The old policy was brief (one-page) and essentially outlined how much would be charged for copies, for labor to retrieve records, and how much would be charged as a deposit. The new policy is more detailed, and specifies how requests are to be logged and documented by the FOIA coordinator, a form that requesters can use to request records, and an internal form that is to be used by staff to calculate costs associated with fulfilling a request. AATA’s FOIA coordinator is deputy director of the AATA, Dawn Gabay.

The city of Ann Arbor’s administrative policy is somewhat more detailed that the AATA’s revised policy. [.pdf of city of Ann Arbor policy]

This brief was filed from the downtown location of the Ann Arbor District Library at 343 S. Fifth Ave., where the AATA board holds its meetings. A more detailed report will follow: [link]

The committee has been discussing a proposal by Dan Ketelaar for support of a proposed development at 618 S. Main, which received a positive recommendation from the Ann Arbor planning commission on Jan. 19, 2012. The 7-story building would include 190 units for 231 bedrooms, plus two levels of parking for 121 vehicles. Ketelaar has estimated that the tax on the increment between the current valuation of the property and the final built project would yield around $250,000 a year in TIF (tax increment finance) revenue to the DDA.

Ketelaar is asking that the DDA pledge 80% of its TIF capture money for six years – about $1.3 million – to support certain aspects of the project in connection with the state’s Community Revitalization Program. The CRP is the successor to the brownfield and historic preservation tax credit program. In order to approve the tax credit, the state would like to see a commensurate commitment from local units – and Ketelaar is proposing that it take the form of the DDA’s support.

At the April 11, 2012 DDA partnerships committee meeting, one of the points that resonated strongest with some board members in favor of supporting the 618 S. Main project was the ability of the contribution to leverage state money that would otherwise not be invested in Ann Arbor. The amount of money from the state that could be leveraged is in the range of $3 million.

Under Ketelaar’s proposal, taxes on the property would still need to be paid. In other words, the DDA would not simply waive its tax capture on the property. The 618 S. Main project would be reimbursed for a portion of those taxes it would normally owe. In the draft policy, that’s reflected in the following passage: “The DDA will not forgo its TIF capture from a project; the DDA may elect to provide a grant to a project utilizing its funds, or it may elect to provide all or some of its support using such in-kind elements as access to parking for contractors or construction staging.”

The maximum amount of a possible grant described in the draft policy is “calculated by estimating 25% of the total TIF captured by a project over ten years.” In the case of the 618 S. Main project, that amounts to .25*(10*$250,000) = $625,000. That’s about half what the 618 S. Main project is requesting.

The DDA board has heard about the proposal on several occasions – first at the full board meeting on Feb. 1, 2012, and at four subsequent DDA partnerships committee meetings. DDA board members are cautious about the precedent that such a pledge might set, and the appropriateness of the DDA’s role at this early stage in the project. (Ketelaar has not yet acquired the land.) At the March 28 partnerships committee meeting, DDA board member Newcombe Clark expressed concern that, depending on the precise role defined for the DDA’s participation, the DDA could effectively be artificially inflating land values.

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

Tony VanDerworp, left, talks with Washtenaw County commissioners Conan Smith and Dan Smith before a May 5, 2011 working session. VanDerworp is director of the economic development & energy department, which manages the county's brownfield program.

The board had been asked at its May 4 meeting to give initial approval of a $1 million grant application and $1 million loan from the Michigan Dept. of Natural Resources and Environment, for brownfield cleanup at the proposed Packard Square development. The board was also asked to authorize designation of the county’s full faith and credit as a guarantee for any loan that might be awarded, up to $1 million.

It was that guarantee that raised concerns among some commissioners, who were uncomfortable putting the county potentially on the hook for a private developer – especially as the county faces a $17.5 million deficit over the next two years.

Also was a concern that the developer – Bloomfield Hills-based Harbor Companies – had not paid off back taxes owed on the site.

Commissioners discussed having county staff talk with representatives of the city of Ann Arbor, to ask whether the city would be willing to back the loan, rather than the county. The site plan and brownfield plan for Packard Square had been approved by the Ann Arbor city council on Monday, May 2.

Subsequent to the May 5 working session, the county board announced that it will hold a special working session on Tuesday, May 17 to continue discussion of the Packard Square project and a possible change to the county’s full faith and credit policy. That meeting is set to begin at 6:30 p.m. at the Washtenaw County administration building, 220 N. Main St. in Ann Arbor.

In addition, the Packard Square grant and loan application, along with the project’s brownfield plan, is on the agenda for initial approval at the board’s May 18 meeting. A public hearing on the brownfield plan is also scheduled that night.

Packard Square Brownfield Proposal

Brett Lenart of the county’s economic development & energy department, which manages the county’s brownfield redevelopment, began with an overview of the brownfield program. To date, 19 brownfield development projects have taken place in six communities, including Ann Arbor, Ypsilanti and Saline. Projects include the Toyota Technical Center, Zingerman’s Deli, and the Dexter Wellness Center, among others.

Lenart said brownfield incentives have resulted in $323 million in new investments for local projects, and have helped to create or retain 3,500 jobs. Tax revenues that the county will receive in coming years because of those investments are significantly higher than what the taxes would have been without the brownfield redevelopment, he said.

Were it not for the brownfield incentives, these sites would likely not be redeveloped, Lenart said. They are difficult projects – that’s why the incentives are appropriate, he said.

Lenart also noted that the incentives will likely be eliminated under proposed state tax reforms, as part of current budget bills in Lansing. It’s not a tool they’ll be able to use much longer.

Specific to the Packard Square proposal, Lenart noted that the 6.5-acre site – the location of the former Georgetown Mall – includes land contaminated by a dry cleaning business that operated there. It’s been standing vacant and has little potential for reuse, he said.

The developer is proposing a $48 million mixed-use development, with retail and office space along with 230 apartments.

