View to the east from the Fourth & William parking structure, overlooking the former Y lot on March 30, 2014. The lot had been closed off to any vehicle access.

For the parcel to remain in use as part of the city’s public parking system, the pending purchaser of the property, Dennis Dahlmann, would need to reach an agreement on a leasing arrangement with the Ann Arbor Downtown Development Authority. The DDA manages the city’s public parking system under a contract with the city.

Eventually, Dahlmann intends to build a mixed-used development on the parcel, but wants to provide surface parking while the project is in the planning stages. A site plan could easily take a year to design, and to obtain necessary approvals from the planning commission and city council. The city council approved the sale of the land to Dahlmann last year at its Nov. 18, 2013 meeting.

Ben Dahlmann, senior vice president with Dahlmann Properties, attended the March 26, 2014 meeting of the DDA’s operations committee to present a revision to the leasing proposal that Dahlmann had made in January. The original proposal had been for the DDA to lease the property back from Dahlmann for $150,000 a year.

The revised proposal would be for Dahlmann and the DDA to split the net income (after expenses) from the parking lot for the next two years. Dahlmann ballparked that number at around $180,000, which would translate to a $90,000 share for Dahlmann – less than the $160,000 per year that Dahlmann figured he’d owe in property taxes.

The final sale of the property by the city to Dahlmann – at a purchase price of $5.25 million – is scheduled for April 2. No agreement on Dahlmann’s offer to lease property to the DDA was reached at the March 26 meeting. But the committee will be taking up the issue again at its April meeting.

On March 26, DDA board members received Dahlmann’s new proposal with the same lack of enthusiasm they’d shown at their Jan. 29 committee meeting, when they discussed the original pitch of a $150,000 annual lease. In January, board members expressed concern that by leasing the property back from Dahlmann, the DDA would be providing an incentive not to develop the property. Dahlmann did not attend that January committee meeting. At the March 26 meeting, however, Ben Dahlmann pointed out that the rider agreement to the sales contract requires a certificate of occupancy by January 2018 for the new building on that site. [.pdf of rider agreement]

If Dahlmann does not develop the property, the city has the right to purchase the property back for $4.2 million, the asking price for the property. And that would translate to a $1 million loss for Dahlmann: “That, coupled with the $160,000 of annual taxes, is more than enough incentive for us to develop a project that I think we all will be proud of,” Dahlmann said.

Banner at the former Y lot on March 26, 2014.

At the March 26 meeting, members of the operations committee focused on their concern that the DDA would still lose money on the deal. They feared that by continuing to operate the former Y lot as a parking lot, the DDA would be decreasing parking activity at other facilities, where the DDA would receive 100% of the net income, not just 50% of it. They also wondered if Dahlmann would be willing to help pay for the cost of repairs to the lot that are currently needed. Further, they felt that there was adequate parking inventory in the immediate vicinity of the surface lot – roughly 1,700 spaces at the nearby Fourth & William and Library Lane structures, as well as 160 on-street metered spaces within a two-block radius.

Dahlmann countered by pointing out that a planned renovation to the Fourth & William parking structure – which could start in August 2014 – could have a negative impact on parking activity at that structure. He also noted that many people prefer surface parking to parking in a structure, and that it would be a convenience to the public that the DDA would be offering.

Dahlmann could not operate a parking facility himself, even if he charged nothing for people to park – without obtaining a special exception use from the city planning commission. Planning manager Wendy Rampson responded to an emailed query from The Chronicle with this explanation: “If there is a principal use of parking on the site – whether paid parking or free – it would require special exception use from the planning commission, unless it was owned or operated by an entity exempt from the zoning ordinance (e.g., the DDA).”

The DDA operations committee will take up the issue again at its April meeting, which is scheduled for April 30. In the meantime, the lot will not be available for parking. Based on committee discussion, it’s at least a possibility that some kind of agreement with Dahlmann might be reached, at which point motorists would again be able to park on the lot.

Motorists looking for parking in downtown Ann Arbor have already been given inconsistent messages about the former Y lot, as the DDA first announced that the lot would be closed around March 15. The DDA subsequently placed signs at the lot indicating that it would be closed on March 29.

Fifth & William Lot in Context

One of the concerns expressed by DDA committee members at their March 26 meeting was that patrons who might continue to park at the former Y lot would otherwise park at other nearby facilities in the system – where there is sufficient capacity, and where the DDA would receive 100% of the revenue from their parking fees.

Aerial photo of former Y lot from Washtenaw County and city of Ann Arbor GIS mapping services. Numbering by The Chronicle.

The Chronicle reviewed historical revenue data for parking facilities in the Fourth Avenue and Fifth Avenue area. Based on that review, there is some merit to the idea that when a facility closes, the result is increased parking use at neighboring facilities. [See Chart 1 below.] For several years, The Chronicle has used data provided by the DDA to track revenue by facility and to calculate revenue-per-space statistics.

But a recent review by The Chronicle of the data provided by the DDA on the Fifth & William surface lot (the former Y lot) showed it’s been inconsistent with respect to the number of spaces available at the lot. In several instances, the number of spaces was reported at 141.

In fact, the lot offers 87-88 spaces. But in the DDA’s analysis of Dahlmann’s original proposal, the number of spaces is recorded as 141 for fiscal year 2012 and 87 for fiscal year 2013. The 54-space difference was portrayed in the DDA’s analysis as the result of spaces used by the Ann Arbor Area Transportation Authority for staging of materials during the construction of the new Blake Transit Center (BTC). The BTC is sited just to the north of the lot. [.pdf of DDA financial analysis of Dahlmann's proposal]

However, in other DDA records, the number of spaces allotted initially for the BTC construction – which broke ground in November 2012 – is shown as 11. Toward the end of the construction, starting in November 2013, the AAATA was given permission to park two temporary trailers on the west side of the lot – when the old transit building was demolished. Those two trailers took up at least another eight spaces in the parking lot. For purposes of this analysis, The Chronicle has adjusted the number of spaces in the data based on 87 spaces at full capacity, 11 spaces lost during initial construction, and another 8 spaces lost during the final construction period.

In Chart 1 below, no adjustments have been made for parking rate increases, so the overall upward trend is at least in part due to increases in those rates.

Highlights from Chart 1 below include the two highest-performing facilities in the public parking system (in terms of revenue per space), both of which are surface lots: the Brown Block in red (bounded by Huron, First, Washington and Ashley) and the Kline Lot in blue (on Ashley, north of William). The Library Lane underground facility off of South Fifth is represented in black. It was previously just a surface lot, until construction started on the underground facility. The gap reflects the construction period for the underground structure. On the left side of the gap, the black line represents Library Lane as just a surface lot. On the right side of the gap, it has re-opened as an underground structure. The former Y lot surface parking is shown in purple.

Chart 1: Surface parking in Ann Arbor’s public parking system. (Data from the DDA, adjusted and charted by The Chronicle.)

The circled numbers in the chart correspond to the following descriptive observations:

1. From October 2008 through September 2009, the library lot surface parking facility (black) clearly outperformed the former Y lot surface parking lot (purple), but did not approach the performance of the Brown Block or the Kline Lot. During that period, the revenue per space generated by the Library Lane surface parking facility was roughly the same as in the Maynard structure, which is located one block east of the Library Lane lot.
2. When the Library Lane surface parking lot closed, to begin construction of the underground structure, starting in October 2009, the revenue per space generated in the former Y lot (purple) – located just across the street – dramatically increased. Performance at the former Y lot  approached that of the two highest-performing facilities.
3. When South Fifth Avenue was closed down during a later phase of the Library Lane construction project, in August 2010, revenue per space dropped for the former Y lot – and stayed roughly flat for the next two years. During that period, revenue per space roughly mirrored the performance of the Maynard structure.
4. When the new Library Lane structure opened in the summer of 2012, revenues per space started to decline at the former Y lot.
5. The downward trend at the former Y lot continued when the Blake Transit Center started construction in November 2012.
6. Likely unrelated to any issues in the Fourth and Fifth Avenue area of downtown is the increase in the difference between the Brown Block surface lot’s performance compared to the Kline Lot. In the first two years of data shown in Chart 1, the Brown Block performed 7-9% better than the Kline Lot, as measured by revenue per space. In the last year, however, that gap had grown to 27%.

Fourth & William Structure

One of the arguments that Ben Dahlmann made at the March 26 DDA operations committee meeting was that upcoming renovations to the southeast elevator tower of the Fourth & William parking structure could have a negative impact on parking activity at that facility. It’s just across the street from the former Y lot. He reasoned that the former Y lot, if it continued to be used as a surface parking lot under a lease arrangement, could serve as a kind of “overflow parking.”

The background to Dahlmann’s point began at the DDA board’s Jan. 8, 2014 meeting, when it authorized up to $40,000 for Carl Walker Inc. to develop architectural renderings for renovations to the southwest stair tower and elevators.

The Fourth & William parking structure, at 994 spaces, is one of the largest in Ann Arbor’s parking system – but has elevators that are more than 30 years old. [A recent trip from the ground floor to floor 7 was timed by The Chronicle at 45 seconds. The comparable trip at the newer Washington & Fourth parking structure took about 17 seconds.]

Also at the March 26 operations committee meeting, Mike Ortlieb, of Carl Walker Inc., presented two possible timelines, based on either a two-phase or three-phase approach to the construction. The basic cost was estimated at $2.45 million. Pursuing the three-phase approach would cost an additional $150,000. The two-phase approach would last about a year – from August 2014 through July 2015. The three-phase approach would take five months longer – through about December 2015. In both scenarios, the goal is to keep the parking structure open for business.

Chronicle chart of potential timeline for renovations to the southwest elevator at the Fourth & William parking structure based on Carl Walker estimates.

The operations committee will take up the Fourth & William renovation again at its April meeting.

March 26, 2014 Operations Committee Deliberations

When the DDA operations committee reached the former Y lot on its March 26 agenda, board members and Ben Dahlmann began with basic introductions. DDA members at the meeting included Roger Hewitt, Keith Orr, John Splitt, John Mouat, Joan Lowenstein and Bob Guenzel.

Dahlmann complimented a large clock that stands in the corner of the DDA boardroom, which is actually designed for outdoor use and looks more or less like a lamp post, but with a large clock face at the top. He quipped that it might be a hint that he should be brief.

Dahlmann first updated board members on the status of the sale: Closing is scheduled for April 2. There had been some delays, he explained, due in part to the need to conduct an environmental study. There are portions of the old YMCA building that are still underground on the parcel. He reminded the board that Dahlmann had agreed to pay $5.25 million for the property – which was about $1 million above the asking price. Alluding to the rider to the sales agreement, Dahlmann noted: “We have three years and nine months to develop it. And if we don’t do that, the city has the option to buy back for $1 million less than what we paid for it. That, coupled with the $160,000 of annual taxes, is more than enough incentive for us to develop a project that I think we all will be proud of.”

At the March 26 operations committee meeting. From left: DDA board member Roger Hewitt and Ben Dahlmann.

Dahlmann told the board it was his understanding that roughly 30,000 cars parked on the former Y lot on an annual basis. He described the surface lot as having a nice central location, and ventured that above-ground parking was more convenient. That convenience, he said, would be a true benefit to the citizens of Ann Arbor and to those who work and dine and shop in the area.

Dahlmann also pointed out that keeping the former Y lot open would help with issues associated with the Fourth and William elevator renovation. It could be an “overflow lot,” he suggested. Based on the information he had, it was his understanding that the former Y lot generates about $250,000 of revenue annually, and that there are roughly $70,000 worth of expenses. Dahlmann’s proposal was to take that $180,000 of net profit and split it between the DDA and Dahlmann. “That is it in a nutshell,” he concluded, and thanked the committee for listening.

Roger Hewitt said that when the DDA first installed equipment to create a surface parking lot at that location, the Library Lane parking structure was not in existence. The surface lot parking equipment had been installed at the request of the Ann Arbor city council, Hewitt said. And since then, the DDA had built and opened the Library Lane underground parking structure.

Hewitt asked Republic Parking manager Art Low: In that immediate neighborhood, how many parking spaces are there without that YMCA lot? Low broke down the parking inventory into two categories: on-street metered parking and off-street parking.

There are about 161 metered spaces within a two-block radius of the old Y lot, Low reported. He said that the numbers he was going to present on usage were not hard numbers, but were pretty accurate. Between 8 a.m. and 6 p.m. those meters are about 70- 75% occupied. Between noon and 6 p.m. they are about 80% occupied. So there’s still a pretty good flow in terms of availability and turnover, he concluded. Low said there was a good turnover in the on-street part of the system.

Within a two-block radius there are just over 2,100 off-street parking spots, Low said. The Fourth & William parking structure is generally about 75% occupied between 10 a.m. and 9 p.m. From Wednesday through Saturday that picks up, he said, to be a lot higher. The Library Lane structure has hit a good threshold at about 72% occupied, he said, noting that Library Lane is not as busy at nighttime as it is during the daytime. The Library Lane underground garage is more of a daytime garage, Low said. You have to keep in mind too, Low continued, that the Library Lane facility also has 33 surface parking spaces. There are also 12 on-street spots on the Library Lane the mid-block cut-through between Fifth and Division.

A little farther to the north, the Fourth & Washington garage has high occupancy levels, but is still at something like an 85% threshold, Low said. The South Ashley lot Kline lot is also very busy and is about 85-87% occupied, Low said. The numbers he was giving, Low reiterated, were general numbers through the day, but he felt they were pretty accurate. There are 87 spaces in the old Y lot, Low said – without considering spaces that had been taken up by the Blake Transit Center construction. Through the last eight months, Low said they’ve only had a portion of those 87 spots available. Through “natural progression,” Low felt, people have found other places to park.

Looking at the dollars-and-cents issue, Hewitt said, if the lot were now operated at its original size of 87 spaces, it would probably be full – because it is a surface lot. But people would be parking there, drawing from other facilities where they are already paying the DDA for parking. It seemed to him that although the DDA would make money on the former Y lot, the DDA would then lose money on surrounding facilities. He asked Low if that would be a fair statement. Yes, Low replied. Low allowed that this kind of debate goes on quite a bit. The system overall is getting more and more full – but in that specific area, the system has a lot of parking availability. There are other areas in the system that could use more parking – but that is a different discussion, Low said.

Hewitt also ventured that the porous asphalt surface at the Y lot might need some repair. Low responded by indicating that Republic Parking would be inspecting the surface more closely in the next few days and make a determination. He said there were definitely some repairs that need to be done – including some curb stops that have been smashed over the winter. And there are certain issues with the surface itself that need to be addressed, but he could not offer a view on the cost at this point.

DDA executive director Susan Pollay then reviewed some of the logistical considerations. The sale closing is set for April 2. She asked Dahlmann what he was looking for in terms of a timeline for the lease. Dahlmann said he was thinking two years. Pollay asked Dahlmann if his proposal to the board included paying for repairs – as the owner of the lot. Dahlmann told Pollay that he had walked past the lot on his way to the meeting and that there were definitely some issues with the surface of the pavement in some areas and there’s still a fair amount of construction debris, he said. He wondered what kind of responsibility the AAATA’s contractor has for putting a lot back into the same condition it was when construction started. Pollay said that no conditions were set, because the lot was already starting to deteriorate.

Dahlmann asked if the AAATA was responsible for repairing any of the damage. Pollay responded: “Nothing specific, no.” If the ownership were not changing, Pollay explained, the DDA itself would be taking on the repairs to the lot.

Dahlmann ventured that from his observations walking around the pavement, although there were issues, they didn’t seem problematical. “We would be open to figuring that out, for sure,” he said. Pollay asked if Dahlmann was proposing that he first fix the lot and then the DDA would operate the repaired lot for Dahlmann. He said he was not sure – because he was not sure what was included in the $70,000 worth of expenditures. “What we’re saying basically here is, look, here is the gross profit and here’s the expenses – let’s split the net profit 50-50.” That would come nowhere near to even covering the taxes on the property, he ventured.

Keith Orr said he looked at the issue in two ways. First, whatever would be split should be the net profit. All expenses would come out first before anything was split. The other concern Orr had was that if it’s a 50-50 split, then the DDA would still be “competing with itself” with its other facilities. At other facilities, the DDA would be receiving 100% of the revenue. That would mean trading a spot where they were getting 100% of revenue for one where they were only getting 50%.

