amtrak station is in the wrong place. [Hieftje supports moving the station to a location currently used as a parking lot in Fuller Park, to create an multimodal facility called Fuller Road Station. The first phase of FRS would be a parking structure used primarily by the University of Michigan, and bus terminals.]

For a recent Chronicle roundup of various transportation initiatives, see “Washtenaw Transit Talk in ‘Flux‘”

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

Absent: Joan Lowenstein

Next board meeting: Noon on Wednesday, Dec. 7, at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]

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

At a special meeting on Friday, May 20, the DDA had calculated that a total of $1,185,132 should be returned to taxing authorities that levy property taxes in the downtown district. The city’s share of that is $711,767. The council’s resolution states that the acceptance of prior contributions to city projects on this occasion should not be interpreted as a precedent about the return of any future excess TIF capture that would be owed to the city under its DDA ordinance.

The assumptions on which the DDA based its calculations for the excess may not necessarily be acceptable to the other taxing units, which are due – from the DDA’s view – to receive a total of $473,365. Those other taxing units are: the Ann Arbor District Library; Washtenaw County; and Washtenaw Community College.

Those assumptions include the idea that the “excess” should be based on the “optimistic” projections in the DDA’s TIF plan – which reduces the excess compared to the “realistic” projections. The DDA also assumes that the excess should be computed year to year, not cumulatively – which also results in a lower excess amount. [.pdf of table showing DDA's calculations in detail]

It was uncertainty about the status of the excess TIF capture, and the city’s contract with the DDA (under which the DDA operates the city’s parking system) that led the council to delay approving its budget at its May 16 meeting.

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

(Left to right): DDA board members Roger Hewitt, mayor John Hieftje, and Leah Gunn at the special May 27 DDA board meeting. (Photos by the writer.)

The financial part of the contract calls for the city to receive 17% of gross revenues from the public parking system, and would have an initial term of 11 years, with one renewal option for another 11 years. That would end the contract in 2033, which coincides with the DDA’s currently established endpoint.

The contract includes a new underwriting clause for the DDA’s fund balance. Key features of that clause are: (1) it’s applicable only through 2016; (2) it’s triggered if combined DDA fund balance fall below $1 million; (3) the trigger is evaluated based on the annual audit of DDA books in September or October, for the previous fiscal year; (4) if underwriting were triggered, it would take the form of reducing existing payments that the DDA makes to the city; (5) the city’s liability is limited to $1 million annually and $2 million cumulatively; and (6) any money the city is deprived of through this underwriting would be restored to the city, at whatever point the DDA’s cumulative fund balance reaches $4 million.

After brief deliberations, the DDA board voted unanimously to ratify the contract, which now includes the underwriting clause. [.pdf of ratified draft contract]

With that vote, the DDA board also approved a new contract clause that specifies how the DDA board and city council will handle a contractually required consultation between the two groups, in conjunction with parking rate changes. The consultation by the DDA will now be a required agenda item at annual joint working sessions between the DDA board and the city council. Currently, the DDA proposes rate changes, which are automatically enacted, unless the city council vetoes them. The new contract stipulates that the DDA would have sole authority to set rates.

The city council may now ratify the parking contract on Monday, May 31, which would help settle part of the city’s revenue issues in its fiscal year 2012 budget. It would allow the council to finalize its budget on that same evening. [For additional background, see Chronicle coverage: "Ann Arbor Council Defers Action Again"]

Councilmembers Sabra Briere (Ward 1) and Stephen Kunselman (Ward 3) sat in the audience of the DDA’s May 27 meeting. On May 31, the contract could face stiff opposition from at least those two, and possibly other councilmembers. After the DDA’s May 27 board meeting, Kunselman characterized the underwriting clause to The Chronicle as a “no-layoff clause for the DDA.”

Another lingering DDA issue that could result in discussion not just by the Ann Arbor city council – but also by the Washtenaw Community College board of trustees, the Washtenaw County board of commissioners, and the Ann Arbor District Library board – is the return of excess TIF capture by the DDA.

Parking Contract: Background

The DDA board had initially ratified the parking contract at a special meeting held on May 20. The board’s resolution at that time included a contingency that the city of Ann Arbor would provide an amendment to the contract that adequately underwrites the combined DDA fund balance.

The city council was expected to ratify its side of the parking agreement on May 23, at a continued session of a prior meeting that had begun on May 16. The council’s ratification was expected to include the required contingency clause. But the council instead gathered on May 23 and immediately voted to recessand continue the same May 16 meeting again – until May 31. At a May 25 meeting of two “mutually beneficial” committees – one from the city council and one from the DDA board – the committees hashed out additional contract language.

Board chair Joan Lowenstein led off the May 27 DDA board meeting with confirmation from DDA deputy director Joe Morehouse that the meeting had been properly noticed for the public. Morehouse confirmed that the notice had been posted more than 18 hours in advance of the meeting.

Lowenstein noted that the board’s agenda included just one item. She reviewed the recent history that had led the board to convene special meetings on successive Fridays.

By way of additional background, here’s a timeline overview of the more recent history of the attempt to finalize the parking contract. The complete history dates back around two years.

• May 2, 2011 – noon: DDA board is poised to ratify a new parking contract that would transfer 17% of gross revenues from the public parking system to the city of Ann Arbor; however, the board tables the item amid concerns about possible excess TIF (tax increment finance) capture. [link]
• May 2, 2011 – 7 p.m.: City council strikes the parking contract approval from its agenda. [link]
• May 16, 2011: City council begins meeting at which it intends to approve FY 2012 budget; but the council recesses before acting on the budget, to continue the same meeting on May 23. [link]
• May 20, 2011: DDA board convenes a special meeting; the board approves the contract, but in light of a $470,000 obligation due to excess TIF capture, they include a contingency on fund balance underwriting by the city. [link]
• May 23, 2011: City council convenes the continuation of its May 16 meeting, but immediately recesses, likely in order to prevent any discussion of a proposal from Stephen Kunselman (Ward 3) to return responsibility for the public parking system from the DDA to the city of Ann Arbor’s public services area. [link]
• May 25, 2011: “Mutually beneficial” committees from the city council and the DDA board meet and finalize language on fund balance underwriting and required consultation with the city council on rate changes. [link]
• May 27, 2011: DDA board convenes a special meeting and ratifies the contract.
• May 31, 2011: City council has scheduled a second continuation of its May 16 meeting.

At the DDA’s May 27 meeting, Lowenstein reminded the board that they had approved the parking contract with the city – but it was contingent on accepting a provision to underwrite the DDA’s fund balance to prevent the balance from getting too low. Lowenstein reviewed how the two mutually beneficial committees had then met and drafted a revision to the contract that would achieve that underwriting. Ratification of the underwriting clause was the purpose of the meeting, Lowenstein said.

Leah Gunn moved an additional amendment to the contract specifying how the periodic consultation on parking rates would work between the city and the DDA.

Bob Guenzel asked Roger Hewitt to go over both changes to the contract.

Parking Contract: Underwriting Clause

Hewitt noted that the first amendment addresses “backstopping.” The “fund balance” means the combined fund balance, not including the DDA’s housing fund. Hewitt said the amendment stipulates that if that combined fund balance falls below $1 million as confirmed by the annual audit, then the DDA may defer payments to the city up to $1 million in a given year, to a combined total of $2 million. Hewitt noted that the clause applies just for the first five years of the agreement.

From the contract:

4. Financial Obligations of the DDA
…
b. Through Fiscal Year 2015-16, should the DDA’s combined fund balance (excluding the Housing Fund) (“DDA Fund Balance”) fall below ONE MILLION DOLLARS ($1,000,000), as shown by the DDA’s annual audited reports, then DDA may reduce amounts payable to the City under Section 4(a) by amounts equal to the difference between the DDA Fund Balance and ONE MILLION DOLLARS ($1,000,000) (“Withheld Payments”), provided, however, that Withheld Payments shall not exceed (i) ONE MILLION DOLLARS ($1,000,000) in any given fiscal year; or (ii) TWO MILLION DOLLARS ($2,000,000) in the aggregate. The DDA agrees that prior to June 30, 2016, its discretionary grants and projects will not exceed the cost proposed in the DDA 10 Year Plan presented to the DDA Board at its meeting of May 20, unless otherwise approved by City Council.