The proposed plan includes $5.1 million of eligible tax increment financing (TIF) activities, captured over a 14-year period. This total includes an estimated $2.4 million in developer-financed costs and $700,000 in interest, as well as $1 million from a state grant and another $1 million from a state loan. Also covered under the plan are $358,222 to be paid to Washtenaw County for brownfield program administrative support (about $25,000 each year over 14 years), and an estimated $1.1 million that will be deposited into the county Local Site Remediation Revolving Fund.

The project is expected to increase the taxable value of the property by an estimated $7.3 million – that’s an increase of about $500,000 in additional tax revenue to several taxing jurisdictions after the TIF repayment period.

Lenart said the county staff was recommending that the board approve the $1 million grant application from the Michigan Dept. of Natural Resources and Environment, as well as the $1 million loan from MDNRE. The combination of the grant and loan would reduce the period of the TIF from 18 to 14 years, Lenart said, reducing the total TIF-captured funds by $2.5 million.

Lenart noted that the county would require that the developer obtain a letter of credit from a bank, as assurance that the county would be able to secure repayment. If there’s a risk, he said, it’s that the county will need to be careful about the terms and conditions of the letter of credit, to ensure it’s in their best interest and that their funds are protected.

Ideally, the board would approve holding a public hearing on the brownfield proposal at its May 18 meeting, he said, and give final approval at its meeting on June 1.

Packard Square: Commissioner Discussion

Conan Smith began by saying that Wes Prater had been right to urge the board to bring this discussion to a working session, before considering it for a vote. [At their May 4 meeting, commissioners had debated whether this project had a significant enough financial impact to the county to require it, under board rules, to first be taken up at a working session. Smith had argued against that move at the time.]

Smith described Packard Square as a badly needed project in Ann Arbor. It’s in an area where affordable housing is needed, on a bus line and within biking distance to downtown. It could be valuable to the economic diversity of the city and the county, he said. The board should rely on the county brownfield redevelopment authority’s review of the project, and take their advice to approve the grant and loan application, Smith said.

It’s incumbent on the board to protect the county’s interests, first and foremost, Smith said. They have tools to help development – through authorizing the county’s full faith and credit and by bonding, among other means – and that’s especially important in areas that are environmentally challenged, like the Packard Square property, he said. There’s a strong public interest in supporting these activities.

That said, the board needs to take every conceivable protection to secure the county’s long-term financial interest, Smith said. His understanding is that the letter of credit offers such protection. He asked for additional details about what risk the county might be taking with this project.

Lenart explained that the letter of credit would be negotiated between the developer and the financial institution, in an amount specified for the benefit of the county. It would allow the county to access the funds under certain circumstances. In addition, the county would have a contract with the developer that would describe how the TIF revenues would be used. For example, the county could specify that they receive TIF revenues for repayment, before those revenues would be available to reimburse the developer.

It would be crucial to structure those two documents – the letter of credit, and the county’s contract with the developer – in concert, Lenart said, especially in reference to milestones and benchmarks that would allow the county to access the letter of credit.

Curtis Hedger, the county’s corporation counsel, stressed that the county gets to negotiate terms – they’ll need to feel comfortable with the agreement before they sign. And it’s key to have the letter of credit be in place for the entire length of the TIF. He also noted that the bank would investigate the developer’s assets very carefully before issuing the letter of credit, which adds a layer of assurance.

One risk that Hedger cited would be if the developer goes bankrupt within 90 days of signing the letter of credit. In that case, a bankruptcy court could invalidate the letter, he said – that’s a major risk. That risk is mitigated by the fact that they’d be getting both a grant and a loan from the state, he said. There’s enough work that could tap the grant funds first, allowing them to pass through the 90-day period without expending additional funds. In that case, if the developer goes bankrupt, the county could simply return the unused loan to the state, he said.

The key thing in the letter of credit is that the terms are crystal clear regarding when the county can access those funds, if necessary, Hedger said, including a detailed list of situations that would trigger the county’s right to collect. If there’s a bankruptcy, the county would be looking to the bank – not the developer – to recoup its money.

Hedger said he’d also recommend including an acceleration clause in the letter of credit, which would state that even if there’s a minor default – like a $50,000 payment – the county would have the right to ask for the entire amount of the loan. The county would be looking to the bank to make Washtenaw County whole, and the bank would have to in turn deal with the developer. That’s why there’s a lot of front-end due diligence by the bank, Hedger said.

There’s always a risk when the county issues its full faith and credit, Hedger said – no one can predict the future. But with a letter of credit that’s both clear and covers a sufficient time period, he added, they should be in good shape.

Lenart added that the county staff would oversee the activities funded by the $2 million in state funds. That adds a level of control about how and when funds are expended, relative to the letter of credit, he said.

Smith then asked about the county’s general policy toward issuing its full faith and credit. Its policy now is focused almost exclusively on public works projects, he noted. He asked Hedger for recommendations about how the policy might be revised.

Hedger said that currently, the county uses its full faith and credit primarily when it issues bonds for county projects or for projects within other local municipalities. Since there will likely be more public/private partnerships in the future, Hedger said, he’d recommend a policy that gives the county more flexibility. It would also be important to be clear that the county won’t do these types of deals unless they lock down some type of security, he said, like a letter of credit.

Packard Square: Commissioner Discussion – Unpaid Taxes

Wes Prater then began his questioning by clarifying that the developer was an LLC. He asked whether the firm owed any taxes. Lenart answered that the taxes aren’t up to date, but that this brownfield agreement would be an effective way to resolve that situation.

[Responding to a query from The Chronicle, county treasurer Catherine McClary reported that Harbor Georgetown LLC owes 2009 taxes totaling $178,025.26 and 2010 taxes of $159,845.57, if paid on or before May 31, for a total of $337,870.83. Interest increases each month. The 2009 taxes are in forfeiture – that is, if not paid by next year, the property would face foreclosure.]