Hewitt said he first wanted an estimate of what it would take to repair the lot sufficiently to operate the lot for two years. He also did not feel that the lot should be looked at in isolation – because there’s so much parking capacity on either side of the lot. He wanted to factor in the revenues from the Library Lane structure and the Fourth & William parking structure. The DDA would need to consider what the profitability is of all of its parking facilities, Hewitt said.

Dahlmann asked if the DDA knew how often the lots in the vicinity were 100% full. Republic Parking manager Art Low told Dahlmann that information was absolutely available, but he did not have it off the top of his head. When the peaks are reached, it tends to be Wednesday through Saturday or the evening hours, Low offered. DDA deputy director Joe Morehouse said he did not think that 100% capacity had been reached since New Year’s Day – adding that it did not happen all that frequently.

Photo taken March 30, 2014 – the first day the former Y lot was closed to the public. The view is looking north. The new Blake Transit Center is on the far side of the lot.

Morehouse pointed out how the Library Lane doesn’t have the evening traffic that Fourth & William does. Hewitt said that the DDA had a fiduciary responsibility that if it entered into an agreement, it would not be one that risked taking a loss. He ventured that it would be kind of a complex deal to put together. So Hewitt wanted first to get some idea of the cost that it would take to make the lot operational for two years. Hewitt wanted Morehouse and Low to put something together that made financial sense.

Dahlmann ventured that it might not be a large factor, but he felt that convenience would be a factor. He felt that the data probably suggest that when the former Y lot is fully operational, people would prefer to park there. As a consumer, he said, he would not eat dinner on Main Street if he knew that he was going to have to park on an upper floor in a parking structure. There has to be some value in that, he said, although he did not know how much.

Pollay stated her understanding that the DDA was supposed to provide the property “free and clear” at the closing of the sale. She said that meant that the parking equipment would be taken off the lot – but she would ask Republic Parking how easy it would be to reinstall it. She did not think it would be that difficult.

Republic would be told that equipment can be removed, but it might be the case that it needed to be reinstalled. That was the direction that Pollay had received from the city, she said. Hewitt added that “it’s the city’s choice on that.” Pollay said that even though the DDA was operating the lot, it was officially city property. That’s why she needed to be respectful of the direction that she was receiving from the city, Pollay said. She understood her direction from the city to be a clean, unencumbered provision of the lot.

Dahlmann countered that if the purchaser feels it’s fine to leave the equipment there, that should mean something. Pollay said she would follow up with the city and let everyone know what direction she received.

Next Steps

The DDA operations committee is expected to take up the issue of possibly leasing the former Y lot again at its April 30 meeting. It’s not currently an agenda item for the DDA board’s April 2, 2014 meeting.

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In this matter, the council would be acting on a four-year-old recommendation approved by the Ann Arbor DDA in 2009:

Thus it is recommended that when developments lead to the removal of on-street parking meter spaces, a cost of $45,000/parking meter space (with annual CPI increases) be assessed and provided to the DDA to set aside in a special fund that will be used to construct future parking spaces or other means to meet the goals above. [.pdf of meeting minutes with complete text of March 4, 2009 DDA resolution]

The contract under which the DDA manages the public parking system for the city was revised to restructure the financial arrangement (which now pays the city 17% of the gross revenues), but also included a clause meant to prompt the city to act on the on-street space cost recommendation. From the May 2011 parking agreement:

The City shall work collaboratively with the DDA to develop and present for adoption by City Council a City policy regarding the permanent removal of on-street metered parking spaces. The purpose of this policy will be to identify whether a community benefit to the elimination of one or more metered parking spaces specific area(s) of the City exists, and the basis for such a determination. If no community benefit can be identified, it is understood and agreed by the parties that a replacement cost allocation methodology will need to be adopted concurrent with the approval of the City policy; which shall be used to make improvements to the public parking or transportation system.

Subject to administrative approval by the city, it’s the DDA that has sole authority to determine the addition or removal of meters, loading zones, or other curbside parking uses.

The $45,000 figure is based on an average construction cost to build a new parking space in a structure, either above ground or below ground – as estimated in 2009. It’s not clear what the specific impetus is to act on the issue now, other than the fact that action is simply long overdue. In 2011, the University of Michigan’s Institute for Social Research expansion was expected to result in the net removal of one on-street parking space. [For more background, see: "Column: Ann Arbor's Monroe (Street) Doctrine."]

The resolution on the council’s Dec. 2 agenda was sponsored by Christopher Taylor (Ward 3). Taylor participated in recent meetings of a joint council and DDA board committee that negotiated a resolution to the question about how the DDA’s TIF revenue is regulated. In that context, Taylor had argued adamantly that any cap on the DDA’s TIF should be escalated by a construction industry CPI, or roughly 5%. Taylor’s reasoning was that the DDA’s mission is to undertake capital projects and therefore should have revenue that escalates in accordance with increases in the costs to undertake capital projects.

Based on Taylor’s reasoning on the TIF question, and the explicit 2009 recommendation by the DDA to increase the estimated $45,000 figure in that year by an inflationary index, the recommended amount now, four years later, would have be closer to $55,000, assuming a 5% figure for construction cost inflation.

The actual cost of building an underground space in the recently completed (2012) underground Library Lane parking structure could provide a more current estimate, but the DDA has not made public a breakdown of how that project’s actual costs lined up with its project budget.

The last two month’s minutes from the DDA’s committee meetings don’t reflect any discussion of the on-street parking space replacement cost. Nor has the issue been discussed at any recent DDA board meeting.

By way of additional background, the Ann Arbor DDA’s most recent financial records show that last year on-street parking spaces generated $2,000 in gross revenue per space or $1,347 in net income per space annually. The contract with the city under which the DDA operates the public parking system stipulates that the city receives 17% of the gross parking revenues. So the city’s revenue associated with an on-street parking space corresponds to $340 annually.

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.

Left to right: DDA board member Keith Orr, mayor John Hieftje.

The DDA had actually already adopted its FY 2014 budget – back on Feb. 6, 2013. And although it’s been customary in the past years for the DDA to adopt its budget in advance of the city council’s approval, the state enabling statute for downtown development authorities provides a different sequence: “Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality.”

Considerable debate on the DDA’s budget had unfolded among city councilmembers at their May 20, 2013 meeting. And the council had ultimately decided on a 10-1 vote to approve a FY 2014 budget for the DDA that differed from the one the DDA had adopted in February. In addition to recognizing an additional $568,000 in tax increment finance revenue (TIF), the council’s action transferred an additional $300,000 from the DDA’s TIF fund to the DDA’s housing fund.

At their June 5 meeting, some DDA board members balked at the council’s action, citing the replacement of rusting-out light poles on Main Street as a more pressing need than reserving funds for undetermined future housing projects. But ultimately the board adopted the council’s approved budget on an 8-2 vote – with dissent from Sandi Smith and John Mouat. Absent from the meeting were Russ Collins and Nader Nassif.

At the June 5 meeting, the board concluded that a portion of the more than $516,000 cost for the Main Street light poles would need to come from the city’s general fund. Mayor John Hieftje indicated at the meeting that in the next month he expected the city council would be presented with a budget resolution authorizing the difference between the $516,000 total cost and the $268,000 that the DDA considers available in its council-approved budget.

Also approved by the DDA board were annual routine adjustments to its current year’s budget, which are undertaken to ensure that actual expenses and revenues are reflected accurately. The adjustments are made so that expenses do not exceed revenues in any of the funds. During those deliberations, back-and-forth between board treasurer Roger Hewitt and Newcombe Clark indicated a realization that the kind of budget amendment they were undertaking for FY 2013, at the end of the fiscal year, might be used to work around the budget levels authorized by the city council. It’s not completely clear if that strategy is possible.

But in response to Hewitt’s assurance that budget amendments could be enacted for any reason – as long as expenditures didn’t exceed revenues – Clark made his comment about people staying up too late on Monday nights. [The city council meets on Monday nights, and the council's deliberations on the DDA budget have gone long into the evening. If the DDA board can change its budget after adopting the council-approved version, then the council's deliberations would seem to be moot.]

The June meeting was Clark’s penultimate one, as his term expires at the end of July and he’s moving to Chicago to take a job there. The board’s July 3 meeting will also be board chair Leah Gunn’s last meeting, which will mark the end of over two decades of service on the DDA board, beginning in 1991.

The parking revenue and patrons report from the public parking system was one of the regular highlights of the meeting. The DDA manages Ann Arbor’s public parking system under a contract with the city. The parking report was complemented by a board resolution that awarded five additional monthly parking permits to The Varsity residential project, bringing its total to seven. The DDA can assign monthly permits to residential projects under the city’s contribution in lieu (CIL) program – which provides a mechanism for building housing without providing parking spaces onsite.

Local developer Peter Allen addressed the board during public commentary, reporting that his company had been one of three to submit bids in response to the city’s RFP (request for proposals) for brokerage services to sell the former Y lot at Fifth and William streets. He told the board he thinks the parcel is worth $5-7 million or more.

Budget Issues

The board handled two major budget issues and entertained discussion on others. The main issues were: (1) the adoption of the city-council approved FY 2014 budget, on which the council had voted at its May 20, 2013 meeting; and (2) adjustments to the FY 2013 budget, which is the current fiscal year now drawing to a close on June 30.

During deliberations at the May 20 meeting, the council had ultimately decided on a 10-1 vote to approve a FY 2014 budget for the DDA that differed from the one the DDA had adopted in February. Christopher Taylor (Ward 3) cast the sole vote of dissent. In addition to recognizing an additional $568,000 in tax increment finance (TIF) revenue, the council’s action transferred an additional $300,000 from the TIF fund to the DDA’s housing fund.

Budget Issues: FY 2014

By way of background, according the state’s enabling statute for downtown development authorities, a DDA is supposed to adopt its budget after the governing municipality approves it [emphasis added]:

125.1678 Budget; cost of handling and auditing funds. Sec. 28. (1) The director of the authority shall prepare and submit for the approval of the board a budget for the operation of the authority for the ensuing fiscal year. The budget shall be prepared in the manner and contain the information required of municipal departments. Before the budget may be adopted by the board, it shall be approved by the governing body of the municipality. Funds of the municipality shall not be included in the budget of the authority except those funds authorized in this act or by the governing body of the municipality. (2) The governing body of the municipality may assess a reasonable pro rata share of the funds for the cost of handling and auditing the funds against the funds of the authority, other than those committed, which cost shall be paid annually by the board pursuant to an appropriate item in its budget

However, the Ann Arbor DDA board has typically adopted its budget before the city council approves the city’s fiscal year budget, of which the DDA’s budget is a component.

At the board’s June 5 meeting, Roger Hewitt led off the discussion on adopting the FY 2014 budget by noting that according to the state enabling legislation for DDAs, the city council approves the DDA’s budget, and then the DDA board formally adopts that budget. There were a couple of changes that the city council made compared to the budget that the DDA board had previously adopted in February, Hewitt said. So the board was being asked to consider a revised budget that reflected changes approved by city council. [.pdf of FY 2014 DDA budget adopted in February] [.pdf of revised FY 2014 DDA budget]

Income to the TIF fund was being revised in the budget based on new information from the assessor’s office – to a total of just over $4.5 million, Hewitt told the board. The council had also increased the amount of inter-fund transfers from the TIF fund to the housing fund from $100,000 to $400,000 – a $300,000 increase. The budget the board was being asked to consider, Hewitt said, showed capital costs would be increased from $300,000 to $568,000 – to replace the light poles on Main Street.

Ann Arbor Main Street rusted light pole. (Photo from April 2012 by city of Ann Arbor staff.)

Susan Pollay, executive director of the DDA, indicated that only $268,000 of those capital costs were intended by the DDA currently to be used for light poles on Main Street. She told the board that she was in conversation with city staff about how to come up with the difference between $268,000 and the estimated cost of doing the replacement for the poles – which is $516,000, including warranties and labor. She thought that a resolution would be presented to the city council within the next month asking for a city council approval to appropriate the remaining money from the city’s general fund. Approval for the project would be coming back to the DDA board in July, Pollay said.

Looking at the housing fund in more detail, Hewitt noted that the total $400,000 transfer into the housing fund showed up as income to that fund. Another change to the budget was to move a different $400,000 to support affordable housing in Village Green’s City Apartments project, which had originally been part of the previous year’s budget. That leaves the housing fund balance for fiscal year 2014 at about $382,000, Hewitt concluded.

By way of background, the politics of the housing fund transfer involve pending revisions to the city ordinance that regulates how the DDA’s TIF capture is calculated. The existing ordinance language, enacted in 1982, indicates a cap to TIF revenue, calibrated to the anticipated increase in tax valuation in the TIF plan, which is a foundational document for any DDA. Revenue above the cap is supposed to be returned to the taxing jurisdictions in the district, whose taxes the DDA captures. The DDA contends that it only became aware of the cap in 2011, when it was pointed out by the city treasurer.

The DDA eventually adopted the position that it could give the ordinance language an interpretation that did not require the return of any TIF dollars to the taxing jurisdictions. The DDA’s response to proposed changes to the language to prevent its non-cap interpretation of the ordinance was to raise the specter of a diminished ability of the DDA to support affordable housing. Councilmembers who were pushing to clarify the ordinance responded to the DDA’s political argument, based on affordable housing, with a political move of their own – the forced transfer of money from the DDA’s TIF fund to the housing fund.

Sandi Smith led off deliberations by saying she had a problem transferring $300,000 to the housing fund when the DDA had been working pretty hard to contribute to affordable housing, without a clear path for doing that. It’s been a struggle for the last eight years sitting on the partnerships committee trying to find solid projects and a method to invest in affordable housing downtown, she said. The transfer seems “arbitrary,” Smith said, when there are other very clear needs, giving the light poles as an example. Smith felt the DDA had been very good about putting money aside for housing, but she allowed that the DDA had cut back a couple of years in order to build the new Library Lane underground parking structure. But the board had now begun again to invest in housing and to put some money aside.

It’s challenging now, Smith said, to accept what the council had done by moving an arbitrary amount of money over into the housing fund – without a project that is specifically ready to go. She described it as unfortunate that the city had not approached the DDA partnerships committee beforehand to have a discussion with the chair of that committee or the chair of the DDA board, to ask: “Is this a useful thing for you to do?” She said it had been done in an arbitrary and off-the-cuff way at the 11th hour.

Smith asked what kind of flexibility the board had at this point. She did not see the transfer from TIF to the housing fund as a benefit to anything the DDA is doing as far as affordable housing goes. She did not feel it benefits the downtown in any way to move the money over to the housing fund in a “holding pattern,” waiting for the DDA to find a project to invest in. Hewitt told Smith that he did not necessarily disagree with her, but the state law is clear that the DDA’s budget must be approved by the city council. The DDA adopts its budget after the city council approves it. “The law is the law,” Hewitt concluded.

Newcombe Clark talks with DDA executive director Susan Pollay before the June 5 meeting.

Newcombe Clark drew out the fact that in the council’s resolution passed on May 20, the housing fund transfer is explicitly required, but the council’s direction to spend money on the Main Street light poles is put in terms of a request. He concluded that one of the moves had been forced while the other had been merely requested.

Mayor John Hieftje, who voted with the 10-member majority in supporting the council’s resolution, told the board that these issues had been discussed at the council’s meeting. He had been unsuccessful in convincing other councilmembers that the amount of the housing fund transfer should not be as great, he said. His point at the council meeting had been to stress the importance of replacing the light poles on Main Street, he added. But he noted that the original resolution that had been put forward called for an even greater amount of $500,000 to be transferred to the housing fund, which would have made it unavailable to spend on light poles. What the council had approved had been a compromise. He described the number of light poles that had blown down as three or four. [City staff in the public services area responded to an e-mail query from The Chronicle about the exact number of light poles that had failed, by explaining that two had fallen while two more had been replaced when they were deemed on inspection to be in immediate need of replacement.]

