During communications time for the council’s meeting on Feb. 19, 2013, Stephen Kunselman (Ward 3) expressed his view that the CIP should start including the 360 units of public housing managed by the AAHC.

Ann Arbor Housing Commission properties. The size of the dot is proportional to the number of units in the location. (Map by The Chronicle. Image links to interactive map.)

Kunselman’s argument for future inclusion of AAHC properties in the city’s CIP is based in part on the fact that the city of Ann Arbor currently holds the deeds to those properties. But his broader point is that he’s opposed to the city relinquishing title to the properties – as part of a proposal made to the council by AAHC executive director Jennifer L. Hall. Hall has served in that capacity for about a year, and began her Feb. 11 presentation at the council work session with an overview of improvements that AAHC has achieved since she took the post.

Hall’s proposal stems from a need to cover an estimated $500,000 per year funding gap for needed capital investments, coupled with a perceived shift in priorities by the U.S. Dept. of Housing and Urban Development (HUD) in its funding strategy. That shift is somewhat away from subsidized public housing, where rent is subsidized in units owned by a housing commission. [Ann Arbor's situation is apparently unique – because the city, not the AAHC, holds the deeds.] While HUD still allocates several billion dollars nationally for public housing, it subsidizes even more in programs that are based on vouchers. And based on the last three years, the trend is toward more funding on the federal level for vouchers than for public housing.

Some HUD vouchers are tied to a tenant – a person. A potential tenant can take that voucher to a private landlord – and it’s the tenant who receives the rent subsidy, wherever that tenant is able to rent a place to live. Other HUD vouchers are tied instead to privately-owned property, and whoever lives in that private project receives the rent subsidy.

The strategy that Hall will be asking the council to authorize is one that converts AAHC properties to part private ownership, in order to take advantage of project-based HUD vouchers. The private ownership of the AAHC properties will also allow the possible use of tax credit financing to pay for needed capital investments – roofs, boilers, plumbing and the like.

The conversion to project-based vouchers would take place under HUD’s Rental Assistance Demonstration (RAD) program. To set the stage for that, the board of the AAHC selected a co-developer at its Jan. 10, 2013 meeting: Norstar Development USA.

The council would need to take two specific steps in order to proceed with the RAD: (1) approve the contingent transfer of the city-owned AAHC properties to the AAHC; and (2) approve a payment in lieu of taxes (PILOT) for the properties so that they’d owe just $1/unit in property tax per year. As city-owned properties, no property tax is currently owed. Without the PILOT provision, taxes would be owed. Requests to take those steps are expected to come to the council in March. March will also be a period during which public hearings will take place on this issue.

Although Kunselman expressed clear opposition to the idea of transferring the deeds, and Mike Anglin (Ward 5) joined him in expressing significant skepticism, other councilmembers were more positive. They still had several questions about the complexities and the risks associated with the RAD program. [For more background on the AAHC’s efforts to prepare for the RAD program, see Chronicle coverage: “Housing Commission Eyes Major Transition.”]

The Feb. 11 budget work session included the 15th District Court and the capital improvements plan (CIP). A session held on Feb. 25 covered the fund-by-fund budget picture for the next two years. Presentations on those topics are covered in separate Chronicle reports. The council’s discussion of its budget priorities – identified at a planning retreat late last year – is expected to begin at a March 11 work session.

Highlights of Hall’s Feb. 11 presentation to the council included accomplishments of the housing commission over the last year, as well as a description of the properties Hall considers to be in the best condition, contrasted with those in the worst condition. She then walked the council through the key elements of the RAD program. Councilmembers had a range of questions.

Housing Commission Accomplishments

Ann Arbor Housing Commission executive director Jennifer L. Hall has held that position for a bit over a year. The AAHC board made the decision to hire her at its Oct. 19, 2011 meeting. At her first meeting of the board, on Dec. 21, 2011, she sketched out a possible expansion scenario.

Jennifer L. Hall, executive director of the Ann Arbor Housing Commission, addressed the city council at its Feb. 11 work session.

But Hall’s presentation to the city council on Feb. 11, 2013 focused on a path to sustaining the existing units of housing administered by the AAHC. To be eligible for the RAD program, for example, AAHC public housing could not have a “troubled status” designation. Hall was able to report to the AAHC board last fall, at its Oct. 17, 2012 meeting, that AAHC’s public housing operations no longer had a “troubled status” designation from HUD.

The news about AAHC’s public housing program emerging from the “troubled status” designation to achieve “standard performer” status was accompanied by even better news for AAHC’s voucher program (Section 8). After previously having “troubled” status, the AAHC voucher program is now considered by HUD to be a “high performer.”

Some of the data underlying the better status includes the time it takes AAHC to make a public housing unit ready for the next tenant after one tenant moves out – the “unit turn” time. Three years ago, based on minutes from the Jan. 20, 2010 board meeting, one subset of the AAHC public housing units had turn times of as much as 270 days. But that’s improved to 21 days on average, with another 14 days to occupy a unit – for a total of 45 days on average to get a new tenant into a unit after the previous tenant moves out.

Because HUD gives AAHC a rent subsidy for a unit only if it’s occupied, an unoccupied unit translates to zero revenue for AAHC. The overall vacancy rate for AAHC public housing has improved from 95% (12-20 vacant units) to 99% (1-5 vacant units).

Toward the end of the council’s session on AAHC, Chuck Warpehoski (Ward 5) told Hall that he appreciated the leadership she’d shown during her short time as head of AAHC. That helped him have confidence in what she was proposing. And despite his opposition to the proposed conversion through the RAD program, during the “thank you mode” of the presentation, Kunselman added his thanks to Hall, saying that he was most impressed with the turnaround.

Housing Commission Properties

At the council’s Feb. 11 work session, AAHC executive director Jennifer L. Hall gave councilmembers an overview of some of the housing commission’s properties – from the best-maintained units to those with problems.

