Mayor John Hieftje (left) and DDA board member Roger Hewitt (right) head to their seats to start the DDA's board meeting. (Photos by the writer.)

Instead, the board received this news from the chair of its bricks and money committee: The city has raised the possibility that the DDA might need to return money to various taxing entities – including the city of Ann Arbor – from the taxes captured through the DDA’s tax increment finance district. The city communicated its concern to the DDA on Monday morning, the day of the noon meeting.

The issue concerns the DDA’s TIF plan, which was renewed in 2003, and language in the city’s ordinance establishing the DDA under the state’s enabling legislation. The TIF plan contains projections for the growth in taxable value of property (both real and personal) in the district. The city’s ordinance stipulates that if the actual “captured assessed valuation” grows at a rate faster than the expectation expressed in the TIF plan, then at least 50% of the additional amount must be returned proportionately to the taxing authorities from which the taxes were captured.

The vagueness of the ordinance language leaves several open questions that will require further review by the city attorney’s office and the DDA’s own legal counsel, as well as the financial staff from both organizations.

Those questions include: (1) What’s the relevant time period? (2) Which set of TIF plan estimates are applicable – the one labeled pessimistic, optimistic or realistic? (3) Who is the responsible party for adherence to the ordinance? (4) Does the ordinance language refer to real property only or also to personal property? (5) Do payments already made by the DDA to the city of Ann Arbor out of the TIF for the new municipal center count towards any sum that might need to be returned?

After hearing the news, the board decided to table the resolution on its agenda that would have ratified the DDA’s side of a new parking contract under which it would continue to manage the city’s parking system. [Previous Chronicle coverage: "Column: Ann Arbor Parking – Share THIS!"]

Board members recognized that it would likely be necessary to convene a special meeting of the board, given the city’s need to approve its budget on May 16. Later the same day, on the evening of May 2, the city council struck from its agenda the item that would have ratified the city’s side of the new parking contract. The city council has not yet weighed in on the text of the contract, but did express its view on the financial terms at its April 19 meeting.

As DDA board members absorbed the news about the TIF question, they heard their usual set of reports from their committees and wrapped up the meeting is less than an hour – they had no further business to transact. Board member Russ Collins, who was prepared to call in to the meeting from Detroit, where he’d been summoned for federal jury duty, did not need to do that. 

TIF Question

To understand the news from the DDA’s meeting, it’s useful to start with some basic background.

TIF Question: Background

Ann Arbor’s Downtown Development Authority is established under the state’s enabling statute, which governs how such entities may be formed by local governments. [.pdf of state enabling legislation: Act 197 of 1975]. A DDA uses a tax increment finance (TIF) district as a way of focusing investment of tax revenues on a specific geographic area – the TIF district.

The DDA itself does not levy taxes within the district. Instead, a DDA “captures” property taxes that are already levied by other taxing entities. In the case of Ann Arbor’s DDA, the other taxing entities whose revenues are captured inside the district include: the city of Ann Arbor, Washtenaw County, the Ann Arbor Transportation Authority (AATA), Washtenaw Community College (WCC), and the Ann Arbor District Library.

For DDAs formed after 1994, other taxing authorities have had a chance to opt out of allowing their taxes to be captured. From the state statute:

125.1653 Sec. 3 (3) Not more than 60 days after a public hearing held after February 15, 1994, the governing body of a taxing jurisdiction levying ad valorem property taxes that would otherwise be subject to capture may exempt its taxes from capture by adopting a resolution to that effect and filing a copy with the clerk of the municipality proposing to create the authority.

Ann Arbor’s DDA was formed in 1982 for a 30-year period, but was renewed in 2003 to extend through 2033.

A standard part of any TIF capture, including that of Ann Arbor’s DDA, is that the tax capture is limited to those taxes on the difference between existing value of a property and a newly constructed property. This difference is the increment in “tax increment finance.”

Ann Arbor’s TIF capture is somewhat different from simple TIF in two ways, both of which have the effect of limiting the amount of taxes captured.

First, once the increment is determined for the initial year of a newly constructed property, that increment stays constant for purposes of future capture. In other words, after a property is built and continues to appreciate in value over time, the taxes on additional value due to that appreciation are not captured by the Ann Arbor DDA. This is a point that DDA board member Leah Gunn reliably makes whenever the DDA’s TIF capture is discussed, and Monday’s meeting was no different.

The second way that Ann Arbor DDA TIF capture is different from simple TIF relates to projections that are included in the TIF plan for the DDA. A TIF plan is an element described in the state statute:

125.1664 Tax increment financing plan; preparation and contents; limitation; definition; public hearing; fiscal and economic implications; recommendations; agreements; modification of plan. Sec. 14. (1) When the authority determines that it is necessary for the achievement of the purposes of this act, the authority shall prepare and submit a tax increment financing plan to the governing body of the municipality …

The complete Ann Arbor DDA TIF plan is available on the DDA’s website. The TIF plan includes estimates of the year-to-year increase in new taxable value in the district.

Here’s how the DDA’s TIF capture is limited by the TIF plan: If the growth rate of the TIF capture exceeds the amount estimated in the plan, then the excess is supposed to be returned to the various taxing authorities. From the city’s DDA ordinance:

If the captured assessed valuation derived from new construction, and increase in value of property newly constructed or existing property improved subsequent thereto, grows at a rate faster than that anticipated in the tax increment plan, at least 50% of such additional amounts shall be divided among the taxing units in relation to their proportion of the current tax levies. If the captured assessed valuation derived from new construction grows at a rate of over twice that anticipated in the plan, all of such excess amounts over twice that anticipated shall be divided among the taxing units. Only after approval of the governmental units may these restrictions be removed. [.pdf of Ann Arbor city ordinance establishing DDA]

TIF Question: Breaking the News

The 50%-return condition specified in the city’s DDA ordinance is the issue that was raised at the DDA’s Monday meeting. It was Roger Hewitt who announced at the meeting that the question had been identified by the city of Ann Arbor. [The growth in TIF capture does, in fact, appear to have outpaced the growth anticipated in the plan.] Leah Gunn, who is the longest-serving member of the board, elicited from Hewitt that he’d received a rather concerned phone call from deputy DDA director, Joe Morehouse, at about 9:30 a.m. [The meeting started at noon.]

Mayor John Hieftje – who sits on the DDA board, serving a slot designated in the state enabling legislation – said the city had become aware of the issue late Friday, April 30. He said the city’s legal staff had worked over the weekend on the issue and would need additional time, working with the DDA, to sort things out. It was interesting that the language had been sitting there for some time, he said, and had not been addressed. He allowed that the language of the ordinance was not very clear.

