Updated: Tempers flare as DDA votes to hand over $2 million to Ann Arbor with no strings attached

The DDA is making the transfer in good faith that a mutually beneficial parking agreement between the city and DDA will be worked out later this year.

The DDA has been providing the city $2 million a year for the last five years under a $10 million, 10-year parking agreement that expires in 2015. The city tapped out the full monetary worth of that agreement five years early and is seeking new terms to continue payments.

DDA board member Jennifer Hall decried the $2 million transfer of parking revenue to the city's general fund today.

Ryan J. Stanton | AnnArbor.com

Members of the public and even some DDA board members came forward today to decry the fact that the money comes with no strings attached.

"Responsible boards are careful about setting precedent," said Arbor Brewing Co. owner Rene Greff, a former DDA board member. "And yet you stand poised to hand over $2 million of DDA funds to the city with no expectation or guarantee of getting any value in return. The mission of the DDA is to spend public dollars to spark private reinvestment. This resolution clearly will not serve that mission and supporting it violates your fiduciary duty."

The Main Street Area Association and the Ann Arbor Area Chamber of Commerce also took stances against the $2 million transfer.

DDA board member Jennifer Hall was the most outspoken, offering up a six-minute prepared speech in which she chastised DDA board members and Ann Arbor City Council members who worked out the framework for the $2 million transfer behind closed doors during the last year. Hall said the meetings of the working group should have been open to the public, but even some DDA board members were kept away from sitting in on the discussions.

"I don't support this type of conduct," Hall said. "I find it sneaky, and underhanded, and corrupt, and possibly illegal, and in violation of the public trust in our government. Obviously not everyone is in agreement with me on this or things would have happened in a different way. But at the very least you should be able to understand why I'm so angry today."

Three board members joined Hall in voting against the $2 million payment: Newcombe Clark, Gary Boren and Keith Orr. John Mouat was absent.

DDA members who supported the transfer included Russ Collins, Leah Gunn, Roger Hewitt, Mayor John Hieftje, Joan Lowenstein, John Splitt, and City Council Member Sandi Smith.

Orr proposed an alternative in which the DDA would provide the city $1 million on July 1, and then another $1 million on Jan. 1 if an agreement was reached by then.

"I've been heartened to hear that discussions are frank and fruitful and that certain general areas of agreement have been reached," Orr said. "However, what we have before us is not an agreement. In my business, if I were to present this to my attorney for review, he would advise me not to sign. Not because it is a bad agreement, but simply because it is not an agreement at all."

A majority of board members voted down Orr's proposal. After much debate, they ultimately supported the full $2 million transfer to the city.

Rene Greff, owner of Arbor Brewing Co. and a former DDA board member, criticized the DDA today for its actions.

Ryan J. Stanton | AnnArbor.com

At multiple points during today's meeting, Hall accused Mayor Hieftje and Council Member Smith of having conflicts of interest. She said because they both earn paychecks from the city, they stand to gain directly from the $2 million transfer and should not be allowed to vote on the issue.

Jerry Lax, the DDA's attorney, decided both Hieftje and Smith could vote on the issue. Lax said state law provides exemptions from normal conflict-of-interest rules when dealing with contracts between two public entities such as the city and the DDA.

Had Smith and Hieftje not been allowed to vote on the $2 million transfer, it would have fallen short of the six votes required for approval.

Smith said she and others who have been working on the mutually beneficial agreement between the city and DDA feel enough progress has been made to make the $2 million transfer now on good faith until a full agreement is in place later this year. She said there are several agreed-upon talking points for those negotiations, such as a shift in parking enforcement oversight from the city to the DDA.

"The one thing that I really wanted to have is the dialogue that the enforcement belongs here with the DDA, and it has taken a year and a half to have city staff recognize and be willing to have that dialogue," Smith said. "And it's something that I've never given up on — to have that particular piece be a part of this and be in writing and be at the table. And because I feel that we have gotten to this point and now are in a position to have meaningful dialogue ... I am willing to support this."

Hall still disagreed.

"Giving $2 million for nothing in return violates the DDAʼs mission and our responsibility to the downtown," she said. "Our mission is to undertake public improvements that have the greatest impact in strengthening the downtown area and attracting new private investments. There is nothing at all in this proposal today that even remotely relates to this mission. What we have in front of us today ... is essentially a transfer of $2 million from the DDA to the city for no reason."

Hewitt said the working group has made an earnest and honest effort to come up with a structure that could serve both the city and the DDA going into the future. He said he's confident there will be a fair and equitable agreement reached.

Hewitt denied Hall's accusations that any meetings have violated the state's Open Meetings Act. He said they weren't technically public meetings.

"I'm not going to get into a name-calling situation," he said. "If that's what she feels, I'm sorry she feels that way and, I'm sorry, those accusations are not justified."

AnnArbor.com was denied entry to a meeting of the working group held last month in City Administrator Roger Fraser's office inside city hall.

The group included Boren, Collins and Hewitt from the DDA, and Council Members Carsten Hohnke, Christopher Taylor, and Margie Teall. Smith doubled as a council member and DDA member.

Hewitt said that was the only meeting he's aware of where anyone was turned away. He said officials felt that meeting needed to be conducted in private because they were discussing sensitive personnel issues involving the transfer of parking enforcement duties.

Hewitt said any other DDA members outside of the working group could have attended that meeting if they wanted. He also said meetings of the mutually beneficial committee that has met several times in the last six months are open to anyone who wishes to attend — though some complain they haven't been publicly posted.

Hall, whose term on the DDA ends in July, said she would not be surprised if Hieftje refused to reappoint her after today. But she said it was important enough to publicly address what she considers a lack of open discourse leading up to the $2 million agreement.

She ran through a timeline of events, starting with a January 2009 resolution brought forward at City Council to begin discussions. A DDA resolution two months later established a committee. At every meeting since, Hall said, the DDA has had a standing committee report on its monthly agenda, but few details have been forthcoming.

"Since council has seated their committee, we have heard reports from Sandi Smith to the effect of 'the committee has not met' and 'there is nothing to report,'" Hall said. "Once she stated the committee had asked staff some questions and was awaiting answers. And then, boom, last Wednesday there's all of a sudden a very detailed discussion about what it is that we're giving $2 million for."

Hall said she has a hard time trusting that some future agreement can be worked out when the city already has the DDA's money in hand. "We've reduced our own programs, and here we are today, ready to sacrifice our future again to give the city $2 million to plug a hole in its budget," she said.

Hieftje, who was not part of the working group, said the framework for continued discussions between the city and DDA "has a lot of promise." For that reason, he said it made sense to go forward with the $2 million transfer now so the city can include it in its budget forecast.

In the worst economic downturn in 80 years, Hieftje said the DDA — which he considers an arm of the city — should be expected to step up to help the city with its budget shortfalls.

Kyle Mazurek, the chamber's vice president of government affairs, said the DDA is only enabling the city to delay tough budgetary decisions. He argued consequences of the $2 million transfer will be increased parking rates and proposals akin to increasing parking meter enforcement.

"A $2 million transfer tied to nothing is irresponsible," said Maura Thomson, executive director of the Main Street Area Association. "If the DDA is in the business of bailouts, then that should be openly stated in the DDA's mission."

Ryan J. Stanton covers government for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529.