Board chair Leah Gunn ventured that the city’s general fund will have to cover the balance of the expense for the light poles [$516,000 - $268,000 = $248,000]. Hieftje indicated that he was hopeful it would be possible, but he was not sure if that would have majority support on the city council: “I can’t predict that.” But he would be voting to support replacing light poles with general fund money, he said. Smith indicated that to her it was a priority to replace light poles. She characterized the housing fund transfer as “feel-good money,” because there’s pressure for affordable housing – without a commitment by the council to find a way to fund it. She indicated she would not support the budget change even though she knew it would pass. About the council’s fund transfer, she concluded: “It’s nonsensical to me.”

Clark floated the idea that light poles in front of Ashley Mews could be replaced with housing fund dollars. Pollay told Clark that the light poles in need of replacement are located on Main Street between Huron to the north and William on the south – so, no. [Ashley Mews is south of William.] Hieftje added that Craig Hupy, the city’s public services area administrator, had characterized the need to replace the light poles on Main Street as “urgent.” [The need is based on rusting of the poles, which apparently makes them susceptible to catastrophic failure.]

John Mouat indicated agreement with Smith – though he was not so much concerned about comparing replacement of light poles to investment in housing. He was more concerned about the process. He agreed with Smith’s characterization of the amounts as arbitrary. The DDA support of affordable housing needs to take place in the context of a process, he said. So he was not inclined to support the budget. John Lowenstein pointed out that this was for the fiscal year 2014 budget, and that meant that if there were no appropriate housing projects to spend the money on in that fiscal year, then the budget for next year would be amended based on experience rather than “random decisions.”

DDA board member John Mouat.

Gunn noted that the DDA’s partnerships committee would be meeting with representatives of the housing community later in June to find out what affordable housing projects are in the pipeline. But the DDA’s commitment to affordable housing is clear, and the light poles are an emergency, Gunn concluded. During her report out from the partnerships committee, Sandi Smith had noted that the June meeting would include representatives of the affordable housing community so that the DDA board can be as informed as possible about the joint city and county goals, and how the DDA can align its work plan to best help the process. That meeting will take place two hours later than it usually does – which puts the time at 11 a.m. on June 12.

Given that the meeting with representatives of the housing community was pending, and that the city council was going to be considering possible action on funding light poles, Hieftje ventured that the DDA board had the option of postponing the vote on the budget until its next meeting, in July. Bob Guenzel responded to Hieftje by pointing out it was not actually an option because the board needed to adopt the budget before the fiscal year started. Guenzel then stated, “But I assume we can amend the budget along the way if we decide to do that in July, and that can be done.” This comment set the stage for discussion later in the meeting – about the DDA’s ability to change its budget later in the year without city council approval.

Keith Orr agreed with Mouat’s point about the process. It struck him as odd that some councilmembers said they were looking for a more autonomous DDA [an allusion to comments by Jane Lumm (Ward 2)], but at the same time the council is also giving very specific direction about how to spend the money.

Outcome: The DDA board approved the fiscal year 2014 working budget on an 8-2 vote. Dissenting were Sandi Smith and John Mouat.

Budget Issues: FY 2013

The board was also asked to consider amendments to its current year’s budget to reflect the actual revenues and expenses through the year – mainly to avoid the possible circumstance that has arisen in the past in which expenses might exceed revenues in a particular fund, which is a violation of state law. Hewitt noted that the board had already undertaken a midyear budget adjustment – to reflect some of the costs of the Library Lane parking garage construction. Changes considered at the June 5 meeting included items related to the Zingerman’s brownfield grant, pushing a $400,000 payment for Village Green’s affordable housing units to the next fiscal year, adding in grants to the Ann Arbor Housing Commission for Baker Commons improvements.

Hewitt noted that the maintenance fund for the parking system was getting down to its lowest level. The DDA has been using maintenance funds, Hewitt said, to pay for the new Library Lane parking structure. But for the next year’s budget there is a transfer of $4.4 million back into the parking maintenance fund, he reported.

Then came Clark’s inquiry about the possibilities for amending the budget generally, given that the board was amending that year’s budget to adjust it for variances near the end of the fiscal year. Clark questioned what the requirement was for amending the budget: Was the DDA required to amend its budget twice a year? Hewitt indicated that it was only necessary once, but the DDA had amended the budget previously this year – because a huge amount of construction costs had come in that were not reflected in the budget for this year. So a midyear revision was done to give a clearer idea of where the DDA would be at the end of the year.

Clark asked if the requirement was only that expenses be updated that were above budget, or if adjustments to revenue were also required to be made. Hewitt indicated that both kinds of revisions were supposed to be made – for revenues and expenses. The important thing is that the expenses can’t be above what were budgeted. Clark then made clear why he was asking question: Does it need to go back to the city council for approval? he asked. The answer Hewitt gave Clark was no. The council approves the DDA’s budget for the upcoming fiscal year, Hewitt said. But the council does not need to approve the DDA’s final budget, which reflects the DDA’s actual expenses and revenues, Hewitt contended.

Clark inquired whether there was some threshold for a reason the DDA might change its budget. Does the state of Michigan care why the DDA might change its budget? Clark asked. Not that he was aware of, Hewitt said: “It’s up to us.” The important thing is that the DDA can’t have negative fund balances, Hewitt said, stressing that the DDA can’t spend more money than it has budgeted for. Clark’s summary of what he’d drawn out: “Too many people’ve been staying up too late on Mondays, then.” The allusion was to the fact that city council had debated issues of DDA budget control at its Monday meetings, long into the night.  If the DDA retains the ability to amend its budget later, that would allow the board to work around the council-approved budget parameters.

Outcome: The DDA approved the adjustments to its FY 2013 budget.

Budget Issues: Police Funding

At its June 3, 2013 meeting, the city council had voted 8-2 to encourage the DDA to consider allocating $270,000 to fund three police officers for the downtown area. During her communications time, board chair Leah Gunn reported the council vote, which had been approved two days earlier. Gunn told the board that she was referring the request to the board’s operations committee. She indicated that the board needed to talk to the chief of police and other community members in order to weigh the council’s request.

Budget Issues: DDA Ordinance Revisions

During communications time, Roger Hewitt noted there had been quite a lot of discussion about modifying the ordinance regulating how the tax increment finance (TIF) capture for the DDA is defined. The issue had been postponed until September, he noted. [That vote by the city council postponing final consideration until Sept. 3 came on May 6, 2013.] The previous day, he and Bob Guenzel along with Susan Pollay had some informal discussions of the ordinance along with some councilmembers, Hewitt reported. [The proposed ordinance revision would clarify the existing language in Chapter 7 of the city code, originally enacted in 1982, so that the DDA's preferred interpretation – which does not cap the DDA's TIF revenue – would not be possible.]

Budget Issues: Third Quarter Update

The third-quarter financial report was also delivered by Roger Hewitt. He noted that the $1.28 million increase in parking revenue was due to the loan that the DDA had received for parking equipment from Republic Parking. Accounting rules required the DDA to show that money as revenue, with interest to be deducted as expenses. He noted that utility costs have been higher than anticipated, as were bank charges. The increased bank charges, he said, were attributed to the increased use of credit cards by parking customers. Fees charged for those credit card transactions continue to go up, he said. Hewitt also highlighted that the $400,000 payment to Village Green to support affordable housing in the City Apartments project would not take place this fiscal year. That would be pushed to the following year.

Parking for The Varsity

The DDA board was asked to consider assigning monthly parking permits to The Varsity, a residential high-rise building at 425 E. Washington St. in downtown Ann Arbor. The request was for five additional monthly parking permits in the public parking system, bringing The Varsity’s total to seven.

The right to purchase monthly parking permits – under the city’s “contribution in lieu” program – is administered by the DDA.

The DDA had previously approved two permits for The Varsity, which is a 13-story, 173-unit, 178,380-square-foot apartment building for approximately 418 people. Construction is nearing completion.

The project needs to provide a total of 76 parking spaces. That parking is required in order to qualify under the city’s zoning code for the additional floor area that the project contains, beyond a basic 400% floor area ratio (FAR). If the parking is not provided onsite, a developer can meet a parking requirement by making an upfront payment of $55,000 per space or by purchasing monthly permits in the public parking system for an extra 20% of the current rate for such permits – with a commitment of 15 years.

The Varsity’s developer had originally planned to meet part of the 76-space requirement with two spaces that were assigned to a car-sharing service. That arrangement fell through. And the developer lost a space due to physical constraints related to ADA (Americans with Disabilities Act) compliance. Car-sharing spaces can count as four spaces apiece for satisfying parking requirements.

That led to the request for an additional five spaces, for a total of seven for The Varsity.

The Varsity is the second project to use the parking CIL. On Oct. 3, 2012, the DDA board voted to approve the purchase of up to 42 monthly permits by the 624 Church St. project, another residential development.

Parking for The Varsity: Public Commentary

Brad Moore introduced himself during public commentary time as the associate architect on The Varsity. He noted that the project had previously requested some spaces but had not requested enough of them – so they were now back to ask for a few more. He told the board that he was available to answer questions when the item was reached on the agenda.

Parking for The Varsity: Board Deliberations

When the item was reached on the agenda, Roger Hewitt asked Moore to come to the podium to answer questions. After reciting the history of the requests, Hewitt asked Moore what happened to the two physical spaces that were intended to be used for the car-sharing service. Moore explained that the deal with Zipcar had fallen through because Zipcar had wanted the spaces to be available to the general public – whereas The Varsity wanted the cars to be available just to residents of The Varsity.

What Hewitt wanted to know is what happened to the two physical spaces that prevented The Varsity from including them in its current count of parking spaces. Moore explained that the spaces are located on an adjacent property that is under the same ownership. However, because those two spaces are not a part of the project’s site plan, Moore indicated there was a problem in counting those spaces to satisfy the parking requirement. Newcombe Clark expressed some puzzlement that the spaces themselves could not count as one space apiece for the parking requirement, yet those same spots had been intended to count as four spaces apiece under the Zipcar arrangement.

Hewitt ventured that it might be possible to create some kind of an easement in perpetuity that would allow for the inclusion of those two spaces has part of the parking requirement tally for the project. John Splitt questioned whether the developer for The Varsity was even interested in pursuing such an easement. John Mouat expressed some skepticism about the idea of pursuing an easement, saying it seemed like an encumbrance on the adjoining property. Joan Lowenstein added that pursuing an easement could take several months.

Hewitt allowed that there was somewhat of a timing issue, and indicated that he would have preferred for The Varsity to have approached the DDA sooner. Still, Hewitt indicated that he would support allocating the permits. Sandi Smith added that the permits under the CIL program are purchased at a premium cost of an extra 20%. She characterized the permits as no different from any other permits. Clark questioned Smith’s characterization – venturing that the permits being granted to The Varsity would allow jumping to the front of the monthly permit line, or else would require reducing the amount of hourly parking available in the structure where the permits were being granted.

Hewitt responded to Clark by indicating his understanding was that The Varsity would need to have the permits in hand in order to receive its certificate of occupancy. Hewitt indicated that either The Varsity monthly permit requests would jump to the front of the monthly permit waitlist, if there were a list, or that the amount of hourly parking would decrease. He indicated that the waitlist turned over relatively quickly these days – but he noted that it depends on the structure. Given the small number of spaces and the hold-up it would mean for the development of a large building, Clark indicated that he would support the allocation of the spaces. However, he wanted to see the operations committee address the policy issue sooner rather than later.

Hewitt said that the operations committee is very focused on the issue of trying to rationalize needs within the system. He characterized the CIL program as stemming from an ordinance passed by the city council – saying it was not a DDA policy. However, the DDA has veto power if there are no spaces available in the system, and the DDA has the right to decide in which structure the spaces are allocated, Hewitt said. In this respect, the DDA is responding to a city ordinance, he said.

Clark asked if the developer would care if the parking permits were assigned to a structure further away from the building under construction. Moore replied that he figured the developer would prefer that the permits not be assigned to the most remote location. Clark ventured that if he were on the waitlist and he kept getting bumped for something like this, “I’d be frustrated.” Approaching the issue in a piecemeal fashion was not advisable, given the amount of construction that’s taking place downtown, Clark felt. Hewitt told Clark he agreed with him completely. He contended that demand in the public parking system is increasing at a significant rate and the DDA is trying to catch up with a very dynamic and changing system. But he agreed that the DDA needs a rational system for making the decision on permits.

Keith Orr indicated his agreement on the need for a policy so that decisions are not seemingly random. He indicated that he would be the “gadfly vote” and would vote against the allocation of permits to The Varsity just as a reminder that there needs to be a policy in place.

Outcome: The DDA board voted to allocate a total of seven monthly parking permits to The Varsity, over dissent from Keith Orr.

Routine Parking Reports

Delivering the parking report as usual was Roger Hewitt. The monthly parking report for March 2013 was up first. For that month, and he described overall revenues as up 7% compared to March 2012, although the number of hourly patrons was down by about 2%. He called 7% roughly the equivalent of the rate increase over the previous year. That translated to a flat performance on the revenue side. However, he offered some mitigating factors – one less business day, worse weather than last year, and the timing of the university’s spring break. And that accounted for the flat performance in revenue, he contended.

March was the last month of the third quarter. So Hewitt gave an update for the third quarter. For that three-month period, the number of hourly patrons was roughly flat, but revenue was up about 11%, which was above the level of the rate increases, he said. For the quarter, Hewitt characterized the parking system as having continued strong demand and good revenue growth. That was a trend that has persisted for about two years, he said.

Hewitt then reviewed the nine-month period year-to-date. Overall revenues are up 12%, though the number of hourly patrons is down a little bit, he noted. From that he concluded that people who are visiting downtown are staying longer. Revenue growth is above the level of the parking rate increases. The new Library Lane underground parking garage is showing stronger performance than had been anticipated – so it is almost to the point of starting a waitlist for monthly parking permits, Hewitt said. That’s good news and bad news, he said. It shows strong demand, but it is filling up faster in the DDA ever anticipated. And that forces the DDA to face problems down the road sooner than the DDA thought it would. John Mouat ventured that instead of “problems” they might be “opportunities.” Hewitt also indicated that downtown looks strong based on his own personal business. [Hewitt owns the Red Hawk restaurant on South State Street, and the revive + replenish grocery and cafe at Zaragon Place on East University.]

Also during his discussion of revisions to the current year’s budget, Hewitt had noted that parking revenues were higher than budgeted – attributable mostly to better-than-expected revenues from the Library Lane structure. Typically a new structure won’t generate a lot of revenue in the first couple of years, he said, because people take a while to find the structure and to change their habits. But people are changing their habits at a much more rapid pace than the DDA had anticipated, Hewitt said.

Mayor John Hieftje picked up on an earlier comment that Hewitt had made – that it might be necessary to create a waitlist for monthly parking permits for the Library Lane structure. Hewitt responded to Hieftje, saying that the challenge in coming up with a policy on that issue is that the DDA does not ask people on their way into a parking structure who they are and why they are here. Trying to balance monthly demands and hourly demands between workers and guests is not a simple thing. Clark ventured that nothing the DDA does is simple.

The following charts were generated by The Chronicle with data provided in regular monthly parking reports.

Ann Arbor public parking system total revenue.

Ann Arbor public parking system hourly patrons.

Ann Arbor public parking system surface lots.

Ann Arbor public parking system structures.

Ann Arbor public parking system total revenue by facility.

Ann Arbor public parking system. Number of hourly patrons by facility for selected facilities.

Communications, Committee Reports

The June 5 meeting included the usual range of reports from the board’s standing committees and the downtown citizens advisory council, as well as public commentary.

Comm/Comm: Economic Development Task Force

During her communications time, board chair Leah Gunn notified the rest of the board that the city council had passed a resolution establishing an economic development task force. [That action had come at the council's May 20, 2013 meeting. The task force, which includes membership from the city and Ann Arbor SPARK, as well as the Ann Arbor DDA, will consist of up to nine members. Three of the members will come from the Ann Arbor DDA board.] Gunn indicated that she was appointing board members John Mouat and Bob Guenzel, as well as executive director of the DDA Susan Pollay, to represent the DDA on the task force. [The city will be represented by city administrator Steve Powers, and city councilmembers Sally Peterson and Marcia Higgins.]