The immediate consequence of the news was that the board did not vote on the new parking contract under which the DDA would continue to operate the public parking system. The proposed contract called for the city of Ann Arbor to receive 17% of gross parking revenues and would provide the DDA with the authority to set rates, without the possibility of a city council veto – the council currently has the power of veto. Hewitt said he felt it was imprudent to discuss the parking contract, when the potential financial impact on the DDA  – due to the TIF issue raised by the city – would be significant but uncertain.

Hieftje was keen to see the item formally moved and then formally tabled, to make clear what the status of the agenda item was.

Outcome: The board voted unanimously to table the resolution ratifying the parking contract.

TIF Question: Board Reaction

Sandi Smith, who serves on the Ann Arbor city council as well as the DDA board, was effusive in thanking the other members of the DDA’s “mutually beneficial” committee – Roger Hewitt, Russ Collins and Gary Boren – for their hard work on trying to reach an agreement on the new parking contract. They’ve been working for well over a year on the agreement. She noted that DDA board members are all volunteers who could be doing things other than holding 7 a.m. meetings.

Board members Sandi Smith and Keith Orr before the start of the DDA's May 2 board meeting.

[Smith was implicitly contrasting DDA board members with city councilmembers, who receive an annual salary of just under $16,000. She was referring to the early Monday morning meetings the two committees from the council and the DDA board have held over the last few months.]

DDA board chair Joan Lowenstein pointed out that the DDA has a current contract under which it manages the public parking system – the contract runs through 2015, and can be extended at the DDA’s option through 2018. That contract would allow the city of Ann Arbor to withdraw about $2 million less per year from the public parking system revenues than the contract that was on the DDA’s agenda for consideration.

Newcombe Clark wanted some clarification about the DDA’s May 2010 resolution that approved a transfer of $2 million to the city of Ann Arbor from the public parking system –  a transfer that was not required under the terms of the current parking contract. He wanted to know if the DDA would be able to meet the time frame specified in that resolution for completing a new parking contract.

At Smith’s urging, the exact language of that resolution was located not much later in the meeting. In relevant part, it reads:

RESOLVED, The DDA authorizes providing the City with $2 million in fiscal year 2010/11 with the following expectations:

• The DDA and City representatives who have developed the preliminary terms will continue to meet at least once a month to complete work on an agreement that will go to the DDA and City Council for approval, and these meetings will be open to the public.
• The DDA and City representatives will aim to conclude their work by October 31, 2010, but certainly no later than the end of the fiscal year 2010/11. [.pdf of DDA resolution of May 5, 2010 authorizing payment of $2 million to city of Ann Arbor]

Lowenstein concluded that if the DDA board reached a new agreement with the city on parking revenues by June 30, the end of FY 2011, the board would be abiding by the terms of its resolution.

Lowenstein suggested that once the legal interpretation of the ordinance was agreed on by the DDA and the city, there should be an independent audit to determine the amount of any money that needed to be divided up.

Leah Gunn noted that the DDA’s legal counsel, Jerry Lax with Bodman, would be unavailable beginning the next day, so she hoped the attorneys on the DDA board would be able to pitch in – they include Lownenstein, Bob Guenzel, and Gary Boren.

Smith asked for a proportionate breakdown of the TIF taxing entities. Hewitt said that the DDA’s TIF revenue is roughly 60% from the city of Ann Arbor and the remaining 40% from the Ann Arbor Transportation Authority, Washtenaw Community College, Washtenaw County and the Ann Arbor District Library. Josie Parker, director of the AADL, attended the meeting – she often attends meetings of the DDA board and its committees.

Hewitt noted that given the city’s need to have its budget approved by May 16, he expected the DDA board would need to convene a special meeting sometime before then. The city’s budget assumes roughly $2 million more in revenue from the public parking system than the current contract specifies.

TIF Question: Material Issues

In connection with the city’s DDA ordinance, which stipulates the minimum 50% return of TIF capture in excess of TIF plan estimates, an immediate question is whether the TIF capture has, in fact, outpaced the plan’s estimates.

An initial look at the numbers indicates that the taxable values subject to capture have increased faster than the TIF plan projections. Here’s a snapshot of numbers since the 2003 renewal of the Ann Arbor DDA. [Close-of-roll numbers in the left column come from the city of Ann Arbor treasurer's office. Estimates in columns 2-4 are from the DDA TIF plan Appendix C]

                                TIF PLAN ESTIMATES
Actual Valuation        "Realistic" "Optimistic"  "Pessimistic" 

2004    $76,955,174     $71,836,326  $72,658,263  $71,021,758
2005    $78,671,971     $73,937,930  $75,209,080  $72,683,949
2006    $81,877,369     $76,101,112  $77,849,585  $74,385,101
2007    $92,998,789     $78,327,678  $80,582,937  $76,126,129
2008    $92,204,889     $80,619,488  $83,412,404  $77,907,969
2009   $113,460,032     $82,978,457  $86,341,373  $79,731,579
2010   $140,612,435     $85,406,555  $89,373,346  $81,597,939
2011   $137,800,186     $87,905,812  $92,511,951  $83,508,054

-

In FY 2010, the amount of taxes generated for the DDA’s TIF district – based on the actual valuation – was $3,537,939. The DDA has budgeted $3,935,790 in TIF revenue for the current fiscal year, FY 2011. But currently the DDA anticipates this number to be closer to $3.7 million.

Given the apparent excess valuation compared to the TIF plan – even on the “optimistic” estimates – several questions arise when it comes to calculating a possible return of TIF capture to various taxing entities under the city’s DDA ordinance. Some of these questions were floated at the DDA’s board meeting. Others were identified in subsequent conversations between board members and The Chronicle:

1. What’s the relevant time period? The ordinance identifies the “rate” of growth, which entails comparing valuations over some period of time. Interpretation A would be that each year when the tax rolls are closed (after the Board of Review has handled all appeals), that year’s valuation is compared with the previous year’s, and the percentage difference is calculated. That percentage is compared with the percentage growth forecast by the TIF plan between those two years. Interpretation B would compare a given year’s valuation against the valuation in the first year of the plan (not the previous year) and compute the percentage difference between them. That percentage difference would then be compared against the percentage growth forecast by the TIF plan from the beginning of the plan to the current year.
2. Which set of TIF plan estimates are applicable – the one labeled pessimistic, optimistic or realistic? The ordinance language refers to “anticipated” growth, without specifying whether that means the “realistic,” “optimistic,” or “pessimistic” estimates. Arguments for either the “optimistic” estimate or the “pessimistic” estimate would be susceptible to the criticism it is not “realistic.” Initial ballpark calculations done by the city have been based on the “realistic” estimates.
3. Who is the responsible party for adherence to the ordinance? The taxes captured by the DDA’s TIF district are administered not by the DDA staff, but rather by the city assessor’s office, just as they are for all taxing entities. The city receives an administrative fee for this work equal to 1% of the tax bill – it’s labeled ADMIN FEE on the bill. [When the city council passed last year's budget, Stephen Kunselman (Ward 3) proposed a budget amendment to reduce the administrative fee, but it received little traction and did not pass.] So it’s the city that transfers the DDA’s TIF taxes to the DDA. For other taxing entities, like the Ann Arbor District Library, it’s not completely clear what their avenue of complaint is, if they are owed money that was erroneously captured – through the city of Ann Arbor or through the DDA?
4. Does the ordinance language refer to real property only, or also to personal property? The valuations included in this article lump together valuations of real property and personal property. Real property refers to building and land. Personal property refers to pieces of equipment. A specific example of personal property [but from outside the DDA TIF district] would be the planned acquisition by Sakti3 of battery cycling equipment and thermal chambers as a part of the firm’s expanded operations. Based on the DDA TIF plan, through 2003 personal property in the DDA district accounted for roughly 25% of TIF capture.
5. Do payments already made by the DDA to the city of Ann Arbor out of the TIF for the new municipal center count towards any sum that might need to be returned? In May 2008, the DDA board pledged up to $540,000 annually from its TIF capture to help finance the city’s new municipal center. [.pdf of May 7, 2008 DDA board meeting minutes] If it’s determined that too much money has been transferred to the DDA for its TIF capture, then the DDA might point to the money pledged as a part of the municipal center finance plan as covering any amount owed to the city of Ann Arbor.

Given the various open questions about the calculations, it’s not possible to say with great precision how much money might be at stake. Back-of-the napkin calculations by The Chronicle indicate since 2004, on the high side it could be in the range of $3 million total that may have been erroneously transferred to the DDA. Of that amount, the city of Ann Arbor’s share would be a bit less than $2 million. After the city council meeting on May 2, Tom Crawford, the city’s CFO, told The Chronicle that the city’s preliminary estimate was a bit lower – more in the range of $2 million total.

Communications, Committee Reports, Commentary

The board’s meeting included the usual range of reports from its standing committees and the Downtown Citizens Advisory Council. Every board meeting also includes two opportunities for public commentary – one near the start of the meeting and the other at its conclusion.

Comm/Comm: Bricks and Money Committee – Third Quarter

Roger Hewitt gave an update on the third-quarter financials for the DDA’s 2011 fiscal year. The TIF revenue drew some discussion. The DDA had budgeted $3,935,790 in TIF revenue, but now anticipates that revenues will be closer to $3.7 million. The difference was attributed to the overall loss in commercial property value, which balanced out the addition of new projects.

Sandi Smith said the newest figures she’d seen showed another 2% loss.

Parking revenues are a part of every report out from the bricks and money committee. Hewitt noted that revenues were up, but not by as high a percent as the rate increase that had been implemented.

John Hieftje asked for someone to explain the jump in hourly parking patrons in March. Hewitt indicated that it’s a “slippery” number – it indicates people who park, but who don’t have monthly passes. There’s no accounting for the length of time they stayed. Hieftje pressed again, asking if there had been a big promotion or something during the month.

By way of partial explanation, Joan Lowenstein noted that last year, construction workers who had been working on the University of Michigan North Quad dormitory had been parking at the Maynard Street structure – using permits. Their spaces are now used by hourly patrons. The number was up by 13,000, said Hieftje, which is about one-third – it’s a big jump and it had caught his eye, he said. Hewitt said it takes a while for people to realize that the spaces are available again.

Comm/Comm: Bricks and Money Committee – Construction

Reporting out from the “bricks” part of the bricks and money committee, John Splitt gave an update on the Fifth and Division streetscape improvement project. He reported that Eastlund Concrete would be starting up work again very shortly, if they have not already started. Leah Gunn chimed in to say that the construction barrels have been set out.

DDA board members Leah Gunn and Keith Orr.

On the Fifth Avenue underground parking garage, Splitt reported that progress continues on the east leg near Division Street – walls are being poured in that part of the garage. The decks in the east leg are already poured. He reported that SME, the company that designed the earth retention system, has finished inspections of the earth retention system on the north side of the site and have moved to the west side. All necessary repairs have been accomplished on the north side.

[The inspections and repairs came as a result of a breach in the earth retention system that took place in late March.] Splitt said he’s hoping to schedule a tour of the site for the next meeting of the bricks and money committee. He indicated that a staircase on the east side of the garage will likely be completed by then. Details will be firmed up by the time of the next committee meeting.

Comm/Comm: Economic Development

Reporting out from the DDA’s communications and economic development committee, Joan Lowenstein said that Ann Arbor SPARK‘s director for research and business information, Donna Shirilla, had briefed the committee at its last meeting. Shirilla had said it’s clear that the IT sector is a prevalent part of the Ann Arbor downtown mix of businesses. One-third of the downtown businesses are in the IT sector, and 15% of the county’s IT employment is downtown. Small businesses like the atmosphere of downtown – the ambiance of downtown is what they’re looking for.

Shirilla said that higher rents don’t seem to be a deterrent to smaller IT businesses. Life sciences and the automotive industry are also represented, but they would typically need a larger floorplate. Once they reach a certain size, they leave. Downtown Ann Arbor offers lots of small spaces, but not much in the way of larger spaces, Shirilla reported.

Lowenstein said that in discussing possible DDA-SPARK collaboration, one idea the committee floated would be to jointly host a roundtable discussion with IT firms about available space and talent. The committee discussed information on housing and other amenities that would help SPARK recruit companies. The committee also talked about improvements to the DDA website. They decided they would not go to the time and expense of a complete redesign, but talked about reorganization of the information that’s presented on the website.

Comm/Comm: Partnerships Committee – Energy

Reporting out from the partnerships committee, Sandi Smith quipped that the co-chair of the committee, Russ Collins, goes to great lengths to avoid giving the report – he’d been called for jury duty in federal court in Detroit. [Another board member, Keith Orr, had been called for jury duty in the 15th District Court, but it turned out that no trial needed to be held in Judge Chris Easthope's court that day.]