What is the county becoming? Prater asked, exasperated. He likened it to the federal bailout of General Motors, and asked what kind of collateral the company had. “This is kind of outrageous, if you ask me,” he said.

Anne Jamieson-Urena, director of brownfield and redevelopment incentives for AKT Peerless Environmental and Energy Services, was on hand as a representative for the developer. She reported that the developer was getting a 40-year loan backed by the U.S. Dept. of Housing & Urban Development (HUD), which she described as very secure financing for the project. HUD won’t close on the loan until the developer’s taxes are paid, she said. HUD also requires that they prove they have the means to clean up the site – that’s why they need the brownfield deal. Both the city of Ann Arbor and the county brownfield redevelopment authority have indicated they won’t support the project unless all back taxes are paid, she said.

Jamieson-Urena described it as a difficult site to clean up, and a complicated project with lots of moving parts. She said she realized the county board was coming in at the middle of the discussions.

Prater cut her off, saying he wasn’t interested in the developer’s process – his concern is for the county and only the county. It looks like the developer wants the county to pay for the site cleanup so that they can get a loan, he said. The LLC isn’t willing to invest its money, he said, yet they want to get the profits – and taxing authorities will be sacrificing 14 years worth of tax revenues. Prater said he’s OK with the TIF, but not with the state grant and loan being backed by the county. That’s too risky, he said.

When Jamieson-Urena noted that the grant and loan allow the TIF period to be reduced from 18 to 14 years, Prater replied, “I may be dead – and half of this group may be dead by then!” If the developer isn’t willing to reach into his own hip pocket for funding, the county shouldn’t help, he said – or perhaps Ann Arbor should offer its full faith and credit for the project instead.

Dan Smith also commented on the unpaid taxes. He said he didn’t want to change the rules in the middle of the game, but the first thing the developer should have done was to take care of those back taxes. He’s disappointed that the project is this far along and there’s still a tax issue.

When Jamieson-Urena reported that the developer has been making payments, Smith replied that you either pay your taxes or if you don’t like it, take it up with the tax tribunal. The county needs a policy making it clear that taxes need to be current before a project chews up so much staff time and resources.

Smith then said he shared Prater’s concerns over the loss of tax revenue during the TIF period. He also wondered about the need for housing. There seems to be plenty of available housing near Ann Arbor, he said, and it wasn’t clear that they need to be encouraging more construction at this time. Even so, Smith said he thought he’d find a way to support the project, despite his concerns.

But before they move ahead, Smith said the county needs to develop a policy regarding use of its full faith and credit on projects like this. He has concerns that they might be hanging their hat on technicalities in the letter of credit – if they miss something, suddenly they’re more liable.

Smith also noted that they’ve seen numerous banks fail – some for which they wouldn’t have thought it was possible. That seems to have been quickly forgotten, he said. Having a letter of credit, even from a major bank, doesn’t eliminate risk.

Smith said he sits on the board of the Northfield Township Downtown Development Authority. They were given rosy projections about revenues they’d be receiving from a TIF, but those haven’t materialized. People seem to have conveniently forgotten the last three years of history, he said.

Yousef Rabhi asked what would happen if the bank issuing a letter of credit goes under. Hedger said he’d need to look into that and report back.

Rabhi then clarified that the project couldn’t move forward unless taxes were paid. Lenart replied that they couldn’t do the state grant or loan unless taxes were paid in full. Nor would the developer be able to secure the $48 million in financing it needs, he said.

Dan Smith said the issue isn’t about whether the taxes would eventually be paid – it’s that the project has moved ahead so far while still owing taxes. “It’s just not right, is the bottom line,” he said. Lenart agreed, but said it’s also a reflection of the fact that the property isn’t functioning well in its current condition.

Alicia Ping also expressed concern over the unpaid taxes – they should develop a policy on this, she said.

Rabhi, who’s a member of the county brownfield redevelopment authority board, said that group should discuss developing a policy that would require taxes to be paid before a project comes to the county board for approval.

Packard Square: Commissioner Discussion – Policy, Public Benefit

Ping also asked whether the city of Ann Arbor was ever asked about offering its full faith and credit, rather than the county. No, Lenart said, they weren’t asked. The county, through its brownfield redevelopment authority, is the only entity that could authorize the brownfield TIF. If the city, rather than the county, were to give its full faith and credit, it would add a contractual layer to the agreement with the state, he said.

Ping then asked about the staff oversight required – how would that be compensated? Lenart said the county could pull off a fee of up to 3% out of the $2 million grant/loan – or roughly $60,000 – to cover administrative expenses. That would pay for county staff time as well as a consultant’s work, who would have more expertise to oversee the work. An additional $25,000 annually would be paid to the county from TIF revenues. Tony VanDerworp, director of the county’s office of economic development & energy, said it would also reimburse their staff expenses up to this point. Ping said that amount seemed low, to cover all those costs.

Ping said her main concern was offering the county’s full faith and credit, and she’d like to see whether Ann Arbor would be willing to do that instead.

Brett Lenart of the county's economic development & energy office.

Lenart said if the county won’t back the loan, then the city would need to apply for the state grant and loan with its full faith and credit. If the city is unwilling to do that, they’d need to resize the brownfield plan, he said.

Barbara Bergman wanted to know what public benefit would be derived from the project. Aside from the tax revenue, what’s in it for the citizens – is it just access to affordable housing?

Lenart cited as benefits the addition of market-rate apartments, and the removal of about 2,500 tons of contaminated soil.

Removing contamination was certainly a benefit, Bergman said. As for the housing, does the project fit the city’s goals? Lenart noted that the city council had recently approved the project’s site plan and brownfield plan. Anne Jamieson-Urena said the apartments would likely be in the $700 to $1,300 range. Responding to a question from Bergman, she said it wasn’t specifically targeting the student market. She described other aspects of the project, which will include retail shops and office space.

