Screen of iPhone showing Uber vehicle responding to request for a pickup on May 24. The resulting trip – from Jackson & Maple to Liberty & Main – was calculated by Uber as costing $8.

Both topics will also be considered at the board’s next meeting on June 26.

Consideration of a general driver-for-hire ordinance comes in reaction to the recent entry of Uber and Lyft into the Ann Arbor market. However, taxicab board chair Michael Benson stressed during the meeting that the point of the possible new ordinance was not to “target” Uber and Lyft, but rather to ensure that all drivers for hire are registered with the city. Those two companies, which coordinate drivers and passengers through software applications, have been sent cease-and-desist letters by the Ann Arbor city attorney’s office – for aiding and abetting the violation of a state statute regulating limousines. [.pdf of cease-and-desist sent to Lyft] [.pdf of cease-and-desist sent to Uber]

But the board heard from a University of Michigan student during public commentary time, who reported that the cease-and-desist letters, dated May 14, 2014, were having no impact – as he’d used one of the services three times the previous evening. In the course of his remarks, the UM business undergrad outlined several advantages of Uber and Lyft, including price, convenience and efficiency.

The board had voted at its April 23 meeting to ask the city attorney’s office to draft general driver-for-hire ordinance language for consideration at its May 22 meeting, but that draft was not yet available.

So at its next meeting on June 26, the board is expecting two possible proposals to be ready for consideration: (1) a new rate structure proposal; and (2) a draft ordinance on regulating all drivers for hire. The taxicab board could forward a recommendation to the city council to enact either proposal. A decision on enactment rests with the city council.

Discussion of the driver-for-hire issue at the May 22 meeting included themes familiar from the board’s April 23 conversation, mostly centering on the desire of board members to ensure public safety for patrons of businesses that operate on the public right-of-way. They want to ensure that drivers who are being compensated for their work are registered with the city, that their vehicles are inspected, and that they are adequately insured.

The rate changes to be considered by the board on June 26 come in the context of board interest in seeing the taxicab industry able to compete with limousine services, as well as with services with business models like those of Uber and Lyft. Currently the maximum rate in Ann Arbor is $3 to get in, $2.50 per mile, and 40 cents per minute waiting time.

Those maximum rates were last adjusted upwards three years ago, on May 16, 2011, in response to gas prices that had nudged past $4 per gallon. At that time, the taxicab board indicated it did not anticipate considering another rate change until the gas prices were over $5 for at least two consecutive months.

So the board’s thinking is not being driven by gas prices, which are currently between $3.75 and $4 in the Ann Arbor area. Instead, a possible increase in allowable fares is based on concern that the taxicab industry in Ann Arbor might not be able to survive unless taxis are allowed to charge more. Taxicab board member Robert Goeddel supported setting a significantly higher maximum, saying that if the taxicab industry does not survive, he does not want it to be because the basic costs of doing business can’t be covered.

City CFO Tom Crawford, who sits on the taxicab board as an ex officio member, noted that it’s a challenge to consider changes in rate structures at the same time as new entrants have come into the market – who have a lower cost structure than the taxicab industry. He expressed some concern that the result could be a “race to the bottom” for pricing that could work to destroy the taxicab industry.

In other business, the board elected its officers for the next year – an annual task. Benson and Stephen Kunselman were re-elected as chair and vice chair of the board.  

Public Commentary: Meeting Start

There are two opportunities for public commentary – one at the start of the meeting and another at the end. One person spoke at the start of the meeting.

Tyler Hoffman introduced himself as a University Michigan undergraduate. He wanted to give his perspective, having been here for three years now – as he’d seen the way things were before Lyft and Uber were in Ann Arbor and after Lyft and Uber are here. The positive public response has been too great to try now to make Lyft and Uber go away, he contended. “The cease-and-desist letters have done nothing,” he said, and he knew that because he’d used those services many times since the cease-and-desist letters were sent.

“It’s a great service and is something that the public and especially the students want,” Hoffman told the board. Uber and Lyft are also generally cheaper, he said. He was glad that the board was talking about rate deregulation, calling it very proactive. Taxicab medallions are an outdated business model, he said. With a cab, you’re given a window where you have to wait. With Lyft and Uber, he has a 10- or 15-minute wait, and he can see where the car is at any given point in time. So you can see, for example, that the car is nine minutes away.

Instead of making a taxicab wait five or 10 minutes outside, he knows when his ride from Lyft or Uber is coming, he gets a text message when that the car has arrived, and there is no wait involved. Hoffman went on to describe how using Lyft and Uber is very quick and efficient. It is also cashless, he said, as there’s no cash exchanged. Taxicabs might use Square, but the service provided by Lyft and Uber is even simpler than that. They don’t take cash tips and if you try to give cash tips, the drivers don’t take them.

Another advantage cited by Hoffman is that Lyft and Uber have a more modern fleet. As a college student, when he wants to get a ride to Scorekeepers on a given night, he might not care about how modern the car is. But UberBlack has nicer cars with chauffeur-licensed drivers, he said, describing how Uber and Lyft do have requirements on their fleet. Hoffman reported that he asked a Lyft driver what he does when he’s not driving for Lyft, and the driver said he also worked for a taxicab company.

The driver was reckoning with getting fired – but had told Hoffman that he knew this is the direction that innovation was going in the industry. These new services also created competition and Hoffman felt that’s always a good thing: “It’s got everyone shaking in their boots, so to say.” Hoffman characterized the issue of insurance as convoluted, so he didn’t know if he was going to be protected if he gets into an accident. But the difference between having a chauffeur’s license and not having a chauffeur’s license is the difference between spending 45 minutes at the Secretary of State’s office and handing over $25, he said. To him, that procedure did not improve your ability to drive safely. The question of insurance was more of a legitimate issue, he added.

Changing Rate Structure

Stephen Kunselman, who is the city council’s representative on the taxicab board, opened up the May 22 discussion on raising rates, saying it’s been many years since they were last raised. But he really didn’t want to be “guinea pig” community trying to create a rate system that is more complicated. “If we just want to raise the rates to allow the taxicab companies to have a better time trying to compete, then I’m all for that.”

The bigger issue, Kunselman said, is whether the city is going to begin enforcement against “gypsy companies” – by which he meant Uber and Lyft. Kunselman said he appreciated the comments from Tyler Hoffman during public commentary, but the point that Hoffman had skipped over was the insurance requirements that are necessary to operate vehicles for hire. Competition is important, Kunselman said, but when you compete by cheating, that’s not acceptable – and that’s what Uber and Lyft were doing when they use drivers who are using private cars with private insurance. What Kunselman had read is that when an accident occurs, then a passenger is not covered.

A $1 million insurance policy that’s provided by Uber and Lyft is not necessarily a guarantee, Kunselman said: “It’s just a marketing ploy.” It’s a new and dynamic change in the industry, he said, but that’s not to say that Yellow Car, Amazing Blue, and other local taxicab companies will not come out with their own apps and provide that same sort of service. When that competition catches up, Uber and Lyft would be pushed aside, he felt.

Ann Arbor is a hot market that has a lot of peaks and valleys in the demand, Kunselman said, and that led him to another concern he had with the Uber and Lyft business model: “Surge pricing” is more like price gouging, he said. That’s why there are taxicab rates, so that it’s fair to everyone – wealthy, poor and middle class alike. If the industry uses “surge pricing,” he noted, then during peak demand, only the wealthy are going to get ride. “That’s not equitable, and that’s not appropriate, and I don’t think that’s what this community is about. If that’s the kind of elitism that University Michigan students want, then that’s disappointing,” Kunselman said.

During public commentary at the end of the meeting, Rick Clark of Amazing Blue taxicab company was skeptical that software apps were the answer to everything – partly because of the surge pricing. A young college student might think it’s great that he can get a ride like that, Clark said, but during a UM football game, that student is going to get gouged.

Kunselman ventured that there are issues the state of Michigan might need to address. Kunselman characterized the business models used by Lyft and Uber as “basically cheating,” and ventured that they would get caught eventually, citing other states where Uber and Lyft had been accused of racketeering. Uber and Lyft are pushing the envelope, he said, but at some point it only takes one accident and one lawsuit to shut them down. As far as taxicab rate deregulation, Kunselman said he’d just as soon recommend raising the rates at the next meeting, and let the taxicab companies try to compete at that level, then see what happens.

Eric Sturgis followed Kunselman’s comments by stressing that the number one goal is safety. Uber and Lyft use drivers who are not registered with anyone. The city doesn’t know if there’s a felon out there taking people around in a car, he said. Sturgis pointed out that the number of registered taxicabs was decreasing: “We are losing taxicabs.” So that made him want to consider full rate deregulation. Ann Arbor is an intelligent community, Sturgis said, and he didn’t think the board should be telling people that they’re not smart enough to know which taxicab to take based on fares. He said he’d be willing to look at taking small steps to start, but he’d like to see the board head in the direction of deregulation.