Smith began by giving an update on the DDA’s energy saving grant program – it pays for energy audits and then matches business owner investments up to a cap of $20,000. She characterized the $650,000 spent on the program to date as a remarkable investment in buildings. It’s a good example of the DDA leveraging its investments to encourage private investment. Smith indicated that the next committee meeting will include a discussion about how to allocate a smaller amount annually [$100,000 compared to $200,000]. Strategies include making the grants smaller, focusing on just audits or possibly focusing just on matching grants. Another question, Smith said, is whether to focus on smaller or larger businesses.

Responding to comments made by Smith, mayor John Hieftje continued a theme he’s begun in connection with the reduction in funding the DDA has needed to make in the energy saving grant program because of increased financial pressure. That theme is to highlight the city’s PACE (property assessed clean energy) program, which is being funded with a federal grant. Hieftje indicated that the city has hired a staff person to work on PACE, and part of her mission is to engage with other groups. Most of the pieces of the program are in place, he said. It would help if the DDA would help roll out PACE.

Smith noted that PACE is designed for much bigger property owners. The beneficiaries of the DDA’s energy saving grant program, like Vicki’s Wash and Wear Haircuts, are small businesses. For the re-lamping project that owner Vicki Honeyman had undertaken, the matching grant was a huge factor in allowing her to do that, Smith said.

Comm/Comm: Partnerships Committee – RFP Processes

Smith reported that the committee had had an interesting discussion with David di Rita of the Roxbury Group, which had served as the consultant for the Library Lot RFP (request for proposals) process. That process was terminated by the city council at its April 4, 2011 meeting. Di Rita had told the committee that some RFP processes he’d been involved with have worked well and others have not. The key is to have a vision and be clear in your RFP, he said. RFPs that are obscure and cast a wide net don’t typically go anywhere. Something that reflects a clear community vision tends to do better, he told the committee. [For Chronicle coverage that mentions that partnerships committee meeting: "Balancing Ann Arbor, Detroit and a Vision"]

Smith noted that in the city of Ann Arbor, RFPs are issued that are not clear and then people are surprised when proposals come back and it’s not what they want. Smith noted that Jesse Bernstein (chair of the Ann Arbor Transportation Authority board) and Josie Parker (director of the Ann Arbor District Library) also attended the committee meeting. The two had talked about long-term visioning – not just five or 10 years, but 30 years.

Comm/Comm: Transportation Committee

John Mouat reported out on the spring walk-around by the transportation committee. They’d looked at outskirt areas where people enter the downtown, he said. They’d considered what can be done in the short term with limited dollars. Areas they’d identified were on the west side where roads cross the railroad tracks. There are trip hazards near Main Street. Near Kerrytown they identified sidewalk improvements that could be undertaken. Other categories identified include: downtown bike sharrows – the new markings have been added by the city, but there are gaps in their placement, he said.

The committee took a look at countdown pedestrian signals – do they help or hurt? Mouat said there’d been a good response to the plantings added around the parking structures. The next step will be to put prices on items to make decisions on where to focus investment.

Comm/Comm: Scheduling – DCAC

For the first time in The Chronicle’s memory, Ray Detter did not deliver a report to the DDA board on the downtown citizens advisory council’s most recent meeting, which is typically held the Tuesday evening before the Wednesday when the DDA board meets. The board meeting had been shifted to Monday, in order to facilitate greater board member attendance for an anticipated parking contract vote.

During the board meeting, Detter was leading one of several tours of the downtown historical markers. The tours have been spotted in the wild on two occasions in the last week. [Occasion 1] [Occasion 2]

Comm/Comm: Scheduling – Open Meetings

Given the shifted scheduling of the meeting, at the start of the meeting Sandi Smith asked for confirmation that it had been properly noticed to the public. Joe Morehouse, deputy director of the DDA, indicated that the paper notice had been posted at the city hall building and at the DDA offices, and that it had been included in the city’s Legistar scheduling system.

Comm/Comm: Comment

No one addressed the board during either of the times on the agenda set aside for public commentary.

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

Absent: Russ Collins

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

The DDA will make  another work session presentation before the city council’s meeting on Monday, Nov. 15 – this one about the parking contract under which the DDA uses city-owned assets like decks, lots, and streets to manage the city’s parking system. The current $10-million contract runs through 2015. But the DDA has already paid the city $12 million on that contract, and the city wants an even better deal. Although it won’t be part of the parking contract language, the DDA sees the ability to take more leadership in the development of city-owned surface lots as part of the benefit it would get from a renegotiated parking deal with the city.

For the city, the parking deal is crucial for its budget planning for FY 2012. Already at its mid-October meeting, some city councilmembers began to raise questions about projections for FY 2012. The council must approve the FY 2012 budget this coming May. [The city's fiscal year begins on July 1 each year – the current budget year is FY 2011.] This past May, the city’s projected budget deficit for FY 2012 was $5 million, which already assumed an additional $2 million payment from the DDA.

There are likely enough votes on the 12-member DDA board to approve the new deal. And based on the most recent city-DDA discussions, the new arrangement is likely to take the form of a percentage-of-gross arrangement – 17.5% of gross parking revenues would be paid to the city.

But here’s a different way to describe the arrangement: The city of Ann Arbor would impose a 17.5% parking tax on downtown motorists. That is, downtown parking patrons will pay exactly 17.5% more to park than is actually required for the public parking system to sustain itself, in order that general fund revenues for the city of Ann Arbor can be supplemented.

And to derive support for the city of Ann Arbor general fund from the parking system, the DDA’s parking fund will operate at a greater deficit for the next few years than it would if the city honored the current parking contract. During that period, the DDA’s tax increment finance revenues – the amount it captures from other taxing authorities besides the city of Ann Arbor – will need to remain uninvested on behalf of the broader community. The unspent TIF fund balance will be able to offset the parking fund deficit, leaving the DDA still solvent, but barely so.

Two important questions have been ignored in the course of the city-DDA negotiations: (1) Is it appropriate to use non-city TIF funds – from the county, Ann Arbor District Library, Washtenaw Community College and Ann Arbor Transportation Authority – to offset the parking fund deficit caused by striking a new parking deal with the city? and (2) If the city’s public parking system generates more revenue than is required to operate and maintain it, what investment of that excess revenue would yield the greatest and best return for the community?

Background: Ancient History

At the start of the parking contract negotiations in the early summer, a term sheet with three key parking-contract-related items was intended to guide the negotiations between the respective “mutually beneficial” committees from the DDA and the city council: (1) a role for the DDA in enforcement of parking regulations; (2) a role for the DDA in enforcement of other non-parking city ordinances; and (3) increased services in the downtown area. But in late September 2010, it was apparent that these points would no longer be a part of the discussion.