As an example of the commission’s best-maintained properties, Hall cited Baker Commons, a building with 64 one-bedroom apartments located in downtown Ann Arbor at the intersection of Packard and Main streets. Hall described Baker Commons, which was built in 1980, as the housing commission’s “best, most beautiful building.”

Baker Commons still requires maintenance, however. Last fall, on Oct. 3, 2012, the Ann Arbor Downtown Development Authority board allocated a $260,000 grant for the replacement of the roof on Baker Commons. The work was done in mid-November. Hall also showed the council before-and-after slides of the carpeting in a common area, replaced by marmoleum.

Two-foot contour map of the North Maple Estate property. The highest portion of the site is toward the north (upper left of the image), where no units were built.

She contrasted Baker Commons with units at North Maple Estates on the west side of town. The topography of the site poses challenges, and she described how many of the units have been built on the lowest part of the parcel. There are constant flooding issues, she said.

Based on a 2009 capital needs assessment, Hall estimated the capital investment gap – between what was actually needed and the amount HUD would be giving AAHC for public housing capital repairs – at around $500,000 per year. And the RAD program, with its potential for tax credit financing through privatization, is a way Hall would like to address the capital needs of most of the properties all in “one go.”

North Maple Estates was a touchstone for Ward 3 councilmember Stephen Kunselman’s remarks toward the end of the work session on the housing commission. He grew up on the west side of town, and had friends who lived in the project – which consists of 20 4-5 bedroom detached single-family units, built in 1969. He allowed that he was a little bit “nostalgic,” but noted that the families who lived in North Maple were families he grew up with.

Responding to Hall’s estimated $500,000 annual capital needs for all of the commission’s public housing units, Kunselman contended that much of that was for shorter-term needs, like appliances and boilers. So he wanted to make sure that any solution to cover that funding gap was longer-term – because appliances might need to be replaced again in 10 years. He was concerned that the housing commission might find itself in exactly the same situation 10 years from now.

Kunselman concluded that he would not support the transfer of deeds from the city to the housing commission so that a private entity could become the majority owner of the properties. Kunselman was also not supportive of transferring housing commission employees to the new private entity. When the council is asked to approve the transfer, Kunselman said, “I will say no.”

While other councilmembers expressed concerns and had questions, their outlook was more positive than Kunselman’s. Sabra Briere (Ward 1) allowed that Kunselman is right – it’s all about the people who actually live in the housing commission’s units. But she didn’t want to rule anything out until the council gets to the point of making a determination. She’d look at it with a level of optimism and skepticism.

Christopher Taylor (Ward 3) allowed that there was a certain amount of risk, but he looked at the potential for an “eight-figure” reward. He characterized the approach recommended by Hall as a “hard restart” which the city should consider investigating.

More Background on the Conversion

By way of general background, public housing is supported with government funding – primarily at the federal level – and owned by local government entities. The city of Ann Arbor actually owns the units administered by the Ann Arbor Housing Commission. From the city ordinance establishing the Ann Arbor Housing Commission [emphasis added]:

All deeds, mortgages, contracts, leases, purchases, or other agreements regarding real property which is or may be put under the control of the housing commission, including agreements to acquire or dispose of real property, shall be approved and executed in the name of the City of Ann Arbor. The Ann Arbor City Council may, by resolution, decide to convey or assign to the housing commission any rights of the city to a particular property owned by the City of Ann Arbor which is under the control of the housing commission and such resolution shall authorize the City Administrator, Mayor and Clerk to take all action necessary to effect such conveyance or assignment.

Another kind of government-subsidized housing (Section 8 vouchers) supports individuals who qualify based on their household income. Residents use those vouchers to help pay for private rental housing of their choice. Locally, AAHC manages the Section 8 voucher program for Washtenaw, Monroe, and western Wayne counties. AAHC also manages the public housing units in Ann Arbor.

In her presentation to the council on Feb. 11, Hall explained that a year ago the AAHC had 1,298 vouchers under contract, with a goal to have 1,378 under contract by December 2012. That goal was exceeded, as 1,420 vouchers are under contract as of January 2013.

To a more limited degree, HUD also provides project-based vouchers. For example, the AAHC has an allocation of 37 vouchers that are tied to specific projects, including 20 for the nonprofit Avalon Housing’s Pear Street apartment complex and 12 for assisted living in units managed by Area Agency on Aging 1-B.

Part of the reason Hall would like to convert AAHC’s public housing to project-based vouchers is due to a policy shift by HUD – away from public housing and toward voucher programs.

U.S. Department of Housing and Urban Development: Voucher programs versus public housing programs. Over the last three years, HUD voucher programs (blue) have shown an increasing funding trend compared to public housing (red). Voucher programs are also funded at a much higher level overall – $28.2 billion compared to $5.8 billion in 2012.

The RAD program, which Hall was proposing to the council on Feb. 11, uses the project-based-voucher approach, but also allows entities like the AAHC to partner with private-sector developers on housing projects – something the AAHC currently can’t do.

Overall, Hall sees HUD as more committed to the voucher-based approach in the future, which would provide AAHC with a more reliable funding source for ongoing operations.

But the RAD project-based-voucher approach also allows public housing entities to tap private investment for needed capital improvements on existing public housing – by converting current public housing units into units that are owned by a public/private partnership.

Based on a 2009 capital needs assessment, Ann Arbor’s public housing stock would need about $40,000 per unit in repairs and renovations over the next 15 years. But based on current funding levels for public housing, HUD would provide only about $18,000 per unit over that period – or possibly less. The gap works out to $22,000 per unit. For the AAHC’s 360 units, that’s $8 million over the next 15 years, or in round numbers, about $500,000 a year.