Reporting out from the partnerships committee, Joan Lowenstein said that Paul Krutko, CEO of Ann Arbor SPARK, had spoken to the committee. One thing he had stressed is the fact that “place making” matters. He’d said it’s important to “create place.” The idea is that nowadays people figure out a place they want to live and then find a job there, instead of the other way around, she said. There are a lot of businesses that SPARK talks to who want to locate downtown, but the right kind of space is not available for them, Krutko had also told the group, according to Lowenstein. And corporate leaders often raise the issue of the availability of hotel and meeting space in downtown Ann Arbor. He’d said it is a real obstacle, because other communities have the ability to host large conferences, and can then attract people who become aware of the community through their attendance at the conference.

Lowenstein cited Greenville, South Carolina, as an example of a city that has a lot of hotel and conference space downtown. A big automotive conference is hosted there, which was attended recently by six people from the University of Michigan, who spoke at the conference. It was in South Carolina, not here – where the auto industry is, Lowenstein said. Ann Arbor SPARK sees a lot of opportunity to partner with the DDA, Lowenstein said – on the topic of benchmarking against comparative communities and working to understand how places like Greenville are doing a better job than what Ann Arbor is doing, and to see what Ann Arbor can do better.

Ann Arbor SPARK has also made themselves available for RFP (request for proposals) processes like the one for the former Y property, so that SPARK can help look for appropriate businesses to locate there. Lowenstein characterized the partnerships committee session with Ann Arbor SPARK as beneficial. Sandi Smith pointed out that four councilmembers had been present at the partnerships committee meeting [Sabra Briere, Sally Petersen, Marcia Higgins, and Jane Lumm]. She described the councilmembers as engaged in the whole discussion, saying it was a very powerful meeting.

Comm/Comm: Sale of Former Y Lot

By way of background, on March 4, 2013 the city council had authorized the city administrator to issue an RFP (request for proposals) for brokerage services to sell the former Y property located at Fifth and William. It’s currently owned by the city, which it had purchased for $3.5 million. On Oct 15, 2012 the council had voted to allocate the net proceeds of the sale of the Y site to the city’s affordable housing trust fund.

During public commentary at the end of the DDA’s June 5 meeting, local developer Peter Allen reported that the bids for the RFP for brokerage services had been opened last Friday. There had been three bidders, he said: Jim Chaconas of Colliers International; Tim Guest with CB Richard Ellis Inc.; and Allen himself with his company, Peter Allen & Associates. The timetable is to interview in late June or early July, Allen said. A recommendation was supposed to go to the city council around Aug. 1, he continued.

Allen reported that he heard interest from boutique hotels and from grocery stores. Certainly ground-level retail is in demand, he said. He thought that a mix of uses would be very consistent with the connecting William Street (CWS) project – a recent planning effort that had been led by the DDA. From a market standpoint, he felt that the CWS recommendations are very solid, thorough and achievable. One of the implications for the DDA board to think about, he said, was the fact that the proceeds from the sale go to the city’s affordable housing trust fund. He felt that the market value of the parcel could be in the neighborhood of $5-$7 million, or more depending on how it is configured. The idea of adding air rights on top of the new Blake Transit Center is very feasible, Allen said. The topic of possibly updating the CWS study in the context of possible proceeds would be a suitable topic for a future meeting of the DDA, he said.

Comm/Comm: A2D2 Zoning Review

Ray Detter reported out from the previous evening’s meeting of the downtown area citizens advisory council. He noted that the DCAC had supported the passage of the A2D2 zoning and the downtown design guidelines two years ago. He recited a description of how the design guidelines provide a mandatory process, but only voluntary compliance with recommendations of the design review board.

Detter characterized the city council’s May 13, 2013 vote on the 413 E. Huron project as a 6-5 approval. But he said that the council’s opposition to the design, mass and scale of the building had been unanimous. The six members who voted for the project, Detter said, feared a possible lawsuit over a denial. From that episode, Detter concluded that there was something lacking in the city’s D1 zoning definition. [D1 is the city's zoning district that allows for the highest density development.] Detter highlighted other areas zoned D1 in the city that he felt warranted further review – including sites to the east of Sloan Plaza, and the former YMCA site at William between Fourth and Fifth avenues.

He characterized the problem as conflicts between the D1 zoning category and the nearby residential neighborhoods. He allowed that there had been a lot of public input throughout the earlier A2D2 process, but he said that the city needs to do a better job now at correcting areas where D1 zoning needs improvement. Detter then alluded to the city council’s resolution, approved on April 1, 2013, that directed the planning commission to conduct a review of D1 zoning.

The recommendations resulting from that review should not be left up to the planning commission’s ordinance revision’s committee, he said. He contended that a lot of people did not believe that floor area ratio (FAR) premiums should be provided for “things we don’t want as a community – student housing, for one thing.” [Currently, the D1 zoning category allows for 400% FAR by right, with additional by-right FAR provided for residential use.] Some people say that a moratorium is needed while the community makes up its mind about these things, Detter said. “We don’t want 413 [East Huron] to happen again,” Detter concluded.

He allowed that the council’s resolution directing the review set Oct. 1 as a deadline. But Detter contended that no real schedule had been set for getting it done.

Comm/Comm: July 3 Meeting Date

During communications time, board chair Leah Gunn raised the question of the board’s regular monthly meeting date in July – which this year falls on July 3. She offered the choice of changing the date or keeping it as it is: “What is your pleasure?” John Mouat indicated that he would not be able to attend. With no further comment from the board, by apparent mutual assent the established meeting date of July 3 remained unaltered.

During communications time Gunn also pointed out that no regular meeting was scheduled for the month of August, which is the board’s custom.

Comm/Comm: A2 Downtown Blooms Day

Nancy Stone, who handles communications for the public services area of the city of Ann Arbor, addressed the board during public commentary time to thank the DDA for its annual support of A2 Downtown Blooms Day. She highlighted the contrast between now and 25 years ago, when the annual volunteer date was called Downtown Cleanup Day. Whereas 25 years ago people were using brooms to sweep up litter, today it’s a festival of planting flowers and beautifying the city, she said. In addition to the DDA she thanked the merchant associations and Pizza House, which provided pizzas for the volunteers. She showed the board a video that had been created by 2|42 Kids Care Club assisting with the event last month.

Comm/Comm: Stipends for Street Performers?

During communications time toward the start of the meeting, mayor John Hieftje, who also sits on the DDA board, told other board members that he wanted to share an idea he had also discussed briefly at the downtown marketing task force the previous day. He described being at the farmers market a few weeks ago, when it was a beautiful sunny day, and he had gone over to Sculpture Plaza where a group of University of Michigan students were playing an interesting array of instruments – an accordion, an upright bass, and a saxophone. It was very nice music, he continued, and they were drawing a crowd. He characterized it as very pleasant.

Hieftje recalled a few summers ago being in Montreal and seeing some street performers. In talking to them afterwards, he said, they revealed that they had received a stipend for performing. So he wanted to see the DDA board explore the idea, which might amount to a few hundred dollars per occasion, to sponsor some “spontaneous” street performances – though he allowed they would not be exactly “spontaneous.” He ventured that such a program might cost $2,000 a year. That kind of thing might make it more interesting to be downtown, he said.

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

Absent: Nader Nassif, Russ Collins.

Next board meeting: Noon on Wednesday, July 3, 2013, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date.]

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City Apartments, a Village Green residential property under construction on Feb. 4, 2013. (View is at First & Washington looking east) The bottom two floors are a parking deck, which is on track to be turned over to the city and the DDA on March 15, 2013. It will expand the capacity of the public parking system by almost 100 spaces. (Photo by the writer.)

The surplus from FY 2014 would be used in the FY 2015 budget, which calls for $23.8 million in expenditures against $23.5 in revenues, leaving the DDA with about $5.2 million in total fund balance reserve at the end of FY 2015.

DDA revenues come from two main sources – tax increment finance (TIF) capture and Ann Arbor’s public parking system.

Besides operation and capital maintenance of the parking system, revenues to the public parking system are used by the DDA to support the getDowntown program’s go!pass subsidy. So one focus of the Jan. 25 DDA operations committee meeting was budgeting for that program. The go!pass is a bus pass that downtown employees obtain through their employers, who pay $10 annually for passes for each of their employees. In a presentation made to the operations committee, Michael Ford – CEO of the Ann Arbor Transportation Authority – requested a total of $623,662 to support the getDowntown program, including the go!pass subsidy. That compares with $553,488 granted by the DDA last year. For FY 2014, the DDA’s draft budget calls for a $600,000 allocation that could cover most of that request.

This year’s draft budget also calls for $250,000 in parking revenue to be spent on a possible arrangement with the city of Ann Arbor to pay for additional downtown police patrols. Based on the conversation at the operations committee meeting, it’s not a topic on which any recent detailed talks have taken place. But DDA executive director Susan Pollay indicated a strong interest in having those conversations with the city. If that didn’t lead to an agreement with the city, she said, then the DDA board was certainly not obligated to spend the money in that way.

Another $300,000 in the FY 2014 budget that could be used somewhat flexibly is in the TIF fund budget, labeled “capital construction.” It could be used to fund sidewalk improvements between William and Liberty along State Street to facilitate patio dining for restaurants along that strip – or streetscape improvements for William Street, or even alley improvements near the Bell Tower Hotel, Pollay told the committee.

The full DDA board will be asked to approve the FY 2014 and FY 215 budgets at its Feb. 6 meeting. The DDA’s fiscal year is in sync with the city of Ann Arbor’s fiscal year, which begins on July 1. The city council will settle the city’s FY 2014 budget by May 20 – the council’s second meeting in May. While the city uses a two-year planning cycle – which begins fresh this year – the council approves its budget just one year at a time. [.pdf of draft DDA budgets FY 2014-15] [.pdf of FY 2013 six-month financial statements] [.pdf of monthly parking reports]

Parking Fund Budgeting

The Ann Arbor DDA operates the public parking system under a contract with the city of Ann Arbor – an agreement that calls for the city to receive 17.5% of gross revenues to the system. For this year and the following two budget years, that 17% payment to the city is projected to translate to $3.14 million, $3.20 million and $3.24 million.

In the current year, total parking revenues are budgeted for $18.1 million. But according to the financial statements through December 2012, which is mid-way through the fiscal year, actual parking revenues through that period are $9.4 million, or about $300,000 more than the budgeted year-to-date number. Projected parking revenues for the next two fiscal years are $19.3 million and $19.6 million, respectively.

Parking fund revenues pay for the direct expense of contracting with Republic Parking for the day-to-day operations of the system (about $6.5 million), rental for some properties not owned by the city but used for public parking (about $0.5 million), as well as roughly half the DDA staff compensation and administration (about $370,000). The other major allocation from the parking fund is for maintenance of the parking structures. For FY 2014 there’s $4.4 million set aside for parking maintenance.

Parking Fund: Alternative Transportation

One focus of the Jan. 25 DDA operations committee meeting was budgeting for the getDowntown‘s go!pass program, which is also funded from parking revenues. Downtown employers can purchase a go!pass at a cost of $10 per employee – with the condition that the business must purchase a pass for all their employees. Beyond that, rides taken with the go!pass are free to the pass holder or their employer. The cost of the rides has been subsidized historically by the DDA, using revenues from the parking system. The getDowntown program is administratively a part of the AATA. Through the AATA’s fiscal year FY 2012, which concluded at the end of September 2012, here’s how go!pass ridership has trended:

go!pass total rides by year. The number of rides taken with go!passes has roughly doubled since 2004. This past year reflected a dip, which appears to be related to a reduced number of cards in circulation: 6,591 compared to 7,226. (Data from AATA; chart by The Chronicle.)

go!pass rides by month, year over year. The red trend line is the most recent year, 2012. The previous year is shown in black. (Data from AATA; chart by The Chronicle.)

While the total number of rides dipped slightly, the number of rides per card continued its upward trend. Since 2004, the number of rides per card has increased from about 60 to about 90. (Data from getDowntown program; chart by The Chronicle.)

In a presentation made to the operations committee on Jan. 25, AATA chief executive officer Michael Ford requested a total of $623,662 to support the getDowntown program, including the go!pass subsidy. That compares with $553,488 granted by the DDA last year. In the DDA’s budget summary for FY 2014, the getDowntown subsidy falls under the line item for “alternative transportation” – for which $615,000 is allocated this year.

The detailed breakout for the parking fund, which the DDA uses to support getDowntown – indicates that $15,000 of the $615,000 is allocated for the “connector study.” That’s a study meant to determine a locally-preferred alternative mode for a high-capacity transit system along the corridor that arcs from US-23 and Plymouth southward along Plymouth to State Street and farther south to I-94. In the fall of 2012, the DDA approved that $15,000 as part of a total $30,000 commitment over two years. Other funding partners for the $1.5 million project – which is supported by a $1.2 million federal grant – include the city of Ann Arbor, the AATA and the University of Michigan.

Compared to the DDA’s $600,000 budgeted amount, Ford’s request is $23,662 more. As one way to cover that difference, DDA executive director Susan Pollay pointed committee members to $300,000 of discretionary grant funding from the parking fund that’s in the draft FY 2014 budget. Of that amount, $50,000 could be used to cover the gap between the budgeted amount and Ford’s request.

By way of additional background, in the past the AATA has essentially agreed to absorb the cost of go!pass rides that might be taken in excess of the funded amount. So, at the AATA board’s Aug 24, 2011 meeting, a decision was made to accommodate the DDA’s financial circumstances and to set the amount charged for go!passes in 2013 at the amount the DDA had already allocated – $475,571.

At the Jan. 25 DDA operations committee meeting, getDowntown director Nancy Shore put the cost-per-ride figure used to calculate the request at about $0.90 per ride. In negotiating the cost-per-ride for similar arrangements – like the University of Michigan MRide program – AATA uses as a benchmark the amount that bus riders would pay if they paid the full fare under a regular 30-day pass. The 30-day pass is the cheapest full-fare option. Full adult cash fare on boarding would be $1.50.

At the AATA board’s most recent meeting, on Jan. 17, 2013, the relationship between rides taken and fares collected was highlighted. The treasurer’s report included a note that despite greater ridership numbers, the fares collected were not keeping pace. One theory floated was that this disparity could be attributed to go!pass ridership in excess of the projected funding need.

The request from AATA this year is based on the projected ridership. In the chart below, presented by Ford at the Jan. 25 meeting, the decreased request in the first line, for getDowntown program operations, is explained by the fact that this year the program will not incur the cost of an evaluation survey. The projections based on ridership originating east of US-23 are made possible by the swipe-able go!pass cards and fare-box technology, which allow the AATA to analyze where riders are boarding the bus.

YEAR                 2013       2014
getDowntown       $52,488    $35,488   
go!pass          $475,000   $479,000   
NightRide 
go!pass discount   $5,000    $18,233   
ExpressRide 
go!pass Discount   $7,000    $18,000   
Route 4 
East of US-23     $14,000    $56,363   
Route 5 
East of US-23          $0    $16,578   
====================================
Total            $553,488   $623,662

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The $14,000 provided last year to help subsidize improved service to and from Ypsilanti on Route #4 was actually authorized by the DDA board on Dec. 1, 2010, as a “challenge grant” – which was made hoping to prod other entities to join in supporting the increased service.

And committee members on Jan. 25 wanted to know what kind of requests were being made by the AATA municipalities and entities other than the DDA. Ford responded by indicating that other communities that are a part of the “urban core” will also be asked to help fund the Route 4 improvements as part of conversations that have continued since the abandonment of the Act 196 countywide authority, which was newly incorporated in the fall of 2012.

By way of background, part of the Ann Arbor city council resolution on Nov. 8, 2012 – which withdrew the city from the new transit authority the council – also gave direction to the AATA to continue conversations with immediately neighboring communities about options for improving local transit. And the AATA has engaged in talks with communities about a smaller-than-countywide transit authority with possible members to include the cities of Ann Arbor, Ypsilanti, and Saline, as well as the townships of Pittsfield and Ypsilanti. Involvement with the townships of Superior and Ann Arbor is also a possibility.

In addition to expressing an interest that the Ann Arbor DDA not be the only entity providing additional support, committee members indicated they’d also like to see even better service provided on Route #4 – in the form of an “express” route that had no stops between downtown Ypsilanti and Ann Arbor. Ford seemed receptive to the idea in concept, and suggested it might be necessary to think about using I-94 to provide that service. DDA board member Roger Hewitt indicated that he felt one obstacle in the way of Ypsilanti becoming an even more vibrant community is the amount of time it takes to ride the bus between Ypsilanti and Ann Arbor.