The term sheet had been produced in late April 2010 by a “working group” of councilmembers and DDA board members that met out of public view and outside the committee structure established in the summer of 2009 by the DDA board and the city council to re-negotiate the contract. But the city council had first broached the subject of a new parking deal with a January 2009 resolution calling on the DDA to begin conversations about a revision to the contract. Why then? Sandi Smith (Ward 1), who serves on both the city council and the DDA board, had noticed that for the two-year budget plan covering 2010 and 2011, the city’s financial staff had penciled in $2 million in FY 2011 as a payment from the DDA. And Smith understood better perhaps than most of her council colleagues that the payment was not required under the city-DDA parking contract.

The 2005-2015 agreement specified a $1 million “rent” payment for each of 10 years, with the stipulation that the city could request up to $2 million in any given year, as long as the total did not exceed $10 million for the 10-year contract period. The city requested $2 million in each of the first five years, which meant that the $2 million penciled in by the city for FY 2011 was not required under the contract. Over heated objections by some members of the DDA board, the DDA approved the additional payment in May 2010, which was added to the city’s FY 2011 general fund budget. The extra $2 million was apparently analyzed by the board and the city’s legal counsel as a unilateral revision to the current contract. [Chronicle coverage: "DDA Oks $2 Million over Strong Dissent." Additional Chronicle coverage on this issue: "DDA-City Development Ideas" and "DDA: Dogged Enough for Development?"]

Background: More Recent History

If the three main points on the term sheet related to parking contract language were, by the end of September 2010, no longer part of the active discussions between the city and the DDA, what was the focus of their October conversations?

Recent History – Oct. 11 and Oct. 25

At the Oct. 11 and Oct. 25 meetings of the two mutually beneficial committees, the focus turned to revision of the existing parking contract, as opposed to introducing fundamentally different roles and responsibilities for the DDA. DDA board member Russ Collins acknowledged that really what was left to do was to clean up the language of the parking contract so that it reflects what is actually happening. He expressed some level of frustration, saying, “I don’t know how hard to beat this.” He characterized it as details that the city and DDA staff – Sue McCormick, public services area administrator for the city, and Susan Pollay, executive director of the DDA – would need to work through. As for the committee members, he wondered how much they really wanted to “flog” it.

One key change in the conversation that took place at the October meetings was a shift from $2 million to $3 million to characterize the amount of the money to be transferred annually from the DDA to the city. This was not a proposed increase, but rather a way to label the total parking-system-related fund transfer that the DDA currently makes to the city. In addition to the flat $2 million parking payment the DDA has made in each of the last six years, the $3 million figure includes an estimated $835,930 payment to the street repair fund, plus around $170,000 from the Fifth & William and 415 W. Washington lots. The city council asked the DDA to funnel revenue from those two lots to the city over the last year – requests to which the DDA agreed.

Grouping all the separate parking-system-related payments under a single dollar figure sets the stage for contemplation of a percentage-of-gross payment arrangement. Rather than basing the payments on a concept of “rent” for the city-owned assets in the parking system, the DDA would simply pay the city a percentage of its gross parking revenues. That single amount would replace the four separate payments now made by the DDA to the city.

Other key ideas introduced at the October meetings included the ability of the DDA to direct the allocation of some minimum fraction of the city’s community standards labor for parking enforcement activity. During the conversation around that topic, Sue McCormick observed that the DDA’s requests for coverage of specific enforcement times and areas would need to accommodate the scheduling of enforcement officers, which is governed by union contracts. The DDA would need to provide any direction far enough in advance that union staff can bid on the shifts they’d like to work.

With respect to enforcement areas, the contract will need to specify with greater clarity what specific geographic areas of the city will have parking managed by the DDA. For the FY 2011 budget year, the city began a program to install additional parking meters near the downtown, motivated by a desire to generate more revenue to the city – a move the DDA felt violated the current parking contract. However, the DDA did not mount a legal challenge at the time.

During October committee conversations, Sandi Smith was keen to see city enforcement staff included in DDA operations committee meetings on a regular basis. It would  allow them to provide the DDA with their perspective, as well as to give enforcement staff more insight into the DDA’s goals.

The notion of holding the city harmless for its enforcement activities drove much of the conversation at the October meetings. For example, if the DDA were to direct enforcement activities in a way that diminished parking fine revenues to the city, folks on the city’s side were interested in making sure the agreed-upon arrangement would hold the city harmless with respect to that diminished parking fine revenue. From the DDA’s perspective, if the city were guaranteed to be held harmless for any decrease in parking fine revenue, then the city would no longer have an incentive to staff parking enforcement at any particular level.

The DDA’s parking revenue does not include the fines that the city collects. The DDA’s parking revenue is restricted just to fees that motorists pay to park downtown. Currently, there are three basic parking rates, corresponding to three types of parking: on the street, surface parking lots, and multi-level parking structures. The DDA can make recommendations to change parking rates, which it can then implement unless the city council vetoes the changes. At the October meetings, DDA board member Roger Hewitt floated the idea that this council veto could be removed as a part of the new parking arrangement.

Part of the rationale for eliminating the council veto is based on the DDA’s transportation demand management (TDM) strategy for pricing. While there are currently three prices for the three types of parking, a TDM approach could possibly include a variety of different prices, based on geographic location and time of day. Those prices might well be adjusted with some frequency. The argument against a council veto is based partly on the logistics of getting city council approval for every proposed change in the TDM implementation. The two committees drew an analogy to the AATA bus fares, over which the city council does not exercise any discretion.

A percentage-of-gross payment arrangement with the city also serves to align the incentives of the city and the DDA on parking rates. Even if it had a veto power under a new parking contract, the city council might be less inclined to use it to block an increase, given that a parking increase would likely result in more revenue to the city. As Sue McCormick pointed out during the conversations, the percentage-of-gross arrangement also creates an incentive for the DDA to keep its direct parking costs down in a way that a percentage-of-net arrangement would not.

The Near Future

Based on the conversation at the Nov. 8  meeting of the committees, the key elements of the new parking agreement that the city council will hear from the DDA at its Monday, Nov. 15 work session will be the following:

• a payment from the DDA to the city expressed in terms of a gross percentage of parking revenue – 17.5%
• ability of the DDA to set parking rates for the system without veto power from the city council
• ability of the DDA to direct a minimum number of enforcement hours and regions to be implemented by the city’s staff
• a clear definition of the geographic regions of the city for which the DDA manages parking
• inclusion of city parking enforcement staff in DDA operations committee meetings.

