The decision was prompted by questions raised on Friday, April 29 by the city of Ann Arbor about the implementation of the city’s ordinance governing TIF capture for the DDA district. The ordinance includes a clause stipulating that if the growth rate in the TIF capture exceeds what is anticipated in the formal TIF plan, at least half of the excess must be divided proportionately among the taxing authorities that had some of their taxes captured in the TIF district.

The total amount of excess TIF capture that has accumulated since 2004 in the Ann Arbor DDA district is $1,185,132. The difference between that total and the combined $473,365 to be paid to Washtenaw County, WCC and AADL is $711,767. That difference is the proportionate share that would be due to the city of Ann Arbor (including the Ann Arbor Transportation Authority), which also has some of its taxes captured in the DDA TIF district. In fact, around 60% of the taxes captured in the TIF district are due to city of Ann Arbor millages.

However, Friday’s resolution included a “whereas” clause indicating that the city of Ann Arbor is likely to recognize that the $711,767 in excess TIF capture has effectively already been returned to the city, in the form of (1) a roughly $0.5 million annual grant to the city to help make bond payments on its new municipal center, and (2) a $1 million expenditure to demolish the old YMCA building, as well as other grants.

The determination of the excess was based on: (1) the “optimistic” projections in the TIF plan; (2) the combined real and personal property valuations in the district; and (3) excess growth calculated by comparing the actual growth rate between successive years against the forecast growth rate in the TIF plan between those years.

The payments to the other three taxing entities are planned to be made before June 30, making them a part of the 2011 fiscal year, which ends June 30. That will require the board to amend the FY 2011 budget.

The financial impact of the payments on the DDA led the board on Friday to review the financial component to the new contract currently being negotiated with the city under which the DDA operates Ann Arbor’s public parking system.

Before the excess TIF issue came to light, the DDA board had been prepared on May 2 to agree to a contract that would have transferred 17% of gross parking revenues to the city each year. Gross parking revenues are projected to be around $16 million in the next year.

At Friday’s meeting, the DDA board ratified its side of an agreement that would transfer 17% of gross parking revenues to the city, but added a contingency that would require the city of Ann Arbor to formalize a plan proposed by mayor John Hieftje to backstop fund balances for the DDA.

The contingency means that the city council’s May 16 budget meeting, which is continuing on May 23, will likely continue past that Monday to resume again on Tuesday, May 31. Hieftje, who also sits on the DDA board, said he felt there would be sufficient support on the council on May 23 to ratify the parking contract and formalize the backstopping plan.

The DDA will need to schedule another special meeting the week of May 23 after the council meets to resolve the contingency. The council would then be able to finalize its budget on May 31.

This brief was filed from the DDA’s offices at 150 S. Fifth Ave., where the special meeting took place. A more detailed report will follow: [link]