Some committee members also questioned the structure of the “all-in” go!pass program requirement – which means an employer must purchase passes for all employees of the company at a cost of $10, even for those who might not ever use the card. It’s part of the reason that the cost per card to employers is relatively low – and until two years ago was even lower ($5).

Part of getDowntown director Nancy Shore’s presentation to the committee included an anecdote about a lost wallet and the holder of a go!pass saying the pass was the most valuable item in their wallet. Hewitt responded to that part of the Shore’s presentation by observing that even though the card holder contended that the go!pass was valuable, that person was not being asked to contribute to its cost – because it’s provided through the employer. Shore’s presentation indicated that many downtown employers see the go!pass as one of the only benefits they’re able to offer to their employees besides salary.

Parking Fund: Beat Cops

After subtracting $50,000 for possible alternative transportation, the remaining $250,000 of discretionary funding in the parking fund budget could be used to pay for downtown beat patrols by the Ann Arbor police department. Based on the conversation at the operations committee meeting on Jan. 25, it’s not a topic on which any recent detailed talks have taken place – but DDA executive director Susan Pollay indicated a strong interest in having those conversations with the city. If that didn’t lead to an agreement with the city, she said, then the board was certainly not obligated to spend the money in that way.

Conversation among committee members was mixed on the idea. Bob Guenzel wondered how much downtown policing $250,000 would buy. [Guenzel was Washtenaw County administrator during the time that some townships litigated over the amount they were being charged by the county for sheriff's road patrols.] John Mouat wondered if the $250,000 might not be spent more wisely on “ambassadors” for the downtown. Of the committee members, Hewitt seemed more enthusiastic about the idea, pointing to ongoing issues in the South University area, where he owns a business.

Hewitt expressed skepticism, at least in the near term, that the relatively new Main Street Business Improvement Zone could eventually be expanded beyond its current geographic boundaries – along a few blocks of Main Street – to include a significant part of the rest of downtown Ann Arbor. In any case,  the Main Street BIZ was, he said, more focused on the “clean” part of the slogan “clean and safe.” So, while the self-assessment used to finance the BIZ might support snow removal and handbill removal, it would not be capable financially of hiring personnel to address the “safe” part of the slogan.

At the committee meeting on Jan. 25, Pollay alluded to the idea that the DDA had harbored an expectation that downtown beat patrols would continue to be provided – as a result of the DDA’s willingness to support the city’s municipal center project. By way of background, the DDA agreed to make an $8 million grant to the city – in the form of roughly $0.5 million in annual installments – to help pay for the city’s police/courts project, known called the Justice Center. That grant to the city comes out of the roughly $4 million in TIF capture that the DDA receives annually. The DDA board’s decision to allocate that grant came at the DDA board’s May 8, 2008 meeting.

In this AAPD officer activity report, 22 minutes were logged on downtown foot patrol.

However, the downtown beat patrols, which some officers chose to do on bicycle, were discontinued, as the total sworn officers in the AAPD decreased through the late 2000s. The strategy used by then-police chief Barnett Jones was to encourage officers to spend their “out of car time” in the downtown area. [For some coverage on that issue from the 2010 budget season, see: "Budget Round 6: Bridges, Safety Services."]

A new digital system for logging officer activity reports rolled out at the start of 2013 and could allow for a realistic assessment of the current level of downtown police coverage.

Parking Fund: Revenue Trends

Parking revenue totals are reported monthly to the DDA operations committee. The most recent month for which data was provided was December 2012. Those numbers show an increase in revenues of about 7.2% compared with December 2011, and a drop in the number of hourly patrons by 8.5%. Those numbers come in the context of a 13% increase in the number of spaces in the system – from 6,870 to 7,805. Mitigating factors cited by Republic Parking manager Art Lowe at the Jan. 25 committee meeting included the fact that Midnight Madness fell this year in November, not December, and that in 2011 Christmas and New Year’s fell on the weekend.

Lowe also indicated that some of the decrease in the number of hourly patrons is attributable to the conversion of parking patrons from hourly parking patrons to monthly permit parkers. Above a certain threshold, for the same amount of parking activity, a monthly permit holder would be paying less for their parking. Based on numbers provided by Lowe at the meeting, and subsequent clarification with DDA staff, it appears that around 3,600 monthly permits were in play for December 2012, compared with around 3,100 for the previous year.

Lowe also said that the Fourth and William structure was likely seeing some incremental erosion of its previous patrons, as a result of the new nearby Library Lane underground garage.

Another highlight evident in the charts is the fact that the Library Lane underground structure, completed in the summer of 2012, has now reached the same revenue-per-space numbers as the on-street metered parking spaces.

And in a month and a half, capacity of the public parking system will be getting an additional 95 spaces. At the operations committee meeting, executive director Susan Pollay told the board that Village Green was still on track to hand over the parking deck component of the City Apartments project to the city and DDA on March 15, 2013. The building included a 244-space parking deck on those first two floors, 95 of which are to be available for public parking. The rest of the spaces will be used by residents of the 146-unit project, when the construction is completed.

That announcement of a March 15 handover was met with some skepticism on the operations committee – because the structure will still need a certificate of occupancy from the city before the transfer can take place. However, it was generally understood that the intent was for the parking deck to be open before construction of the entire project was completed. The building is on track for fall 2013 move-in, based on remarks from Pollay to committee members.

Ann Arbor Public Parking System: Total Revenue

Ann Arbor Public Parking System: Patrons

Ann Arbor Public Parking System: Structures

Ann Arbor Public Parking System: Surface Lots

Ann Arbor Public Parking System: Whole System

TIF Fund Budgeting

While the DDA’s budget is dominated by its administration of the parking system, that’s not a function assigned to the DDA by state statute. But it’s a function the DDA has performed for the city since the early 1990s.

The part of the DDA’s revenue budget that’s enabled by state statute comes from tax increment financing (TIF). Under a TIF arrangement, an entity “captures” a portion of the property taxes in a specific geographic area that would otherwise be collected by taxing authorities in the district. In the case of the Ann Arbor DDA, taxes captured include those of the Ann Arbor District Library, Washtenaw County, Washtenaw Community College, and the city of Ann Arbor. The tax capture for the Ann Arbor DDA is only on the initial increment in valuation – the difference between the value of property when the district was established, and the value resulting from improvements made to the property. In other words, the Ann Arbor DDA’s TIF doesn’t capture increases due to inflation.

For each of the next two years, the DDA is projecting around $4 million of revenue from its TIF capture. Big-ticket expenditures from the TIF fund include $3.4 million for bond payments and interest, as well as $508,608 as an annual contribution toward the city’s police/courts building.

The TIF fund budget also includes $440,631 for approximately half of the salaries, fringe benefits and administrative costs of the DDA. [The DDA splits these costs roughly evenly between the TIF fund and the parking fund. The DDA has four employees.] For the next year, the DDA is planning to spend about $1.3 million more from the TIF fund than the revenues it will receive, drawing down the TIF fund balance by that amount. That would leave about $800,000 in the TIF fund balance.

Included in the FY 2014 TIF budget is $300,000 that could be used somewhat flexibly – which is labeled “capital construction.” At the Jan. 25 operations committee meeting, DDA executive director Susan Pollay told members that the money could be used to fund sidewalk improvements between William and Liberty along State Street to facilitate patio dining for restaurants along that strip – or streetscape improvements for William Street, or even alley improvements near the Bell Tower Hotel.

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The location of the 624 Church St. project is indicated with a red pushpin. Locations of structures in Ann Arbor’s public parking system are indicated with blue Ps.

Most recently, at the Dec. 19 meeting of the DDA’s operations committee, the discussion focused on location: For which of the six public parking structures would monthly permits be sold? The developer of the 624 Church St. project would prefer that the project be allowed to buy permits in the Forest parking structure.

The Forest facility, a joint venture of the DDA and the University of Michigan, is the structure closest to the proposed residential development. According to the developer’s Nov. 28 submittal to the city, the 13-story project would include more than 80,000 square feet of new floor area with the following configuration of apartments: 11 one-bedroom; 21 two-bedroom; 33 three-bedroom; and 11 four-bedroom units. That’s a total of 76 apartments, with 196 bedrooms.

The developer, Opus Development Corp., has already won approval from the DDA’s board to satisfy the project’s parking requirement without providing onsite spaces – by instead using the contribution in lieu (CIL) program. The CIL provides an option to purchase monthly permits, but the cost is at a rate 20% higher than standard pricing.

Discussion by the DDA operations committee on Dec. 19 centered around the issue of fairness: Would allowing the purchase of permits in the Forest structure give the developer of the 624 Church St. project an unfair competitive advantage in the South University area rental market? Raising the fairness issue was DDA board member Roger Hewitt, who owns Revive + Replenish, which is a tenant in the ground floor of the Zaragon Place on East University. Zaragon is a nine-story apartment building with almost 250 bedrooms, catering to the student rental market.

Other board members did not perceive the issue to be problematic, from the perspective of fairness to already-existing projects. And Susan Pollay, executive director of the DDA, pointed out that the decision to allow a project to purchase monthly parking permits is a tool that’s available to the DDA to help make a private development possible that otherwise would not be. In the case of 624 Church St., building parking spaces on that site isn’t feasible. Hewitt was concerned that the strategy – if the DDA allowed permits to be purchased at a structure very near to projects – might result in an incentive for developers in the future not to build any onsite parking.

The committee’s discussion was inconclusive, but committee members indicated they wanted to develop a formal policy on which parking structures would be chosen for monthly permits sold under the CIL program. The 624 Church St. project is due to come before the city planning commission on Jan. 15, so the developer would prefer to have the issue settled by then. But given the DDA’s desire first to establish a policy that would guide this and future decisions, it’s unlikely it will be finalized as early as mid-January.

Based on the committee’s discussion, capacity in the parking system does not appear currently to be a limiting factor on selling CIL permits. The committee also reviewed the latest monthly parking data, which shows continued increased usage of the new underground garage, Library Lane.

Revenues per space in the Library Lane structure are now beginning to approach those of on-street parking spaces, but are still the lowest of any facility in the system. That’s due in part to a discounted rate offered to induce holders of permits in other structures to move to Library Lane.

Also of interest at the operations committee meeting was a draft policy for holding events on top of the Library Lane structure, including the closure of the mid-block cut-through, Library Lane itself.

624 Church: Additional Background on CIL

The D1 zoning for the 624 Church St. project doesn’t actually include any parking requirements – as long as the total floor area does not exceed 400% FAR (floor area ratio). But as proposed, the project comes in at 665% FAR. And to get the extra 265% FAR as a by-right premium, the city’s requirement of 1 parking space for each 1,000 square feet of additional floor area works out to 40 parking spaces.

The DDA board had already voted, on Oct. 3, 2012, to authorize the parking spaces – somewhere in the system. It’s the first time the policy has been applied. It’s not the same mechanism that was used to provide Google an incentive to locate some of its offices in downtown Ann Arbor. Parking spaces were offered to Google on a subsidized basis. What’s at issue for 624 Church St. is the ability to purchase monthly permits by paying a premium rate.

A mechanism for new developments in downtown Ann Arbor to meet minimum parking requirements – without providing onsite spaces – has been part of the city’s downtown planning and development policy for a little more than three years. The city council adopted new zoning for the downtown on Nov. 18, 2009.

And the Ann Arbor DDA, which operates the public parking system under contract with the city, had approved its recommendation of a specific CIL policy more than two years ago, at its July 7, 2010 board meeting.

The city council then formally adopted the DDA’s recommended policy, at its April 2, 2012 meeting, with the policy’s two options: (1) purchase monthly parking permits in the public parking system for an extra 20% of the current rate for such permits, with a commitment of 15 years; or (2) make a lump sum payment of $55,000 per space. It’s option (1) that the 624 Church St. project is exercising.

Current standard pricing of permits at Forest is $145 a month. At the CIL rate, the cost would be $174 a month.

624 Church: Committee Discussion on Location

Roger Hewitt raised two issues of concern to him – fairness and the unintended consequence of giving an incentive to developers not to provide onsite parking spaces. He also felt there could potentially be a legal liability for the DDA.

On the fairness question, Susan Pollay – executive director of the DDA – indicated that the kind of judgments involved were already being made in the context of the DDA’s regular monthly parking permits program. She wondered what the legal liability could be. Hewitt responded by saying that if a developer spends millions of extra dollars to add parking spaces to a project, and a different developer in the future simply asks the DDA to purchase monthly permits, the project that’s been granted the right to satisfy parking requirements by purchasing permits could become a more profitable project.

Hewitt feared the DDA would be incentivizing developers not to build onsite parking spaces. So he floated the idea that if N spaces were required, then only some percentage of N would be provided in a structure located close to the project. For example, he said, if the project needs 40 spaces, then perhaps 10% – or four spaces – would be provided in a location close to the project, with the rest provided elsewhere in the system.

Pollay again questioned whether there was any actual legal liability. DDA board member Joan Lowenstein, an attorney, indicated she didn’t think there was a legal problem – and the matter of fairness was one that’s to be addressed through an administrative process.

Hewitt reiterated his position – he was worried that in the future, because of the availability of the monthly permit options, “nobody builds parking.” DDA board member John Splitt ventured that it’s not completely clear whether a project that satisfies its parking requirement through the purchase of monthly permits would be more profitable than one that builds onsite spaces. He said the DDA doesn’t know what the return on the investment for a private developer is – one who charges residents for the use of an onsite parking space – to build those spaces. Hewitt ventured that the return is less than building “student dorm space.”

Pollay noted that the DDA was established to encourage new development, to increase TIF (tax increment financing), and that the contribution in lieu (CIL) of parking is specifically designed to encourage residential development. She stated that the only way the 624 Church St. project could be built – due to constraints of the site configuration – is if the CIL program were available.

DDA board member Leah Gunn noted that the only open question is the location of the monthly permits – because the board had already voted to allow 624 Church St. to purchase monthly permits somewhere in the system. She wondered if it were possible to sell some of the permits in the Forest structure and some elsewhere.

The conversation circled back to the question of fairness. Pollay asked if Hewitt was worried about fairness with respect to future projects or current projects? Hewitt seemed to indicate that fairness would dictate that existing projects should also have the option to obtain permits under the CIL program. Pollay stated that projects like Landmark and Zaragon Place are already built – so she didn’t see it as a fairness problem.

Landmark and Zaragon have onsite parking spaces, and those developments are renting the spaces to their tenants, Pollay noted. So Pollay said it seemed to her like those projects built parking spaces onsite because they chose to. Lowenstein ventured that it’s a competitive market, so the availability of onsite parking could be an advantage.

On the issue of fairness, Gunn asked if it was fair for Google’s parking permits to be subsidized initially, but not the parking spaces for Barracuda Networks. She allowed that employees of Barracuda are still getting a deal, because of the discount that the DDA has applied (for anyone, not just for Barracuda) to the cost of permits in the new underground Library Lane structure.

Gunn came back to her point that the DDA had already determined that the public parking system had adequate capacity to sell 40 permits to the 624 Church St. project. The only question is where, she said. Responding to concerns voiced again by Hewitt, Splitt suggested that the question of location could require “a bit more of a deeper dive.” Splitt didn’t want the choice of location for the permits to translate into a disincentive to construct onsite parking spaces.

Pollay suggested putting off a decision and asking city planning staff for their input. She suggested forming a subcommittee. Gunn wanted clarification: Would the subcommittee focus just on the 40 permits for 624 Church St.? Hewitt stated that the subcommittee should work on a general policy on location, saying, “We need a policy to defend in public.” Splitt wondered if it might not be possible to approve the 40 spaces for 624 Church St. in a particular location without the general policy. Pollay suggested that it might be worth hearing from the DDA’s legal counsel.

Local attorney Scott Munzel, who represents the developer, attended the operations committee meeting. He told committee members that it was an interesting conversation. He felt that developers prefer to build parking spaces on site, if they can, and suspected they make money on those spaces. He felt that allowing the purchase of monthly permits in a nearby structure would not be a disincentive to build spaces on site. He pointed out that the CIL program requires the payment of a premium – 20% more than the prevailing standard cost. That 20% was not huge, he allowed, but it’s real.

