Proposal to place new limits on Ann Arbor DDA postponed until April
A proposal to place new limits on the Ann Arbor Downtown Development Authority, including the amount of taxes it captures, was postponed at Monday night's City Council meeting.
Council Members Sumi Kailasapathy, D-1st Ward, and Stephen Kunselman, D-3rd Ward, are co-sponsoring a set of ordinance changes that now will be taken up April 1.
The changes would bar Ann Arbor's mayor and any other elected officials from serving on the DDA's governing board, place new term limits on DDA board members, and redistribute roughly $1 million a year in future tax revenues from the DDA to different taxing units.
Council Member Stephen Kunselman, D-3rd Ward, said he noticed the DDA's tax capture is projected to grow by nearly $1 million a year due to growth in the downtown tax base and he wants to send that money back to the taxing units.
Ryan J. Stanton | AnnArbor.com
Kunselman said he noticed the DDA's tax capture is projected to grow by nearly $1 million a year due to growth in the downtown tax base and he wants to send that money back to the taxing units.
"The intent of these ordinance amendments are to just bring some stability, some trust and confidence into the DDA as an institution," Kunselman said.
"And as we go through the effort, the DDA's budget is to remain whole is my intent," he added. "We're not trying to hamstring the DDA's ability to pay their bills."
Mayor John Hieftje said he has concerns about what's being proposed, though.
"My concerns about this aren't the financial impact to the DDA," he said. "It's more the financial impact to the city's general fund, which I believe could be negative were we to take this action. I'm sure that will come out as we do further discussion on the numbers."
DDA Executive Director Susan Pollay and DDA board members were in attendance Monday night but did not speak.
The DDA has released a seven-page report on the history and purpose of the DDA, with a detailed look at projects it has financed over the years with the tax dollars it collects.
The report states that even though the city reduced its tax levy over the last decade, the city still received more tax dollars out of the DDA district in 2012 than it did in 2002.
Since the DDA's creation in 1982, the report states, the private sector has invested hundreds of millions of dollars in new downtown developments, business renovations and expansions.
Last year, the building permit valuation of private construction in the 27.41 square miles of Ann Arbor outside of the DDA totaled $77.1 million or $2.8 million per square mile. But inside the DDA, which is 0.42 square miles, the total building permit valuation was $42.3 million, the report states.
The DDA district encompasses all or part of 67 city blocks. Of the $22 million in total taxes paid by property owners in the downtown last year, $3.7 million went to the DDA.
The city ordinance changes being proposed by Kunselman and Kailasapathy state any tax-increment financing or "TIF money" used by the DDA must be specifically allowed under the 1975 state law that created DDAs and must directly benefit properties within the DDA district.
The changes also make it clear the DDA is required to submit an annual TIF report to the city before the first regular meeting of the City Council each January.
Kailasapathy said at Monday night's meeting she's concerned the city's audit committee isn't getting answers to its questions about the DDA's finances.
She pointed out the DDA's latest audit states parking garage bonds are to be serviced with revenues from the DDA's parking fund. But millions of TIF dollars are being used for that.
"We need to discuss this and other financial statement errors with the DDA's auditors to determine whether the auditors need to reissue the DDA's financial statements," she said.
Kailasapathy said members of the audit committee have requested financial information from the DDA that was not provided in a timely manner because its chief financial officer has been sick.
"I'm quite concerned by the fact there's no succession plan to address the issue of a sick CFO," she said. "All these events have only added more questions about the DDA as an institution."
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's email newsletters.
Comments
Stephen Lange Ranzini
Wed, Mar 20, 2013 : 2:47 a.m.
I applaud Sumi & Steve for their internal audit work regarding the DDA. I have another issue that needs to be added to the list of issues requiring some internal audit inquiry. In a January piece on the DDA in A2Politico it is asserted that: "In July 2012, DDA officials borrowed $1.3 million from Republic Parking officials at 6 percent interest to fund the installation of new automated pay equipment in the city's parking garages." Is this true the DDA borrowed $1.3 million at 6%!? Why so high? Why borrow at all from a vendor when the city is sitting on $250 million in idle funds? Of course the fact that the equipment has had "issues" in deployment in other cities is an entirely different issue. If the city can borrow for 5 years at 2%, that means they threw away $52,000 a year or $260,000! Why? See: www.a2politico.com/2013/01/high-overhead-debt-load-push-dda-parking-revenues-98-percent-below-national-average/
Stephen Lange Ranzini
Wed, Mar 20, 2013 : 10:43 a.m.
@Veracity: Sorry the exact amount as of June 30, 2012 had actually declined to $207.5 million (it had been higher in prior years). You can get this number from the June 30, 2012 CAFR report (annual audit of the city of Ann Arbor) on page 24 by adding up the figures on the first three lines of the assets on the balance sheet (statement of net assets). The first three lines are are cash and cash equivalent investments. See: http://tinyurl.com/A2-2012-CAFR I agree with your comment 100%. To save $250,000 the city ought to have created an agreement to lend the DDA this money. The DDA board should have asked for a loan from the city rather than borrowing expensive money from a vendor.