Hall’s plan is to seek a range of financing in connection with the RAD conversion. But the main source is likely to be low-income housing tax credits (LIHTC), awarded through the Michigan State Housing Development Authority (MSHDA). Tax credits are awarded for projects, and are in turn sold to investors who provide funding for construction or renovation. Depending on market conditions and other factors, pricing for those credits could range from roughly 85-95 cents on the dollar. From a recent report by the Congressional Research Service:

Typically, investors do not expect the project to produce income. Instead, investors look to the credits, which will be used to offset their income tax liabilities, as their return on investment. The return investors receive is determined in part by the market price of the tax credits. The market price of tax credits fluctuates, but in normal economic conditions the price typically ranges from the mid-$0.80s to low-$0.90s per $1.00 tax credit. The larger the difference between the market price of the credits and their face value ($1.00), the larger the return to investors [.pdf of "An Introduction to the Low-Income Housing Tax Credit" from the Congressional Research Service.]

These are the Ann Arbor public housing properties being considered for conversion, that were included in AAHC’s RAD application:

• Baker Commons: 64 one-bedroom units
• Green Baxter Court: 24 townhomes with a total of 65 bedrooms
• Hikone: 30 townhomes with a total of 82 bedrooms
• Lower Platt: 4 houses, each with 5 bedrooms
• Miller Manor: 104 units with a total of 108 bedrooms
• Evelyn Court: one single-family home with three bedrooms
• Garden Circle: one single-family home with three bedrooms
• Maple Meadows: 30 townhomes with a total of 82 bedrooms
• North Maple Estates: 20 single-family homes with a total of 85 bedrooms
• North Maple duplexes: Two three-bedroom duplexes, for a total of 12 bedrooms

In addition to choosing Norstar Development USA as a co-developer, AAHC has already completed several other steps needed for the RAD initiative. Three entities have been hired as consultants to help handle various aspects of the process. Avalon Housing, a local nonprofit that focuses on supportive services for affordable housing, was hired as a consultant to take the lead in applying for low-income housing tax credits (LIHTC). [.pdf of Avalon Housing contract] The AAHC had originally hoped to apply for a February round of credits, but given the short timeline, has decided to wait until the August round.

From left: Ann Arbor Housing Commission board members Ron Woods and Christopher Geer attended the city council work session on Feb. 11. Other board members are Leigh Greden, Marta Manildi and Gloria Black.

Also acting as a consultant is Tom Davis of Recap Real Estate Advisors. [.pdf of Recap Real Estate Advisors contract] Davis will provide advice about compliance with HUD regulations as well as financial transactions that AAHC might pursue, including the application for low-income housing tax credits.

AAHC will also be getting help with this transition from Rochelle Lento, an attorney with Dykema who specializes in LIHTC deals. [.pdf of Dykema contract] Lento has already been working with AAHC on a pro bono basis, and assisted with changes to bylaws and articles of incorporation for an AAHC nonprofit subsidiary – the Ann Arbor Housing Development Corp. – which will serve as the entity that enters into partnerships for these RAD projects. Those changes were approved by the AAHC board at its Nov. 14, 2012 meeting.

Council Questions: Highlights

At the Feb. 11 work session, councilmembers had a number of questions and concerns. Here are some highlights.

Council Questions: Norstar?

Sally Petersen (Ward 2) asked about Norstar Development USA – the co-developer that AAHC has selected: What’s in it for them? Hall explained that Norstar’s business is doing housing development. Norstar does its own housing development, but also hires itself out – just like an architect or an engineer would – to do projects. Norstar’s staff would share the developer fee, and get paid to do the work of putting the project together, Hall explained.

Norstar gets paid to hire architects and engineers, complete the due diligence, and oversee construction. “They’re a developer – that’s their business,” Hall explained. Norstar has expressed to the Ann Arbor Housing Commission that they’re not necessarily interested in being involved for the full 15-year period imposed by the IRS compliance for affordability of the housing units involved in this type of deal. The deal could be structured in a way for Norstar to exit sooner than 15 years.

Hall explained that Norstar’s business is more on the development side, as opposed to the property management side. Norstar has a property management company that it works with, but that company is not a part of Norstar, Hall told the council.

Council Questions: Why Now?

Petersen noted that the LIHTC-type of financing that would be used has been around since 1986. She asked Hall to give two or three reasons why Ann Arbor should do this now?

Hall cited the opportunity provided through the RAD program as the main reason for acting now. Through RAD, Hall explained, HUD is promising new, additional project-based vouchers to be attached to the AAHC units. “That’s the number one reason to do it,” Hall said.

Council Question: Pre-development Funds?

Sumi Kailasapathy (Ward 1) asked Hall about the estimated pre-development costs of around $100,000-$200,000. That would cover all the due diligence. Kailasapathy wanted to know how that cost would be covered.

Hall explained that HUD will allow the AAHC to take the first $100,000 out of its own budget. The rest is being negotiated with Norstar, Hall said. Normally, the developer would pick up those costs as risk, as part of the deal. So that’s all being negotiated right now, Hall said.

Hall also told the council that AAHC would be applying for pre-development funds from grant sources. But Hall confirmed that the first $100,000 would be coming out of AAHC’s existing budget.

Council Question: All or Just Some Units?

Christopher Taylor (Ward 3) wanted to confirm that all of AAHC’s units would be included in the proposal. Hall indicated that was right, but noted that it would likely happen in two phases.

AAHC was approved for around 280 units in its initial application, she said. Now that the developer, the architect and the contractor have looked at the housing commission’s properties, they have some different ideas about the properties in the initial application. So AAHC has talked to HUD about modifying or amending its initial application.

AAHC is looking at a rehab package for the first phase. For the second phase, there’s consideration of some demolition and new construction. But that’s too much work to undertake right now, Hall said, so there would likely be an application for a second phase next year.

Council Question: Big Deal? Promises?

Taylor asked Hall how big a reset this would be, if this all works out. “Gigantic,” Hall answered. “There is no other way to reinvest and keep these units in the condition they need, unless the city puts a significant chunk of funding in every single year. I don’t know how we would do it.”