Responding to Hoffman’s remarks, board chair Michael Benson said the board has to balance a few competing priorities – first and foremost public safety. The taxi industry is the only industry that solely operates on the public right of ways, he noted. So the city has a responsibility to ensure not just safety, but a level of competitiveness.

About the Uber and Lyft issue, he noted that the cease-and-desist orders are a first step. Benson said he didn’t know what Lyft or Uber do to inspect vehicles. Maybe the standards are different from what the city requires for vehicles for hire. So if someone is offering to drive a vehicle for hire, there should be a common standard, he said. The city needs to be able to address that.

All of these businesses are operating in the public right-of-way, Benson said, and that makes them different from a restaurant or anything else. That’s why the taxicab industry should be regulated at all. Benson felt that some kind of rate increase is necessary. He expressed concern that the current rates don’t take into account the rising cost of insurance for taxi operators. One approach would be to increase the fares beyond a small $0.25 increase. He also supported allowing a surcharge for three or four passengers.

LuAnn Bullington ventured that if the board deregulated taxicabs, then cabs would essentially be providing limousine service. She felt it would be appropriate to increase the maximum rate based on increases in gas prices. She would like to see Uber and Lyft enter the Ann Arbor market, but she also has concerns about public safety. If Uber decides to go to the state and get themselves a limo license and compete like everybody else, she’d have no problem with that. It’s just another business model.

Bullington also felt that taxicab companies would be adopting new technologies as well, and would be able to let customers know when they’re coming in real time. She mentioned that Yellow Car has been working with the Ann Arbor Area Transportation Authority [as the AAATA's paratransit contractor] to notify passengers at home to tell them that the ride is almost there. As far as options available to the riding public, she did not want to see everything “turning into vanilla.” She hoped that Uber starts playing fair and becomes registered as a limo company, like they should be.

Number of taxicabs licensed in Ann Arbor by year. (Data from the city of Ann Arbor, chart by The Chronicle.)

Sturgis came back to the point about the number of registered taxicabs in the city, saying that the decrease is a great concern. That is allowing Uber and Lyft to enter the market, he said, because they’re seizing upon an opportunity. He felt the reason the number of taxicabs is decreasing can be attributed to the cost of insurance. He said he wants the best service possible and the safest service possible, which Uber and Lyft don’t provide. Raising the maximum rate could be a short-term fix, but Sturgis wondered if there were a longer-term vision.

Tom Crawford offered two points of caution. The first is how to interpret the number of taxicabs registered in the city in 2014, which was recorded as 96 in the materials provided to the board. Crawford pointed out that the figure is footnoted because the count had not been completed, calling it an “interim number.”

While this board is talking about the taxicab industry, Crawford continued, it may be that the city’s perspective is to have a variety of ways to meet transportation needs – taxicabs being one of them. So the board should be cautious about concluding that there is some “right number” of taxicabs. The city may need more taxicabs or fewer, in light of other transportation options that are available, Crawford concluded.

In support of Crawford’s observation, Kunselman noted that voters had just approved a new transit millage that’s going to increase service in the evenings and weekends. That’s going to change the dynamic as well – because bus transportation would be a lot cheaper than a limo or a taxi.

Crawford pointed out that the board was discussing two things going on at once: Rate deregulation and a new entrant in the market. The new entrants actually have a business model, as he understood it, where they potentially have a lower cost of doing business than the taxicab industry. So that would drive rates down. When you have a new entrant that is competing with a different cost structure, that could work out economically to lead to the destruction of the taxicab industry. So now might be exactly the time when you do not want to deregulate, he said.

Instead, it might be more important to make a very clear distinction about what is a taxicab and what is not a taxicab. Crawford understood the excitement of the new business model, but it is not a model that is delivering the same product that a taxicab is delivering, he said. A differentiation of those business models might be healthier for the industry, he said. Crawford ventured that deregulation at this time might result in a race to the bottom of the lowest rate. And that could lead to riskier, less secure businesses, he cautioned.

Responding to Crawford, Robert Goeddel said the current rate structure – which set a maximum rate – did not prevent a race to the bottom. Rates can already go as low as they need to go, he ventured. So we’re already in a situation where a race to the bottom is a risk. But he did not want to see a scenario where people are not using taxicabs because taxicabs are going out of business – because they cannot afford to be in business. If the taxicab industry going to change because of the dynamic in the market, he wanted that to be because there’s a better service out there – not because it’s impossible to do business. And right now, he continued, it seems like it’s not possible to do business and be competitive.

Goeddel agreed with a comment that Kunselman had made at the board’s previous meeting, that more options might not lead to better price – citing the example of increased downtown housing units. After building all those new apartments downtown, many people thought it would drive rents down – but that is exactly the opposite of what has happened, he said. He was paying more to live in Ann Arbor than ever before, reporting that his rent rose by 10% last year. He was amenable to raising the rates, but felt that $0.25 would not be sufficient. He said he might be interested in “pseudo regulation,” where rates are raised beyond the point of reason, which would give the appearance of deregulated rates without taking the full leap.

Bullington contended that Ann Arbor has some of the highest gas rates in the country, so she was interested in raising the maximum rate for that reason. Crawford pointed out that the last time the board had recommended raising the maximum rate, the board had also concluded that if gas prices moved out of a certain range for a certain period, then the maximum rate could be revisited. But gas prices have been lower than that since that time, Crawford said. So he thought that insurance has been more of a cost issue than the price of gas.

Benson noted that the option being considered is not to deregulate the taxicab industry: “We’re still going to inspect vehicles. We’re still going to license the drivers.” The point of discussion was the fare structure, he said. Even if the fares were deregulated, the city would still have interest in compliance on vehicle inspection and licensing the drivers.

Benson said he was pleased that the board was considering either a potential rate hike or deregulation – to allow the industry to be able to compete, but also perhaps distinguish itself in the service it was offering. He pointed out that there are multiple models in which a taxicab can operate. For example, a taxi can be hailed on the street – and that’s the only vehicle that can legally do that. But you can also call a taxicab dispatcher and if a company does have an iPhone app or something similar, you can request a cab and away you go, much like a limo service, he said.

Benson thought it was critically important to educate people about the difference in the modalities – and the city had actually tried that. An ordinance change was approved by the city council a few years ago that tried to help make that distinction, he said. He wondered how effective the educational campaign was. Some people are aware of the difference between a taxicab and a limo, but a lot of people just aren’t, he said. So the educational component is critically important.

Benson asked AAPD officer Jamie Adkins, as she was on the front lines, what could be done to educate folks that taxis are taxis and limos and limos, and there is a difference. Adkins told Benson that part of the problem is getting police officers to understand the difference – because they think that all for-hire drivers are the same.

At the end of the meeting during public commentary, Bill Chinchen, owner of the AirTran taxicab company, addressed the issue of limos acting as taxicabs. He told the board that he’d done a count in the area of South University and Church on Thursday, Friday and Saturday nights. There were 32 unlicensed cabs sporting top lights and picking up passengers off the curb. He’s talked to talked to the police officers, he said, but not gotten any satisfaction.

Chinchen reminded the board that in October 2012, there was a big crackdown on the “fake cabs,” and that lasted about a week. Then they all started filtering back. Chinchen said it’s not that officers don’t know who is who – they just don’t want to be bothered with it. “They have other better things to do than chase around all these guys taking away our business,” he said.

Benson summarized the option that the board had discussed: full deregulation of rates; a fare increase to cover cost of business, including insurance; or a fare increase beyond the cost of doing business to allow some play in the market. Benson also mentioned the possibility of allowing for a passenger surcharge to allow a higher rate for three or four passengers.

Kunselman then suggested that the board ask Crawford to prepare a change in taxicab rates for discussion at the next meeting.

Crawford told Kunselman that he didn’t have a problem with the rates and the publication structure that had been suggested by one of the taxicab companies. Crawford then checked his understanding of the kind of rate structure the board wanted him to draft. Crawford said he got the message that the board wanted to see a substantially higher maximum fare set. He also understood that rates would be published on the rear vehicle doors.

Benson added that the rates should be published so that passengers would see the rates as they entered, and also as they’re sitting, riding in the cab. Crawford noted that a meter should be revalidated if a fare is changed. Considerable back-and-forth ensued between board members and Crawford on this point, with the basic conclusion that the ordinance should state that a penalty would be incurred if the meter was set to a rate that was higher than the published rate, but not if it was lower. But in any case, the meter would need to be revalidated if the company changed its published rates.