Bergman said she’d still like to know what $700 would buy – it wasn’t clear to her if this was the kind of housing needed by the population that has a hard time finding affordable places to live.

Conan Smith pointed out that the board had eliminated the county’s planning staff, which in the past would have been able to evaluate the project. If the commissioners wanted that kind of evaluation, they needed to fund staff resources accordingly. If not, they needed to focus on the brownfield piece and the financing, he said. That piece is focused on the environmental reclamation of the site, he added. Working hand-in-glove with the private sector, they could ensure the site’s cleanup – that’s what the brownfield program is all about.

As a result of the project, they’ll get additional tax revenues from the project and a cleaned-up property, while the developer benefits from getting an asset, Smith said. The city has already vetted the project, he added, and he felt the commissioners should rely on the city’s judgment.

Kristin Judge noted that the county will be losing tax revenues because of the TIF – why doesn’t that show up in the staff memo’s report on the project’s financial impact?

VanDerworp replied that they assume the site wouldn’t be redeveloped without the brownfield incentives to remove and remediate contaminated land, and demolish existing structures. Without the incentives to cover the $5.1 million in cleanup costs, it’s cheaper to buy land elsewhere, he said. The incentives are designed to kick-start redevelopment. And when redevelopment occurs, he added, the county and other taxing entities will eventually see higher tax revenues than they otherwise would.

Judge pointed out that there isn’t any other property available like this is Ann Arbor, so the developer has incentive to put a project there. She also noted that if the Washtenaw Avenue corridor improvement authority (CIA) is approved, that’s another hit to tax revenue. [See Chronicle coverage: "What Does Washtenaw Corridor Need?"]

Jamieson-Urena replied that a CIA is different from a TIF. With a TIF, the county would still be collecting the baseline tax revenue – it’s only the increase caused by the appreciation of the property that will be going to the developer, she said.

VanDerworp told commissioners that they’ll be holding a working session in the future on the CIA. The Packard Square project is different, he said, in that it’s focused on brownfield cleanup.

Responding to a question from Judge, Jamieson-Urena said the developers don’t intend to operate at a loss, but that the return on their investment will be minimal. They’re looking at huge cleanup costs, she said, as well as demolition and other expenses. So Judge asked whether the project made business sense. Jamieson-Urena replied that the brownfield program is in place to help get blighted properties back on the tax rolls.

Judge wondered whether the brownfield plan could be approved without the loan. It could, Lenart said. Judge said she wasn’t comfortable with the county backing the loan. However, she supports the brownfield cleanup, and said the project itself looked beautiful.

They can proceed without the loan, Lenart said, but it will extend the project. The letter of credit is intended to provide a level of comfort in protecting the county, he said. If the board approves that, then they’ll cut the length of the TIF and see higher tax revenues four years earlier.

Ronnie Peterson asked how the project’s timeline would be affected, if the board of commissioners directed staff to return to the city and ask that the city provide its full faith and credit, as Ping had suggested. Lenart said it would delay the state’s approval of brownfield incentives. Jamieson-Urena added that it could put the whole project in “tremendous jeopardy.”

Peterson said he supports economic development, but generally for commercial and industrial projects – not residential. He’d hate to see every residential developer come to them for this kind of support, noting that there are a lot of challenged properties in the county. He asked when the developer needs final approval.

The developer has been working with the city since January, Jamieson-Urena said, and received approval from the city council on May 2. The county’s brownfield redevelopment authority board has also approved it, she reported. They’ve already given the Michigan Dept. of Environmental Quality a draft application, she said – it usually takes MDEQ two to four months to approve a project, after it’s formally submitted.

All they’re asking is that the county board allow them to proceed, she said. They’re not requesting terms of the loan at this point, she noted. Ideally, they’d like to start demolition in the fall of 2011.

Peterson asked whether that meant the project could move forward without the county’s granting its full faith and credit. Lenart replied that the application to MDEQ includes a question asking whether the county would accept the loan and back it with its full faith and credit. They would need to answer that question when they apply, he said. Lenart also noted that several years ago the county had applied for a similar loan backed by its full faith and credit, but that project had never moved forward.

Peterson characterized this request as very unusual, saying it’s not the role of government to use its credit in this way – there are other needs that are more important. It’s also apparent that the developer doesn’t have any skin in the game, he said. The developer is doing this project on credit, yet plans to reap the harvest. He said he could support the brownfield TIF, but wouldn’t support backing a loan for a private developer. That’s not the county’s role, he said.

Bergman recalled that the brownfield project in Ann Arbor – Broadway Village at Lower Town – hasn’t materialized. It’s just empty land behind a fence, she said. Lenart noted that some work has occurred, but the TIF isn’t activated so no money has changed hands.

Conan Smith said it goes back to the issues he raised at the beginning of their discussion: (1) what will they do with this project; and (2) what’s their policy about providing support for private development. He hoped they would support private entities – there will likely be more opportunities for public/private partnerships in the future. One reason these incentives are available is because profit margins are so thin, especially for contaminated sites, he said. Otherwise, dilapidated properties would remain a blight. He noted that while most brownfield projects in Ann Arbor are residential, the county board has also approved many commercial or industrial brownfield projects in other communities.

This is an opportunity to do something good for the community, Smith said. The board needs to ensure that the county is protected, and he thought they had the in-house expertise to do that. They needed to craft a very tight policy to allow them to use this tool to work with private developers, perhaps in a limited way.

Regarding the Packard Square project specifically, Smith supported moving quickly. He said he’s seen projects go down because of delays. Smith also questioned whether requiring property owners to pay back taxes would have a chilling effect on development. Perhaps it would cause developers to choose other properties, he said, leaving the blighted properties to remain undeveloped.

The brownfield redevelopment authority recommended action on this project, and there’s clearly been precedent for backing a loan, Smith said. With the right protection, he supported moving ahead with the project. Then the board should have a robust discussion to craft a policy to guide future projects.