Taylor followed up by asking Hall what gave her confidence that HUD’s promise of increases to this type of voucher program would be kept.

Hall told Taylor that she personally attaches skepticism to everything that HUD does, but she said she didn’t know how HUD would get out of the contract. Rochelle Lento, an attorney with Dykema who specializes in LIHTC deals, clarified that when HUD assigns the project-based vouchers with AAHC, they’ll enter into a 15-20 year HAP (housing assistance payment) contract, and that will be binding on HUD. Like any federal grant contract, she said, it’s going to say that it’s subject to appropriations. But the federal voucher program (HAP) has been much more stable over the last 15-20 years than the public housing program, Lento said.

Part of the mentality for HUD, Lento added, is to “get out of the public housing business,” and through the voucher program to have the private sector shoulder some of the responsibility.

Council Question: Risk?

During back-and-forth between Kunselman, Hall, and Lento, Lento was asked to identify the risk to the city. She indicated that the primary risk would be if the property were to be poorly managed and deteriorated. But the city has some control over that, she said, because “you are the management company.”

The other risk she described is if the construction and rehabilitation work is not completed in a timely fashion. The key to that, she said, is having a good general contractor.

Council Question: Tax Credits?

Taylor wanted to know how the tax credit investment made by some entity with a tax liability achieves the privatization goal. Lento told Taylor this was achieved in two ways. One way is that the private investor would necessarily be involved in the due diligence, making sure that the projects actually get constructed or rehabbed. As part of the ownership group for 15 years, she continued, the investor monitors and oversees the project to make sure they’re well-managed and well-maintained.

Taylor ventured that the participation of a tax credit investor in the ownership group is not as a silent partner. Lento indicated that the investor would require regular reporting, for example on the status of the tenant population. Especially for the first 10 years, if the property is not maintained as affordable within all the provisions of the IRS tax code, the tax credits could be jeopardized.

Taylor summarized his understanding of the situation by saying that HUD is getting the benefit of third-party oversight – which is incentivized by linking the tax credits to compliance with the IRS regulations.

Council Question: Why Not Avalon? Philosophy?

Given the complexity of RAD, and given the track record of local affordable housing developer Avalon Housing, Kunselman wanted to know why the city wouldn’t just sell the AAHC properties to Avalon. Lento explained that Avalon can’t take advantage of the RAD program in the same way that the AAHC can. The RAD program is only available to housing authorities, she said.

Hall clarified that there are two parts of the equation. There’s the operating subsidy, which is tied to the vouchers. And then there’s the low-income housing tax credit investment. Avalon could go out and get tax credits, Hall allowed, but Avalon would not have the ability to have the project-based rent subsidy in the same way that AAHC can.

However, Hall allowed that Avalon might be able to make it work.

Kunselman alluded to the fact that Avalon had not been able to bring the Near North affordable housing project to fruition. He concluded that there was, in fact, a lot of risk associated with developing affordable housing.

Lento pointed out that LIHTC was the most successful approach to developing affordable housing nationwide. Kunselman wanted to know how many affordable units LIHTC had generated in Ann Arbor. Ann Arbor is more challenging because of land acquisition, Lento said. Kunselman ventured that the only reason Hall’s proposal is feasible is that the land cost is zero – because it’s public land being turned over.

Lento didn’t necessarily agree that it’s “free land,” but Kunselman insisted that it’s “land that the city owns, land that the city bought – it’s public land.” That’s what makes him skittish, he said, because the city would be losing a lot of control. But he allowed that it’s a philosophical issue.

On a philosophical level, Hall ventured that it might be best to have the property owned by a nonprofit whose goal and mission is to be an affordable housing owner – as opposed to the city. As an example, she gave the former Y site at Fifth and William, which the city acquired from the Y. For a short time, the city operated the 100 units of affordable housing there. Then the building was condemned and eventually demolished, but new affordable housing has not been developed there. Views on all this change, Hall said.

Council Question: Where to Locate Affordable Housing?

Marcia Higgins (Ward 4) took up the issue of the old Y lot. She described it as a poorly-used site, with deplorable conditions. She said everyone seems to forget about that part. She also contended that since that time, the city has learned that putting all the needed supportive housing in the middle of downtown is probably not the most efficient use of funding.

Higgins said the alternative that Hall was presenting was very interesting, and she wished this had been presented sooner. She praised Hall for taking the initiative and appreciated Hall’s hard work. Margie Teal (Ward 4) joined Higgins in expressing her thanks to Hall, and to the AAHC board.

Speaking to the issue of where to locate affordable housing, mayor John Hieftje indicated agreement with Higgins’ position that a large installation like the former Y building should not be located in the downtown. He described downtown Ann Arbor as bearing most of the burden of homelessness in Washtenaw County. To single out the downtown of the largest city in the county seemed unfair to him. The fact is that the clientele of the Delonis Center shelter comes from across Washtenaw County and beyond, he said. So it might be wiser to keep from concentrating that population in the downtown area.

Hieftje noted there was some sentiment on the city council to put the former Y site on the market and sell it. [It's currently used as a surface parking lot, as part of Ann Arbor's public parking system. A resolution, sponsored by Hieftje and Kunselman, is on the March 4, 2013 city council agenda to direct the city administrator to issue an RFP for brokerage services to sell the parcel.] If there were funds left over from the sale of that property, some of it could be put toward affordable housing, Hieftje said.

Hieftje told Hall he appreciated her creativity.

Addressing the appropriate location of affordable housing, Sally Petersen (Ward 2) spoke from her perspective serving on the city’s disabilities commission. She didn’t want the city to become a place where it’s not possible for disabled and elderly people to live downtown.

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Doug Davis of Miles of Golf, left, and Doug Hellman of KemperSports were two of about a dozen people who attended Monday's pre-bid meeting for the Huron Hills Golf Course RFP. (Photo by the writer.)