If at any time during the Term of this Agreement, the DDA Fund Balance exceeds FOUR MILLION DOLLARS ($4,000,000), as shown by the DDA’s annual audited reports, then the DDA shall pay to the City an amount equal to the aggregate Withheld Payments, provided, however, that DDA may delay any portion of such payments that would reduce the DDA Fund Balance below FOUR MILLION DOLLARS ($4,000,000) until such time as the making of such payment would not reduce the DDA Fund Balance below FOUR MILLION DOLLARS ($4,000,000).

Hewitt noted that the DDA would make up deferred payments to the city when the fund balance gets above $4 million.

Sandi Smith, Russ Collins during the brief deliberations at the May 27 special meeting of the DDA board.

Keith Orr drew out the fact that the ability to defer payments applies only to the first five years of the contract, but repayment continues for the duration of the contract.

Guenzel asked Hewitt to elaborate on the part of the clause that limits DDA actions. Hewitt explained that the DDA has some amount of discretionary spending in its 10-year financial plan. That discretionary spending is currently scaled back. That’s essentially what was done at the DDA’s retreat, Hewitt said. What remains in the 10-year plan by way of discretionary spending includes support for the getDowntown go!pass program and consultants on redevelopment of downtown city-owned surface parking lots.

Russ Collins chimed in that the energy saving grants are also included in the discretionary spending. Collins noted that the clause limiting DDA action is meant to ensure that no “rogue streetscape improvements” are undertaken. Sandi Smith noted that currently there’s $400,000 per year designated for discretionary spending. Hewitt observed that the $400,000 is not for specific projects. Guenzel pointed out that additional projects could be undertaken with city council permission.

Parking Contract: Required Consultation

Roger Hewitt explained that the second contract revision was related to an amendment already made to the contract at the DDA’s May 20 special meeting – it added “city council” to the set of entities with which the DDA would consult before enacting any parking rate changes.

2. Operational Powers and Responsibilities Within DDA Parking Area
…
k. Subject to Article 8, applicable law, and City permitting regulations, and after consultation with the City Administrator, City Council, and downtown stakeholders, which may from time to time be identified by either the City or the DDA, the DDA shall determine the rates and hours of parking in the Municipal Parking System and file such rates and hours with the City Clerk and otherwise publish such rates in the same manner as City ordinances, which rates and hours shall take effect thirty (30) days after said filing.

So the amendment that the DDA considered on May 27 basically stipulated that a consultation with the city would come in the form of an agenda item for a standing joint work session established in the contract:

9. Periodic Consultation
…
b. Joint Working Session. As part of the annual established calendar for City Council Working Sessions, City Council shall designate one working session in the fall of each calendar year as a joint working session with the DDA. The agenda for the working session shall be prepared by the City Administrator in accordance with Council Rules and in consultation with the Executive Director of the DDA, provided that such agenda shall include
(i) the DDA’s evaluation of any meter parking rate increases effected during the foregoing year, including, without limitation, the public input associated therewith; and
(ii) a discussion regarding any then-contemplated future meter parking rate increases, which discussion shall satisfy the DDA’s City Council consultation obligation under Section 2(k). It is recommended that a portion of such agenda be dedicated to a discussion of operations under this Agreement and the utility of creating a joint study committee to address areas of mutual interest.

Keith Orr observed that the working session is basically a vehicle for satisfying the provision that requires consultation. Hewitt confirmed that was the case – it’s in the contract so that the city council and public is well-informed about what the DDA intends to do with parking rates and what the rationale is for any changes. Russ Collins said that this communication is in addition to the kind of discussions the DDA would have in public view anyway.

Sandi Smith, who serves on the DDA board as well as on the city council, observed that a consensus had finally been achieved. She thanked Hewitt and the other members of the DDA’s “mutually beneficial” committee – Collins and Gary Boren – for their work. Joan Lowenstein added that Christopher Taylor, on the city council’s “mutually beneficial” committee, has been very helpful.

Outcome: The board voted unanimously to approve the parking contract. [.pdf of ratified draft contract]

Parking Contract: City Council Politics

The new parking contract ratified by the DDA board on May 27 may well see strong opposition on the city council at its May 31 meeting, when the council is expected to take final action on its FY 2012 budget as well as the parking contract. While the city council has formally expressed a view on the financial terms of the contract – at its April 19, 2011 meeting – it has not weighed in formally on other aspects of the contract.

The clause that underwrites the DDA fund balance, which the DDA board approved at its May 27 special meeting, is one part of the contract to which some councilmembers might object. Immediately after the May 27 meeting, Stephen Kunselman (Ward 3) – who sat in the audience along with Sabra Briere (Ward 1) – characterized the underwriting clause as a “no-layoff clause for the DDA.”

City councilmember Stephen Kunselman, and DDA board member Bob Guenzel chat before the DDA's special board meeting on May 27.

Elimination of two staff positions at the DDA is part of a proposal by Kunselman to restore responsibility for the public parking system to the public services area of the city of Ann Arbor. [The DDA has four staff members: Susan Pollay, executive director; Joe Morehouse, deputy director; Julie Uden, management assistant; and Amber Miller, planning and research assistant.] Kunselman’s proposal did not receive any discussion at the council’s May 23 session. But that was only because the council voted to recess the meeting immediately after it started. [.pdf of Kunselman's intended resolution]

As it’s currently framed and worded, Kunselman’s proposal is unlikely to achieve support from a majority on the council. But this basic concept might have some traction on the council, and to some extent even on the DDA board: Assign responsibility for the public parking system to some other entity than the DDA – perhaps a body within the city’s organization similar to the park advisory commission.

A “parking advisory commission” would review and recommend city staff-proposed parking rate changes in a fashion that is parallel to the way that the park advisory commission recommends swimming pool admission fees. That is, the “parking advisory commission” would recommend rates to the city council, which would then give them final approval.

That’s essentially how parking rates are currently handled – the DDA proposes rates to the city council, which then can veto those rates, if it acts within 60 days. Under the new contract, however, the DDA would have the sole authority to set parking rates, albeit after a required consultation with the city council. In her most recent newsletter to her constituents, Sabra Briere (Ward 1) wrote that she felt the contract language gets things backwards:

The parking agreement also removes from Council the ability to reject any change in the parking fees, and requires that the City report to the DDA on how money is spent to maintain the streets in the DDA. Some of us on Council feel that this is backwards, and that the Council should be the responsible body, not the DDA.

I agree with that.

Mayor John Hieftje, who voted for the contract on May 27 as a DDA board member, said at the May 20 special meeting of the DDA board that he thinks the votes are there on the city council to support the contract. It was Hieftje who offered the amendment requiring the DDA to consult with the city council, saying he felt a stronger majority might be achieved with that amendment.

But based on their comments made at council meetings or Sunday caucus gatherings over the last several months, five councilmembers are at least somewhat likely to vote against a contract giving the DDA sole authority to set rates: Briere and Kunselman, along with Stephen Rapundalo (Ward 2), Marcia Higgins (Ward 4), and Mike Anglin (Ward 5). All five are running for re-election this year. Currently, all but Briere will be challenged either in their Democratic primaries, or in November’s general election.

Though not impossible, it would be difficult for Hieftje to reverse his position at the council table on the vote he made at the DDA board table. That same goes for Sandi Smith (Ward 1), who also voted for the contract on May 27 as a DDA board member. And given their intimate involvement in the negotiations with the DDA as members of the council’s “mutually beneficial” committee, it would be difficult for Christopher Taylor (Ward 3), Margie Teall (Ward 4), or Carsten Hohnke (Ward 5) to vote against the contract at the council table.

Of those, the most likely to waver could be Hohnke, who has previously demonstrated a willingness to abandon his committee’s position at the council table. Specifically, on April 19 he voted with the council majority – and contrary to the committee’s advice – on a directive to the committee to pursue a contract that transfered 18% of gross parking system revenues to the city of Ann Arbor.

That leaves Tony Derezinski (Ward 2), whose vote appears to be crucial to achieving the six votes necessary for passage of the contract. Derezinski serves on the partnerships committee of the DDA, and on that basis, might be assumed to lend his support to the contract.