Veracity
Wed, Mar 20, 2013 : 3:35 a.m.
Stephen, Can you provide the source for your statement that the city has $250 million in idle funds? And the city and the DDA do not have an arrangement which allows the city to share funds with the DDA. If anything, the DDA shares some of its parking revenue with the city and both receive portions of TIF payments.
snapshot
Wed, Mar 20, 2013 : 2:40 a.m.
The Mayor should not be engaged in this discussion since he has a conflict of interest. Why any responsible elected government body would allow an entity to control the hard earned tax dollars of the city property owners without being accountable to those property owners is baffling. I could only suggest that it creates unecessary layers of beauracracy to make it more difficult to follow money as an aid to corruption. And were we ever informed as to the terms of the bond issues DDA is negotiating? Why not, since city property owners are on the hook for payment. The DDA is just not a good investment for taxpayers....in fact I would consider it a slap in the face to taxpayers when accounting can't account for our tax dollars. Something smells, and smells bad and many of our leaders are wearing nose plugs.
Widow Wadman
Tue, Mar 19, 2013 : 10:23 p.m.
Kailasapathy's accounting skills were needed on city council. The changes that Kailasapathy and Kunselman are proposing sound reasonable however my preferance would be to have the DDA completely disbanded. Its existence is not necessary for the city government to perform its functions or for development to occur downtown. The people on the DDA are not accountable to voters. The members of DDA promoted that library bond project without any concern for what citizens wanted in terms of library services or for how the bond would affect taxpayers for years to come. The members of the DDA appear to be friends of the mayor but not of the larger voting public.
Veracity
Tue, Mar 19, 2013 : 7:03 p.m.
The DDA budget has averaged over $2 million in deficits for this fiscal year and at least each of the previous two fiscal years. In order to balance its budgets the DDA has been raiding its reserve fund in order to cover the deficits. Reasonable expectation has the DDA continuing with deficit spending in future budgets, at least until its reserve fund is completely depleted within the next year or two. Once its reserve fund is depleted, the DDA will be unable to avoid insolvency at which time it should be disbanded. Unfortunately, even when the DDA no longer exists remaining debt obligations will persist and be acquired by the city. If the city's general fund does not have enough uncommitted cash to cover the DDA's lingering debt obligations then either a special millage or an income tax must be considered.
Arboriginal
Tue, Mar 19, 2013 : 5:07 p.m.
Should the DDA be eliminated? Thumbs up for yes.
Peter Eckstein
Tue, Mar 19, 2013 : 4:55 p.m.
Without weighing in on all the specifics of this proposal, I would say that objective outside observers--notably the respected Citizens Research Council of Michigan--have raised serious questions about the operation of DDAs across the state. They are concerned that DDAs generally are absorbing increasingly large shares of the property tax revenues of their municipalities and other tax-supported entities (like libraries and community colleges) and that they risk becoming "shadow governments" outside the direct control of elected officials. My own concern, as an economist as well as a citizen, is that the tax-increment funding for the state's DDAs is based on the heroic assumption that every dollar of new development in a designated area is due to the efforts of the DDA. If no DDA, no development, so there is no loss to other tax-supported entities (including the city itself) if all the additional revenue from development goes to the DDA (though, in Ann Arbor's case, at least, to the K-12 schools). But that assumption is obviously false in many cases. For example, can it be argued that without the Ann Arbor DDA, the offensive new "Varsity" superquad would not be under construction on Huron Street? Yet the DDA, as I understand it, will be the only non-school governmental entity, receiving the new tax dollars this building will generate into the indefinite future (at least until it goes bankrupt). Now there are arrangements by which, in Ann Arbor, at least, some of the DDA's money goes back to city government, but there still remains a growing pot of dollars that is under the budgetary control of the DDA alone. Of course, many of DDA's spending projects are good things, in and of themselves, and many of them would survive scrutiny in the overall context of city budgeting. But the city has many priorities, and City Council has every right to review the share of revenue from years of development in the extensive downtown area that DDA alone controls
sweetdaddy1963
Tue, Mar 19, 2013 : 4:22 p.m.
I applaud you for the check and balance of the DDA it's about time,now can someone do the same for Rec and Edu like the connection between them and AAPS?
sweetdaddy1963
Tue, Mar 19, 2013 : 9:01 p.m.
What I mean is rec & Ed runs programs separate from aaps regular city programs that have nothing to do with citizen's whom have kids in school they run all city parks, they run youth baseball not little league (coopertown)youth baseball there has never been a little league team in A2 because rec & Ed controls all facilities or is it AAPS? When you play high school sports you pay rec & Ed not AAPA you don't play on rec&ed fields why do you pay them to play sports? My check should be made out to AAPS not rec and Ed who are they I didn't vote for them did I ?
Chester Drawers
Tue, Mar 19, 2013 : 6:44 p.m.
What do you mean regarding the AAPS and their Rec & Ed department?
jcj
Tue, Mar 19, 2013 : 2:31 p.m.
This council is full of wishy washy servants of the "mayor". Only a couple have the nerve to do the right thing!