Rob Turner said he generally supported brownfield projects, noting that it would provide jobs for his colleagues in the construction industry. However, he was concerned about the unpaid taxes, and had serious concerns about using the county’s full faith and credit to back a loan for a private developer. He had invested in a development planned along Ann Arbor-Saline Road in the early 1990s, and lost a significant amount when the project went under.

Turner also recalled the savings and loan crisis – that financial sector went completely under, so even with a letter of credit, there’s risk.

He supported Ping’s suggestion of going to the city of Ann Arbor and asking if they’d back the loan. He said he’d love to see the project happen, “but I think it needs to be done without us.”

Prater pointed out that the county’s equalization director, Raman Patel, had told the board that millions of dollars in tax revenue were being diverted from the county, while the county faced a $17.5 million deficit over the next two years. And seeing what’s happened in the financial industry, they need to be cautious, he said. People have tried to live off the government, and now it’s coming home to roost. Federal and state funding is drying up, and the county needs to tighten its belt and figure out how it can provide services without outside funds. “Taking actions such as this are not going to help our cause,” he said.

Conan Smith replied that most of the tax diversion that Patel reported occurs through downtown development authorities (DDAs) and local development finance authorities (LDFAs), which are different from brownfield TIFs. DDAs and LDFAs are designed to capture tax increases tied to market forces, he said, while brownfield TIFs are designed as an incentive to increase the tax base.

Next Steps

Commissioners then discussed the possibility of holding another working session on this topic, and asked staff to draft a policy regarding use of the county’s full faith and credit for this kind of project. Hedger said his concern was about producing such an important policy too quickly, but he noted that they could always choose to amend it later.

On Wednesday, May 11, the county issued notice of a special working session on this topic, slated for Tuesday, May 17 at 6:30 p.m. The agenda includes an update on the Packard Square project, and a proposal for a full faith and credit policy. The meeting will be held at the county administration building’s boardroom, 220 N. Main St. in Ann Arbor.

Present: Barbara Levin Bergman, Kristin Judge, Ronnie Peterson, Alicia Ping, Wes Prater, Yousef Rabhi, Conan Smith, Dan Smith, Rob Turner.

Absent: Leah Gunn, Rolland Sizemore Jr.

Translation of the analogy in the rhetorical question: “Do you want to leave the (incorrect) impression that the DDA is implementing transportation demand management because the city has asked the DDA to increase revenue?” Greff introduced the horse-and-cart analogy during deliberations on the language of a DDA resolution that responded to the city’s request for the DDA to increase revenues to assure adequate reserve funds. The board passed the resolution on the financial question, along with one forming a four-person committee to begin the discussions on the parking agreement between the DDA and the city.

These were two of nine resolutions passed by the board in just over two hours of deliberations. The remaining seven dealt with an award of $607,000 to Avalon Housing, an associated policy for such affordable housing grants, a commitment of DDA resources for public process on a community vision for the 300 block of South Fifth Avenue, grants to merchant associations to assist businesses, a $25,000 grant to getDowntown for its commuter challenge, time limits on DDA grants, and a policy regarding removal of metered on-street parking spaces.

Formation of Committee for Discussions with City of Ann Arbor on Parking Agreement

At its Jan. 20 meeting, city council passed a resolution asking the DDA to open discussions on the parking agreement between the DDA and the city. Then, at its Feb. 17 meeting, city council asked that the DDA put forward a plan to increase its revenue to ensure adequate reserve funds. These two requests provided the background for the DDA boards’ operations committee meeting on Feb. 24. At Wednesday’s full board meeting, Roger Hewitt, chair of the committee, described that operations committee meeting a week prior as “at times contentious.”

That background was supplemented by the immediate context at the board’s meeting of  a list of questions read forth by Kyle Mazurek, vice-president of government affairs for the Ann Arbor Area Chamber of Commerce, during public commentary at the start of the meeting. His questions were:

• What did the city net from parking meter revenues before the DDA took over management in 2002? What does the DDA net from parking meters with/without “rent” paid to the city?
• Does the city incur disproportionate costs downtown relative to elsewhere in the city? Do you have city estimates for cost and revenues downtown? Even rough numbers would be helpful.
• It is my understanding that the DDA TIF includes $1.5 million in city taxes, and that the city still captures $4 million in taxes from properties located within the DDA (i.e., more than 70% of the total). Are these numbers accurate?
• Can you please provide a list of recent grants or projects undertaken by the DDA on behalf of the city? Can you provide a list of grants for projects undertaken by the DDA on behalf of other governmental agencies whose taxes are captured in the DDA’s TIF (County, Library, WCC)?
• City council approved a resolution at its Feb. 17 meeting expressing concern about the DDA’s finances. Can you provide the Chamber a copy of the city policy regarding minimum/maximum fund balances so we can better understand this concern? Are you aware of a new fund balance policy that the city will institute in the near future?
• It seems that the discussion about extending a revenue stream from the DDA/city parking agreement is being done covertly. Is there a way to make this discussion more public, more transparent? We are all downtown stakeholders and would like to know more about policy choices that affect us – e.g., whether the DDA is being asked and/or is agreeing to raise parking rates even higher than proposed one month ago for the new parking structure.

Emphasis is added above to ease visual scanning. The second item on the list is pertinent to a remark made by Mayor John Hiefte at the most recent Sunday night caucus, when he stated that the parking agreement between the DDA and the city was renegotiated in 2005 due in part to the fact that the DDA area represented a disproportionately greater burden on city services.

The next-to-last item on the list is pertinent to the discussion from the DDA operations committee in which board members and DDA staff had concluded that there was, in fact, no such city policy on minimum/maximum fund balances.

[Editorial aside: The Chronicle parsed Mazurek's points to be implicit statements phrased as questions, more for rhetorical effect than to elicit information and data.]