Excess TIF Capture: Regional Politics

An issue as yet undiscussed by any public body except the DDA is excess tax that has been captured in the DDA’s TIF (tax increment finance) district dating back to 2003. The issue was brought to light by the city of Ann Arbor just before the DDA was set to vote on the parking contract on May 2.

Although the DDA has now calculated that the Ann Arbor District Library, Washtenaw Community College and Washtenaw County should be returned a combined $473,000, if the excess is computed differently, that could have an additional million-dollar impact on the DDA’s financial picture. [Chronicle coverage: "DDA Parking Excess Taxes Still Not Done"]

Two crucial decisions underpin the DDA’s calculations: (1) They’re based on the “optimistic” TIF growth projections in the TIF plan, not the “realistic” projections; and (2) They’re based on a year-to-year calculation of excess, not a cumulative calculation.

By not using the “realistic” projections, the calculations inherently favor the DDA. The year-to-year approach to the calculations does not inherently favor the DDA – that depends on the pattern of growth in the district. In the case of the attested pattern of TIF growth in the DDA’s district since 2003, however, the year-to-year calculation favors the DDA.

For its part, the city of Ann Arbor is expected to “forgive” the $711,767 in excess TIF capture from the city – in light of TIF money previously received for city of Ann Arbor projects. But that’s also not completely certain.

And if the other taxing units – the library board, the county board of commissioners, or the Washtenaw Community College board of trustees – scrutinize the calculations, those bodies might conclude that they want to insist on a different method of calculation.

If the DDA winds up needing to return significantly more than $473,000 to those taxing units, it increases the likelihood that the DDA would need to use the “underwriting” clause in the new parking contract.

Present: Bob Guenzel, Roger Hewitt, John Hieftje, John Splitt, Sandi Smith, Leah Gunn, Russ Collins, Keith Orr, Joan Lowenstein, John Mouat

Absent: Gary Boren, Newcombe Clark

Next board meeting: Noon on Wednesday, June 1, 2011 at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]

Purely a plug: The Chronicle relies in part on regular voluntary subscriptions to support our coverage of publicly-funded entities like the Ann Arbor Downtown Development Authority and the city of Ann Arbor. Click this link for details: Subscribe to The Chronicle.

At a special meeting held last week on May 20, the DDA board had initially ratified the contract, with a contingency that the city of Ann Arbor would provide an amendment that adequately underwrites DDA fund balances. Then at a Wednesday, May 25 meeting of two “mutually beneficial” committees – one from the city council and one from the DDA board – the committees hashed out that language. The contract would transfer 17% of gross parking revenues to the city.

Key elements of the underwriting clause include: (1) it’s applicable only through 2016; (2) it’s triggered if combined DDA fund balances fall below $1 million; (3) the trigger is evaluated based on the annual audit of DDA books in September or October of the previous fiscal year; (4) if underwriting were triggered, it would take the form of reducing existing payments that the DDA makes to the city; (5) the city’s liability is limited to $1 million annually and $2 million cumulatively; and (6) any money the city is deprived of through this underwriting would be restored to the city, at whatever point the DDA’s cumulative fund balance reaches $4 million.

At the May 25 meeting, the committees also agreed on how the DDA board and city council will handle a contractually required consultation between the two groups, in conjunction with parking rate changes. And at its May 27 meeting, the DDA board approved that clause stipulating the consultation by the DDA will now be a required agenda item at annual joint working sessions between the DDA board and the city council. Currently, the DDA proposes rate changes, which are automatically enacted, unless the city council vetoes them. The new contract stipulates that the DDA would have sole authority to set rates.

The city council may now ratify the parking contract on Monday, May 31, which would help settle part of the city’s revenue issues in its fiscal year 2012 budget, and allow the council to finalize its budget on that day. [For additional background, see Chronicle coverage: "Ann Arbor Council Defers Action Again"] Councilmembers Sabra Briere (Ward 1) and Stephen Kunselman (Ward 3) also attended the May 27 meeting.

This is a preview of the council’s continued meeting, which starts at 7 p.m. in council chambers at city hall. Topics that council might address include excess TIF (tax increment finance) capture in the Ann Arbor Downtown Development Authority district, a new parking contract with the DDA, and possible amendments to the FY 2012 budget. Factors that might play a role in council’s deliberations include alternative calculations of the excess TIF capture, and issues of control regarding components of the proposed parking contract – such as giving the DDA sole authority to set parking rates.

Council’s Continuation: Background

The council is using a strategy of recessing, then continuing the same meeting, in order to comply with a city charter requirement that the next year’s fiscal year budget be approved at the council’s second meeting in May, which this year fell on May 16. On that date, council chose not to approve the budget for FY 2012, which starts July 1.

The council’s reluctance to approve the city’s budget can be traced to uncertainty about the status of labor negotiations with the city’s police and firefighter unions, as well as uncertainty about the amount of public parking system revenue the city will receive in a new contract being negotiated with the Ann Arbor Downtown Development Authority. That contract was supposed to have been settled by Oct. 31, 2010.

But a scheduled vote by the two parties did not come until May 2, a day when the council and the DDA board met – separately – intending finally to conclude the contract. The DDA board, which met earlier that day prior to the council’s meeting, did not vote on the contract. That’s because board members were informed that morning by city of Ann Arbor financial staff about issues involving possible excess tax capture in the DDA’s TIF district. And the city council then struck the item from its May 2 agenda.

The issue of possible excess tax capture led the DDA to schedule a special meeting held last Friday, May 20, to resolve the return of any excess taxes, and to ratify its side of the new parking agreement with the city.

Readers who attend the council’s May 23 meeting in person, or watch the proceedings on CTN’s Channel 16 – on television or via CTN’s Channel 16 live Internet stream – might see the resolution of lingering issues regarding excess TIF capture in the DDA district, as well as still outstanding issues on the parking contract.

The council might also choose to engage in a series of amendments to the FY 2012 budget, but it’s possible that councilmembers won’t take a final vote on the budget itself. Instead, the council could recess the meeting a second time, to be continued on May 31. Sometime before May 31, the DDA would hold another special meeting, to vote on the city council’s version of the parking contract.

Excess TIF Capture: Will City Forgive $711,767?

At least two issues still linger with respect to the excess tax capture issue: (1) an assumption that the city of Ann Arbor would not insist that its $711,767 share of the $1,185,132 excess capture be returned; and (2) whether the conclusions on which the DDA based its calculations for the excess will be acceptable to the other taxing units, which are due – from the DDA’s view – to receive a total of $473,365. Those other taxing units are: the Ann Arbor District Library; Washtenaw County; and Washtenaw Community College.

At the continued meeting tonight (May 23), the city council is likely to add to its agenda some kind of resolution establishing that the city of Ann Arbor does not expect a return of the $711,767 in excess TIF that it is due. The rationale expressed at Friday’s DDA special board meeting for not making the $711,767 payment to the city was based on a total of $7.5 million in TIF funds already returned to the city since 2003.

For the city’s part, the financial interest in forgoing the $711,767 one-time payment might be coupled with the negative impact the payment would have on the DDA’s ability to offer a parking contract that provides for a regular annual transfer of 17% of gross parking revenues to the city. Next year, that annual transfer would amount to around $2.7 million, based on roughly $16 million in parking revenues.

At their meeting tonight, some councilmembers might argue that the city is simply owed the excess TIF capture, as well as the 17% in public parking system revenue – and that it’s up to the DDA to figure out how to make good on those obligations. One option that’s been mentioned by the city council’s negotiating team during parking contract talks between the city and the DDA is simply to dissolve the DDA.

A request made by The Chronicle under the Freedom of Information Act, returned by the city last week, indicates that the city’s financial staff appears to maintain a current analysis of what the impact would be of dissolving the DDA – though the FOIA response did not include the analysis itself. Back in December 2009, the city’s chief financial officer, Tom Crawford, told the city council at a budget retreat that dissolving the DDA would result in a net positive to the city’s general fund of $700,000 per year.