Munzel suggested an approach where the DDA could agree to sell 40 permits now in the Forest structure, but reserve the right “to boot them out” to a different structure in the future. That might be a way to make people feel more comfortable, he ventured.

A question from DDA board member Keith Orr drew out the fact that the parking permit contract under the CIL program was for 15 years. Pollay indicated that the idea was that in 15 years, it was hoped that the transit system of the future would be so robust that parking requirements for new developments would be zero.

Gunn then asked Joe Morehouse, deputy director of the DDA, where he’d choose to sell the permits. Economically, Morehouse said, it would be better to sell the permits for the Forest structure – compared to the Maynard and Liberty Square structures. The $29 added to the $145 for a standard monthly permit at Forest would yield more in a year than hourly parking typically does at Forest, he said. But the location where the permits would benefit the system most would be at Fourth and William, he said.

By way of additional background, there are currently 101 monthly permits for the Forest structure assigned by the DDA. But the University of Michigan has access to one-third of the 854 spaces there. UM affiliates with an appropriate parking pass can enter the structure until the one-third limit is reached.

Munzel noted that the city planning commission would have the 624 Church St. project on its agenda on Jan. 15, 2013. The parking requirement, met through the CIL program, would be part of the development agreement, which will be part of the site plan approval process, he noted. Munzel felt that Opus Development Corp. wouldn’t necessarily “have heartburn” if the location was not settled by the Jan. 15 planning commission meeting. Munzel felt it wouldn’t be a problem to say, “The DDA is still considering it.” It would, however, be easier to say, “This is what’s been decided,” Munzel said. It would need to be decided by the time a final approval is given by the city council, he said.

Varsity: Also Asking for CIL

At the Dec. 19 meeting of the DDA operations committee, it was noted that the Varsity development is also looking for four monthly permits under the CIL program. The project, located on East Washington Street, is a 13-story, 173-unit, 178,380-square-foot apartment building for approximately 418 persons with 77 parking spaces. Construction on the project is well underway.

Roger Hewitt’s reaction to the news that the Varsity was requesting four CIL spaces was: “How’d they get almost done and then find out they needed spaces?” Amber Miller, the DDA’s planning specialist, explained that the Varsity thought it had a viable agreement with Zipcar to contract for spaces, to satisfy part of the parking requirement.

In response to an emailed query, Ann Arbor city planning manager Wendy Rampson essentially confirmed that understanding, writing that the Varsity had proposed to locate two car share spaces (Zipcar) in a surface parking lot on the property it owns west of the Varsity. One car share space is equal to four required parking spaces.

That would add eight spaces to the total provided by the Varsity, even though the Varsity only needs to provide an additional six spaces. Rampson believed that because the Varsity was not able to reach an agreement with Zipcar, the developer is now requesting four monthly permits from the DDA under the CIL program. The four permits, with the two spaces on the west parcel, add up to the six additional spaces that the Varsity needs to fulfill its additional parking requirement.

Monthly Parking Data

At its Dec. 19 meeting, the DDA operations committee received the regular report of parking revenues broken down by facility. At the Dec. 5, 2012 meeting of the full board, DDA board member Roger Hewitt indicated that the format of monthly parking reports would be changed to include more detailed data. That change has not yet been implemented. Currently, the DDA uses revenue and total numbers of hourly patrons as an imperfect proxy to gauge use of the system.

Ann Arbor public parking system: Hourly patrons in November 2012 (green trend line) showed a slight increase over November 2011, after showing a four-year low in September and mid-range numbers in October, compared to the last three years. Compared to last year, the number of parking spaces in the system has increased from 6,995 to 7,806, mostly due to the construction of the Library Lane structure, with its 700+ spaces.

Ann Arbor public parking system: Revenue continues to show higher levels than last year in the same month – due at least in part to higher rates, hourly billing instead of half-hourly, and around 800 additional spaces in the system compared to last year. Revenues from October to November this year showed a slight downward trend, as they have in each of the last three years.

Ann Arbor public parking system: Revenue per space in structures. The Forest structure (yellow trend line) is historically somewhat volatile, as it’s subject to the rhythms of the University of Michigan academic schedule. That’s the structure where the 624 Church St. project would like to purchase 40 monthly parking permits, instead of building the spaces on site. Library Lane (black trend line) showed continued increases in usage, with revenues per space approaching those of the on-street parking spaces (gray trend line).

Ann Arbor public parking system: Revenues per space in surface lots. Revenues at the old Y lot at Fifth and William (purple trend line) reflect the onset of Library Lane construction, which removed the surface parking there, and later, the opening of the new Library Lane parking structure.

Ann Arbor public parking system: Revenues per space. Systemwide (heavy black trend line) the system showed a slight decline from October to November in revenues per space, as it has in past years.

Events on Top of Library Lane

At its Dec. 19 meeting, the operations committee was also provided with a draft of ideas for a policy on special events at the Library Lane mid-block cut-through and the top of the Library Lane parking garage.

The preamble to the draft includes the expectation that the site would eventually include a building with public open space:

The structural component of the underground Library Lane structure was designed to anticipate the construction of a future building and a future public open space area. In the meanwhile, until such time as these elements are designed and constructed, the DDA is supportive of community groups using the Library Lane surface parking lot and the adjoining Library Lane for events, public gatherings and meetings.

In the draft, the main bureaucratic requirement is approval by the city of Ann Arbor for a special events permit, which currently costs $34. There would also be an insurance requirement and the need to agree in advance to pay for any damages. Event organizers would not be allowed to drive stakes into the surface of the site. Trash is required to be removed from the site after an event. No water is available, and the use of power generators would not be allowed.

In some of the smattering of conversation on the issue, DDA board member Keith Orr ventured that he thought it’d be interesting to see a Bottom of the Park-type event, hosted on the lowest level of the underground garage – a play on the name of the Ann Arbor Summer Festival‘s “Top of the Park.”

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Ann Arbor public parking system: monthly permit use by length of stay. An example of the kind of data that’s possible to track for the public parking system. The DDA board has requested that Republic Parking start including additional data in its monthly parking report.

The DDA manages the city’s public parking system, and a report presented to the board for October 2012 – the most recent month for which data is available – showed $1.675 million in revenue, which amounts to an increase in revenue compared to October 2011 of about 15.5%. The increase is at least partly a function of rate increases, changes to the billing method, and an increase in the parking system inventory. The recently completed Library Lane underground parking garage offers more than 700 spaces, which were not available a year ago. The use of the parking system as measured by hourly patrons showed only a 1.8% increase.

At the meeting, DDA board member Roger Hewitt announced that future monthly reports would begin including more detailed information on the length of time patrons park in the system. Currently the board uses revenue levels as a kind of imperfect proxy for system usage.

Also related to the parking system, the stats for November will include the fact that the parking system maxed out – with all spaces in the entire system filled – on the night of the Midnight Madness holiday shopping promotion. That’s an event sponsored by the Main Street Area Association (MSAA), which took place on Nov. 30. Maura Thomson, executive director of the MSAA, relayed her appreciation to the board during public commentary for the DDA’s financial support of the holiday lights strung on trees downtown.

Again related to parking were brief remarks made to the board by local attorney Scott Munzel, who spoke on behalf of the developer of the proposed new residential project at 624 Church St. The DDA board had given its support for around 40 parking spaces to be provided for that 14-story, 81-unit apartment building through the city’s contribution-in-lieu program. Munzel alerted the board that the project was anticipated to be on the city planning commission’s Jan. 15, 2013 agenda. Munzel was hoping the location of the parking spaces in the public parking system could be determined by then.

Ray Detter, speaking for the downtown citizens advisory council, updated the board on another major development – 413 E. Huron. The northeast corner of Huron and Division is the location of a planned residential and retail development with 213 apartments – which does not need any variances in the D1 zoning district. Detter reported the developer’s intention to proceed with the development even through it was strongly criticized by the city’s design review board.

Addressing the board on a non-parking topic was Jim Balmer, president of Dawn Farm, a nonprofit offering both residential and out-patient services supporting recovery for alcoholics and drug addicts. Dawn Farm’s Chapin Street facility has been supported in the past by the DDA, and Balmer addressed the board to thank them for that support and to highlight a future funding request – $150,000 to pay down debt. The grant is intended to help Dawn Farm achieve a target of 200 beds for its residential facilities, up from the current 159 beds.

The board received news that the preliminary draft audit report indicates that the fiscal year 2012, which ended June 30, 2012, will be unqualified – that is, “clean.” The unrestricted net assets held by the DDA at the end of the fiscal year totaled about $8.65 million.

Parking

As usual, parking was a dominant theme of the DDA’s board meeting.

Parking: Profit-Loss

Roger Hewitt gave the parking report. It included a profit-and-loss statement on each facility for the year ending June 30, 2012. [.pdf of profit-loss statements] The second to the bottom line, he noted, reflects whether a particular structure “made money or not.” The key to that is three lines above that bottom line – bond payments.

Four structures still have bond payments being made, he pointed out. The Fourth & Washington and the Fourth & William structures still have the original construction bonds that need paying off, he noted. Two other structures have related bond payments: Maynard and Forest – which both underwent significant renovations. Hewitt pointed out that even after the bond payments are factored in for Maynard and Fourth & William, they’re still making money – unlike Fourth & Washington and Forest.

Hewitt said the more significant point is not to evaluate whether an individual structure is making money but rather whether the parking system as a whole is working. And the net annual income is nearly $800 per space, Hewitt said. So net revenue from the parking system is anticipated to be about $5.6 million for last fiscal year.

Responding to a question from Sandi Smith, Hewitt indicated that the $5.6 million figure was after making the payment due to the city of Ann Arbor, for 17% of gross parking system revenues. The total paid to the city was about $3 million or roughly $300,000 more than was budgeted, Hewitt said. It also includes the rent paid to privately-owned parking lots the DDA uses.

Parking: Midnight Madness

Hewitt also reported on a unique occurrence that, depending on your viewpoint, was either good or bad, he said. The previous Friday night, on Nov. 30, was Midnight Madness – and it maxed out the parking system. At some point during Friday night, every single spot at every structure and surface lot was filled, Hewitt said. That had happened only once before – on the Friday of the art fairs this year. That’s nearly 5,600 spaces, he said. The two structures at Maynard and at Fourth & Washington had parking activity that would be the equivalent of filling and emptying four times, Hewitt reported. If the new Library Lane structure had not been on line, it would have been necessary to shut down the system for 2 hours at the beginning of evening. There were almost 1,500 more parkers entering the system between 5-8 p.m. than last year on Midnight Madness.

John Mouat ventured that more important than the parking numbers were the people who were downtown. Hewitt said: “There were a lot of people downtown Friday night!” He saw that reflected in his restaurant. [Hewitt owns the Red Hawk.] Hewitt thanked the Republic Parking staff for their work in getting people in and out as quickly as possible.

Leah Gunn added that based on a conversation with Maura Thomson, executive director of the Main Street Area Association, “business was booming.” People were not just walking around, Gunn said, they were buying.

Maura Thomson, executive director of the Main Street Area Association.

Thomson also appeared before the board during public commentary time to thank the DDA publicly for the downtown holiday lights display. She felt it contributes to stimulating the downtown economy, and has an impact on the experience people have downtown that can’t be measured. It creates an environment that helps people feel connected to the downtown and makes people want to talk to other people about how great they think this downtown is, she said. As someone who works to promote downtown, she thanked the DDA for making her job easier.

Board member Nader Nassif responded to Thomson’s remarks by noting that he now lives on Fourth Avenue. He’d like to see the holiday lights expanded to other areas of downtown, not just Main Street. Sandi Smith echoed Nassif’s sentiments, calling it an easy piece of low-hanging fruit. Smith also suggested adding some wayfinding directions from the downtown to the Border-to-Border trail and the new Argo Cascades.

Parking: Monthly Report

The monthly parking report – comparing October 2012 against October 2011 – showed a 15.5% increase in revenue, with the number of hourly patrons up 1.8%. Hewitt pointed out that the new underground Library Lane structure showed about $77,500 in revenue, which he called “pretty good for a new structure.”

Hewitt indicated that the operations committee will be looking at the kind of statistics it requests from Republic Parking, the DDA’s subcontractor for parking operations. After adding the new Library Lane underground garage, the committee will be asking that Republic produce more detailed statistics on hourly users and how they affect the system. He said the format of the report would likely be modified to get a better idea of the impact of hourly users on the system.

Ann Arbor public parking system: Revenue. Compared to October 2011, revenue was up again (green trend line) – by 15% after showing about nearly the same revenue year-over-year in September. The revenue increase reflects increased rates, billing by the hour, and 865 additional spaces compared over the 6,955 in the system that were available in October 2011. It’s not clear how much additional usage of the system it reflects.

Ann Arbor public parking system: Patrons. Compared to October a year ago, the number of hourly patrons was up incrementally by 1.8%.

Ann Arbor public parking system: Focus on structures. The new Library Lane structure showed a clear upward trend in revenues per space (black trend line).

Ann Arbor public parking system: Focus on surface lots. The Fifth & William lot (purple trend line), near the newly opened Library Lane structure, may have lost some patrons to the new structure.

Ann Arbor public parking system: Focus on system. Revenue-per-space systemwide continues upward.

The different statistics that will be included in the standard monthly reports reflect an attempt to get a clearer picture of how different patrons are using the parking system. The DDA makes monthly permits available at prices that yield less revenue per space than the DDA would receive, if all spaces were paid at the standard hourly rate. For example, the standard hourly rate for a parking structure is $1.20 per hour. A standard monthly permit in some structures costs $145 per month. So a downtown worker who used a permit for eight hours daily would break just about even after three weeks, compared to paying hourly. [145/(1.2*8)]

The strategy the DDA is using to free up spaces for hourly patrons in structures near the University of Michigan campus has been to offer discounted permits in the new Library Lane structure – for new patrons or for people willing to shift their permits from Liberty Square or Maynard to the new Library Lane structure. That discounted rate is $95 per month. In the first week of December, 260 of the cheaper permits for Library Lane had been sold, with an additional 336 permits sold at the regular rate of $145 – for a total of 596 permits sold for the 738-space structure.

Revenue from permits alone for Library Lane would translate into about $73,000 per month. [336*145 + 260*95] Back in October, with fewer monthly permits sold, and about 8,000 hourly parking patrons using Library Lane, the structure generated $77,500 in revenue.

With additional statistics about how long hourly patrons are staying and how long monthly permit holders are parking, the DDA hopes to get a clearer understanding of the impact that pricing policies have on parking behavior.

Parking: Spaces for Bicycles

Two of the parking spaces in the Maynard structure will be given over to bicycle parking starting in March or April. John Mouat gave an update on the project, which getDowntown director Nancy Shore has suggested be called the “Bike House” – on analogy with the Big House, as University of Michigan’s football stadium is known.

Sketches and preliminary pricing has been done by designer Dan Mooney. At its Oct. 3, 2012 meeting, the DDA board authorized a $30,000 budget for the facility, which is expected to provide room for about 50 bikes.

Similar “cages” in other cities use a chain-link fencing material. However, the DDA hopes that a more aesthetically pleasing option can be identified. The preliminary drawings include a laminated glass half wall, instead of a chain-link design.

The facility is designed for commuters who would pay a rental amount for use of the “cage.” Bicyclists would still be responsible for securing their own bikes in racks inside the cage. [.jpg of rack configuration].

Development

A number of items on the Dec. 5 agenda related to the Ann Arbor DDA’s role as a development authority.

Development: Parking

Under city policy, the public parking system is used as a development tool – and that policy is implemented by the DDA. So local attorney Scott Munzel appeared before the board during public commentary time representing Opus Group of Minnetonka, Minn. – which is developing a residential project at 624 Church St. in downtown Ann Arbor. It will be a 13- or 14-story, 83-unit apartment building with approximately 181 beds. A request had already been made to the DDA by the developer to provide the required 40-42 parking spaces by contracting for them in the public parking system. That’s instead of building the spaces on site as part of the project.

The authorization to work out the parking agreement in the context of the city’s “contribution in lieu of parking” program came on a vote taken at the Oct. 3, 2012 meeting of the DDA board. The DDA manages the city’s public parking system under a contract with the city.