Kunselman also wanted to allow for flat rates. If a taxicab drops the flag on the meter and goes out to the airport, the meter might say $60, but they should be able to charge $40 for the trip. Kunselman summarized his view by saying he wanted to give taxicab companies the ability to charge a higher rate, but to compete by offering cheaper rates.

Regulating Drivers for Hire

Benson led of the discussion of the general drivers-for-hire ordinance by saying he understood that the assistant city attorney did not have a draft ordinance ready for review that day – but it was in the works. Later in the meeting, Sturgis asked if the city attorney’s office was confused about what the taxicab board was asking them to do. No, Crawford, said, they’re not confused. Kunselman added: “Government just doesn’t work that fast.”

Kunselman stated that he didn’t think the ordinance should be about registering vehicles, but rather about registering drivers for hire. He noted that vehicles are registered by the state under the limousine act, or by the city as taxicabs. He wanted to focus on drivers: Taxi drivers are licensed by the city but limousine drivers are not.

He continued by saying that drivers for Uber and Lyft are not registered anywhere. About the Uber and Lyft business models, Kunselman said he didn’t know of any private sector business that self-regulates for public safety – and that’s the problem with the Uber and Lyft business model, he said. Uber and Lyft are cheating by not requiring proper insurance, Kunselman said. He ventured that the new ordinance might need to be separate from the taxicab ordinance.

The basic issue, Kunselman continued, goes back to using the public right-of-way to pick up the public and make a profit using public resources – our public roads. That’s very different from regulating restaurants, he said. The taxicab board has a responsibility to protect the unsuspecting public, he said. Education of the public could be talked about all day long.

But based on the remarks of Hoffmann during public commentary, University of Michigan students are just interested in the cheapest ride, Kunselman said – until they end up in a hospital and are hit with a bill of millions of dollars for head injuries. He thought people had forgotten one of the reasons the state’s limousine law was tightened up years ago. It happened when one of the Detroit Red Wings players [Vladimir Konstantinov], following the Stanley Cup win back in the 1990s, had ended up in the back of a limo – which Kunselman believed was improperly regulated – and was paralyzed when he went flying from one end of the limo to the other. That resulted in a tightening up of the limo industry, Kunselman said. When that happens with an Uber driver and their uninsured car, we’ll end up with the same problem, Kunselman ventured.

It’s unfortunate that the younger generation has forgotten the experiences of the older generation with respect to public safety, Kunselman said. So Kunselman wanted the board to consider a totally separate ordinance that regulates drivers who are offering their vehicles for hire. The ordinance should allow the city to require that drivers provide proof of insurance, that the vehicles they’re driving for their business are safe. That way, the city could do its part as a public entity to ensure public safety.

Benson responded to Kunselman’s focus on registering drivers as opposed to vehicles, saying that the city should have a way of registering vehicles other than taxicabs, which it currently licenses. The idea would be to ensure that a vehicle used to provide rides for hire meets minimal standards. Those standards might be the same as what the state requires for limousines. Or maybe the standards would be more like the standards for taxicabs. But Benson felt that all vehicles for hire in the city needed to be registered.

Kunselman agreed with Benson’s remarks – if the city has the ability to enact those requirements under state law.

Sturgis disagreed with the idea that young people don’t care about public safety: “I think they do care about public safety. I think they may be not educated about Uber and Lyft.” Sturgis ventured that students are price conscious because of the high cost of tuition.

Bullington wanted police officers to have the ability to pull over a driver for hire and ask if they are registered with the city. It’s about putting more teeth in the law, she said.

Crawford offered a word of caution about lumping Uber and Lyft into the same category, saying that based on his very cursory research on Uber and Lyft, they appear to have different business models. It might turn out that one or the other of those business models is more amenable to the way the taxicab industry wants to proceed.

A brief discussion among board members – on the point of putting some additional teeth in the existing taxicab ordinance as well – resulted in an approved motion to add that to the board’s request of Crawford and the city attorney’s office.

Public Commentary: Meeting End

Public commentary not already included in the report above included remarks from Stadium Taxi and SelectRide representatives.

During public commentary at the conclusion of the meeting, Mark Newman, owner of Stadium Taxi, told the board he thought the taxicab board needed to get the word out to the students that services like Uber and Lyft are illegal. He suggested that the president of the University of Michigan should send a mass email out to the students telling them that Uber and Lyft. Newman raised the specter of a students getting into an accident and suing the city of Ann Arbor. He’s talked to several different police officers in the evenings, he said, and they’re not doing anything. His business has gone down 30% because of Uber and Lyft, he said.

Newman called on the city to put a cease-and-desist order on the software application itself, so that it could not be used. When he concluded his remarks, board chair Michael Benson got clarification that Newman’s company is not at taxicab company, but rather a limo company. Kunselman responded: “But we are the taxicab board!”

Newman replied that the taxicab board works with the city – and they know the city staff – whereas he does not.

Mark LaSarge with SelectRide objected to the board “stomping on” Newman for not being a taxicab company, pointing out that public commentary is for the public. At the end of all the public commentary, Benson extended his apologies to Newman for any implication that he didn’t have a right to speak.

LaSarge complimented Kunselman for his remarks about price gouging, possible racketeering issues associated with Uber and Lyft. Many of the concerns are based on fear and doubt, he said. Fear and doubt are “twin thieves” that steal from you the ability to do what you would otherwise do right, he said. A business model is the business of that business, not the city, he said.

The city’s business is making sure that everybody is conducting business safely according to the appropriate regulations, and providing a basic standard uniform service. Is the driver a safe driver? Are the vehicles appropriate? Is the insurance appropriate? About those questions, LaSarge told the board: “That’s your job. How I price my ride is irrelevant to you.” Whether the application is called Uber or Lyft or TaxiMagic, “so we can get a cute little dot on the screen coming toward you – that’s not your business. That is ours.”

Present: Tom Crawford, Jamie Adkins, Eric Sturgis, Stephen Kunselman, LuAnne Bullington, Michael Benson, Robert Goeddel.

Next taxicab board meeting: June 26, 2014 at 8:30 a.m. at city hall at 301 E. Huron. [Check Chronicle event listings to confirm date]

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The postponement of an initial vote to the council’s next meeting, on Feb. 21 22, means that a final vote on licensing could not come sooner than the council’s March 7 meeting. An initial vote on zoning regulations for medical marijuana businesses was already taken by the council at its Oct. 18, 2010 meeting. On Monday, the final vote on those zoning regulations was also postponed to March 7. The council’s pattern over the last two months has been to postpone the final vote on zoning regulations for medical marijuana businesses so that it will coincide with the final vote on licensing.

Betsy and Alex de Parry listen as councilmembers deliberate the question of whether to grant a fee waiver if de Parry resubmits his Heritage Row project to the city.  (Photos by the writer.)

The council also took action on several development-related issues. Without discussion, councilmembers approved an amendment to a contract with Village Green to develop a 244-space parking deck as the first two stories of a 9-story building, City Apartments – a 156-unit residential planned unit development (PUD) at First and Washington. The contract approval is part of a series of milestones that is planned to culminate in Village Green’s purchase of the city-owned land parcel for $3 million by June 1, 2011, and with construction starting later in the summer.

The council also approved an application fee reduction, from nearly $5,000 to $2,000, for the developer of Heritage Row, a residential project proposed for Fifth Avenue just south of William Street – if  the project is resubmitted within 90 days. The resolution began as a fee waiver, but was amended to be a reduction. On resubmission, the project will go through the complete review process, starting with a citizen participation meeting.

The council also took action to implement the city’s new design guidelines for new downtown buildings. It sets a purely voluntary review and compliance process in place for now, with the expectation that the mandatory review process with voluntary compliance will be implemented later.

The council unanimously approved the city’s new capital improvements plan (CIP) after a close 6-5 vote that removed an item calling for an extension to the Ann Arbor municipal airport runway. And one item appearing in the CIP was moved ahead to possible fruition: A possible roundabout for the Maiden Lane and Fuller Road intersection will be studied and engineered under a $460,139 contract with DLZ Michigan Inc.

At Monday’s meeting, the council also authorized applications for federal matching funds to acquire development rights for two greenbelt properties.

And labor issues found their way into the deliberations in two ways. First, Stephen Rapundalo (Ward 2), chair of the council’s labor committee, gave a breakdown of the large disparity between health care costs paid by the city’s fire and police union members as contrasted with the city’s non-union staff, as well as with University of Michigan employees. Second, as part of its consent agenda, the council approved a $54,000 contract with a consultant to study fire protection service requirements in Ann Arbor. The city administrator cited such a study at a recent council budget retreat as useful if the city decides to contemplate a shift to a combined paid-on-call and full-time staff fire department.