The board began deliberations by quickly addressing the mechanics of the committee formation: how many and who appoints the members. The draft resolution called for the DDA to form a committee of four and for city council to form its own committee of four. Board member Leah Gunn suggested a change from a committee of four to a committee of three for both bodies. Hieftje, who sits on the DDA board in the slot designated for either the mayor or the city administrator, wanted committees with four members. Board member John Mouat allowed that out of four people only three of them will show up at any given meeting. The board settled on four.

Gunn asked how the members would be selected on the DDA’s side, and Susan Pollay, executive director of the DDA said that it was the board chair, currently Jennifer S. Hall, who made such selections. The actual selection came at the very end of the board’s meeting. The DDA’s committee will consist of Roger Hewitt, Gary Boren, Jennifer Hall, and Rene Greff. Greff will chair the committee.

Greff began the deliberations on the substantive issue of the resolution. She had concerns about the wording. “We need to be honest with ourselves and the community about what’s happening,” she said. She compared the arrangement  between the DDA and the city to that between a homeowner, who’d paid off their mortgage before its term, and a lender. If you doubled up your payments and met the terms of your mortgage in 15 years instead of 30, she said, you wouldn’t say, “Oh, I think I’ll just leave that payment in my budget!” For that reason, she said, it was important not to use the phrasing “extend payments to the city beyond July 1, 2010.”

To be completely aboveboard, Greff suggested, the phrasing needed to be something like “allocate additional dollars.” Hewitt did not consider the suggestion to be a friendly amendment, which resulted in discussion of Greff’s wording change.

Board member Sandi Smith, who is also a member of city council, cautioned against being specific about either the dollar amount or the actual mechanism by which payments from the DDA after 2010 would happen. Whether it’s the parking agreement that needs to be re-opened, or some other mechanism that would result in payments by the DDA to the city, is something that the two four-member committees should figure out, said Smith. She pointed to the language referencing “mutually beneficial financial agreement” as consistent with that. Greff stated that the resolution needed to say more than that. “We already have a mutually beneficial financial agreement,” she said.

In response to Greff, Smith suggested that the resolution could also include a “Whereas” clause, saying that there’s a shortfall anticipated in the city’s budget. Greff pointed out that the resolution should state the consequence of that shortfall: “We’re talking about an anticipated request for additional funds!” Smith allowed that the “Whereas” clause should say that.

From Mouat came the suggestion that the many concerns could be addressed by replacing “extending” with “additional” and striking the phrase “parking agreement.” Board member Leah Gunn echoed Smith’s idea that the two committees should have a wide-ranging discussion, not limited by years or dollar amounts.

Hall felt that the language of the resolution could speak to “finding additional money to find a mutually beneficial financial agreement” without limiting years or dollars.

At this point the board settled on a title that read “Resolution Establishing an Ad Hoc DDA Committee to Begin Discussions with the City Regarding Additional Payments to the City.”

The body was modified to include a “Whereas” clause stating “Whereas the city anticipates it will experience shortfalls in its budget,” and language in a “Resolved” clause to reflect the title, which now read “additional payments.”

Hieftje, saying that he wanted to react to something earlier in discussion, [presumably Greff's remarks about the need for the language to be honest and aboveboard] noted that the city has given formal notice (through the council’s resolution) that it wanted to reopen discussions of the parking agreement. “How much more formal could the city have been?” He said that when asked about the subject, he’d always responded by saying that the city is going to ask for additional money. He said he agreed that it should be a wide-ranging discussion. The city had given the DDA the revenues from metered parking, he said, and the discussions could include taking those reveneus back.

Hall responded to Hieftje’s remarks by saying that she was glad DDA is establishing the committee, noting that the city council had called for a discussion [in its resolution] without saying specifically what that discussion might be. “We’ve had to guess,” she said.

Hieftje was not content to let the matter rest at that, saying that he wanted to go back to his earlier point that there’s been nothing about the city’s position that hasn’t been public. Nothing has been done behind closed doors, he said.

Greff then weighed in saying that the issue was not whether something had been done behind closed doors, but rather that the city council’s  language ["extending payments"] had been “a little bit cute.” Greff noted that an assumption by the city of a $2 million payment by the DDA to the city is built into the city’s budget, but that was not reflected in the request to open discussions. Hieftje responded to Greff by saying that the city had made no effort to hide the $2 million dollar assumption and that he couldn’t understand why anybody would think that’s not the number.

Hall came back around to point out that Hieftje was stating a dollar amount, but there was no dollar amount in the resolution passed by council.

Outcome: Passed unanimously.

DDA Response to City of Ann Arbor Request on DDA Finances

Hewitt framed the issue as one about what the DDA’s fund balances are during the initial construction period for the South Fifth Avenue underground parking garage. Hewitt commented briefly on the parking demand management framework referenced in the draft resolution – a “compromise document” arising from the operations committee meeting a week prior. Hewitt characterized parking demand management as an approach where parking spaces in high demand would have higher fees, and spaces in low demand would have lower fees.

The draft resolution contained a “Resolved” clause on parking demand management that proved to be a main point of contention during board deliberations. The content of the clause was not so much at issue as its status as a “Resolved” clause, as opposed to a “Whereas” clause. Here’s the clause:

Beginning July 1, 2009 the DDA anticipates implementing a range of hourly parking rates on and off-street as a part of any overall parking demand management framework, with the average of these rates as reported to city council on February 17, 2009.

Gunn recounted how at council’s Feb. 19 meeting Tom Crawford, Ann Arbor’s chief financial officer, had expressed concern about the DDA’s fund balances. She said that the city of Ann Arbor had no policy on fund balances and that she thought the DDA’s finances were perfectly healthy. She pointed to an Ann Arbor News article  in the Sunday, March 1 edition that reported on the delay that Village Green’s First and Washington project (City Apartments) was experiencing in getting financing. [It's a project that the DDA is helping to finance, because it includes construction of public parking spaces.] Noting that the DDA doesn’t have to pay Village Green a dime until certificate of occupancy, she didn’t foresee that happening before 2011-2012. Gunn suggested that this scenario be included as an informational attachment in the DDA’s resolution.