Anyone who plans to submit a response to the RFP was required to attend the meeting, which lasted 30 minutes and was followed by a field trip to tour the course. Among those attending were Doug Davis and Chris Mile of Miles of Golf, Doug Hellman of KemperSports, Joe Spatafore of Royal Oak Golf Management, and William Arlinghaus of Greenscape.

Also attending were several citizens who have publicly opposed the RFP process, including Ted Annis, Nancy Kaplan, Myra Larson and Paul Bancel. Some are involved in the citizens group Ann Arbor for Parkland Preservation (A2P2).

The meeting, led by city parks manager Colin Smith, was a chance for potential bidders to ask questions or request additional information. The deadline to submit proposals is Oct. 29. [.pdf file of Huron Hills RFP]

Overview of RFP Process

Smith began by apologizing for a mix-up in the meeting time – two websites had posted two different start times, and some people had been waiting an hour. He also explained why the room might have felt stuffy – last Friday, HVAC for the entire city hall building had been turned off as part of an ongoing renovation of the structure, and there won’t be any air-conditioning or heating for at least three weeks.

Smith then reviewed some points in the process, and said that until Oct. 8 he’d accept questions or requests for information by email. His replies would be sent out to everyone who signed in at the pre-bid meeting, Smith said, so that everyone would receive the same information.

After the Oct. 29 deadline, responses will be reviewed by a selection committee, which Smith has previously said will consist of city staff, and representatives from the city’s golf task force, park advisory commission and city council. Interviews would begin in mid-November. If the selection committee makes a recommendation, it will then be reviewed by the golf task force and park advisory commission. Final approval would rest with city council.

Smith also reviewed some of the general information and scope of the RFP. [For an extensive report on the RFP, as well as public commentary about the project, see The Chronicle's report of the park advisory commission's Aug. 17, 2010 meeting: "Public Turns Out to Support Huron Hills Golf"]

The 18-hole, 116-acre golf course is located on the city’s east side and is split by Huron Parkway, with seven holes on the north and 11 holes to the south. Designed in 1922 by the golf architect Thomas Bendelow, Huron Hills is a 5,071-yard, par 67 course with a slope rating of 107, according to the RFP. The city’s ownership dates back to 1949, when the University of Michigan deeded the lower nine holes of Huron Hills Golf Club to the city – plus $10,000 – in exchange for Felch Park. The city bought an adjacent 57.5 acres in 1951.

The city is asking for proposals that “maximize the recreational golf opportunities” at Huron Hills. The RFP states that the city will retain ownership of the property and buildings, as well as any improvements that might be made. Beyond that, they are looking for proposals that follow four general principals:

• A commitment to growing the game of golf.
• Conduciveness to entry level golfers.
• Accessibility and affordability of recreational golf opportunities, especially for children and seniors.
• To better serve the Ann Arbor golf community.

Questions from Potential RFP Responders

This article reports the questions organized thematically.

Questions: Finance

Doug Hellman of KemperSports asked the most questions during the 30-minute meeting, and led off by requesting financial data about the golf course’s performance. Smith clarified that as an enterprise fund, the revenues and expenses are reported separately – that is, they aren’t wrapped into a larger departmental budget. [Enterprise funds are operations that are expected to be self-sustaining.] He agreed to provide financial data for the past five or six years, as well as information about the number of rounds played.

Some of that financial information is available in the RFP:

Huron Hills Golf Course

             FY2007     FY2008     FY2009

Starts       13,913     15,558     21,229
Net loss  ($145,845) ($195,514) ($276,164)

-

Smith had also given an update on the financial performance of Huron Hills at the Sept. 21, 2010 meeting of the park advisory commission, which resulted in some discussion among commissioners. From The Chronicle’s coverage of that meeting:

The golf enterprise fund includes operations at Huron Hills and Leslie Park golf courses. In total, the fund reported revenues of $1.122 million for the year, with $1.645 million in expenses – for a $523,529 total loss. Huron Hills revenue of $304,541 was 19% higher than expected, while expenses were lower than budgeted by nearly 8%.

At Leslie Park, revenue of $817,638 was 1.5% higher than budgeted. Expenses of $1.067 million were on par with budget.

Commissioner Tim Berla asked how many rounds of golf were played last year, and was told about 30,000 rounds at Leslie and 20,000 rounds at Huron Hills. Berla then calculated, based on the roughly $500,000 loss, that the city is paying about a $10 subsidy for each round of golf. He noted that this was his perspective and that others look at it differently, but he found it troubling. It seems out of balance to subsidize something that only a small percentage of residents use, he said. It might be the case that more people play soccer, Berla said, but the city pays perhaps 10 times as much for its golf courses than it does for its soccer fields. “I just wanted to note that, that’s all.”

Smith pointed out that the subsidy came from the general fund, not out of the parks and recreation budget – though he conceded that if the city council decided to change the accounting for golf, it would significantly impact the parks and recreation budget. But regardless on your perspective about a subsidy to golf, Smith said, both courses as budgeted were doing a fantastic job in an overall market that saw declining revenues and rounds played statewide.

Berla asked Smith to remind them of where the courses stood in terms of the long-range plan that had been laid out by a consultant hired to assess the city’s golf operations. FY 2010 was the second year in a six-year forecast, Smith said. For that year, the forecast had anticipated a $519,000 loss for the courses. So they’re on track with the forecast, he said, adding that the courses were never expected to eliminate their losses completely over that six-year period.

Gwen Nystuen recalled that PAC had recommended Huron Hills not be an enterprise fund. Smith confirmed that of the two courses, Leslie was more likely to be self-sustaining. Nystuen pointed out that the rest of the parks weren’t self-sustaining, and the city is willing to subsidize them. Do they calculate how much it costs someone to walk across a park? she asked. The city shouldn’t put something into an enterprise fund if the operation can’t support itself. Smith replied that the golf courses “will be part of very robust discussions come budget time.”