Medical Marijuana Licenses

Considered again by the council was a proposed set of licensing requirements for medical marijuana dispensaries and cultivation facilities in the city.

By way of background, at its Oct. 18, 2010 meeting, the council gave its initial approval to a set of zoning regulations for medical marijuana businesses, but it has not yet given its final approval to those regulations. The council’s strategy is to bring both licensing and zoning forward at the same time for a final vote. All new city ordinances require two votes by the council, the second of which is accompanied by a public hearing.

The context for developing zoning regulations was set at the council’s Aug. 5, 2010 meeting, when councilmembers voted to impose a moratorium on the use of property in the city for medical marijuana dispensaries or cultivation facilities. They also directed the planning commission to come up with zoning regulations. Subsequently, the city attorney’s office began working on a licensing system, which the council first considered at its Dec. 6, 2010 meeting.

At its Jan. 3, 2011 meeting, the council heavily amended the licensing proposal. Among the key amendments made at that meeting was one that stripped “home occupation” businesses out of the proposal. At the Jan. 3 meeting, the council also increased a cap on the total number of licenses available to 20 for dispensaries and 10 for cultivation facilities. Another major amendment made on Jan. 3 was the creation of a board to govern the issuance of licenses. However, the council delayed voting on the first reading of the proposal. [.pdf of licensing ordinance language at the start of the Feb. 7, 2011 meeting]

At its Jan. 18 meeting, the council was poised to undertake further amendments to the licensing proposal, including many that concerned limiting the amount of information that is required to be divulged by those associated with license applications. However, the council did not amend the proposal further at that meeting.

The moratorium on additional facilities in the city to be used as medical marijuana dispensaries and cultivation facilities was extended by the council at its Jan. 18 meeting to go through March 31, 2011.

Medical Marijuana: Public Commentary

At its meetings over the last few months, the council has heard extensive public commentary on medical marijuana, but that commentary does not constitute a formal public hearing, which will be held at the same meeting when the council votes on final approval of the licensing, provided it eventually gives initial approval to the licensing system. At Monday’s meeting, several speakers addressed the issue during time set aside for public commentary.

T.J. Rice introduced himself as the owner of the first dispensary in Ann Arbor – he’d established it at Fourth and Washington on Feb. 2, 2010, he said. He reminded the council that people’s lives and our future is at stake. He told the council he hoped by the end of the evening that the provisions for list-keeping would be written out of the proposed licensing system. He reminded the council of Ann Arbor’s rich history of tolerance for cannabis, pointing to the large plurality of local support for the 2008 state referendum, as well as the 2004 Ann Arbor city charter amendment. He asked the council not to forget the city charter amendment in the process. He allowed that his past felony conviction for cannabis is real, but that his concern is for patients and he hoped the council would make wise decisions.

Dennis Hayes began by saying that the council’s work on the issue is yet unfinished. He stated that in the legislative intent section of the ordinance, the 2004 charter amendment should be mentioned. It should also include a statement about state and constitutional mandates as they apply to patients and caregivers. He asked the council to think about what they could do besides maintaining lists of information so that the lists themselves would not become evidence of violating federal law. He asked the council to consider the geographic transportability of licenses. He said that labeling also needs to be addressed. He suggested that the proposed licensing board doesn’t currently have a slot for a patient as a member, and that it should have one.

Like many of the speakers, Tony Keene had previously addressed the council on the topic of medical marijuana. At the council’s Jan. 3, 2011 meeting, he’d been critical of dispensaries as a business model to provide access to medical marijuana for patients. From The Chronicle’s report of that meeting:

[Keene] had distributed a yellow two-side sheet to the audience that described an alternative strategy to the city’s proposed licensing scheme. During his public commentary turn, Keene highlighted some of main points of the alternative. Key among them is the idea that “dispensaries” are in concept not lawful under the Michigan Medical Marijuana Act, but that business models developed along the lines of “compassion clubs” and “co-ops” are. So the proposal would be to close down all dispensaries and start from scratch – with compassion clubs and co-ops and individual caregivers making up “caregiver centers.”

Keene attended the council’s Feb. 6 caucus, on the Sunday night before its regular meeting, and reiterated to the one councilmember who attended, Sabra Briere (Ward 1), his view that dispensaries are not a good solution, and that dispensaries are the only voices being heard. At the caucus, he told Briere that the council had no understanding of the topic and that they had no idea what they were doing. As an example, he pointed out that the current licensing had no explicit definition for a “cultivation facility.” [Briere brought forward an amendment on Monday that provided a definition of such facilities.]

On Monday night, Keene complimented the council for keeping the spirit of the Michigan Medical Marijuana Act in mind, noting that nothing would require his business, which involves caregiver support services, to have a license.

Keene’s commentary was distilled into a simple message: Say yes to medical marijuana, say no to dispensaries. It’s time to shut down the dispensaries, he said. There are adequate mechanisms of caregiver support that patients who cannot grow for themselves can find a way to get their medicine, he said. A dispensary is a million-dollar-a-year business, he said. If a medical marijuana business owner is not willing to purchase marijuana from an exchange and to be completely open and transparent, Keene said, then that person has no business being in the medical marijuana business.

Rhory Gould reminded the council that their challenge is to find a balance between the concerns that some people might have and the interests of patients. Offering patients more choices, he said, would result in competition, thus lower prices and better service. He reminded the council that Ann Arbor is surrounded by more conservative communities. He suggested that parking affects ease of access to dispensaries, and in light of that called for a geographic distribution of licenses: 10-15 licenses for downtown and 15 for the rest of the city, and 5-8 licenses for growing facilities. He noted that the original moratorium was only for 120 days and had then been extended well beyond that time. He wanted to get employees hired, space rented and start paying taxes, he said.

Chuck Ream told the council that they’d come a long way and that he wanted to focus on three remaining areas. First, the section expressing the legislative intent of the licensing ordinance, said Ream, is negative and pejorative and should be changed to reflect the city’s charter amendment. Second, he said there is no need to have more than one person’s name posted on the wall – warning that 15 people have been killed and others robbed. There is no need to post people’s names so that every junkie and robber can have access to that information. Third, he said there’s no need to require a listing of all suppliers. That kind of listing would drive the “little guy” out of business, he said.

Medical Marijuana: Council Deliberations

Sabra Briere (Ward 1) led off deliberations by noting that some of the proposed changes that had been analyzed by the city attorney’s office had been forwarded to councilmembers only around 6 p.m. [The council had a budget work session that began at 6 p.m.]

Medical Marijuana: Council Deliberations – Amendment 1 (Define Cultivation Facility)

Briere then waded into proposed changes, starting with definitions. The amendment offered and eventually approved defined cultivation facilities this way:

Medical marijuana cultivation facility means a structure or each space in a structure that is separately owned or leased by a person other than the owner of the structure, in which marijuana plants are being cultivated other than as a medical marijuana home occupation.

Queried by Marcia Higgins (Ward 4) about the motivation for the change, Briere observed that the definition of “cultivation facility” in the original draft was essentially a tautology: “Cultivation facility means a medical marijuana cultivation facility.” She added that the desire was to distinguish cultivation facilities from home occupation-type businesses. [At the Jan. 3 meeting, the council had stripped out home occupation businesses from the licensing requirements.]

Higgins said the definition seemed to indicate a large structure, leased to different people – could there be several cultivation facilities in one structure? City attorney Stephen Postema did not answer Higgins’ specific question, but essentially reiterated the content of the definition. Higgins indicated that she found the definition more confusing now than before. Postema said some definition of cultivation facility was needed.

Sandi Smith (Ward 1) clarified with Postema that the consequence of the proposed definition was that each individual cultivation facility in a larger structure would need to have a license.

Amendment outcome: With dissent from Rapundalo and Higgins, the definition of “cultivation facility” was approved.

Medical Marijuana: Council Deliberations – Amendment 2 (Define Authorized Person)

Next up was the definition of an “authorized person.” The eventual language accepted by the council was this:

(e) Authorized person means:
(i) an owner of a dispensary or cultivation facility;
(ii) the directors, officers, members, partners, and individuals of a dispensary or cultivation facility that is a corporation, limited liability company, partnership, or sole proprietorship;
(iii) any person who is in charge of and on the premises of the dispensary during business hours.

Briere explained that the definition of an authorized person is important in the context of the licensing requirement that city staff be able to enter the premises for inspection, if allowed by an “authorized person.” Briere drew an analogy to the idea that a plumber working at a resident’s home would not be authorized to allow someone else to enter.

Christopher Taylor (Ward 3) wondered why “an employee” was not on the list of possible persons who would meet the definitional criteria.

Briere explained that depending on the business model, some employees might be more in charge or less in charge of the facility. A cleaning person would not be in charge, for example.

Amendment outcome: The new definition of “authorized person” was unanimously approved.