The percentage-of-gross deal translates in the first few years into roughly a $3 million annual payment to the city from the DDA, which approximates what the DDA has paid the city each year for the last six years. In later years it will be even more. [In addition to the $2 million payment that is likely familiar to readers, the DDA has also paid an escalating amount into the city's street repair fund, estimated at $835,930 in FY 2012, and has committed revenues from the 415 W. Washington and Fifth & William surface parking lots, anticipated in FY 2012 to be $73,549.]

Numbers: Non-City Taxing Authorities

The negotiations between the city of Ann Arbor and the DDA over the parking deal aren’t really between two isolated parties. Those two entities each represent us – in different ways. The city of Ann Arbor is not representing itself – rather, it represents the interests of Ann Arbor taxpayers. The DDA is not representing itself – rather, it represents the interests of a broader community of taxpayers and taxing authorities besides the city of Ann Arbor: Washtenaw County, Ann Arbor District Library, Ann Arbor Transportation Authority and the Washtenaw Community College.

The DDA captures a portion of the taxes that would otherwise go to these other taxing authorities in the same way that it captures a portion of city of Ann Arbor taxes. Specifically, the DDA captures those other authorities’ taxes on the incremental increase in taxable value in the first year that improvements are made to property inside its district. The DDA does not capture taxes on the base taxable value of properties before the authority was created, nor does it capture taxes on the appreciation that accrues to properties after they have been improved.

The conversation between representatives of the city and the DDA has focused on a way to sustain the current habit of parking-system-related payments from the DDA to the city. The idea of a 17.5% of gross payment is a rough approximation of the continuation of this habit.

In the table below, the first column reflects what the DDA would pay the city if it continued to make payments the way it has for the last six years. It’s worth pointing out that if the DDA and the city honored the current parking contract, every number in the first column of dollar figures would be reduced by $2 million. The second column is the amount of gross revenue the DDA expects to see from parking fees. The final column is the difference between a 17.5-percentage-of-gross arrangement and continuation of the pattern of the last six years. [Parens indicate negative amounts.]

        Transfer        Parking          17.5%          Gross
YEAR    Habitual         Gross         of Gross      Minus Habit 

2012    3,006,650      16,162,753      2,828,482     (178,168)
2013    3,042,916      17,471,502      3,057,513       14,597
2014    3,080,633      18,142,709      3,174,974       94,341
2015    3,119,858      18,914,835      3,310,096      190,238
2016    3,160,652      19,830,701      3,470,373      309,720
2017    3,203,079      20,410,989      3,571,923      368,845
2018    3,247,202      21,008,666      3,676,517      429,315
2019    3,293,090      21,721,400      3,801,245      508,155
2020    3,340,813      22,358,347      3,912,711      571,897

-

The DDA considers the initial lower number in the first year – compared to what the DDA would pay the city based on recent habit – as an accommodation by the city.

Numbers: A Greater Deficit

What the city-DDA conversation has mostly left out, however, is something that finally began to surface at the most recent meeting of the mutually beneficial committees on Nov. 8: On any scenario of continued payments to the city by the DDA, the DDA’s parking fund is projected to operate at a greater deficit for the next few years than it would without the payments. Some deficit was expected, based on the major capital projects of the Fifth Avenue underground parking structure and the Fifth and Division streetscape improvements that the DDA is currently undertaking.

To understand how the DDA plans to operate its parking fund at a deficit, but remain solvent, it’s useful to understand that the DDA’s budget has two sources of revenue that are reflected in four different funds. The DDA’s TIF fund receives revenues from tax increment capture, and the housing fund in turn receives transfers from the TIF fund. The parking fund receives revenues from parking fees, and the parking maintenance fund in turn receives transfers from the parking fund. One way to determine whether the DDA is solvent is by summing the fund balances in each of the four funds: parking, parking maintenance, TIF, and housing.

In the table below, based on DDA numbers, the first column of dollar figures are the combined totals for the DDA’s parking and parking maintenance funds, based on the assumption that the DDA continues payments as it has over the last six years. The second column shows what would happen to the total fund balance if the TIF capture were limited to just the city of Ann Arbor portion of the taxes [calculated here at 60% of the total capture]. The third column shows projected total fund balances including all of the TIF. The final column expresses the projected total fund balance as a percentage of operating expenses.

       Sum of      All-Fund               All-Fund
YEAR    Prkng     Minus Non-A2  All-Fund  Pct of Exp

2012  (2,671,482)    710,158    2,845,806   14%
2013  (4,905,587)   (961,323)   1,677,918    8%
2014  (5,258,327)   (366,072)   2,958,326   14%
2015  (5,686,041)    176,987    4,212,498   20%
2016  (4,865,390)  1,983,142    6,755,310   31%
2017  (3,356,114)  4,578,286   10,113,783   46%
2018  (1,639,545)  7,418,378   13,743,203   63%
2019     (89,453) 10,114,738   17,256,302   77%
2020   2,792,616  14,199,517   22,185,382  100%

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The first column of dollar figures shows that the parking funds, taken together, are projected to operate at a deficit through 2019. But the third column assures us the DDA is projected to remain solvent. Solvency is being achieved with projected TIF revenues – taxes collected from the city of Ann Arbor and other taxing authorities. What happens when we strip away the TIF dollars that are captured from non-city taxing authorities? That’s what the second column shows.

That’s the column that should be troubling to county administrator Verna McDaniel, Ann Arbor District Library director Josie Parker, Washtenaw Community College president Larry Whitworth, and Ann Arbor Transportation Authority CEO Michael Ford. The column demonstrates that the TIF captured from their public bodies is the only thing that will keep the DDA solvent in 2013 and 2014. The negative amounts in those years would disappear, if the city and the DDA honored the current parking contract.

It’s difficult to escape the conclusion that the material effect of the proposed new parking deal is this: Non-city TIF capture will be used as a means to add to the general fund budget of the city of Ann Arbor.

A Pause on Investment of TIF?

We’ve seen that some non-city TIF capture will need to sit uninvested in the broader community for a few years, because it’s needed in the short term to offset deficits caused by the renegotiated parking contract between the DDA and the city.

It was, of course, the DDA’s intent to use the TIF fund balances to offset the deficits in the parking fund. These were deficits that were anticipated to be caused by its major construction projects as well as other parking fund activity. That activity includes funding the go!pass program, which offsets bus fare costs for downtown employees. For these kinds of efforts, there is a narrative the DDA can tell to non-city taxing authorities about why parking decks or streetscape improvements downtown are worth using their TIF to support.