PAC chair Julie Grand, who serves on the city’s golf advisory task force, noted that the strategy right now for Huron Hills is to make rounds affordable so that they can draw in seniors and youth, by making play more accessible. And David Barrett pointed out that Leslie now has a liquor license – he asked if revenues from alcohol sales were “baked into” the total revenues for Leslie. Smith replied that total revenues did include alcohol sales, which were about $40,000 out of $79,000 in concession sales at Leslie during the year. Barrett asked if the liquor license had been a plus for Leslie, and Smith said that it was, especially for bringing in more leagues, outings and traveling golf groups.

At Monday’s pre-bid meeting, Paul Bancel asked for information on the municipal service charge that the golf course pays, including a breakdown of what the charge entails. Smith clarified for others that the municipal service charge is a charge that all non-general fund entities in the city pay – it covers the cost that the city incurs to provide services for the enterprise funds, he said, including administrative overhead. For Huron Hills, it’s about $87,000 annually.

Ted Annis said it was his understanding that Huron Hills would break even if the municipal service charge weren’t a factor. Smith said that wasn’t true – it would still lose money. Responding to another query, Smith said Leslie Park Golf Course – also owned by the city – wasn’t making money either. Why then was Huron Hills singled out for this RFP? That was based on direction given by the city council, Smith said.

Later in the meeting, Hellman requested financials for Leslie Park Golf Course as well.

Questions: Ownership

Bancel asked a series of questions related to ownership of facilities on the golf course. Smith clarified that the city would own the land and the facilities. [A list of assumptions provided in the RFP includes a statement that the city "remains the owner of the Huron Hills property, its buildings and appurtenances."]

As a hypothetical, Bancel described a scenario in which a contractor spends $2 million to build a facility on the property – how does the city contemplate assuming ownership? How would the city handle a transfer of ownership? Smith said it would depend on the proposal – that’s something that would have to be negotiated.

Hellman confirmed with Smith that the maximum term of the agreement is 20 years.

Questions: Labor

In response to a question about whether the city uses volunteers for the course, Smith said that there are some volunteers and neighborhood activists who do things like maintain flower beds, but the ranger service is done by a seasonal paid worker.

Later in the meeting he clarified that there are living wage requirements, which are outlined in the RFP. [For background on the city's living wage ordinance, see Chronicle coverage: "Living Wage: In-Sourcing City Temps"]

Bancel asked what the union situation was, and Smith said there are two workers at Huron Hills: The course supervisor, Andrew Walton, is a member of the Teamster’s union, while the course superintendent, Mark Wanshon, is a member of AFSCME. Asked whether the city anticipated that those workers would remain unionized, Smith said the RFP speaks to that. From the RFP:

4. Management and Oversight. The proposal must provide a detailed business plan that recognizes the City’s role in oversight of City land, and identifies how the existing two full-time employees may be incorporated.

Hellman asked that they be provided with a staffing chart showing the employees’ hourly rate, as well as resumes or background information for the current staff. [Walton attended Monday's meeting, but did not participate in the discussion.]

Questions: Relationship with Leslie Park Golf Course

Bill Newcomb, a member of the city’s golf task force, asked whether the city could reject a proposal that included Leslie Park Golf Course. Smith replied that as long as it met all the requirements of the RFP, it wouldn’t be rejected just because it incorporated both courses.

Hellman asked whether the two golf courses shared resources, such as equipment or personnel. No, Smith replied, the only thing that’s shared are the golf passes, which can be used at either course.

Questions: Liquor License

Smith clarified that Huron Hills doesn’t have a liquor license. When asked why Leslie Park Golf Course had one but Huron Hills does not, Smith said the consultant had recommended having one at Leslie. He said it would be possible to pursue obtaining a liquor license at Huron Hills as well. Someone asked if there was one available, and Smith said he wasn’t aware of one.

Hellman later asked about a reference to alcohol in the section outlining uses of the premises and property. From the RFP:

No alcohol will be served on the Premises at Contractor-sponsored events or private rental events, or otherwise consumed on the Premises, without the written approval of the Community Services Area Administrator. Section 3.2 of Chapter 39 of the City Code authorizes the City Administrator to issue permits to allow the consumption of wine and beer in areas which consumption would otherwise be prohibited. The City Administrator hereby delegates to the Community Services Area Administrator the authority to issue such permits for the moderate consumption of wine and/or beer on the Premises. When so approved in writing, moderate consumption of alcohol (wine and beer only) may be permitted. All other use of alcoholic beverages on the Premises is prohibited.

Who was the community services area administrator, he asked, and does this refer to a liquor license? Smith clarified that the community services area administrator is his boss, Sumedh Bahl. The section was referring to a permit that could be obtained for special events, not a regular liquor license. He again stated that it would be possible to pursue getting a liquor license for Huron Hills, if one were to become available.

Questions: Misc.

Hellman asked what prompted this RFP – what are the city’s goals? “That is a long answer, over many years, perhaps,” Smith replied. He summarized by saying that entities in an enterprise fund are supposed to be self-supporting, and that’s not been the case for a long time with the golf courses. The city brought in a consultant in 2007 – James Keegan, managing principal of Golf Convergence – to analyze the courses and make recommendations. [More detailed background is provided in The Chronicle's report of the Aug. 17, 2010 meeting of the park advisory commission. See also coverage of PAC's Nov. 19, 2009 meeting, which included an update on golf operations by Doug Kelly, the city's director of golf.]

Huron Hills has improved since then, Smith said, but it’s still operating at a loss. During the most recent budget cycle, everything was on the table, and the city council gave direction to the staff to issue a request for proposals (RFP) for a possible public/private partnership at Huron Hills. As for the city’s goals, Smith said they wanted it to remain a course that’s accessible to the public, while providing financial relief to the city.