Medical Marijuana: Council Deliberations – Amendment 3 (Combined Facilities)

Briere carried the next amendment forward, indicating some weariness. The next amendment clarified whether a combined operation that includes both a cultivation facility and a dispensary would require two licenses – one for the cultivation facility and one for the dispensary. The eventually approved language reads:

(4) The first year’s licenses shall be capped at a number 10% higher than the licenses applied for in the first 60 days, but not more than 20 dispensaries and 10 cultivation facility licenses. Any license terminated during the license year returns to the City for possible reissuance. A business that is a combined dispensary and cultivation facility shall require two separate licenses.

Briere reported that the metaphor she’d discussed with city attorney Stephen Postema that morning was that of a brewpub, which manufactures and distributes alcohol on the same premises. Having both kinds of operation puts you in a different position, Briere said. Sandi Smith (Ward 1) asked that the word “possible” be inserted before “reissuance” to make clear that the city was not obligated to reissue a returned license.

Amendment outcome: The council unanimously approved the amendment making it clear that a combined facility would need two licenses.

Medical Marijuana: Council Deliberations – Amendment 4 (Proof  of Insurance)

Saying that she would love it if someone else would take up the issue of bringing amendments forward, Briere trudged ahead. Next up was a general provision that required proof of insurance for licensees. The exact types were left blank in the amendment, with the idea that the blanks would be filled in before the second vote on the ordinance. Tony Derezinski (Ward 2) expressed some reluctance in leaving the items blank, but said that if city attorney Stephen Postema could provide the information to fill in the blanks by the second vote, he was okay with it.

(4) Before the City officially issues a license, the applicant shall provide the City with proof of insurance in the following types and amounts:
(a)
(b)
(etc.)

Amendment outcome: The council unanimously voted to insert a requirement of proof of insurance.

Medical Marijuana: Council Deliberations – Amendment 5 (Strike Physician Names)

Next up was an amendment to strike the names of physicians who would be rendering services on the premises from the information required on an application form.

(f) Name and address of all physicians who will render services on the premises of the cultivation facility or dispensary.

Briere said there were undoubtedly reasons for wanting to know this information. But she pointed out that if the goal was to find out which physicians were referring patients to a dispensary, then this requirement would not meet that goal, because a physician need not be on the premises to make the referral. She also pointed out that the physicians doing the referrals could change from time to time.

Smith supported striking the requirement, saying that it would not inform a licensing board decision about whether to grant a license.

City administrator Roger Fraser and Marcia Higgins share a humorful aside during the Feb. 7 meeting.

Higgins asked why a physician would render services at a dispensary. Why would they do that? she asked. If this is an additional place the physician would be practicing, then she’d want to know that, she said.

Assistant city attorney Kristen Larcom explained that there is locally at least one dispensary with a physician on the premises to review and make referrals for state of Michigan medical marijuana registry cards. Why can’t a physician do that at their office? wondered Higgins. Higgins stated she’d not be supporting the amendment.

Carsten Hohnke (Ward 5) raised the practical issue of whether the changing of a physician on the premises could cause the license to be invalid. Postema indicated that the information should be updated with the city if it changed. He also said there’s no requirement that a physician be on the premises and that the majority of dispensaries don’t have one.

Margie Teall (Ward 4) and Stephen Kunselman (Ward 3) both said they’d support the amendment.

Amendment outcome: With dissent from Rapundalo and Higgins, the requirement was eliminated that physicians’ names be included in a license application.

Medical Marijuana: Council Deliberations – Amendment 6 (Strike Services)

Next up was an amendment that altered the requirement that the license application include a description of products and services to be offered by the licensee. In its final form, the language was simply stricken:

(j) A description of the products and services to be provided.

Briere said that there simply needed to be language indicating whether an applicant is applying for a dispensary license or a cultivation facility license. Smith suggested striking the item in its entirety. She said a licensing board decision would not be informed by knowing what strain of marijuana or delivery methods were being offered.

A back and forth that included Rapundalo and Derezinski – who serve on the council’s liquor license review committee – drew out the fact that liquor licenses are specific to the kind of alcohol served and the specific types of entertainment offered on the premises. So they were keen to see the language stay in the ordinance.

Mayor John Hieftje questioned whether the analogy to liquor licenses was the best one to use – he thought a pharmacy would be a better point of comparison.

Amendment outcome: The council voted to strike the language about products and services, with dissent from Higgins, Derezinski, Rapundalo, and Taylor.

Medical Marijuana: Council Deliberations – Amendment 7 (Security Measures)

The council next considered an amendment to modify the requirement on video security measures. [Language to be stricken is displayed in strike-through; added language in italics.]

(i) security cameras to monitor all areas of the licensed premises where persons may gain or attempt to gain access to marijuana or cash. Recordings from security cameras shall be maintained for a minimum of seventy-two hours in a secure off-site location. The Administrator may adopt regulations implementing this requirement, including but not limited to regulations on the design, location, maintenance, and access to the cameras and recordings. Those regulations shall take effect 30 days after being filed with the City Clerk unless modified or disapproved by the City Council.

Smith stated that she was uncomfortable with the city administrator having that role. Kristen Larcom indicated there are a number of ordinances where the city administrator promulgates such regulations. Higgins ask if Larcom had had a conversation with city administrator Roger Fraser about it – no, she hadn’t. Taylor noted that the language doesn’t give an instruction to the administrator, but rather gives the administrator an authority.

Kunselman expressed reluctance to adopt measures modeled after Colorado’s laws – which had been mentioned in connection to the video requirement – because for Colorado, the video recordings are all about tracking revenue. [At the Sunday night caucus, Tony Keene had said that in Colorado, the video feeds go straight to the treasury department.]

Amendment outcome: The council approved the video surveillance language, with dissent from Kunselman, Higgins, Smith and Mike Anglin (Ward 5).

Medical Marijuana: Council Deliberations – Amendment 8 (Package Labeling Warning)

Next up was insertion of additional language [indicated in italics] on the package labels for medical marijuana.

THIS PRODUCT IS MANUFACTURED WITHOUT ANY REGULATORY OVERSIGHT FOR HEALTH, SAFETY OR EFFICACY. THERE MAY BE HEALTH RISKS ASSOCIATED WITH THE INGESTION OR USE OF THIS PRODUCT. USING THIS PRODUCT MAY CAUSE DROWSINESS. DO NOT DRIVE OR OPERATE HEAVY MACHINERY WHILE USING THIS PRODUCT. KEEP THIS PRODUCT OUT OF REACH OF CHILDREN. THIS PRODUCT MAY NOT BE USED IN ANY WAY THAT DOES NOT COMPLY WITH THE MICHIGAN MEDICAL MARIJUANA ACT OR BY ANY PERSON WHO DOES NOT POSSESS A VALID MEDICAL MARIJUANA PATIENT REGISTRATION CARD.

Smith said that she hoped that they might eventually also contemplate some language indicating educational resources.

Amendment outcome: The council unanimously approved the additional language.

Medical Marijuana: Council Deliberations – Amendments 9, 10 (Rephrase to Positive)

Two amendments were made that essentially replaced “no person shall fail to” with language that asserted what is required. In their approved form, the amended portions of the ordinance read:

An authorized person shall consent to the entry into a cultivation facility or dispensary by the Building Official and zoning inspectors for the purpose of inspection to determine compliance with this chapter pursuant to a notice posted in a conspicuous place on the premises two (2) or more days before the date of the inspection or sent by first class mail to the address of the premises four (4) or more calendar days before the date of the inspection.

…

All security measures required in this chapter shall be maintained in good working order. The premises shall be monitored and secured twenty-four hours per day.

Amendment outcome: The council unanimously approved the rephrasing of the language.

Medical Marijuana: Council Deliberations – Amendment 11 (Changes to Facility)

Next up was an amendment to make clear how changes to the operation of a business and possible changes to the physical structure would be handled in the licensing. These acts would be prohibited [deleted text is shown as strike-through, with added text in italics]:

(d) Make any changes or allow any changes to be made in the operation of the cultivation facility or dispensary as represented in the license application without, applying for and being issued a new license first notifying the City by amending its application.

(e) Make any changes or allow any changes to be made to the structure in which the business is operating without applying for and being issued appropriate permits and obtaining final inspection approval.

Amendment outcome: The council unanimously approved the amendment.

Medical Marijuana: Council Deliberations – Amendment 12 (Posting Names)

An amendment that reduced the number of names required to be posted on the premises of a business, together with the license, was approved [deleted text is shown as strike-through, with added text in italics]:

A cultivation facility or dispensary license issued by the City under this chapter, including the name and contact information for the owner(s) and business manager(s),  for an authorized person and business manager(s), if any, shall be conspicuously posted in the cultivation facility or dispensary where it is easily open to public view.