It’s an open question whether the city council, at its May 23 session, will scrutinize the assumptions on which the DDA excess TIF calculations are based. At the council’s May 2 meeting, Crawford had indicated that the city’s initial calculations of the excess were based on the DDA TIF plan’s “realistic” revenue projections. [.pdf of table showing DDA's calculations in detail]

But the calculations presented at the DDA’s special meeting on Friday were based on an “optimistic” scenario. According to The Chronicle’s math, that’s a difference that works in favor of the DDA’s budget by a little over $100,000. Another assumption – that the excess should be calculated year-to-year, not cumulatively – could have a substantially greater impact. Based on The Chronicle’s math – which is not yet independently confirmed – it could amount to at least $1 million more than the $1,185,132 that the DDA has calculated should be returned to all taxing authorities.

Parking Contract

Lingering issues on the parking agreement include: (1) attachment by the DDA board of a fund-balance underwriting contingency to its approval of the parking contract – which includes a transfer of 17% of gross parking system revenues to the city; and (2) the city council’s willingness to accept a key non-financial component of the new parking contract – giving the DDA sole authority to set parking rates.

To address the first issue, the city council is likely to consider some kind of resolution that provides an assurance to the DDA that the city will underwrite its fund balances, if those balances drop to unacceptable levels due to a parking contract that transfers 17% of gross parking revenues to the city.

The second issue could result in a tight vote on the parking contract itself. At Friday’s special meeting of the DDA board, a nod was made to a concern of some councilmembers about giving the DDA sole authority to set parking rates. Currently, the DDA proposes parking rate changes, which are enacted if the council does not veto them within 60 days. That nod came in the form of an amendment that now includes the city council as an entity with which the DDA must consult before enacting any rate changes. [The contract also requires the DDA to follow a public engagement process similar to the city council's public hearings, before enacting any rate changes.]

That change might not satisfy those on the council who’ve previously indicated some opposition to granting the DDA increased control: Sabra Briere (Ward 1), Stephen Rapundalo (Ward 2), Stephen Kunselman (Ward 3), Marcia Higgins (Ward 4) and Mike Anglin (Ward 5). All five are up for re-election this year. The contract could thus pass on a 6-5 vote. Of course, any of the remaining councilmembers might also vote against that provision of the contract.

In case the city council amends the contract to retain control of rate changes, the DDA board would be able to consider and possibly adopt that revised contract at a special meeting it will likely convene this week anyway –  in order to ratify the city council’s solution to the fund balance underwriting contingency.

FY 2012 Budget

The council might entertain amendments to the proposed FY 2012 budget, but choose not to give it final approval, waiting instead for the continuation of the meeting on May 31.

If the council does decide to entertain budget amendments, they’re likely to include the following: (1) use of $90,000 in general fund reserves to add to the parks allocation; (2) use of $85,600 in general fund reserves to add to human services funding; (3) use of a nominal amount of general fund reserves to cover the cost of an additional primary election (as proposed, the FY 2012 budget anticipated primaries in only two of the city’s five wards); and (4) elimination of a proposed fee for three-times-weekly trash pickup in the downtown area.

Tracking the Council Meeting

Options for tracking the actions of the Ann Arbor city council include attending the meeting in person at city council chambers, 301 E. Huron, or watching the proceedings on CTN’s Channel 16, (on television or on CTN’s Channel 16 live Internet stream).

Somewhat more timely than The Chronicle’s comprehensive meeting reports are briefs filed in the Civic News Ticker. Readers who are eager to find out the outcome of city council votes can track the news there.

Update: 7:30 p.m. May 23, 2011. None of the issues the council was expected to resolve on Monday’s meeting were addressed. Instead, at the very start of the meeting, the council voted to recess, with the meeting to be continued on May 31.

Left to right: DDA board members Bob Guenzel, John Mouat, Sandi Smith, and Russ Collins at the May 20 DDA special board meeting. Obscured from view between Guenzel and Mouat is John Hieftje. They were distributing the paper handouts with calculations of excess TIF revenues. (Photos by the writer.)

It was also intended to settle the matter of excess capture of TIF (tax increment finance) revenue in the DDA district – an issue raised by the city of Ann Arbor just before the DDA board had originally planned to vote on the new parking contract on May 2.

The board did vote on Friday to affirm a calculation by DDA staff that roughly $473,000 of excess TIF capture since 2004 would be divided among the following taxing authorities, which have a portion of their tax revenues captured in the DDA TIF district: Washtenaw County; Washtenaw Community College; and the Ann Arbor District Library.

Based on a representation at the special meeting by mayor John Hieftje – who has a statutory seat on the DDA board – the city of Ann Arbor is likely to agree to “forgive” the $711,767 in excess TIF capture that would be due to the city. More than that amount has effectively already been returned to the city, in the form of a roughly $0.5 million annual grant to the city to help make bond payments on its new municipal center, and a $1 million expenditure to demolish the old YMCA building, as well as other grants. In total, around $7.5 million has gone to the city, according to the DDA.

At Friday’s special meeting, the DDA board also voted to ratify its side of a new contract under which it would continue to operate the city’s public parking system. Among other features, the new contract would obligate the city of Ann Arbor to report regularly on how it is using public parking system revenues for street repair in the downtown, and how it is enforcing parking regulations downtown.

More controversially, the new contract would allow the DDA to set parking rates. Currently, the DDA forwards proposed rate changes to the city council, which can then veto the DDA’s proposal if it acts within 60 days. If the council does not act to block the rate change, the change is enacted. Although Hieftje said at the DDA board meeting he felt there was adequate support on the council to approve such a contract, there are currently at least five likely no votes on the 11-member council.

Also controversial is the exact percentage of gross revenues the city would receive from the public parking system. Before the issue of the excess TIF capture arose, the DDA board was poised to ratify a parking contract that would transfer 17% of gross parking revenues to the city of Ann Arbor’s general fund. At Friday’s special meeting, the resolution before the board dropped that number to 16%. Hieftje proposed an amendment to raise the figure to 17%. That amendment was attached to a contingency that the city council would provide a plan amendable to the DDA in which the city would “underwrite” the DDA’s fund balances. It was the 17% with a contingency that the DDA board passed.

So the special DDA board meeting did not settle with finality either the issue of the excess TIF capture or the DDA’s side of the parking contract. For the TIF capture issue, the relevant taxing authorities – especially the city of Ann Arbor – will need to affirm the solution that the DDA board approved.

For the parking contract issue, the DDA’s contingency means that the city council’s Monday, May 23 meeting – which is a continuation of its May 16 meeting, when it was supposed to approve the FY 2012 budget – will likely be recessed and continued again on May 31.

One possibility for how events would unfold is this: (1) May 23 – the city council ratifies the city’s side of the parking contract and provides the plan for underwriting DDA fund balances; city council also deliberates and amends FY 2012 budget but does not take a final vote on it; (2) May 24-27 – DDA schedules a special meeting to accept the parking contract contingency; and (3) May 31 – city council resumes the meeting started May 16 and previously continued on May 23, and approves FY 2012 budget. [.pdf of draft parking contract]

Historical Background: May 2, 2011

Board chair Joan Lowenstein led off with a confirmation from Joe Morehouse, the DDA’s deputy director, that the special meeting had been properly noticed to the public under the Open Meetings Act. Morehouse indicated that a paper notice had been posted at city hall, and the meeting had been added to the city’s online Legistar scheduling system, and posted to the DDA’s website calendar.

Lowenstein began by reviewing where things had stood before the May 2, 2011 DDA board meeting. The DDA board had been poised to ratify its side of a new parking contract under which it would continue to operate the city’s public parking system.

By way of background, the DDA has already transferred $2 million more to the city from the public parking revenue than the current contract with the city requires. The decision last year to transfer an additional $2 million of parking revenue to the city was made at a board meeting last April, over strong objections of some board members. [Chronicle coverage: "DDA OKs $2 Million Over Strong Dissent"]

The details of the new parking contract have been negotiated at public meetings between so-called “mutually beneficial” committees of the city council and the DDA board for nearly a year, starting in June 2010. Before that, a “working group” of councilmembers and DDA board members had worked out of public view since early 2010 to establish a term sheet as the basis of the negotiations.

Last summer, as the two committees finally emerged into public view to start the negotiations, their stated goal was a ratified new contract by Oct. 31, 2010. That goal was not met.