Hellman asked whether the city was committed to moving forward with outsourcing or a public/private partnership. When Smith hesitated, Hellman quipped, “Well, it is the city council!” Smith said that the city was “certainly interested enough to issue the RFP.” Acceptance would depend on the nature of the proposal, and the outcome of review by the selection committee, golf task force, park advisory commission and city council, he said.

Ted Annis confirmed that the city attorney has signed off on the RFP. Annis also submitted a list of nine questions that he asked Smith to answer. Smith requested that the questions be emailed to him, so that he could send the questions and his responses to everyone who attended the pre-bid meeting. The questions are:

1. Tasks I and II call for a study and recommendations but the bids are being evaluated on a financial basis. [Task I requires a "thorough assessment of current operations" at the golf course. Task II is a proposal of services and financial plan.] How can the bids be evaluated before the completions of Tasks I and II?
2. City staff recommended to Council on 25 January 2010 that a driving range was the City’s best choice. Why isn’t a driving range mentioned in the RFP? If the Respondent proposes a driving range, is that the City’s preference and will it receive a higher score than say, miniature golf or a conference center?
3. The RFP says that the City will own the new facilities. How does this work with bank financing if the buildings are mortgaged to the Contractor?
4. Will the City indemnify and defend the Respondent (Contractor) in the event of a lawsuit alleging an illegal transaction between the City and the Respondent?
5. Will the City indemnify and defend the Respondent (Contractor) in the event of a lawsuit alleging damages in the form of decreased property values as a result of the transaction between the City and the Respondent?
6. There are government organizations (other than Ann Arbor’s PAC with its access to Greenbelt millage funds) that acquire natural lands for long-term preservation. An example is Natural Washtenaw and its Natural Area Preservation Program (NAPP). Is there a problem, legal or otherwise, if NAPP were to bid on these development rights for Huron Hills?
7. What is the zoning?
8. What are the development issues surrounding natural features protection, wetland preservation, and 100-year flood plain?
9. Prior to 25 January 2010, the City received proposals with plans and financial data from one and likely two private businesses regarding the privatization of the current City-operated golf operation on the Huron Hills parkland. Who at the City, City Council, and PAC have seen these plans and data? Who at the City, City Council, and PAC are in possession of these plans and data? What notes were taken from these plans and data?

The meeting concluded and Smith gave directions to the course, for a mandatory tour. He offered to schedule other tours until Oct. 8, for people who couldn’t go that day. As the meeting was breaking up, some people noted that anyone trying to enter into a partnership with the city would likely face opposition. If that hadn’t been apparent previously, it would have been clear on the trip to the golf course, where signs protesting the development of Huron Hills are in several front yards along East Huron River Drive, near the course.

These signs for the Ann Arbor for Parkland Preservation group are in front of several houses along Huron River Drive. (Photo by Judy McGovern.)

Eula Beardsley and Gladys Huston exited the front door of their Ypsilanti rooming house at Adams and Pearl one late December day in 1924.

The hotel opened in 1923, the year that residents celebrated the city's centennial. At left is the Washington Street entrance to the coffee shop and at right is the main Pearl Street entrance. (Image links to higher resolution file.)

“Colder than I thought,” said Gladys. Eula pulled shut the front door. “You’ll warm up at that big lunch today.” The pair walked one block east on Pearl Street, passing shiny rows of black cars in the Wiedman auto dealership to their left.

They crossed Washington, headed towards the door of the elegant new Huron Hotel on the northeast corner of Pearl and Washington.

Two years earlier, the only accommodations the city could offer guests were at the old-fashioned Hawkins House on Michigan Avenue between Washington and Adams. Built in the 19th century, the place had a worn-out and rustic atmosphere. The Ypsilanti Board of Commerce decided the city needed a modern, attractive hotel. It sold shares of stock to city residents, raised $200,000, and built the hotel in eight months, adding two additional floors two years later.

With a restaurant on the first floor, a “sample room” in which gentlemen could select cigars, and neat, comfortable rooms upstairs, the hotel soon became the hub of downtown activity. Downtown workers met there for lunch, organizations booked the restaurant for banquets and awards ceremonies, and traveling businessmen kept the rooms full.

“Good morning, ladies,” said the doorman, dressed neatly in a military-style uniform. Forty-nine-year-old Howard Henson was one of the hotel’s two porters. He hauled luggage into and out of the hotel and ran occasional errands for guests. It was a demanding job, but considered a good one for a black man in 1920s Ypsilanti. Howard supported his wife Roxanna and his sons Walter and Howard. Roxanna could afford to stay at home with the boys, who eventually got a little sister Martha. In a few years, Howard would buy his own home.

Holiday shoppers could enjoy a meal in the coffee shop. (Image links to higher resolution file with additional promotional text.)

Eula and Gladys entered the empty coffee shop on the west side of the building, passing the front desk.

The clerk, 27-year-old Fay Zongker, looked up and gave them a wave. They walked past the shining black tables surrounded by walls painted black on their bottom third and then gold, up to a black frieze near the ceiling.

A savory scent of ham came from the kitchen on the north side of the hotel. The two women went into the kitchen and greeted their fellow waitresses: Alice Lyons, Gladys Douglas, and Flora Snyder. All of the hotel’s five waitresses were scheduled today, to handle the expected holiday-shopper crowd for the $1.25 lunch ($15 in today’s money). Three cooks busied themselves in back.

The women looked over the menu. Today’s appetizers were hearts of celery and queen olives, followed by a light consommé. Then diners could choose baked halibut, fried chicken, ham, steak, or prime rib for an entrée, which came with salad, wax beans, rolls, and mashed potatoes or candied yams. Desserts included pie, ice cream, or nesselrode pudding, a frozen chestnut custard with nuts and dried cherries.