Higgins asked why you wouldn’t want to display the names on the license itself. Taylor drew a distinction between posting ames versus the city having the names in the city’s hands. Higgins summarized her objection by saying that this is a big business, and it seems shady not to list the owners.

Amendment outcome: The council voted to modify the number of names required to be posted, with dissent from Higgins and Rapundalo.

Medical Marijuana: Council Deliberations – Unresolved Issues

In the course of handling the multiple amendments, one was withdrawn – it would would have provided a specific way to trace the origin of the medical marijuana by requiring the state registry ID number of a caregiver.

Another issue was not formally introduced as an amendment – the provisions in the licensing that address prior convictions of felonies.

As it became apparent that the council’s inclination was to again postpone the measure, Hieftje reiterated some of the frustration that he’d expressed midway through the handling of the amendments, saying that he would like to see a marked-up copy of the licensing proposal that reflected all the amendments the council had made. He wanted to be able to consider the material in a form that was more appropriate than what they’d had to contend with that evening.

In response, Postema told the mayor that he could have such a copy to the council by next week. Hieftje seemed to indicate that next week [it was Monday evening] would not be an acceptable delay, saying that it would be very helpful if the council had the material available several days in advance of their next meeting.

Outcome: The council unanimously voted to postpone its initial vote on the licensing scheme until Feb. 22, 2010, but passed several amendments before postponement. [.pdf of licensing proposal as amended on Feb. 7, 2011] The vote that was postponed is the first of two votes the council must take on any new ordinance it enacts. The second vote on licensing would come no sooner than March 7, 2011. A second vote on the zoning regulations for medical marijuana businesses, which won council’s initial approval at its Oct. 18, 2010 meeting, also was scheduled for March 7, 2011.

Heritage Row Application Fee

Before the council was a proposal to waive the application fee if the developer of the Heritage Row project, Alex de Parry, resubmits the planned unit development (PUD) within 90 days.

To qualify for the fee waiver, the project would also need to include the same revisions that previously had been reviewed by city staff – after the project had been rejected, and then rejected again upon reconsideration by the city council in the summer of 2010. The resolution notes that to date, de Parry has paid the city over $30,000 in review fees, a number that was revised upward during council deliberations to more than $42,000.

The residential project, located on the east side of South Fifth Avenue, would renovate seven houses and construct three new 3.5-story apartment buildings behind those houses, with an underground parking garage. The council initially rejected Heritage Row on June 21, 2010, with a 7-4 vote in favor. It required an 8-vote majority for approval, due to a petition filed by adjoining property owners. The city council then reconsidered the project at its July 6, 2010 meeting, and it failed again, on a 7-3 vote. Then at the council’s Dec. 6, 2010 meeting, some councilmembers seemed poised to suspend council rules to allow another reconsideration, but the vote to suspend council rules failed.

The last proposal reviewed by the city includes the following revisions: (1) the top floor of the new south building would be removed from the design; (2) the density would be reduced from 79 units to 76 units and the number of bedrooms would be reduced from 154 to 147; (3) the project would include five affordable units at the 50% AMI (average median income) level, in addition to six affordable units at the 80% AMI level; and (4) the three new buildings would be LEED certified.

Complicating the decision-making on Heritage Row is a different, matter-of-right project called City Place, for which de Parry already has site plan approval. That approval was given at the council’s Sept. 21, 2009 meeting.

Heritage Row Fee: Public Comment

Dissenting views held by the public were expressed in letters to the city from nearby property owners Tom Whitaker and Beverly Strassmann, whose communications were attached to the council’s online packet of materials.

Among other points, Whitaker’s letter raised the question of whether the project would be considered a new project or would be considered to be the same project as before:

But will the City really treat this as a new project? Will Heritage Row Revisited actually receive the same rigorous and comprehensive review that any other new PUD petition would receive? The resolution explicitly says NO, it will not. This time, Heritage Row is to only receive the most minimal of reviews by staff in order to justify the waiving of all fees and to speed it through the process (which will invariably lead to the same conclusion as the last three times). So which is it – the same or new?

Strassmann’s message to the council – as well as Whitaker’s – included a specific issue that emerged during council deliberations: Would de Parry actually build the City Place matter-of-right project? For Strassmann, it’s clear:

The de Parry’s have no intention of building their R4C project. The R4C project would be very foolish to build and it is unlikely to get bank approval. They know that. Nor is it likely that the de Parry’s are about to cash in and move out of state given that they have another local project.

Heritage Row Fee: Council Deliberations

The resolution was introduced by Tony Derezinski (Ward 2), who had co-sponsored it along with Sandi Smith (Ward 1). He recalled that when the council had last had the project on its agenda, on Dec. 6, 2010, the parliamentary requirements would have entailed what some people considered to be extraordinary rule suspensions. The resolution before the council takes care of that, Derezinski said.

Derezinski went on to say that the resolution to waive the application fee had come at the request of the developer, Alex de Parry. Though the information accompanying the resolution indicated that de Parry had paid more than $30,000 in application fees in connection with projects at the site, Derezinski said the exact number was $42,020. The rationale for the fee waiver, he said, was that the city’s planning staff would have relatively little work to do in reviewing the plans, which they’ve seen before.

From left: councilmembers Sabra Briere (Ward 1), Carsten Hohnke (Ward 5), and Sandi Smith (Ward 1) at the budget work session before the Feb. 7 city council meeting. At right is Kevin McDonald of the city attorney’s office.

Derezinski said that he and Smith as well as other councilmembers had worked with the developer to make changes to the project to make it better.

Marcia Higgins (Ward 4) said she thought it was great to see that the project would be coming back, but noted that waiving fees was not standard practice. She suggested instead a reduced fee that would be commensurate with the 15-20 hours of staff time that would be required for the review. The actual fee worked out to $4,900, and Higgins suggested something like half that – $2,000 was the figure she settled on. Derezinski said he didn’t like the idea, but as a practical matter he would not oppose it as a friendly amendment.

Carsten Hohnke (Ward 5) said he had concerns about making such an exception, but said he was prepared to support some version of the resolution. He described how a previous version of the project had been unanimously rejected by the city council. He said that progress had been made in improving the project and he felt the council had some responsibility to be proactive.

Stephen Kunselman (Ward 3) said he did not like the idea of waiving fees. He wondered if the council would be waiving fees for the developer of the Georgetown Mall property. He did not agree with the conclusion that the alterations to the project represented a substantial change. He also wondered what level of LEED certification would be achieved.

Kunselman went on to discuss taxes owed on the individual properties that constitute the site of the project, which came to more than $19,000. He concluded that the developer was a “tax scofflaw.” He also noted that not all the sidewalks had been repaired in front of the properties – the city’s ordinances require that property owners maintain their own sidewalks. He said he did not think City Place would get built, because all the properties would have to be paid off – he seemed to indicate a general skepticism that the developer had the financial wherewithal to build the project.

Mike Anglin (Ward 5) said there’d been a good dialogue on the project. He noted that the city’s R4C/R2A zoning study was not yet finished. There were ways the council could have dealt with preventing City Place from being built, he said, which included a proposed moratorium on projects in R4C areas and establishing a historic district. [A prior proposal from Anglin for a moratorium got little traction on the council. And the council had previously rejected a historic district study committee's recommendation to establish a district in the area.]

Mayor John Hieftje said he would normally not support a fee waiver. The mayor picked up on a comment that Derezinski had made to the effect that in Derezinski’s short time on the city council, he’d never seen anything like the history of the Heritage Row project: Hieftje said in his long time on the council [more than 11 years], he’d also seen nothing like it. He called it a special situation. If it weren’t for City Place, he said, he wouldn’t contemplate supporting the resolution. But he did believe that City Place would be built, if Heritage Row weren’t approved. In an apparent allusion to Whitaker’s letter, Hieftje said that people had suggested other ways to block City Place, but he did not think there were any that were legally acceptable.

Hohnke acknowledged the unusual nature of the situation. He said that the long, hard, tough negotiations had served the community well – City Place had not yet been built.

Outcome: The council approved the application fee reduction for Heritage Row by a 9-2 vote, with dissent from Stephen Kunselman (Ward 3) and Mike Anglin (Ward 5).

Design Guidelines

Before the council for approval was a program of design guidelines for downtown buildings as the final piece of its A2D2 rezoning project. The program was long in the works but the item was a late addition to the Feb. 7 agenda, getting added the same day as the council meeting. [Previous Chronicle coverage, which includes a detailed timeline of the design guidelines work, dating back to a work group formed in 2006: "Ann Arbor Hotel First to Get Design Review"]

Local architect Norm Tyler consults with Marcia Higgins (Ward 4).