Ann Arbor’s “contribution in lieu of parking” program was authorized by the city council on April 2, 2012. That program allows essentially two options: (1) purchase monthly parking permits in the public parking system for an extra 20% more than the current rate for such permits, with a commitment of 15 years; or (2) make a lump sum payment of $55,000 per space. It’s option (1) that the 624 Church St. project will be pursuing.

At the DDA board’s Dec. 5 meeting, Munzel reported that the site plan for the project had been submitted and is expected to be on the Jan. 15 agenda of the Ann Arbor planning commission. Munzel ventured that the planning commission will want to know where the authorized spaces will be, and he told the board that the size of the building had settled in on a slightly smaller square footage, so that 40 spaces would be needed, not 42.

Munzel reiterated the developer’s request that those spaces be provided in the Forest parking structure, which is the closest one to the development. Munzel said that location would best meet the intent of the payment-in-lieu policy and would help stabilize revenue to the DDA. He offered to sit down and chat about that informally.

Development: Grant Request – Dawn Farm

Jim Balmer, president of Dawn Farm, told the board he guessed they all knew who he was, and that they’d seen the request that had been made for financial assistance to reduce the debt on two of the organization’s existing properties. By way of background, Dawn Farm is a nonprofit offering both residential and out-patient services supporting recovery for alcoholics and drug addicts. In 2001, the DDA had made a $135,000 grant to Dawn Farm to assist with the purchase of the property at 112 Chapin St.

The current request being made to the DDA is for $150,000 to help pay down the debt on two other Dawn Farm properties, at 343 Beakes and 324 Summit. The grant from the DDA would free up cash to expand the existing total 159 beds in Dawn Farm’s residential treatment facilities to 200 by early 2013, according to Dawn Farm.

Development: Update on 413 E. Huron

Reporting from the downtown citizens advisory council, Ray Detter told the board that in recent weeks, representatives of the eight downtown and near-downtown residential neighborhood associations had been negotiating directly with the developer of the project at 413 E. Huron St., which Detter described as a “massive 14-story … student housing building.” It’s located just east of Sloan Plaza and immediately adjacent to the Old Fourth Ward historic district.

Greenfield Partners is a financial backer of the project, Detter said. They have rejected all suggestions and requests from the city’s design review board to improve the design of the building, he reported. The design review board had recognized that context is important, and that the project is part of a specific character area, Detter said. [The city's development process of design review is mandatory, but compliance with the recommendations of the design review board is voluntary.] According to Detter, Greenfield Partners said that any further changes would affect the profitability of the project. The bottom line, Detter continued, is that the developer wants to make the maximum he can. “They call it ‘by right’ and they’re going to build it to make that money…”

Detter expressed some optimism based on the draft recommendations from the Connecting William Street project. A draft indicates that the planning commission would be required to report to the city council about how a project team responded to the recommendations of the design review board. The downtown citizens advisory council will join with other groups to work toward improving the design review process for all buildings, he said, not just those on public property.

Development: Board Retreat

Susan Pollay, executive director of the DDA, summarized the recent board retreat that was held on Nov. 17. The board had talked about the basics and what DDAs are created to do. They’d talked about what the board felt the Ann Arbor DDA did well and what outside stakeholders felt they did well, as well as what they did not do as well. A smaller group of the board had met after the retreat, she reported, and distilled the discussion from the retreat into key tactics:

1. Identity. There’s a lot of information that’s currently captured by the DDA about the downtown. More efforts could be made along these lines, Pollay said.
2. Infrastructure. It’s what the DDA is known for. The walkability and attractiveness of downtown is due in large part to DDA dollars, she said.
3. Transportation and parking. There’s more the DDA could do to merge the two areas. The DDA needs to look at the results of the Connector Study [on the corridor between US-23 and Plymouth, through University of Michigan campus and downtown to I-94 and State].
4. Business encouragement. The DDA should include a focus on “clean and safe” and should make conversations with the Main Street business improvement zone (BIZ) a part of that – which would help tap into the private sector.
5. Housing. It’s a key ingredient of the DDA’s success, Pollay said. The city and Washtenaw County, as well as the nonprofit community, have a role to play, she added. The DDA’s specialized role could be in supporting work-force housing. The DDA is trying to make it possible for people to live and work in the downtown.

Audit

Roger Hewitt reported that the operations committee had received a draft of the audit. The final version hasn’t been received yet, but he said it was completely clean as an accurate reflection of the DDA’s financial condition.

The statements include total net assets of $8,767,926 – nearly a $1 million increase over the previous year. That is primarily held in the balances of the DDA’s four different funds: TIF – tax increment finance ($4.7 million), parking ($2.1 million) and the two combined funds of housing and parking maintenance ($1.7 million). For the formal audit, the housing fund and the parking maintenance funds are lumped together as “non-major governmental funds.”

Bike Share

DDA board member John Mouat briefed his colleagues on a bike-share program that the DDA is being asked to support. A bike-share program would allow members to take a bicycle from a station and use it for a period of time. The concept is that several stations would be placed in a geographic area, so that a bicyclist could, as much as possible, ride from one station to another.

By way of background, a year ago – at the DDA’s Dec. 7, 2011 meeting – Mouat had briefed the board on a request from the Clean Energy Coalition for in-kind support for the bike-sharing program. The bike-sharing program would work on analogy to car-sharing programs like Zipcar. The initial request for only 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, 2012 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); the city of Ann Arbor ($15,000 this year and $40,000 annually for three years; and the University of Michigan ($66,000 this year and $200,000 annually for three years). The university was described as contributing the lion’s share because UM is interested in controlling the advertising component of the program.

At the board’s Dec. 5 meeting, Mouat described the project as having “run into a speed bump.” The CEC is looking to increase the amount of the requests. The question of how to ensure adequate operating expenses is crucial. Mouat indicated that his inclination was to put as much as possible of the responsibility on the University of Michigan. He described it as a complicated issue.

At the operations committee meeting of the DDA the previous week, Mouat had reported that the most recent meeting of the potential partners had become a bit contentious. At that operations committee meeting, DDA executive director Susan Pollay had supported the idea of having the University of Michigan take the lead with a launch that would be confined to the campus. When the program was established, it might be expanded – roughly on analogy with the way that the Zipcar program was rolled out in Ann Arbor.

The city of Ann Arbor is represented in the bike-share discussions by Eli Cooper, the city’s transportation program manager who also serves on the AATA board. In a telephone interview with The Chronicle, he indicated that he hoped the initial deployment would not be confined only to the University of Michigan campus. He pointed out that the concept of a bike-share is actually different from Zipcar.

When a patron of a Zipcar uses a vehicle, then the expectation is that the driver will use the vehicle for some period of time, perhaps driving somewhere and parking it for an hour or two, then returning it to the same Zipcar parking space. A bike-share program, in contrast, depends on the availability of a station near the intended destination, so that a user pays for the time of the travel, not for the entire “outing.” So Cooper hoped that the initial geographic deployment of stations would be as broad as possible. Cooper stressed that one of the challenges is that bike-share as a transportation strategy is relatively new.

Misc. Communications

The DDA board’s meeting included a range of other comments and communications.

Comm/Comm: Calendar

The board decided to move its January 2013 meeting to Jan. 9. Ordinarily it would have fallen on Jan. 2.

Comm/Comm: Thank You

Susan Pollay, executive director of the DDA, addressed the board at the end of the meeting during the public commentary time, saying she was wearing her citizen of Ann Arbor hat. She thanked DDA board member Sandi Smith for her tenure as a city councilmember. This year, Smith chose not to seek another two-year term after serving four years representing Ward 1 on the council.

Pollay also thanked DDA board member Leah Gunn, who was going to attend her final session of the Washtenaw County board of commissioners that night.

Comm/Comm: Adopting a Theme

Addressing the board at the conclusion of the meeting was Thomas Partridge. He encouraged the board to adopt a freedom theme for the 21st century. He called for the Ann Arbor Transportation Authority to provide transportation under the theme of Freedom Rides. Ann Arbor hasn’t adopted a theme and has been scooped by other cities like Atlanta, San Francisco, Chicago, New York, and Boston, he said. He criticized what he described as the Caucasian dominance of elected and appointed boards in Ann Arbor.

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

Absent: Newcombe Clark.

Next board meeting: Noon on Wednesday, Jan. 9, 2013, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date]

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DDA Quiz: Board member Sandi Smith is illustrating: (a) the "increment" in "tax increment financing," (b) the amount of a parking rate increase, (c) building heights and flood plains, or (d) relative thickness of concrete slabs in parking structures. (Photos by the writer.)

The amount of the award was 90% of the total amount the board could have awarded –$45,000 of $50,000. It’s the same amount the board has awarded in each of the last three years. It’s based on a variety of criteria, including customer satisfaction surveys, independent inspections of the parking facilities, and financial performance.

February’s meeting also included a review of the DDA’s finances at the mid-point of the fiscal year – through Dec. 31, 2011. The DDA’s fiscal year runs from July 1 to June 30. Operations committee chair Roger Hewitt sketched out a picture that portrayed things unfolding pretty much as expected. Although parking revenues are currently about $125,000 under the year-to-date budgeted amount, parking revenues are projected to finish the year at around $672,536 over the budgeted amount. The gross parking revenue now anticipated for FY 2012 is around $16.8 million. But capital costs associated with the new Fifth Avenue parking garage construction are anticipated to put the parking fund expenses over budget.

Part of that parking system revenue will come from rate increases and changes in billing methods, which were approved by the board at its Jan. 4, 2012 meeting. Some of the changes will not be implemented until September 2012 – like hourly rates at parking structures and lots, which will climb from $1.10 per hour to $1.20 per hour.

But other changes were implemented starting Feb. 1, including a change in the billing method at parking structures and hourly lots – from half-hourly to hourly. The board heard criticism of the change during public commentary, from a resident who makes frequent but brief trips downtown as a patron of the downtown location of the Ann Arbor District Library. The billing change amounts to a “surcharge” on his library use of a couple hundred dollars a year, he said.

The board also heard a pitch from the developer of the 618 S. Main project, Dan Ketelaar, who is interested in financing certain elements of the project through the state’s Community Revitalization Program. That’s the successor to the state’s brownfield and historic preservation tax credit program.

The 618 S. Main project, which received a positive planning commission recommendation on Jan. 19, would be a 7-story, 153,133-square-foot apartment building with 190 units for 231 bedrooms. The idea would be for the DDA to forgo a portion of the taxes that it would ordinarily capture on the newly constructed 618 S. Main project. The DDA captures taxes from the increment in value due to new construction within its tax increment authority (TIF) district.

The board also heard a pitch from Jody Lanning, with Lanning Outdoor Advertising, for a way to finance murals on the city’s parking structures and other public buildings. The board also entertained its usual set of updates from boards and commissions.

Parking Finances

The monthly report on parking revenues and activity is a standard element of Ann Arbor DDA board meetings. The report is usually delivered by board member Roger Hewitt, and the Feb. 1, 2012 meeting was no different. But earlier in the meeting, Hewitt had already touched on the state of the DDA’s parking fund as part of the fiscal year mid-point update.

And the topic of parking revenues, as reflected in a critique of recent rate and billing method increases, came up during public commentary, too.

Parking: Overall State of the Fund

The parking fund is one of four funds in the DDA’s system of accounting. The DDA’s fiscal year runs from July 1 to June 30. The six-month update for the parking fund, reported by Hewitt, shows year-to-date revenue as slightly below the amount budgeted. Specifically, through December 2011 the system had taken in $8,392,644, but the year-to-date budgeted amount is $8,518,094. [.pdf of year-to-date FY 2012 financial picture for all funds]

Still, Hewitt said, the DDA expects to finish the year with $16,835,288 in revenue against a budgeted amount of $16,162,752. That’s a surplus of $672,536 or 4.16% more than budgeted. So by year’s end, Hewitt concluded, the DDA anticipates almost $17 million in parking revenue. Parking operating expenses are, for the moment, lower than budgeted, Hewitt said – just $2,668,055 against $4,743,996 for the year-to-date budgeted amount.

But by year’s end, the capital expenses associated with construction on the new Fifth Avenue underground parking garage are expected to put operating expenses for the parking fund $1,450,514 (or 19.37%) over the year’s budgeted operating expenses of $7,487,994. Direct parking expenses – the contract with Republic Parking, including the 17% of gross that’s paid to the city – are currently slightly under budget, Hewitt said: $3,513,189 against a $3,844,733 year-to-date budgeted amount. But he anticipated that those expenses would be right on budget by the end of the year.

Overall, by year’s end the DDA anticipates spending $835,544 more out of its parking fund than it has taken in.

Parking: Monthly Report

Included in the board’s information packet were three reports: (1) the most recent monthly report, for December 2011; (2) the report for the most recent quarter, for October-December 2011; and (3) the report for the last six months, for July-December 2011. [.pdf of parking reports July-December 2011] All three reports, said Hewitt, tell the same story. Revenues are up 9-10% compared with the same periods a year ago – which is greater than the rate increase that has taken effect since then, Hewitt said.

Patrons are also using the system in greater numbers, he said. Compared with the same six-month period a year ago, the report shows 43,696 (or 4.06%) more hourly patrons. For a year, that projects to 90,000 additional trips downtown, he said. Hewitt called them “strong numbers in an economy that’s not booming.” He said the numbers show a very strong demand for parking.

Ann Arbor public parking system revenue. (Links to larger image)

Ann Arbor public parking system hourly patrons. (Links to larger image)

Parking: Hourly Billing – Approval

When Hewitt updated his colleagues on the parking numbers, he used a rough metric to evaluate the 9-10% increase in revenues over the period of July-December 2011, compared with the same period in 2010: If the percentage-wise revenue increase is greater than the increase expected solely from parking rate increases over the same period, it demonstrates that more total parking hours are being sold.

Sign at Fifth and William surface parking lot entrance off of William Street: "There will no longer be 1/2 hour increment rates." The same billing change applies to parking structures. Rates in structures are set to rise to $1.20 per hour in September 2012.

Until Feb. 1, 2012, that rule of thumb has not needed to factor in any changes to the time increment in the billing method. The billing method – which up until Feb. 1 was based on half-hour increments – has remained constant since 2003. But along with a a recent round of parking rate increases, approved by the DDA board at its Jan. 4, 2012 meeting, a billing method change was approved as well. Hourly parking – in structures and on surface lots – is now charged in hourly increments, not half hourly increments. Before considering the financial impact of that change, it’s worth reviewing the process used to decide rate increases.

A new contract, under which the DDA manages the city’s public parking system, was ratified in May 2011 with the city of Ann Arbor. The terms of the new contract give the DDA the authority to set rates. The previous contract allowed the city council to veto rate increases.

In order to implement parking rate increases, the DDA is required under terms of the contract to schedule a public hearing, with the details of planned rate increases spelled out in writing. The hearing is then to be held at the following month’s board meeting, with a vote coming no sooner than the board’s next monthly meeting. The DDA announced a public hearing before its Nov. 2, 2011 meeting and continued the hearing at its Dec. 7, 2011 meeting. The vote approving the rate increases was held at the board’s Jan. 4, 2012 meeting.

The rate increases described in the board’s Nov. 2 meeting information packet do not include the billing change from half-hour increments to hour increments. But the change in billing will have a substantial impact on the cost of parking and the parking system revenues.

Parking: Hourly Billing – Financial Impact

Some of the rate changes approved by the DDA board on Jan. 4, 2012 will not be implemented until September 2012 – like hourly rates at parking structures and lots, which will climb from $1.10 per hour to $1.20 per hour.

But other changes were implemented starting Feb. 1, including a change in the billing method at parking structures and hourly lots – from half-hourly to hourly.

To compare the hour-increment billing method to the half-hour billing method, assume that parking times are evenly distributed among those people who parked between N and (N + 0.5) hours and those who parked between (N + 0.5) and (N + 1) hours, where N is some whole number.

On the hour-increment billing method – for the current hourly rate of $1.10 – the first group would pay for N + 1 hours, or roughly $0.55 more than under the half-hour-increment method, under which they’d pay just for N + 0.5 hours. The second group would pay for N + 1 hours under either billing method. So by changing from half-hourly to hourly increments, half of the roughly 2 million annual hourly patrons would pay $0.55 more – generating roughly $550,000 more revenue annually.