What other kinds of investments in the broader community will the DDA need to put on hold, in order to renegotiate the parking contract with the city? Two examples of programs the DDA’s current 10-year plan does not project continuing are its energy-saving grant program and the go!pass program. The go!pass program has funding authorized through 2013 – $540,060 for that year, but after that, the DDA’s 10-year plan assumes no funding for go!pass.

The DDA’s partnerships committee meeting on Wed., Nov. 10 also gave a glimpse into what might become a pattern in the next few years: Organizations apply for grants that are consistent with the DDA’s mission, which the DDA cannot afford to approve.

Last Wednesday, the DDA partnerships committee discussed a grant request from the Ann Arbor housing commission – a 50% match on a $1 million federal grant it has received to make capital improvements to Baker Commons, one of the commission’s downtown properties. The committee also entertained discussion on an additional grant to the Washtenaw Shelter Association for the Delonis Center. The DDA board had previously authorized $218,050 worth of improvements to WSA, while holding in abeyance the approval of more than $113,210 for installation of solar panels and for computer hardware at the shelter. Susan Pollay, executive director of the DDA, told the committee on Wednesday that her understanding was that given a choice, the WSA would prefer to see the new computers funded. The outcome of the committee’s deliberation was not in favor of either the housing commission’s or the shelter association’s proposal.

Tony Derezinski – one of two city council representatives to the DDA’s partnerships committee, who is also the liaison from the city council to the Ann Arbor housing commission – was able to coax an “undecided” determination out of the committee, as opposed to a no.

At the partnerships committee meeting, DDA board member Russ Collins linked the housing commission grant to the ongoing “mutually beneficial” discussions between the DDA and the city on the parking agreement. He noted that affordable housing was a city goal and would benefit the city, and therefore should perhaps be part of the context of the mutually beneficial discussions. That sentiment found an unwelcome reception with Margie Teall – a member of the city council who serves on the mutually beneficial committee and as a city council representative to the partnerships committee. She wondered what other projects Collins would want to include in the mutually beneficial discussions. She was implying it would be unreasonable to include the housing commission grant or any other similar projects in those discussions.

Collins’ suggestion also found little resonance with his fellow DDA board member John Splitt, who stated that part of what the DDA did was make investments in city-owned assets, and that the housing commission request was therefore no different than other DDA projects that involve investments in the city’s assets – Fifth and Division improvements, parking decks and the like.

It’s unlikely that the housing commission grant will be looped into the parking agreement discussion. But it’s clear from this partnerships committee conversation, as well as from the raw numbers, that the DDA will not be able to afford investments it would otherwise make, if the parking deal were not being renegotiated to the benefit of the city of Ann Arbor’s general fund.

Possible Solutions: Maintenance, Repair?

At the Nov. 8 meeting of the mutually beneficial committees, there was some recognition on the city’s side that the DDA is going to face a tough financial situation over the next few years.

Sue McCormick, looking at the healthy projected TIF fund balances over the next decade, suggested making the street repair payment out of the TIF fund instead of the parking fund. Joe Morehouse, deputy director of the DDA, pointed out that the number in the spreadsheet they were trying to improve was the sum of the TIF and the parking fund balances – transferring the amount to the city from one fund or the other wouldn’t change the bottom line. The DDA’s Roger Hewitt was also quick to cite policy grounds for not paying the city directly out of the TIF fund.

At that same meeting, Christopher Taylor, who serves on the city council’s negotiating committee, suggested deferring the annual $2 million transfer from parking fund into the maintenance fund for  a couple of years. It’s troubling to see public officials even thinking along these lines, much less expressing this idea out loud, given the city’s specific history with deferred maintenance on parking structures. The historical failure of the city to perform routine maintenance on the parking structures, and the structures’ subsequent deterioration, is what led the city to hand off the parking operation to the DDA in the early 1990s.

The general area of maintenance and street repair is actually a place where the city of Ann Arbor has some room to extend a helping hand to the DDA. Prior to the award of the $14 million TIGER II grant to the city this fall, the city had a contingency plan for funding the replacement of the East Stadium bridges completely out of local street repair millage funds. The influx of federal dollars frees up local street repair funds to be spent on repair of local streets – which is what they’re collected for. But it would also mean that the DDA’s roughly $800,000 annual payment to the city’s street repair fund is  far less crucial to the city’s ability to fund necessary street repairs than it was before the award of the news of the federal TIGER grant. It’s an area where the city is in a position to be generous to the DDA.

Central Questions: Use of TIF, Use of Parking Profit

In the course of the negotiations between the city and the DDA, the focus on two important questions has been lost: (1) Is it appropriate to use non-city TIF fund balances to offset the parking fund deficit caused by striking a new parking deal with the city? and (2) If the city’s public parking system generates more revenue than is required to operate and maintain it, what investment of that excess revenue would yield the greatest and best return for the community?

It’s a step forward if the preceding presentation of the numbers has at least established that question (1) is an actual question warranting an answer: It’s not a what-if scenario – it’s the situation we actually face.

It’s a question that appropriately falls to representatives of Washtenaw County, the Ann Arbor District Library, Ann Arbor Transportation Authority and the Washtenaw Community College to answer. One kind of answer I would anticipate from Leah Gunn – who serves on the DDA board as well as the county’s board of commissioners – is that this use of the TIF is appropriate, because a financially healthy city of Ann Arbor is essential to the health of the entire region. It’s a point of view that is not without some merit. However, there could be others at the county, or elsewhere in the community, with a different view.

For my part, it’s the second question that is more intriguing. Built into the question is an assumption that it’s not wrong to charge people more for parking than it costs to maintain the parking system. [The debate on that assumption is one I'm simply skirting.]

The question of how excess parking revenues should be spent is a pure public policy question, that is not necessarily contingent on who gets to make the public policy choice. But the negotiation between the city and the DDA has focused the public’s attention on the “who” of the policy choice, instead of the choice itself. The “who” making the choice is in some sense a surrogate for the how we feel about the choice itself.

The city’s choice is that excess parking revenues should support the general welfare – no specific item in the general fund is specified. The DDA’s choice is somewhat more specific in identifying investments in the parking/transportation system. So when the DDA spends excess parking revenues on bus passes for downtown workers, it does make some kind of rational sense – because that’s cheaper than building parking spaces for those workers.