The resolution did not incorporate a mandatory process of design review into the city’s ordinances, but instead creates a framework for eventual incorporation of such a mandatory process. Part of the temporary arrangement will be a design review committee consisting of: Chet Hill (landscape architect); Mary Jukari (landscape architect); Richard Mitchell (architect); Tamara Burns (architect); Paul Fontaine (planner); William Kinley (developer); and Geoff Perkins (contractor).

Compliance with the recommendations of a permanent design review board to be established by ordinance would be voluntary. For now, developers would be asked to participate voluntarily with the process, with recommendations coming from the design review committee that was appointed as part of the council’s resolution.

Design Guidelines: Public Commentary

Peter Nagourney addressed the council by recapitulating the long history of the effort to formulate design guidelines. He recounted how the design guidelines had been presented to the city council at their work session on Jan. 10, 2011. He said he was impressed with the work of the task force.

Design Guidelines: Council Deliberations

During the first slot for communications time, Sabra Briere (Ward 1) was critical of the belated way the item had been brought to the agenda. [Items are ideally to be ready for the agenda's first publication on the Wednesday before the council's Monday meetings, but according to their own council rules, councilmembers are supposed to use best efforts to make sure that items are placed on the agenda before the Friday prior to a Monday meeting.] Briere said that placement of an item on the agenda as late as Monday should be reserved only for emergencies. Something as important as the design guidelines, said Briere, should not be added to the agenda that late.

At the start of the meeting, a mayoral proclamation was presented to Peter Pollack’s widow, Eleanor Pollack, for his wide-ranging contributions to civic life in Ann Arbor, which included work on the design guidelines task force that produced the final program of guidelines. Upon presentation of the proclamation, the council rose from their seats and were joined by the audience in their applause honoring Pollack’s memory.

Marcia Higgins (Ward 4), who led the design guidelines task force, said the task force wanted to dedicate their report to Pollack’s memory. Higgins had announced Pollack’s imminent passing at the council’s Dec. 20, 2010 meeting.

When the council came to the agenda item, Higgins led things off by describing the task force’s work as diligent and noted the public input over the last five years. After the Jan. 10 work session, Higgins said the task force had met again to discuss how the mandatory review process and voluntary compliance would be implemented.

She said the completely voluntary process that the resolution put into place sees the design review taking place before the citizen participation meeting, which is required by city ordinance for all new project submissions.

Outcome: The council unanimously approved adoption of the design guidelines program.

Fuller-Maiden Lane Intersection

Before the council was the authorization of a $460,139 contract with DLZ Michigan Inc. to review previous studies of the Fuller Road/Maiden Lane/East Medical Center Drive intersection and propose a design for reconfiguring the intersection. Previous studies point to a roundabout as a good solution to the traffic congestion at the intersection. The poor level of service (LOS) in that area has prompted the city to propose various solutions to the intersection redesign, dating back at least to 2005. Depending on the time of day, the intersection currently rates D and E on the letter-grade scale used to evaluate traffic flow.

In the city’s capital improvements plan (CIP), the intersection improvement is categorized with bridge projects – it’s immediately adjacent to the Maiden Lane bridge over the Huron River.

In 2009, the city studied the intersection in the context of increased traffic load due to possible construction of the Fuller Road Station – an intermodal transit center and parking deck proposed for the area between Fuller Road and East Medical Center Drive. The city’s online meeting packet included drawings of the current configuration of the intersection, as well as the possible roundabout configuration.

The engineering and design of the roundabout project will be funded out of the FY 2011 capital budget for the city’s street reconstruction millage. Construction is expected to be funded out of a combination of: (1) millage revenues in future years; (2) possible funds from a federal Congestion Mitigation Air Quality (CMAQ) grant; and (3) a contribution from the University of Michigan.

In a telephone interview Monday morning before the evening council meeting, Homayoon Pirooz, in the city’s project management unit, told The Chronicle that construction on any project would not begin before the summer of 2012, with 2013 a more likely timeframe. Pirooz ballparked the construction cost of a project like this – once all the traffic lanes leading to the intersection are modified, and the pedestrian amenities are installed – as possibly more than $2.5 million.

Outcome: The council unanimously approved the contract for design and engineering of the Fuller-Maiden Lane intersection.

Capital Improvements Plan (CIP)

At its Feb. 7 meeting, the council voted on approval of the city’s capital improvements plan (CIP). The plan covers the fiscal years 2012-2017, and includes a list of major capital projects – for projects that have identified funding sources, as well as those that do not. The city code requires that the CIP be developed and updated each year, looking ahead at a six-year period, to help with financial planning. It’s intended to reflect the city’s priorities and needs, and serves as a guide to discern what projects are on the horizon.

Included in this year’s proposed CIP was a plan for a runway extension at the city’s municipal airport, an item that the council had voted to remove last year before last year’s CIP was finally adopted.

The city’s planning commission recommended adoption of the CIP at its Jan. 4, 2011 meeting, when commissioners discussed in detail how the plan was developed and how public input was sought. [Previous Chronicle coverage of the possible airport runway extension: "Ann Arbor Airport Study Gets Public Hearing"]

CIP: Public Hearing

Libby Hunter rendered her public commentary in the form of a song, as has become her standard practice. She used the melody from the University of Michigan fight song “Hail to the Victors” and sang lyrics critical of the Fuller Road Station project, which is included in the CIP: “Hail to Hieftje’s transit center …”

Joel Batterman introduced himself as a 2006 graduate of Huron High School and currently a master’s student in the University of Michigan urban planning program. He discussed the Fuller Road Station, an item in the CIP. He said there needs to be a prioritization. The city of Ann Arbor, he said, has a desire for a train station. And the University of Michigan, he continued, has a desire for greater parking capacity. Batterman urged consideration of UM’s own phase 2 draft reports for its Integrated Assessment of Campus Sustainability. Batterman suggested that a better strategy than increased parking capacity was to make better use of existing parking resources. He described thousands of empty spaces on outlying lots, which could be used more effectively through judicious setting of parking fee levels. [Batterman addressed the UM regents at their January meeting on the same topic: .pdf file of Batterman's remarks to regents].

Andrew McGill, prior to the start of the Feb. 7 city council meeting. It was a long wait for McGill to hear the vote on the city’s capital improvements plan. He left knowing that the council had removed the airport runway extension project from the plan – he’d advocated for its removal.

Andrew McGill spoke on behalf of The Committee for the Preservation of Community Quality, noting the 2012 line item in the CIP for the municipal airport runway extension. He said that labeling the extension as a “runway safety extension” is disingenuous. He reminded the council that they’d removed the item from the plan last year by a majority vote. He reminded them that they had only approved an environmental assessment of the airport, not a plan to extend the runway. The environmental assessment, he said, was still being evaluated by the Federal Aviation Administration. McGill concluded by asking the council to affirm the decision made the previous year and to delete the item again.

Providing a counterpoint to McGill’s remarks was Chris Gordon, who introduced himself as president of the Ann Arbor General Aviation Association. Gordon, who lives in Dexter, emphasized the idea that the Ann Arbor municipal airport is not just a city asset – it’s a regional, state, and national asset. He noted that in terms of number of operations, Ann Arbor’s airport is ranked eighth out of the state’s 238 public use airports. He stressed that there are aviation funds that can only be used on aviation assets – it’s not as if money not spent on airport projects could be spent on other, non-aviation projects elsewhere in the city. He urged the council’s support of all the airport projects in the CIP.

Thomas Partridge called for development of a unified plan to invest in people and services.

CIP: Council Deliberations

This year, Stephen Kunselman (Ward 3) raised the same objection about the runway that he had voiced the previous year, and the council again removed the item by a narrow 6-5 vote.

Amendment outcome: Voting for keeping the runway extension in the CIP were: Teall, Higgins, Smith, Derezinski and Rapundalo. Voting against the runway extension were Kunselman, Hohnke, Anglin, Hieftje, Briere and Taylor.

Mike Anglin (Ward 5) questioned what the principles were for developing the CIP and expressed some frustration that there are projects included in the plan that the council has not yet voted on, but they’re included in the plan as if the city is moving forward with them. Anglin also wondered to what extent input from the public had been included in the plan.

Cresson Slotten, senior project manager with the city, described for Anglin how the plan had been developed, including the survey of the public that had been conducted. Slotten’s remarks mirrored his presentation to the planning commission about the plan at their meeting a few weeks ago.

City administrator Roger Fraser noted that the planning commission is required to propose the CIP, but that not every item in the plan needs to have funding identified. Development of the plan, he said, complies with state law, and technically, the city council should simply be voting to receive the plan – implying that it was not really expected that the council would alter the plan.

Outcome: The council unanimously approved the CIP after the narrow 6-5 vote that eliminated the airport runway extension.