A woman in a white apron came in the other end of the kitchen and greeted the waitresses. Emma Sparrow poured herself a cup of coffee and chatted with the women. She finished, put the cup in a sink, and went upstairs to see if she’d forgotten anything in room 35 before its scheduled guest arrived.

At 49, Emma was exhausted after each day of maid work, but she had no choice. She and her husband Benjaman had worked a farm in Superior Township. It wasn’t very lucrative, and they never did get enough money to buy it instead of just renting it. The farm work Emma had done there, helped by her only son Loyd, was as tiring as cleaning rooms – but it had seemed more “theirs.” When Benjaman died, Emma couldn’t handle the farm by herself. She moved to town and applied for work at the hotel to support herself.

Emma and two other maids, Essie Freeman and another widow, Nellie Walling, kept the hotel’s 60 rooms cleaned and made up. The manager, George Swanson, and the assistant manager, Richard MacFarlane, had been talking about adding two more floors to the hotel next year to create a total of 100 rooms; Emma hoped they’d add another maid or two as well.

Emma’s most time-consuming job was cleaning the 10 de luxe suites, which rented for $60 or $65 a week ($764 and $828 today). Next were the rooms with a private bathroom, at $2.50 and $3 per day ($32 and $38). Essie could zip through the cheaper rooms, at $1.50 and $1.75 ($19 and $22), which offered only access to a communal coin-operated lavatory down the hall.

Not two years later the staff would be startled to see those lavatories mentioned in no less a publication than H. L. Mencken’s American Mercury magazine. In the “Americana” section, a compilation of amusing tidbits culled from newspapers across the country, appeared one taken from an Ypsi paper:

“A resident of Mason, Mich. is the nominee of George Swanson, manager of the Huron Hotel here, as Michigan’s most honest citizen,” the item read. “Swanson has a letter in which the Masonite encloses 25 cents with the explanation that he cheated the pay lavatory in the hotel three times while stopping at the Huron two years ago. Since then he has ‘got the good old-fashioned religion,’ he explained, and so encloses enough to cover the debt, plus interest.”

Room 35 looked fine. Emma closed the door and headed for the stairs – just in time, as here came Lawrence, the new bell boy, with a suitcase, followed by a guest.

Lawrence Ollette’s friends envied him his job, a glamorous one for a 17-year-old. He lived on Prospect Street with his 37-year-old mother Cestia, his 40-year-old father Bert, his younger brothers Kenneth and Norvell and his older sisters, Muriel and Hazel. Lawrence liked his job –he thought it better than Hazel’s job as a stuffed toy stuffer in a toy factory – and the other bell boy, 18-year-old Edmund Blair.

Lawrence opened the door to 35 and set down the suitcase. The room seemed a little cold again this week. Perhaps he should tell Mr. Swanson to mention it to the hotel engineer, Alf LeCureux. Lawrence pointed out the room’s bathroom, told the guest to telephone downstairs if he needed anything, and smiled as he was handed a tip.

In addition to transient guests, the hotel also housed permanent lodgers. In 1930, it had 10, most of them single men. Edward Attyes was a 55-year-old traveling salesman for a motor oil company. The 26-year-old Terry Carney and the 27-year-old Ellis Benedict were traveling salesmen for a dry goods firm and for an investment company, respectively. The 25-year-old Clayton Briggs also worked for an insurance company. The 36-year-old World War I veteran Frank Schimel was a schoolteacher.

Also 36, the divorced Elsa Freeman worked as a salesperson for a magazine company. Two married men, the 28-year-old Neal Routson and the 39-year-old WWI veteran Robert Heine, worked as a mechanic for a bus company and as a civil engineer for a paving company. The last two lodgers were the sisters Ada and Gertrude Woodard. Seventy-four-year-old Ada was retired, and lived at the hotel until her death.

Fifty-nine-year-old Gertrude worked as a book indexer at the University of Michigan’s law library. She was known in town as the first woman driver in Washtenaw County. When she died, hotel staff found piles of yellowed papers reaching towards the ceiling of her quarters, with only narrow paths snaking in between.

After World War II, the hotel enjoyed a golden age, housing many air travelers who landed at Willow Run, then one of the nation’s busiest airports. The hotel was almost full much of the time, and Cleary College, Eastern Michigan University, and local organizations booked the dining rooms for formal events.

However, business began to decline in the early 1960s. The hotel’s reign as the town’s social hub ended in 1966, when six airlines were relocated from Willow Run Airport to Detroit Metro. The days of housing such guests as Truman’s vice president Alben Barkley, world-famous runner Paavo Nurmi, and world-renowned black opera singer Marian Anderson were gone. Not long thereafter, the building ceased to be a hotel and was converted to office space. A series of first-floor restaurants occupied the old coffee shop space, the latest one a Cajun chicken restaurant.

But in 1924, a modest crew of 19 ordinary men and women, from various walks of life, maintained the elegant heart of downtown that the papers admiringly called “Ypsilanti’s Waldorf-Astoria.”

Mystery Artifact

This biweekly column features a Mystery Artifact contest. You are invited to take a look at the artifact and try to deduce its function.

Last week’s Mystery Artifact generated many good guesses, ranging from fireplace tool holder to coal bin. As it turns out, both guesses, by Steve Bean and cmadler, are correct! The coal bin, with a rack for tools on its backside, stands in the “Tiffany Window” room in the Ypsilanti Historical Museum.

This week’s item is a small one. The string around the cream-colored item is just a museum tag, and not part of its function. Can you guess what it might be? Take your best guess in the comment section. Good luck!

“In the Archives” is a biweekly series written for The Ann Arbor Chronicle by Laura Bien. Her work can also be found in the Ypsilanti Citizen, the Ypsilanti Courier, and YpsiNews.com as well as the Ann Arbor Observer. She is the author of “Tales from the Ypsilanti Archives,” to be published this winter. Bien also writes the historical blog “Dusty Diary” and may be contacted at ypsidixit@gmail.com.