Greff  began her remarks by saying that she was troubled by the “Resolved” clause [cf. above]. “Why does it belong in the resolution?” she asked. It bothered her for two reasons, she said. First, the DDA had  implemented a parking increase, and it has nothing to do with the city’s request. Second, she continued, the DDA was not actually ready to implement demand management and that the impact was not yet known –  it might be revenue neutral, positive or negative. She offered as a friendly amendment the suggestion to strike the clause, but said that it probably would not be accepted. “No, it won’t be!” responded Roger Hewitt, who chairs the operations committee and who brought the resolution on the committee’s behalf.

Hewitt objected to the notion that the DDA was not ready to implement parking demand managment, saying that the use of “averages” was a first step, and that it was not being done in response to the city’s request. “We’re doing it already,” he said. In that case, Greff, responded, the clause needed to be reassigned to the list of “Whereas” clauses in the resolution: “Do you want to hook that cart to a controversial horse?”

Sandi Smith supported the idea of moving the clause to a “Whereas.”

Gunn returned to Greff’s contention that the DDA was not ready to implement parking demand managment by pointing out that the operations committee had given updates on parking demand managment efforts that were being launched: AVI cards as payment; E-Park stations and magnetic encoded validation tickets; and valet parking. Greff responded by saying that if the DDA had already done these things, then the statement should not go into the resolution as a “Resolved” but rather as a “Whereas.”

Board member Keith Orr said that he supported the amendment. If parking demand management is already being implemented, then it should go into a “Whereas” clause, he said.

Hall and Smith both agreed that the clause should be in the “Whereas” section.

Gunn called the question and the vote on the call was unanimous.

Outcome: Passed unanimously.

[Editorial aside: It is not fair describe as "behind closed doors" the addition of a city council item after the deadline for publishing the agenda in the newspaper. It's not bizarre that items are introduced in this way. It is, however, worth noting that the resolution by council asking for the DDA's financial plan was added to the agenda in this way, the same day as the council meeting. And in that respect, it made the council's deliberations on the resolution less public and visible in advance than it could have been.]

Grant to Avalon Housing

Michael Appel, executive director of Avalon Housing, addressed the board during public commentary at the start of the meeting. He had complimentary words for the board’s partnership committee and thanked them for considering the recommendation to fund some affordable housing outside the DDA district. “It’s not what most DDAs do,” he said. It shows that the DDA understands how the economy is interlocked with people at every level. The board was considering a resolution authorizing $557,000 for rehabilitation of affordable housing units both inside and outside the DDA district. To the amount already in the draft resolution, there would be a request on introduction of the resolution to the board  for an additional $50,000.

Appel said that if the process was troubling to board members about the addition of a $50,000 request to go along with the $557,000, he hoped it would not delay the main resolution.

From left: Jennifer S. Hall, Rene Greff, Gary Boren, John Hieftje, Leah Gunn, Keith Orr (mostly obscured), Jennifer L. Hall, Michael Appel.  Had it been December instead of March, there could have been Jennifer jokes based on a Christmas carol.

When the board considered the resolution, Sandi Smith, who co-chairs the partnerships committee along with Russ Collins, explained that the request for the additional $50,000 was for a property at 211 E. Davis. That 14-unit building brought the total number of affordable housing units supported by the grant to 66 and the dollar amount to $607,000. The rehab work, said Smith, would include upgrades to each unit that included weatherization, and new heating systems.

Hewitt wanted to know if the grant would have a negative impact on the DDA’s ability to support the eventual replacement of the 100 units of affordable housing that formerly stood on the old YMCA lot. “Does approving this jeopardize the 100-units project?” he wanted to know. Jennifer L. Hall, who is housing manager for the city/county office of community development, was on hand to answer Hewitt’s question. Which she did, but not before some light-hearted banter about the two Jennifer Halls (the other being Jennifer S. Hall, who chairs the DDA board) being in the same room at the same time. Hall said that tax-increment financing was the main financing tool, and that depending on the scenario, the amount that the DDA would be asked to contribute was projected to be as little as $400,000 to 500,000, or even as low as $200,000.

Outcome: Passed unanimously.

Policy on Grants for Affordable Housing

Smith said that Avalon’s request for the grant for rehabbing properties renewed a discussion about boundaries. “How far are we willing to go?” she asked. Not all the units supported by the grant that the board had approved were within the the DDA district, but they were all within 1/4 mile of the boundary. The resolution the board considered established  a 1/4-mile radius for which the DDA could provide support for affordable housing.

Greff began deliberations by saying she would be channeling Dave DeVarti. [DeVarti, who was a long-serving DDA board member not reappointed last year by Hieftje, was a staunch advocate of affordable housing.] “Why would we tie our own hands?” asked Greff. She said that if the boundary was left vague, the board would have more flexibility.

John Mouat, who chairs the transportation committee, agreed with Greff, saying that he foresaw the possibility of other projects – not related to affordable housing – warranting support outside of a 1/4-mile radius, such as satellite parking lots.

Hall responded to Mouat and Greff by saying it was important to make clear if they’re likely to say “No” outside of a certain boundary so that people did not develop an expectation and apply for money that would not be forthcoming. She said she didn’t feel the DDA would be limiting itself by limiting the distance. The 1/4-mile limit amounted to walking distance.

Gary Boren said he was continuing Rene Greff’s channeling of Dave DeVarti in asking why support of affordable housing by the DDA should be restricted to the core area.  

Board member Gary Boren took up Greff’s theme by saying, “I’ll channel a little more Dave [DeVarti].” There’s pressure, he said, to push the 100 units of affordable housing, formerly at the old YMCA site, outside of the core. There would be pressure to confine funding to a tighter and tighter core. He concluded by saying he couldn’t support  the resolution.