Greenbelt Matching Funds

The council was asked to approve applications to the U.S. Dept. of Agriculture’s Farm and Ranch Lands Protection Program (FRLPP) for matching grant funds. The funds would be used for the purchase of development rights on two additions to the city’s greenbelt program: 110 acres on the Lindemann-Weidmayer farm in Lodi Township, and 92 acres on the Grosshans farm in Superior Township.

The city’s cost would be paid out of the greenbelt millage funds. The federal match would be up to 50% of the appraised fair market value of the development rights, up to a maximum of $5,000 per acre. The greenbelt advisory commission recommended at its Dec. 8, 2010 meeting that the city make the applications to the FRLPP.

Outcome: Without comment, the council unanimously approved the two recommendations to submit applications for the federal matching grants, to be used for greenbelt properties.

Village Green Contract Amendment

Before the council was approval of an amendment to a contract with Village Green to develop a 244-space parking deck as the first two stories of a 9-story, 99-foot-tall building, City Apartments – a 156-unit residential planned unit development (PUD) at First and Washington. Among other items, the amendment clarifies the ability of the Ann Arbor Downtown Development Authority and the city to provide oversight to the construction process.

Once the parking deck portion of the building is completed and issued a certificate of occupancy, the city of Ann Arbor has agreed to issue $9 million worth of bonds to purchase the deck, and the Ann Arbor DDA has agreed to make the payments on those bonds. The DDA board approved its part of the contract amendment at its Feb. 2, 2011 meeting.

The contract amendment comes in the context of a series of milestones that were put in place last year, when the council extended Village Green’s option to purchase the parcel at First and Washington, where City Apartments would be built, for $3 million. That most recent extension came at the council’s Aug. 5, 2010 meeting, and provides a purchase option through June 1, 2011. The $3 million from the transaction would be put towards the construction fund for the city’s new municipal center, which is now largely complete and partly open for business.

If the $3 million transaction does not go through, the city has said it would borrow money to cover the construction shortfall, a step that would require city council approval. Based on The Chronicle’s conversation at the council’s meeting with a Village Green representative, the company expects the deal to go though and is planning for construction to start in the summer of 2011.

At a Wednesday morning meeting of the DDA partnerships committee, Wendy Rampson – head of planning for the city – told The Chronicle that Village Green had not yet made a formal request to lift the entire building by a few feet, in order to avoid having to dewater the site during construction. Depending on the number of feet, she said, such a request could be handled as an administrative change or else as a request that the city council would need to approve.

Outcome: Without comment, the council unanimously approved the Village Green contract amendment.

Fire Services Analysis

As part of its consent agenda, the council considered a resolution that authorized the city administrator to negotiate a contract to get an analysis of and recommendations for Ann Arbor’s fire protection needs. The contract, for not more than $54,000, will be signed with International City/County Management Association (ICMA) Center for Public Safety Management.

The move comes in the context of two recent budget retreats conducted by the council, where the council discussed the possibility of transforming Ann Arbor’s fire department to a staffing arrangement that would combine full-time career firefighters with paid on-call firefighters.

The city’s current contract with the firefighters union IAFF Local 693 expired on June 30, 2010. Councilmember Stephen Rapundalo (Ward 2), chair of the council’s labor committee, reported at the council’s Jan. 18, 2011 meeting that the city had been negotiating with its firefighters since February 2010, and has used the services of a state mediator on three occasions. Concessions sought by the city from all its unions include a wage freeze and higher employee contributions to the health care and pension plans.

Outcome: The council does not deliberate on consent agenda items. The fire protection services was approved unanimously along with other consent agenda items.

Communications and Comment

There are multiple slots on every agenda for city councilmembers and the city administrator to give updates or make announcements about important issues that are coming before the city council. And every meeting typically includes public commentary on subjects not necessarily on the agenda.

Comm/Comm: Labor Negotiations

Stephen Rapundalo (Ward 2) – consistent with the indication he’d made at the council’s previous meeting that he would give updates on the topic of the city’s negotiations with its labor unions – gave some background meant to correct misperceptions that had been indicated in comments written on the AnnArbor.com website. He clarified that city councilmembers do not participate in negotiations with the city’s unions. Those conversations are handled by the city administrator and other city staff, he said. What the council does is set general parameters for the conversations. [One of the legitimate reasons for the council to go into a closed session under the Open Meetings Act is to discuss labor negotiations and to develop a strategy for those negotiations.]

A second point Rapundalo made was that the firefighters were not the only workers to have made concessions in the past. [At the council's previous meeting, Rapundalo had cited non-union workers as well as the Teamsters police deputy chiefs unit, the Teamsters civilian supervisors and Teamsters police professionals as workers who'd made concessions.] Rapundalo also noted that the firefighters’ concessions had enjoyed a duration of only six months.

As a third point, Rapundalo rejected the idea that the city’s instigation of Act 312 arbitration was somehow an indicator that the city did not want to negotiate with its unions. He said the city is compelled to resort to that strategy, because there is little if any incentive for unions to negotiate – their existing contracts remain in effect even if they expire.

Rapundalo then went on to lay out the disparity between what non-union staff pay in the way of health care and what members of the police patrol union, the firefighters, and the AFSCME workers pay. Non-union city workers pay 20% for co-insurance, plus a $300-$1,000 deductible per year. In contrast, union workers pay a $225-250 deductible per year and that’s it. He then went on to compare University of Michigan health benefits with union benefits. UM, Rapundalo noted, is generally considered to offer fairly generous benefits. For an individual in UM’s system, the cost per year in premiums is $1,416, compared to the $225-250 deductible per year that city union members might pay. For family insurance, the comparison was: UM – $6,480; city of Ann Arbor unions – $500.

The city has dealt with rising health costs year after year, and it continues to negotiate to reduce the disparity in health care costs between its employee groups, Rapundalo concluded.

Comm/Comm: Snow Removal Cost

City administrator Roger Fraser noted that the cost of the previous week’s snow removal had been around $250,000.

Comm/Comm: City-DDA Parking Contract

The Ann Arbor Downtown Development Authority has a contract with the city under which it manages the city’s public parking system. Two committees – one drawn from the DDA board and one drawn from the city – are responsible for negotiating a new contract.

Christopher Taylor (Ward 3) at the council’s budget work session before their Feb. 7 meeting.

Christopher Taylor (Ward 3) reported that the Ann Arbor DDA’s committee is currently working on contract details. Joint meetings of the two committees, said Taylor, would reconvene shortly. [Under terms of a 2005 amendment to that contract, it appears the DDA would have the option unilaterally to extend the existing contract for at least three years past the 2015 term of that contract. However, the idea of the DDA exercising that option has not been a part of the public discussions of the contract.]

Comm/Comm: Downtown Street Outreach Task Force

Sabra Briere (Ward 1) reported that the downtown street outreach task force, which she is chairing, had completed its fact-finding work and is currently writing up its report. The report would be presented to the council, she said, at the second council meeting in March, if not sooner. [The council had appointed the task force at its Sept. 20, 2010 meeting. Previous Chronicle coverage: "Ann Arbor Task Force Consults Panhandlers"]

Comm/Comm: Environmental Commission Vacancy

Carsten Hohnke (Ward 5) told his colleagues that for the current vacancy on the city’s environmental commission left by Steve Bean – who chose not to continue his service on the EC – he was nominating Susan Hutton, development director at Leslie Science and Nature Center. He also announced that there would be another vacancy soon on the EC and that the council was actively soliciting applicants. [Anya Dale's term on the EC ends on Feb. 20, 2011.]

Comm/Comm: Advocating for Least Fortunate

During public commentary reserved time at the start of the meeting, as well as the general time at the meeting’s conclusion, Thomas Partridge told the council that he was advocating for the least fortunate among us. He called for ending discriminatory housing and transportation policies. He criticized the city snow plows that piled the snow up into “glaciers,” making it difficult to traverse them. He called for a “kinder, more reasonable mindset.” He called for leadership that is forward-looking and fair.

Comm/Comm: Parks Volunteer Recognition

A mayoral proclamation at the start of the meeting recognized Delta Rho Chapter of the Phi Beta Sigma Fraternity as volunteers for the city’s parks program. The fraternity focuses its volunteer efforts on Liberty Plaza downtown and includes food distribution to the homeless population who frequent the park.

Present: Stephen Rapundalo, Mike Anglin, Margie Teall, Sabra Briere, Sandi Smith, Tony Derezinski, Stephen Kunselman, Marcia Higgins, John Hieftje, Christopher Taylor, Carsten Hohnke.

Next council meeting: Feb. 22, 2011 at 7 p.m. in the Washtenaw County administration building, 220 N. Main St. [confirm date]