Key Features of New Parking Contract

Key new elements of the new parking agreement include a requirement that the city report to the DDA on its street maintenance activity in the downtown area, as well as its parking regulation enforcement activity. A standing committee composed of DDA and city staff would help ensure communication on enforcement issues. The term of the proposed contract would be 11 years, with a one-time renewal through 2033, which is the end of the DDA’s lifetime. [First established in 1982 for 30 years, and set to expire in 2012, the DDA was renewed by a city council resolution in 2003.]

More significantly, however, would be a new authority for the DDA to set parking rates independently of the city council. Currently, the DDA forwards proposed rate changes to the council, and those changes automatically take effect unless the council acts to veto them. The new contract would eliminate the city council veto power.

The financial component of the new parking contract reflects a significant conceptual change – moving from multiple categories of fixed payments to a percentage-of-gross approach. One example of a fixed payment in the current contract is for roughly $840,000 to be transferred from public parking revenue to the city’s street repair fund – an amount that is keyed to an inflationary escalator.

Another example of a fixed payment is the DDA’s payment of up to $2 million in “meter rent” – the current contract stipulates $1 million, with an option for the city of Ann Arbor to request $2 million in any one year, as long as the total amount of meter rent over the 10-year life of the contract (ending in 2015) does not exceed $10 million. Through the 2010 fiscal year, $10 million in meter rent had already been transferred to the city under the contract – which is why the additional $2 million transferred last year, for FY 2011, was controversial.

The exact figure for the percentage-of-gross payment had been a contentious issue, but on May 2 the DDA board was poised to ratify the contract at 17%.

At Friday’s special board meeting, Lowenstein reminded board members how on the morning of May 2, they’d been informed of the clause in the city’s ordinance on the DDA – contained in Chapter 7 – that limits the amount of TIF capture.

Briefly put, the mechanism of a tax increment finance (TIF) district allows an entity like the Ann Arbor DDA to “capture” a portion of the property taxes in a specific geographic area that would otherwise be collected by taxing authorities in the district.

Lowenstein set up the parking contract discussion by explaining how the DDA had an unexpected obligation to return $473,000 in excess TIF capture to taxing authorities in the district.

Deliberations: Parking Contract Percentage – The Case for 16%

Board deliberations on the financial conditions of the parking contract were intermingled with discussion of the return of excess TIF revenue, because of the impact on DDA fund balances of the one-time $473,000 payment to taxing authorities in the DDA’s TIF district.

Board chair Joan Lowenstein began the deliberations on the contract by saying that the whole point is to continue to partner with the city on management of the parking system. The reason the DDA board was considering re-opening the contract at all is that the city of Ann Arbor needs additional money, she said, and there will be a continuing need.

At the same time, Lowenstein cautioned, the DDA has a responsibility to maintain the city’s parking infrastructure, and a responsibility to maintain a fund balance. If projections for parking revenues are off by 1 or 2 percentage points, she said, that completely changes the DDA’s budget. If there’s a cost overrun for the Fifth Avenue underground parking structure that’s currently under construction, there needs to be a fund balance that could handle those eventualities and handle them quickly.

The return of $473,000 in excess TIF capture to taxing authorities in the district, Lowenstein said, had resulted in the resolution that the board was considering: a percentage-of-gross figure of 16% for the parking agreement, instead of the previously contemplated 17%. Even on a 16% scenario, she continued, there would be low combined fund balances for the DDA: FY 2012 – $3.08 million; FY 2013 – $2.17 million; FY 2014 – $2.33 million; FY 2015 $2.04 million; and a low in FY 2016 – $1.93 million. The $1.93 million was very low, she said, but the DDA was willing to endure that, in order to provide a fair parking revenue to the city.

DDA board member Russ Collins wanted to know what the future impact might be on DDA TIF revenues, as compared to the DDA’s 10-year plan, given that TIF capture would now be calculated correctly. Joe Morehouse, DDA deputy director, explained that in the next year, the TIF valuation is expected to drop. And the DDA’s 10-year plan uses an average projection of a 2% increase in TIF revenue per year, so the impact of the correct calculations in the future would be zero, Morehouse explained.

Board member Bob Guenzel asked for clarification of why the DDA fund balance will be less than previously anticipated. Morehouse explained that it’s due to the one-time payment the DDA will need to make to return excess TIF capture to the taxing authorities in the DDA TIF district.

Deliberations: Parking Contract Percentage – Reverting to 17%

Mayor John Hieftje asked Morehouse to provide the fund balance figures for the 17% scenario.

Year by year, here’s what those numbers looked like [the fund balance is expressed as a percentage of reserves in parens]: FY 2012 – $2.9 million (14.5%); FY 2013 – $1.8 million (8.7%); FY 2014 $1.8 million (8.2%); FY 2015 – $1.34 million (5.7%); FY 2016 – $1.03 million (4.3%); FY 2017 – $1.94 million (8%).

Hieftje said he wanted to ask the DDA to consider that the city is ultimately responsible if the DDA defaults on its obligations. And the city would be willing to “backstop” the DDA for the years when the DDA was concerned about the fund balance being low. It was much more important to put the parking contract in place so that the city would have the yearly income, he said. He felt the DDA could live with those fund balances. He did not think it made sense to plan a long-term agreement on the basis of just avoiding a low fund balance in a specific year.

DDA board member John Mouat noted that the DDA had not been in negotiation mode for a while – the resolution before them was the DDA’s “best take” on the situation, and then it would go to the city council. Lowenstein confirmed that back on May 2, the DDA had effectively concluded negotiations through its mutually beneficial committee. The only change to the situation has been the impact of returning excess TIF.

Guenzel then asked Hieftje if he thought he had enough support on the council for the new parking contract, if the percentage of gross were set at 17%. Hieftje replied that he felt there would be sufficient votes. Guenzel noted that there’s no way to predict for sure. Hieftje allowed that there is discomfort among some councilmembers about the provision in the contract that would allow the DDA to set parking rates. He characterized their concern as not wanting to be seen as using the DDA as a buffer between themselves and voters.

Hieftje went on to say that the city’s CFO and acting interim administrator, Tom Crawford, had said that if the percentage of gross is 16%, then the city would need to make an additional $250,000-300,000 reduction to its general fund budget this year and next. The city was currently doing everything it could to save police and fire positions. He noted that some on the DDA board had asked why that’s the DDA’s problem. [Newcombe Clark, who was absent from Friday's special meeting, has articulated that sentiment, for example.] Hieftje said that it’s all of our problem.

Mayor John Hieftje drafts language of the amendment to the parking contract resolution that ultimately was passed by the board.

Hieftje then offered an amendment to the resolution, changing the amount to 17%. Guenzel seconded the amendment. Leading off discussion of the amendment, Sandi Smith, who sits on the city council as well as the DDA board, said that if it’s important to maintain a fund balance, then there are other strategies the DDA can explore. In the DDA’s 10-year plan, for example, a contribution to the housing fund, which has been paused this year, resumes in 2013. Eliminating that would start to change the picture. Smith also pointed out that the DDA had set aside $500,000 to support the go!pass program, which subsidizes bus passes for downtown employees. If there’s a concern not to drop the fund balance down to 4.3%, then there are ways to change that. Smith said none of the decisions are easy.

Smith went on to say that the city of Ann Arbor is planning to dip into the general fund reserve balance for around $1 million, which is not a position the city wants to be in. But back when the DDA was planning to build the underground parking garage currently under construction, the city’s CFO, Tom Crawford, had cautioned the DDA about maintaining a fund balance of around 15%, and she had taken that to heart. She said she was “tormented” about the issue, but was willing to hear the arguments of others on the board.

Gary Boren clarified that they were currently debating just the amendment to change the number from 16% to 17%. With all due respect, he said – responding to Smith’s suggestion of cutting housing fund transfers or alternative transportation grants – those are elements of the DDA’s core mission. Those go to the heart of what the DDA does, and affects what the DDA will be able to do in the future.

Lowenstein added that in order to accommodate the city of Ann Arbor’s need for additional revenue, the DDA’s budget already includes deferring some maintenance on the parking structures.