Orr addressed Boren’s point by saying that the resolution made the case that the DDA is supporting affordable housing near the core and not farther out, thus resisting the pressure to put affordable housing outside the core.

Outcome: Passed with Greff, Boren and Mouat dissenting.

Community Vision for 300 Block of South Fifth Avenue: What Goes on Top?

Smith introduced the resolution, which states support of a process to develop a community vision for the 300 block of South Fifth Avenue. She said that it was prompted by the dialogue about the underground parking garage, which had prompted the frequent question from residents: What goes on top? The idea, said Smith, was to begin a community conversation that was vague, free from preconception, and not steering towards some pre-set notion.

Hieftje said he was happy to begin the discusison and that the reason it hasn’t come before is that it’s not a good economic environment to start a project. People needed to understand, he said, that it would be a few years before that climate would change.

Mouat said it was an interesting urban planning exercise involving potentially a lot of differnt groups. “Are we really prepared to take it on?” he wondered.

John Splitt stressed that the DDA would just be offering resources: “We’re not trying to steer it into any direction; we’re there to help.” Hall said she supported it, and pointed out that the discussion would include the whole block, not just the library lot. “Somebody needs to get out the door,” she said. “It should have been done ages ago.”

Adrian Iraola of Washtenaw Engineering Co., who manages many of the DDA’s projects, expressed his support of the idea, saying that the city staff had been requested to provide information on fire protection for the underground parking garage without a clear understanding about what might go on top of the structure.

Outcome: Approved unanimously.

Grant to getDowntown

The grant to the getDowntown program to support its commuter challenge (which includes initiatives to encourage biking and walking to work) was brought as a resolution from the recently-formed transportation committee. In a “Whereas” clause, the resolution stated that $100,000 had been allocated to support alternative transportation in connection with the construction of the Fifth Avenue underground parking garage.

Nancy Shore handed out Zipcar postcards announcing the addition of more Zipcar lots. A grand opening event is set for 10:30 a.m. on March 17 in the parking lot by Palio. Sandi Smith asked if the DDA had received any recognition on the cards. Answer: No. But Shore said she’d stress the DDA’s support with representatives of Zipcar.

Roger Hewitt said he was concerned about piecemeal spreading of money around, without accountability about what was being accomplished. He said he wanted to focus comprehensively on questions like the LINK (the purple circulator buses downtown): Does it run frequently enough, and does it serve the people it needs to serve? Hewitt also had questions about the go!pass program, administered by getDowntown, which allows downtown employers to purchase yearly passes for their employees at $5 apiece, with a grant from the DDA making up the actual cost to the Ann Arbor Transportation Authority to provide the rides. About go!pass, Hewitt wondered, “Does that truly encourage people to take alternative transportation, or is it a subsidy of AATA with DDA funds?” Hewitt said he’d rather hold the  $100,000 see if the LINK and go!pass could be improved.

Hall asked why the DDA was limiting itself to $100,ooo. She sid that the DDA had the commuter challenge in the past, but in smaller amounts. She suggested striking the “Whereas” clause about the $100K.

Outcome: Passed with dissent from Hewitt.

At the conclusion of the meeting, when there is an additional time slot for public speakers, Nancy Shore, who is director of the getDowntown program, addressed Hewitt’s concern for accountability. She said that she measured success of the commuter challenge by increased participation in the challenge itself, increases in the total number of sustainable commutes logged during the month, and the anecdotal evidence she heard back from participants about how their personal behavior had changed.

Grants to Merchant Associations

During the public commentary that started the meeting, Maura Thomson, executive director of the Main Street Area Association, spoke in favor of a resolution on the agenda allocating up to $13,000 for each of the four downtown area  assocations of merchants. The resolution called for the money to be spent on a range of items, from graffiti cleanup to marketing and promotions, to travel to the International Downtown Association meeting in Milwaukee (Sept. 11-15, 2009).

Thomson talked about the fact that while the MSAA membership has been growing, its revenue had decreased by 13%, because of a decrease among members paying the highest dues rate. She said that the MSAA was now doing more with less. One way they were getting more for less dollars was through cooperative advertising that directly supported individual merchants. She cited two programs already up and running: one with The Ann Arbor Chronicle [this publication] and another with Ann Arbor Radio. In both programs, ads for individual merchants share a single slot at no extra cost to members. Thomson said that they had plans for similar ad programs with Arborweb, MLive and  Concentrate.

She also plugged a new event sponsored by MSAA: Ann Arbor Restaurant Week. She said the DDA grant would help offset some costs inccurred, which were not in their 2009 budget. The event runs June 14-19.

The board deliberated only briefly on the grants, with Gunn expressing her wish to hear back from attendees of the IDA meeting about what they learned there.

Outcome: Passed unanimously.

Policy on Removal of Metered On-street Parking Spaces

The resolution encourages Ann Arbor city council to set a cost to be assessed when developments require removal of on-street parking spaces associated with parking meters. The cost suggested in the resolution is $45,000. Board deliberations resulted in wording changes that made the use of the funds accumulated less restrictive than constructing other public parking spaces.

Policy on Time Limits for DDA grants

Hewitt introduced the resolution by saying that in developing the 10-year financial plan, there had been a number of grants approved by the board, but not paid out. These grants had stayed on the budget, thus skewing the whole financial picture. The resolution called for all grants to be paid out within the year or the following fiscal year, or else the grant would terminate. The idea was to make fund balances reflect reality, he said. Board deliberations included a suggestion from Boren to simpify the wording to eliminate mention of “within the year,” and just use the “following fiscal year,” saying that mentioning both suggested that there was a two-tiered system, which there isn’t.

Outcome:  Passed unanimously.

Present: Gary Boren, Rene Greff, Jennifer Hall, Roger Hewitt, John Hieftje, Joan Lowenstein, John Mouat, Keith Orr, John Splitt, Sandi Smith, Leah Gunn

Absent: Russ Collins

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