But what I’d like is something even more specific. I’d like to be able to say to a motorist who’s effectively paying a parking tax: Here’s exactly what that tax is going to buy for the benefit of our community. I’d like to identify a specific transportation project that our “parking tax” revenues will fund. Is it a mono-rail in the Plymouth-State street corridor? ["Transit Connector Study: Initial Analysis"] Is it street cars for the Washtenaw Avenue corridor? Or is it an enhanced on-demand paratransit service to help people get around town without a car?

Another way of putting that: I’m looking for our elected officials to integrate a plan for excess parking revenue into the AATA’s current effort to develop a countywide transit plan. ["AATA Continues Push for Master Plan Input"]

The city and the DDA will likely ratify the new parking deal sometime before the city’s FY 2012 budget is approved next May. I’m not optimistic, but I’m looking to my elected representatives at the city for a better effort to break the cycle of addictive behavior they’ve displayed historically towards using parking revenues to subsidize the city’s general fund. Dipping into excess parking revenues to aspire to solvency is just not good enough. I want it invested in something special, something great, something that will make Ann Arbor better than what it is, not just better than other cities in Michigan.

The bottom line according to a 2005 city of Ann arbor analysis of DDA costs versus payments. (The circle means "negative") The DDA sees it differently.

On Monday evening, March 23, several Ann Arbor residents took advantage of an entire city council session devoted to public comment on the recent A2D2 zoning revisions. The  zoning revisions apply to an area that  coincides almost exactly with the Downtown Development Authority district. We thus take the opportunity to focus on this district, and how taxes are collected in this geographic area, in light of recent community discussion on the topic.

The Chronicle has previously reported a remark by made by Mayor John Hieftje at a recent Sunday night caucus, in which he stated that the parking agreement between the DDA and the city was renegotiated in 2005 due in part to the fact that the DDA area represented a disproportionately greater burden on city services. Also previously reported, Kyle Mazurek, vice president of government affairs for the Ann Arbor Area Chamber of Commerce, posed several questions to the DDA board at its meeting on March 4, including one about the possibility of disproportionate use of city services in the DDA district:

Does the city incur disproportionate costs downtown relative to elsewhere in the city? Do you have city estimates for cost and revenues downtown? Even rough numbers would be helpful.

In providing a response to Mazurek, DDA staff took as its starting point a 2005 analysis undertaken by city of Ann Arbor staff, which concluded that the cost of city services provided in the DDA area was greater than the payments recovered for those services from the DDA by $6,198,542.

By the city’s account, the DDA provided $720,000 in payments (mostly for snow removal and pothole repair) against $6,886,701 in city costs incurred in the area (the bulk of which were for police and fire protection, but also included historic marker cleaning, flower planting, street light amenities, and graffiti removal). Otherwise put, on the city’s analysis, over $6 million worth of city services were provided to the DDA geographic area in 2005 for which the city did not recoup any revenue from the DDA.

In replying to Mazurek, the annotations by DDA staff call into question the appropriateness of some of the city figures (e.g., the cost for police services in what the Ann Arbor Police Department calls the Adam District, which includes service to the University of Michigan and neighborhoods outside the DDA district.) However these figures are not adjusted  in the reply.

The table underpinning the DDA’s response to Mazurek lays out the 2005 city analysis together with the DDA staff commentary. On the DDA’s balance sheet, the $6,886,701 in city costs are almost completely offset by $6,849,000 in cost recovery by the city. Where the bottom lines between the DDA’s and the city’s 2005 analyses differ lies in two main sources of cost recovery that are not included in the city’s 2005 analysis: (i) parking fines ($2 million levied in the DDA district out of $2.5 million citywide), and (ii) city taxes levied in the DDA district ($3,629,000).

Tax Capture in the DDA district. (image links to higher resolution file)

This second point is worth noting, because it depends on the fact that the city continues to collect property taxes in the DDA district. That is to say, the DDA does not capture all of the taxes in the DDA district, but rather only the increment between the initial value of properties and the additional value that comes from improving (i.e., developing) them – hence the name tax-increment finance (TIF).

So, who gets what taxes in the DDA district?

In 2008, the total taxable value of property in the DDA was $324,293,338, and yielded a total of $18,738,324 in property taxes. [Detailed breakdown by the DDA in this PDF.] Of that nearly $19 million figure, about $8.5 million went to schools, a little under $4 million went to the city of Ann Arbor, and around $3.6 million went to the DDA.

Editorial Aside

The question of whether the DDA area represents a disproportionate burden on city services is not answered by the kind of analysis undertaken by the city. That is a cost versus cost-recovery comparison, which is not the same as a measure of proportional burden. To make a case for excess proportional burden, the denominator needs to be specified. Is it the land area? Is it the built square footage? Is is the number of residents? What exactly is the X in the denominator?

The question itself as to whether the DDA area uses proportionally more city services than other areas, or even whether the city recovers its costs for those services, distracts from the real questions here: (i) Should the DDA TIF accrue to the city’s general fund and be budgeted directly by city staff with confirmation by city council? (ii) Should the other main source of the DDA’s revenue – parking fees – be budgeted directly by city staff with confirmation by city council?

In his campaign for a Ward 5 council seat in fall 2008 (a race won by Carsten Hohnke), one of John Floyd’s central themes was that the taxes captured by the DDA should be allocated based on the regular budget process. Otherwise put, Floyd’s answer to (i) was, and is,  “No.” “Yes.” It’s tantamount to the position that the DDA should not exist. In fact there is no requirement that it exist. But that is a question that can be debated without the distraction of a discussion about  whether the DDA area represents a disproportionate burden on city services.

This question of an existing “disproportionate burden” is also not the same as a similar-sounding theme of Floyd’s 2008 campaign, which was this: With a vision of greater density and growth downtown and the increased burden on city services associated with that increased density, there would not be a commensurate growth in the general city budget – because the increase in tax revenues would come as a result of development, i.e., on the increment that the DDA collects, and hence would go to the DDA.

As for question (ii), on the same caucus night that Hieftje contended the DDA area represented a disproportionate burden on city services, Hohnke pointed out that the enabling legislation for the DDA did not entail any particular financial arrangement on parking revenues – or even that the DDA be assigned responsibility for parking. That’s true.  The city is entitled to manage the parking system in whatever way it likes. Whether it manages parking itself, or through the DDA, the salient point that is emerging is that the city has abandoned the basic assumption that parking fees should be set so that the parking system is simply sustainable, not to generate revenue to be used for non-parking purposes.

Whether it’s a good idea to abandon that assumption is a practical question that can be debated independently of the academic question of disproportionate burden imposed on city services by the DDA district.