Hieftje said that what he’d heard for a while reported back from the city’s negotiating committee was a concern about the DDA’s fund balance, based on Crawford’s comments. He contended that Crawford remembered his remarks about fund balances a little differently from what Smith had portrayed.

Hieftje suggested an additional meeting of the two negotiating committees to give the DDA some comfort with respect to the city’s assurance that it would backstop the DDA’s fund balances. That way, if there were a problem with a construction overrun or a drop-off in parking demand, the DDA would have some assurance that the city would step in and fill the gap. It’s certainly not in the city’s interest to see the DDA fail to meet its financial obligations, Hieftje said. “We can make that good,” he told his DDA board colleagues. He pointed out that it’s the city’s general fund reserve that matters for bond ratings. If the DDA needed the money, Hieftje said, it would be there.

Board member Russ Collins asked if the sentiment that Hieftje had expressed could be added to the amendment adjusting the amount from 16% to 17%. Hieftje then suggested that he’d asked councilmembers to add time on May 31 to their calendars for another meeting. The two negotiating committees could meet, then let the city council make a decision on the parking contract on May 23, when council’s meeting – begun on May 16 – resumed.

Smith asked Hieftje to provide some information about what was happening in the state legislature with respect to health care benefits for public employees. Hieftje allowed that the legislation had the potential to have a good impact on local governments because it would require some public employees to contribute 20% of their health care costs. But he said that would be too far down the road for it to have an immediate impact.

Lowenstein clarified that if it were to be necessary that the DDA required support from the city to meet its obligations, then any expenditure over a certain amount would need city council approval. Hieftje allowed that he couldn’t guarantee that the council would approve such an expenditure, but he thinks there would be strong support for it. It’s not in the interest of the city to see the DDA default on its obligations, Hieftje said.

Guenzel said the issue with percentages is really tough. Having worked in an organization where the goal was an 8-12% reserve, it’s very important. [Before retiring in May 2010, Guenzel had served as Washtenaw County administrator.] He said he might disagree with Crawford that 15-20% should be a goal, but said that 8-12% is necessary. He had a concern that with 16% and 17% as a percentage of gross in the parking contract, there’s a difference in the fund balance levels. He noted that the future could look better than what the DDA was forecasting – these are projections.

Guenzel said he liked the idea of the city stepping up and making a statement. The question is whether it could bind a future council. He stressed that the DDA did not want the city to take over its assets – the DDA is a separate entity. But if they were talking about a partnership, then if the city is willing to consider making some kind of an assurance on the DDA’s fund balances, he’d vote for 17%.

Roger Hewitt expressed concern about the fund balance – it would not be above $2 million again until 2017, he observed. He said he was interested in seeing what the city would be willing to offer in the way of an assurance. But on the 17% scenario, it left the DDA with a pretty slim balance, he said, especially with a $50-million construction project currently being built. The DDA’s deputy director, Joe Morehouse, who handles financial matters for the DDA, had suggested $3.5 million as the cash balance needed for the organization, Hewitt said.

Hewitt said he was willing to attend one more negotiating committee meeting, but without some assurance from the city to guarantee the DDA’s fund balances, he was not comfortable with 17%.

DDA board member Roger Hewitt gazes at the wall of fund balance numbers projected on the screen during deliberations on the parking contract.

Picking up on Hewitt’s point about ongoing construction projects, Smith pointed out that soon the amount would reach $60 million, because of the construction on the parking deck that’s part of the City Apartments project to be built by Village Green at the First and Washington lot. The DDA is committed to supporting that parking deck with $9 million in bonds, when the project is completed.

Collins said he’s likely to follow Guenzel’s analysis. To be blunt, he said, when you’re talking about several million dollars, the difference between $1 million and $2 million in reserves isn’t much. He said the committees had worked hard to come up with something that is “equally annoying” to both the city and the DDA, and he felt they’d arrived at that point. [Collins is a member of the DDA's negotiating committee, along with Smith, Hewitt and Boren.] He said he shared an interest in seeing the city chime in with something that would provide some underpinning.

Collins then expressed some general frustration about how the DDA is perceived in the broader community. He said he served on the DDA board to try to do good things for the city, and the downtown in particular. But the word on the street is that the DDA is “up to something.” He said as the DDA tries to accomplish something good for the city, that’s not the word on the street – it’s not in the media that way, and it’s not accepted that way in the hearts and minds of the city council.

Collins said he hoped the new parking contract would help change that perception. He noted that people who sit on the board to try to do something positive are volunteers. He said he would support the 17% contract with that positive tone, even though some people might call him foolish for doing so.

Russ Collins lamented the fact that the DDA board is trying to do good things for the city, but that it's not perceived that way by some people in the community.

Mouat said his concern is that despite two years of conversation, the city and the DDA are still negotiating. He said he tended to agree with Hewitt, that they are not done yet. His tendency would be to put out the 16% offer and then look for the city to provide something to give the DDA more confidence. He was more comfortable with the resolution at 16%.

Smith said that without having a specific “trigger” identified, she could not vote for a contract with 17%. She wanted to either vote down the amendment, or table the resolution. The more she looked at the numbers, the 4.3% fund balance is pretty slim, she said.

Lowenstein said she felt it’s cumbersome and difficult to think about having an additional committee meeting, having the committees make a recommendation, coming back to the DDA for a special meeting, and then having the matter go back to the city council. She also observed that the DDA had been negotiating against itself for a long time. In principle, she’d be in favor of 17% as Hieftje had represented it. One scenario would be to approve the contract at 16%. And if the council is serious about making some kind of pledge in exchange for 17%, then the DDA would only need one more special meeting in order to approve that. That would limit the number of times they have to get a whole bunch of people together, Lowenstein suggested.

Deliberations: Parking Contract Percentage – City Guarantee

Hieftje then offered an additional phrase to his amendment changing the percentage of gross to 17%. The alteration of the amendment made the DDA approval “contingent” on city council approval of a plan acceptable to the DDA to backstop the DDA fund balance in certain years. Collins suggested the word “underwrite” instead of “backstop,” and with that, the altered amendment was under discussion.

DDA board member John Splitt said that with the additional language about the city’s guarantee, he would support 17% as the percentage of gross figure.

Smith said that one concern she had with this scenario is that a future city council would be making decisions about whether the DDA needed to do maintenance on parking structures. She did not want it to be the case that a future city council might choose not to do some preventative maintenance on parking structures, in order to keep the fund balance high.

Hieftje reiterated the sentiment that it’s certainly not in the city’s interest to see the DDA struggle to pay bills or do maintenance. Mouat said it felt to him like board members were hovering around the same concept – they could ponder and ponder, but the devil is in the details. He wondered at what point it would not be the DDA board that would be overseeing DDA funds, but rather the city council. The DDA really needs the city council to be more clear, he said. It’s hard to pass a resolution without knowing exactly how it’s going to work.

Hewitt said he shared the same sentiment as Mouat – he did not want the city council to be performing the function of the DDA board. He said he could support the resolution as amended, but would look very critically as the language eventually proposed by the city council.

Splitt asked Hewitt if the two negotiating committees could work out such language. Collins noted that the DDA’s legal counsel, Jerry Lax is available again – he’s “walking around now.” [Lax underwent a knee replacement.] Hieftje said he could appreciate the discomfort of board members. But he said if the contract with the amendment is not approved by the city council, “the same thing will happen at 16%.” In any event, he suggested that the DDA keep a meeting slot open. He’d told councilmembers to reserve a time on May 31 to which the council could continue its budget meeting – the one already begun on May 16.

Smith asked to review some of the hybrid solutions she’d proposed in the past – scenarios where the percentage-of-gross parking revenues to be transferred would change after a certain number of years. Although Morehouse adjusted the parameters to show DDA board members onscreen what those solutions would look like, there seemed to be little traction on the board for pursuing any of them.

Collins said the DDA needs to remember that some folks at the city were initially looking for 20%. So it’s important to recognize the difficulty of negotiation from the city’s point of view. What they want to do is get this resolved and move on, Collins said. He said the DDA would have the opportunity to manage itself toward better fund balances. Politics is the “art of the possible,” he said. The 17% is hard from the city’s point of view.