In the monthly parking report for February 2012, which should be available by the time of the April board meeting (there’s a two month lag time), it’s reasonable to expect at least around $550,000/12 or $45,000 in additional revenue for that month, compared to February 2011.

The March 4, 2009 DDA board minutes reflect similar numbers based on the hourly rate at the time, $0.80: [emphasis added]:

Whereas, The DDA Operations Committee also determined that it has tools available to it to increase parking revenues if needed including the following (in recommended order):
-increase the daily cost of meter bags $5/day from $15/day to $20/day (anticipated to increase revenues by $181,000/year). The DDA could also limit the amount of meter bag fee waivers it provides nonprofits and government agencies, which is currently in excess of $150,000)
-Return to charging for parking by one-hour increments rather than 30-minute increments (anticipated to increase revenues by $400,000/year). The change to 30-minute increments was made in 2003.
…

Back in 2009, the DDA board was simply weighing various alternatives for generating revenue – at the request of the Ann Arbor city council to explain how the DDA could afford construction of the new underground parking garage. The board did not act at the time to change the billing method.

Beyond a clarificational question asked by board member Nader Nassif at the Jan. 4 meeting, the board did not deliberate on the billing method change, and it received little, if any, public scrutiny – because the change was not included in the written set of rate increases associated with the public hearing. However, the change in billing method did not go unnoticed.

Parking: Hourly Billing – Public Commentary

During the public commentary period at the start of the Feb. 1 meeting, Matthew Barritt told the board he is concerned with two things: (1) short-term parking for library patrons; and (2) the change from half-hourly billing to hourly billing for structures and lots. As a result of the construction on the new underground parking structure on Fifth Avenue, he said, two dedicated spaces on the lot next to the library – for 10-minute short-term use by library patrons – were eliminated. There used to be a 10-minute grace period, he said.

Ann Arbor District Library book return slot off of William Street.

Barritt described how he and his family visit the library about twice a week – dropping off and picking up books, after reserving them online. They previously were able to come and go under the 10-minute grace period. Now, he’s had to pay 60 cents per visit to the library to check out and pick up books.

Barritt asked for a restoration of the 10-minute grace period. It’s his understanding that there is a grace period, but it’s not publicized and does not seem to be operationally functional. Because there’s no longer dedicated spaces with a 10-minute grace period, he said, it works works out to a “surcharge” of over $100 on his library use.

And with the change from half-hourly billing to hourly billing, Barritt said, the effective parking rate is different from the advertised rate. It’s always rounded up, he pointed out, and that results in an underrepresented rate. As an example, he said, for 10 minutes – at an hourly rate of $1.30 (rounded up) – that works out to nearly $8 an hour.

Barritt stated that the practice is inappropriate and he ventured that the DDA couldn’t have pitched such a rate to the city council for approval. He recognized the need for revenue, but stated that the effective rates should be the same as the advertised rates.

Barritt concluded by saying he’d like to see a fully-functional 10-minute grace period in the current lot as well as in the new underground parking structure.

Parking: Hourly Billing – Board Discussion

Later in the meeting, as Roger Hewitt was updating his board colleagues on parking revenues, Joan Lowenstein asked about the issue that Barritt had raised. Hewitt responded by saying that with the transition to hourly billing (instead of half-hour increments), a 10-minute grace period would remain in place. Board member Russ Collins wondered if that would apply even to lots with automatic walk-up pay stations (without attendants).

William Street just north of Fifth Avenue looking west. Five-minute parking is available next to the downtown location of the Ann Arbor District Library.

DDA deputy director Joe Morehouse clarified that the grace period is implemented for all hourly facilities, but he acknowledged that the dedicated spots for library patrons are not provided in the Fifth and William lot [also known as the Old Y lot]. That’s the lot that essentially became the closest surface-lot alternative for library patrons after construction began on the site for the underground parking structure. Morehouse clarified that there is, in fact, a 10-minute grace period – in fact, it can be stretched to 15 minutes to allow for time to exit the lot.

Leah Gunn, who chaired the board meeting in Bob Guenzel’s absence, noted that on East William Street (just north of Fifth Avenue) there are 5-minute on-street spaces for quick drop-offs at the library – that’s where the book and the audio visual return slots are located.

In the new underground parking structure, Hewitt added, a walk-up payment system will be a primary option. Those will be in place on the surface and on the first two levels underground. Patrons will pull a ticket on the way in and put the ticket into the automatic pay station on the way out – which will allow payment with a credit card or cash. A staffed booth will also be available if that’s what a patron prefers. There will be no pay stations on underground levels three and four initially, because they’re expected to be filled with monthly permit holders.

Parking Management Incentive

Although the DDA manages the city’s public parking system under contract with the city of Ann Arbor, it uses a contractor, Republic Parking, to handle day-to-day operational issues. At its Feb. 1 meeting, the board considered a management incentive under the terms of its contract with Republic Parking. The board has discretion to award $50,000 of the $200,000 total. The other $150,000 of the $200,000 is not discretionary, and is paid to Republic in monthly installments.

The management incentive is paid based on customer satisfaction surveys and independent inspections of the parking facilities, as well as other metrics. The free responses section of the survey included a range of sentiments, from enthusiastic praise of specific Republic Parking employees (“Staff is always very friendly” and “Teri and Cathy are the greatest!!”), complaints about employee job performance (“I don’t pay $12-$13 a day to be inconvenienced because your employees can’t get their job done timely!”), praise for the facilities (“Very clean and nice art work on ground floor at curved wall on the southeast comer”) and criticism of the facilities (“Please clean more. And take care of the awful smell on floor 4″). Sprinkled through the responses are complaints about parking rates. [.pdf of parking customer responses]

The rating scale responses of the survey broke down as follows: 5-Excellent (36.5%), 4 (26.3%), 3 (14.0%), 2 (9.5%), 1-Poor (6.7%), Non-Responsive (6.9%). Last year the same survey yielded the following results: 5-Excellent (22.5%), 4 (32.3%), 3 (17.9%), 2 (4.6%), 1-Poor (2.2%), Non-Responsive (20.1%). So the number of survey respondents giving a rating of 5 or 4 increased from 54.8% to 62.8%. The rating of 1 or 2 also increased, from 6.8% to 16.2%. Around 600 people responded to the survey.

The DDA’s independent parking inspector made 48 written reports to evaluate the cleanliness of the facilities systemwide last year. Average for the year was 90.48%, which is a three-point drop from last year’s score of 93.7%.

The Dec. 31, 2010 accounts receivable balance for parking permit accounts stood at $106,965. That’s 25% of the average monthly billing and five times the target of 5%. But it reflects a decrease from 28.5% last year. The dead ticket average was 2.56% for the year – an increase from last year’s 1.56%, and above the target of 1.75%. The operating surplus on June 30, 2011 was $23,133 more than budgeted.

At the board meeting, Roger Hewitt explained the structure of the Republic Parking contract with the DDA and described the various criteria. DDA staff had weighed all the criteria, made an overall assessment and was recommending $45,000 compared with the maximum $50,000.

In each of the previous three years (2009, 2010, and 2011), the DDA board voted to award the same $45,000 incentive. In those years, mayor John Hieftje had voted against the incentive. This year the vote was unanimous.

Outcome: The board voted unanimously without substantial discussion to award $45,000 out of the $50,000 management incentive.

Communications, Committee Reports

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

Comm/Comm: Underground Garage Construction Update

John Splitt gave an update on the underground parking garage construction. He noted that despite the mild winter, temperatures have not been high enough to allow for the application of waterproof coatings. Work on mechanical systems like elevators, however, continues. Roger Hewitt noted that for an underground parking structure it actually has a bright and open feel to it. The ceilings are two feet higher than in the Maynard structure. The architect, Carl Luckenbach, did a great job with the stairwells, he said – the sun shines down four stories underground.

Hewitt also gave an update on the precise number of underground spaces the structure is expected to provide: 706. [The initial design estimates for a larger structure that would have extended to William Street put the number at around 770. When that dogleg was truncated, it reduced the estimate to 670. More recently, the more conservative figure of 640-650 has been given.]

Comm/Comm: getDowntown Survey

Nancy Shore, director of the getDowntown program, gave the DDA board an update on a survey that had been completed, asking downtown employers and employees about their commuting habits. The survey showed a slight reduction in the number of people who commute by driving alone. [.ppt file of getDowntown commuter survey]

Comm/Comm: Vacancies, SEMCOG, William Street

Joan Lowenstein reported on the most recent meeting from the partnerships committee. Committee members had received an update from representatives of Swisher Commercial about downtown vacancy rates. Ann Arbor is somewhat immunized from the economic downtown, she said. Vacancies decreased by 2.5% in 2011 and there’d been a 40% increase in lease dollar volume – landlords are willing to show some optimism by entering into longer-term leases. Lowenstein said some companies looking to expand can’t find the larger floorplates they need.

Lowenstein also reported that the committee had received an update on forecasts from SEMCOG (the Southeast Michigan Council of Governments) through 2040. SEMCOG estimates the region will make a slow recovery over the next 30 years. [For a more detailed breakdown, see Chronicle coverage of the presentation made to the planning commission: "City Planners Preview SEMCOG Forecast"]

Village Green City Apartments Groundbreaking on Jan. 26, 2012.

Lowenstein reported that the “Discovering Midtown” project – a process for exploring alternate uses of downtown city-owned surface parking lots, has had its name changed. The effort will now be known as “Connecting William Street,” to avoid confusion with a character district in the city’s zoning ordinance that is called Midtown.

The process is being led by the DDA based on direction given by the Ann Arbor city council at the council’s April 4, 2011 meeting. Lowenstein reported that a leadership and outreach committee is working on social media strategies. A hundred different stakeholders and groups have been identified. In mid- to late February a community-wide survey will be released. Parts of that survey are currently being finalized.

Lowenstein also noted that ground had been ceremonially broken on Jan. 26 for Village Green’s City Apartments project at First and Washington. That’s a joint venture between Village Green and the DDA, which will include two floors worth of public parking on the first two stories of the building, some of which will be reserved for residents of the building.

At the Feb. 1 meeting, the board briefly discussed the possibility of canceling the February partnerships committee meeting. Noting a possibly very light agenda, board members were inclined to cancel the committee meeting, which would ordinarily have taken place the week after the board meeting – in this case, on Feb. 8. The board agreed to do that. Executive director Susan Pollay’s suggestion that the 618 S. Main project would be a suitable topic for the partnerships committee agenda that month was not met with any outward signs of enthusiasm from board members.

Comm/Comm: 618 S. Main

During public commentary, Dan Ketelaar spoke about his 618 S. Main project. It would be a 7-story, 153,133-square-foot apartment building with 190 units for 231 bedrooms, located on the former site of Fox Tent & Awning between Main and Ashley, north of Mosley. Ketelaar described the location as in the southernmost part of the DDA district. He also described it as a “gateway project.” He noted that it is located in an area zoned D2 (downtown interface) and is being developed for young professionals. A week and a half ago, he told the board, the Ann Arbor city planning commission had given the project its recommendation, at its Jan. 19, 2012 meeting.

618 South Main facade, facing west from Main Street. (Links to larger image)

The building would include two layers of parking – more than what’s required, Ketelaar said. The courtyard would include a rain garden, and the project would meet the silver standard for LEED certification. Ketelaar told the board he’s suggesting redoing the streetscape along Main between his project and William Street. He reported that Ward 5 councilmember Mike Anglin had requested that traffic calming measures be implemented along that stretch, including adding on-street parking. Ketelaar said he’s interested in helping to “create the future of Ann Arbor” and not just deal with the past.

Early in his turn at the podium, Ketelaar described the parcel as a brownfield site, a topic that the attorney for the project, John Byl, elaborated on. Byl is with the firm Warner Norcross & Judd. He described contamination on the site due to petroleum from an underground tank. The project would clean up that contamination under the state’s Community Revitalization Program, which is the successor to the brownfield program. The required local contribution to that program, he suggested, would come from the DDA. The project would mean a $25 million investment resulting in a taxable value of $9.5 million. He calculated that it would generate $250,000 in additional tax increment finance capture per year.

By way of brief background, 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, like the city or library. The tax capture is only on the increment in valuation – the difference between the value of property when the district was established, and the value resulting from improvements made to the property. In the DDA district, only the taxes on the initial increment are captured – any additional inflationary value beyond that goes to the taxing authorities in the district. Those authorities are the Ann Arbor District Library, Washtenaw Community College, Washtenaw County, and the city of Ann Arbor.

A spiral-bound booklet on 618 S. Main, distributed to board members at the Feb. 1 meeting, outlined the costs for various LEED features – like rain gardens and solar panels, plus streetscape improvements – totaling $2.3 million. The developer would pay all those costs upfront, but six months after a certificate of occupancy is issued, Ketelaar would be reimbursed for up to $1 million, Byl suggested. That would be around mid-2014 or so. The balance of roughly another $1 million would be reimbursed over time from the tax increment that the DDA captured. If the DDA reimbursed at a rate of 75% of the $250,000 a year it would receive in additional tax capture, it would take about six years to reimburse those expenses, concluded Byl.

Comm/Comm: Murals

During public commentary at the start of the meeting, Jody Lanning – owner of Lanning Outdoor Advertising – pitched the board an idea for an advertising partnership involving the placement of murals on public parking structures. She told the board she’s been in the outdoor advertising industry for 18 years.

Concept for a mural on the Fourth and William parking structure in downtown Ann Arbor – presented to the DDA board by Jody Lanning.

She’s worked in the Atlanta and Kentucky markets, she said, and she moved to Michigan three years ago. She said she’s noticed how public art is used in other cities, and she enumerated several benefits of public art. She presented slides depicting some parking garages and the city hall building with concepts for murals.

The business model would consist of renting wall space on parking garages – it would be funded through sponsorships. She estimated that a wall could generate $5,000 in income. Her proposal would be that she’d received a 50% share – out of which 10% would be put aside for scholarships. She suggested forming a board of perhaps four people who would make decisions on the art.

Comm/Comm: Rezoning from D2 to D1

A highlight from Ray Detter‘s report from the previous evening’s meeting of the Downtown Area Citizens Advisory Council included the highlight that nearby residents of 1320 S. University had attended the meeting. They’re opposed to a proposal to rezone that parcel from D2 to D1, which will be considered by the planning commission on Feb. 7, 2012. Detter said the CAC will oppose the rezoning. [The city planning staff recommended denial of the request.]

Present: Nader Nassif, Roger Hewitt, John Hieftje, John Splitt, Sandi Smith, Leah Gunn, Russ Collins, Joan Lowenstein, John Mouat.

Absent: Newcombe Clark, Bob Guenzel, Keith Orr.

Next board meeting: Noon on Wednesday, March 7, 2012, at the DDA offices, 150 S. Fifth Ave., Suite 301. [confirm date]

However, the meeting did include the regular monthly parking report – a comparison of the most recent month’s available data, compared with the same month a year ago. That regular parking report may be somewhat more detailed in the future. For the July board meeting, however, the board received its standard report.

Total public parking revenues for May 2011 were $1,218,442, based on permit holder fees plus fees paid by 170,471 hourly parkers in structures. That’s an increase from May 2010, which had $1,145,740 in total revenues and 169,466 hourly parkers.

Percentage-wise that’s a 6.35% increase in revenue and a 0.59% increase in the number of hourly parkers, with a total system parking space inventory of 19 additional spaces: 7,149 in May 2011 compared with 7,130 in May 2010.

The board has recognized for some time that this kind of measure for parking demand is somewhat coarse. The number of hourly parkers gives some insight, as does the total revenue, but these data do not provide a direct measure of how much of the system’s capacity is being used.

At the DDA board’s bricks and money committee meeting on Wednesday, June 29, Joe Morehouse – deputy director of the DDA – presented committee members with data showing the percentage of total parking hours sold for parking structures, with 100% corresponding to the (practically impossible) scenario of every spot in every space filled with a car 24/6 (structures are free on Sunday) and no time lost when one car pulls out and another pulls in. Like the standard parking report, the comparison for May 2011 against May 2011 using that metric also showed an increase in demand: 33.22% in May 2010 compared to 34.94% in May 2011. [Ann Arbor public parking efficiency chart]

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