Collins allowed that it’s a tremendously small fund balance for a large value of capital assets. As executive director of the Michigan Theater, he said, their aspirations are to have $1-2 million in reserve for a $2.5 million annual budget and a capital asset worth around $10 million. Collins said that $100,000 one way or another isn’t important, but the city’s backing is important.

Guenzel said that under either scenario it’s not enough, so the city’s promise is important. There is a mutual benefit in the new contract, he contended, because it clears up ambiguities. The board needs to get the thing done, he said. He was willing to live with the amendment and pass it that way. He reported that a friend of his had asked him why the DDA is not just turning over all the money to the city. Downtown Ann Arbor is dependent on a thriving city government, he said.

Mouat noted that the DDA was going at the issue yet again at a board meeting – “It’s a hell of a way to do this,” he said. It felt like they were doing the same thing they’d done before. He asked Hewitt and Hieftje if would it make any sense to see if there’s any other key folks on the city council who might participate in drafting the specific language of the city’s underwriting assurance.

Collins stressed that he felt the DDA was already at a decision point. Responding to Mouat’s frustration that the DDA was engaged in the same exercise, he said that progress had been made in the last six months. The board is at the decision point now. It feels the same, but it isn’t, he concluded.

Hieftje asked for confirmation that the projections for future DDA fund balances included TIF revenue from the 601 S. Forest and Zaragon II projects. Morehouse confirmed that the projections did include those amounts. Hieftje said he could not tell the DDA board for sure that council would approve the contract, but he could assure them that he would take it to council. Ultimately, he said, it is a partnership. Responding to comments about the community’s perception of the DDA, there are some pretty staunch defenders of the DDA on the city council, Hieftje assured them.

Splitt said he did not want to delay. He felt that a deal could be made at 17% but not at 16%.

Outcome on amendment: The DDA board voted 8-1 to approve the amendment to change the percentage to 17%, which included a contingency that the city would provide some kind of underwriting language that is satisfactory to the DDA. Dissenting was Gary Boren.

Deliberations: Parking Contract – DDA Rate Setting

Smith proposed an amendment to the contract that addressed the ability of the city to establish parking areas for its employees. The amended language, which was unanimously approved, made it clear that those facilities might also be used for public parking.

But the main concern in the non-financial aspect of the parking contract was for the provision that allowed the DDA to exercise final authority on parking rate changes.

Hieftje noted that some councilmembers have discomfort with the idea that the DDA would have sole authority to set parking rates. He thought there were a majority who would support the contract with that provision, but he felt that a larger majority could be achieved. If there were an annual review one year later after a rate change, where the council could decide if it wanted to take action, that would provide a lot of comfort for some councilmembers, he said.

Smith felt that would undermine a fair amount of what she found mutually beneficial about the contract. Hewitt noted that the DDA is undertaking some fairly dramatic financial commitments, and without the ability to set rates, the DDA couldn’t be confident it can meet those commitments. It’s one of the only things in the contract that the DDA doesn’t already have, he said. With the implementation of a program of transportation demand management, there’ll be a number of different rates, varying with geographic area, time of day, and day of week. He did not want to try to get into a discussion with the city council about some specific rate in a particular location.

Mouat wondered if there were a risk of politicizing rates in different areas, depending on the council ward. Hewitt explained that the idea of transportation demand management is based on where the demand is, not based on what the DDA would like to charge. It’s about what you’re trying to achieve, he said: Do you want someone to park there for two hours or eight hours?

Collins said he thought the DDA could invite the city council to review and comment, just as the DDA invited review and comment from the public. That kind of language could be added. Boren noted that kind of language was already included. The board then agreed to add “city council” explicitly to the list of entities to be consulted before undertaking rate changes [inserted text in italics]:

2. Operational Powers and Responsibilities Within DDA Parking Area.

k. Subject to Article 8, applicable law, and City permitting regulations, and after consultation with the City Administrator, city council and downtown stakeholders, which may from time to time be identified by either the City or the DDA, the DDA shall determine the rates and hours of parking in the Municipal Parking System and file such rates and hours with the City Clerk and otherwise publish such rates in the same manner as City ordinances, which rates and hours shall take effect thirty (30) days after said filing.

Hieftje said he thought the amendment moved in a good direction. Lowenstein pointed out that the council also has representation on the DDA board. [Hieftje and Smith serve on both the city council and DDA board.]

Outcome on amendment: The board voted unanimously to add the city council as one of the entities with which the DDA needed to consult before enacting parking rate changes.

Deliberations: Parking Contract – Parking Rates as Tax

Boren began the deliberations on the main motion to approve the contract by saying, “We don’t have to put our ear to the rail to figure out the direction the train is moving in.” He said there are two issues. One of those is a misperception of what the DDA is all about. A big problem is that the DDA is like Rodney Dangerfield – it gets no respect.

Board chair Joan Lowenstein confers with Gary Boren before the start of the May 20 meeting. Boren was the lone voice of dissent on the parking contract vote.

A second issue, Boren said, is that the city was taking a public service like parking and turning it in to a for-profit venture. That approach is at least marginally going to cause business and residential tenants to try Briarwood Mall instead, he cautioned. Some shoppers will decide to buy shoes at Arborland instead of downtown. When you charge people more to park than it takes to provide the service, he said, it’s effectively a tax. And that pushes people out of downtown. Boren said he sees that as directly in opposition to the DDA’s mission. In the future, he said, the DDA needs to make clearer to the city council the benefits of supporting the downtown. The parking agreement puts downtown money in the neighborhoods, so he’d be opposing it, Boren concluded.

Mouat said he’d struggled for a while with the issue. It’s a tough situation, he said. DDA board members aren’t elected officials, but their job is to represent downtown, and they’re looking out for the community as a whole. If the community is not healthy, then downtown isn’t healthy. He said he was hopeful that when the DDA and the city get past the contract, they can have some fruitful conversations. He said he’d support the contract, but with a little bit of a bad taste in his mouth. He agreed with a lot of what Boren had said.

Collins said he’d support the contract. He recalled the history of the DDA’s stewardship of the parking system. The DDA had taken a negative amenity, and turned it into a much more positive amenity. The DDA had made a decision that the parking infrastructure is a key way it wants to enhance the downtown – that’s the DDA’s legacy, he said. However, he said no positive karma comes from operating a parking system. That’s because you’re charging a fee for something that some people think should be free.

The DDA had tried its best to turn parking into a positive, Collins continued – it’s a burden the DDA carries for the city. In the future, as the DDA considers how it wants to affect the downtown positively, other projects may get lost in the dialogue about parking.

Boren said there were ways the parking contract could have been structured that could have gotten his support: pegging the parking revenues to downtown services. Instead, he said, last year the DDA had given the city $2 million for the right to negotiate, and it was not pegged to the benefit of the downtown. If the DDA must consume itself for the benefit of the city, he said, then it’s not a symbiotic relationship, but rather a a parasitic relationship. The DDA needs to be true to its mission, he said.

As a benefit to the contract, Lowenstein pointed to the reporting that would be required on how the street maintenance money is being spent. Previously, the DDA had been transferring close to $1 million to the city for street maintenance in the downtown, with absolutely no accountability about how it was being spent. In the new contract, there’s a reporting system for what’s being done. There’s also a standing committee on enforcement of parking regulations.

Hewitt said he also agreed with Boren – the contract is far from perfect, from the DDA’s standpoint. There are a few advantages in the new contract, but also some significant disadvantages. He was “not real happy with it.” Looking at the parking system, he said, the DDA was the victim of its own success. For him, Hewitt said, the issue reduces to whether it’s better to run the parking system under this agreement or give system back to the city. His personal conclusion is that it’s better to have the agreement.

Outcome: The board voted 8-1 to approve the new parking contract, with the contingency on a city council assurance on fund balances. Gary Boren voted against the contract.

Return of Excess TIF: Background

The DDA’s tax increment finance district (TIF) by definition captures a portion of taxes in a specific geographic region in downtown Ann Arbor – taxes that would otherwise go to taxing authorities like the city of Ann Arbor (including the Ann Arbor Transportation Authority), Washtenaw County, Washtenaw Community College, and the Ann Arbor District Library.

Only a portion of the taxes are subject to capture – namely, the difference (i.e., the increment) between the baseline property value when the DDA was formed, and the value of improvements made to the property. Increased value of property due to inflation/appreciation after an improvement is made is not subject to capture under the Ann Arbor DDA’s TIF plan. In principle, if no improvements are made to a property within a TIF district that result in an increase in value, no taxes are captured. An example of that is Manchester’s DDA, which was formed fairly recently, in 2005, and there has been no tax capture since then.

The combination of the Ann Arbor DDA’s TIF plan and the Ann Arbor DDA ordinance effectively limit the amount of taxes that can be captured.

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

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

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

It’s worth noting that the excess TIF capture to be returned to taxing authorities under the Ann Arbor ordinance appears to apply independently of the state statutory requirement that any “surplus” TIF that’s not expended according to the TIF plan be returned to the taxing authorities from which it was captured:

125.1665 Transmitting and expending tax increments revenues; reversion of surplus funds; abolition of tax increment financing plan; conditions; annual report on status of tax increment financing account; contents; publication. Sec. 15. … (2) The authority shall expend the tax increment revenues received for the development program only pursuant to the tax increment financing plan. Surplus funds shall revert proportionately to the respective taxing bodies. …

In previous reporting, The Chronicle identified several questions that would need to be answered in order to calculate the excess TIF capture. Here we add the answers on which DDA calculations of excess were based, from the board discussion on Friday [.pdf of table showing calculations in detail]:

1. What’s the relevant time period? The ordinance identifies the “rate” of growth, which entails comparing valuations over some period of time. Interpretation A would be that each year when the tax rolls are closed (after the Board of Review has handled all appeals), that year’s valuation is compared with the previous year’s, and the percentage difference is calculated. That percentage is compared with the percentage growth forecast by the TIF plan between those two years. Interpretation B would compare a given year’s valuation against the valuation in the first year of the plan (not the previous year) and compute the percentage difference between them. That percentage difference would then be compared against the percentage growth forecast by the TIF plan from the beginning of the plan to the current year. DDA answer: Interpretation A. Note that the span of time in question is since 2003, when the DDA was renewed. Before that, according to board chair Joan Lowenstein, the TIF plan estimates were “wildly optimistic” and the conditions of the ordinance were not met.
2. Which set of TIF plan estimates are applicable – the one labeled pessimistic, optimistic or realistic? The ordinance language refers to “anticipated” growth, without specifying whether that means the “realistic,” “optimistic,” or “pessimistic” estimates. Arguments for either the “optimistic” estimate or the “pessimistic” estimate would be susceptible to the criticism it is not “realistic.” Initial ballpark calculations done by the city have been based on the “realistic” estimates. DDA answer: Use the optimistic forecast.
3. Who is the responsible party for adherence to the ordinance?The taxes captured by the DDA’s TIF district are administered not by the DDA staff, but rather by the city assessor’s office, just as they are for all taxing entities. The city receives an administrative fee for this work equal to 1% of the tax bill – it’s labeled ADMIN FEE on the bill. [When the city council passed last year's budget, Stephen Kunselman (Ward 3) proposed a budget amendment to reduce the administrative fee, but it received little traction and did not pass.] So it’s the city that transfers the DDA’s TIF taxes to the DDA. For other taxing entities, like the Ann Arbor District Library, it’s not completely clear what their avenue of complaint is, if they are owed money that was erroneously captured – through the city of Ann Arbor or through the DDA? DDA answer: Here the calculations do not appear to be affected, but at Friday’s meeting, board chair Lowenstein was not eager to assign blame to any particular person or entity, saying that no one had paid appropriate attention and that it was an “honest mistake.”
4. Does the ordinance language refer to real property only, or also to personal property? The valuations included in this article lump together valuations of real property and personal property. Real property refers to building and land. Personal property refers to pieces of equipment. A specific example of personal property [but from outside the DDA TIF district] would be the planned acquisition by Sakti3 of battery cycling equipment and thermal chambers as part of the firm’s expanded operations. Based on the DDA TIF plan, through 2003 personal property in the DDA district accounted for roughly 25% of TIF capture. DDA answer: The language refers both to personal and to real property.
5. Do payments already made by the DDA to the city of Ann Arbor out of the TIF for the new municipal center count towards any sum that might need to be returned? In May 2008, the DDA board pledged up to $540,000 annually from its TIF capture to help finance the city’s new municipal center. [.pdf of May 7, 2008 DDA board meeting minutes] If it’s determined that too much money has been transferred to the DDA for its TIF capture, then the DDA might point to the money pledged as part of the municipal center finance plan as covering any amount owed to the city of Ann Arbor. DDA answer: Yes, the money previously granted to the city of Ann Arbor out of the TIF fund for various projects – which totals around $7.5 million, according the DDA – should count as already returned under the ordinance.

Return of Excess TIF: Deliberations

During deliberations on the parking contract, DDA board member Gary Boren noted that in the calculation of the excess TIF capture to be returned to taxing authorities in the district, the city of Ann Arbor was anticipated to be willing to “offset” the amount that would have otherwise been returned to the city as a taxing authority in the district – around $712,000. That offset was due to the amount of TIF revenue that had been granted back to the city since 2003.

Boren wanted clarification about by how much the $712,000 had been “overshot.” Board member Roger Hewitt reviewed the figure from the PowerPoint slide Lowenstein had presented in her introduction: $7.5 million. The $7.5 million in TIF that the city of Ann Arbor has received from the DDA since 2003 came in the form of funding for: the Calthorpe project; interest payments on the old YMCA lot; LED streetlights; a sanitary sewer study; municipal center LEED certification; and a municipal center bond payment of $500,000 per year.

So Boren suggested that if an excess in TIF capture were ever to happen again, the DDA would have leverage to justify not returning excess to the city of Ann Arbor – because it had already been returned.

When the board arrived at the second item on the special meeting agenda – the TIF excess capture – it was Bob Guezel who led off the discussion.

He asked DDA deputy director Joe Morehouse if he’d verified the numbers. Morehouse indicated that he had, and they’d been forwarded to the taxing units to which the excess would be returned. The DDA had not received a response from them, however. Guenzel ventured that if they disagree, they’ll let the DDA know. Lowenstein said she’d talked to Josie Parker, director of the Ann Arbor District Library, and they’d agreed to sit down and go over it. Lowenstein said the resolution states that this is the DDA’s calculation. The DDA is willing to go over the figures, she said.

John Hieftje asked that the language in one of the “whereas” clauses be modified – he did not want anyone to be alarmed, but he said that it could not yet be said that the city has agreed to waive the return of the excess that would be due to the city. He suggested that instead it should say something like “is likely to forgive.”

Boren clarified that this is an obligation the DDA has to return the excess – the board is approving the calculation, not the obligation. Russ Collins wondered if it would be more appropriate to check the calculations with the different taxing units, before passing the resolution.

Morehouse suggested that what the resolution was doing is affirming the method the DDA is using to interpret the city’s DDA ordinance.

Boren noted that it was only in the DDA’s interest that board members be aware of the issue of the excess TIF capture issue before they had voted on the parking contract, so he thanked the mayor for bringing it to the DDA’s attention, because it was the right thing to do. Hieftje contended that it was “a head-scratching moment” when the city’s financial staff realized that the clause of the DDA ordinance existed.

Lowenstein ventured that the situation shows you should go back and read your ordinances, and maintained that there was nothing underhanded or nefarious about it.

Outcome: The board voted unanimously to approve the calculations on return of excess TIF.

Present: Gary Boren, Bob Guenzel, Roger Hewitt, John Hieftje, John Splitt, Sandi Smith, Russ Collins, Joan Lowenstein, John Mouat

Absent: Newcombe Clark, Keith Orr, Leah Gunn

Next regular board meeting: Noon on Wednesday, June 1, 2011 at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]

Special meeting: TBD at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]

The board had been expected to vote on the measure at that meeting, but postponed it amid questions about the administration of the city’s ordinance on distribution of DDA TIF capture. [Chronicle coverage: "DDA Delays Parking Vote Amid TIF Questions"]

The delay in settling the parking contract has led to a delay in the Ann Arbor city council’s willingness to approve its fiscal 2012 budget.