On November 18, 2013, Ann Arbor City Council amended the Downtown Development Authority Ordinance for the City of Ann Arbor. After many so–called ”compromises” these are the changes to Ordinance No. ORD-13-28 regarding the Downtown Development Authority (DDA).1
(1)No member may serve more than 3 consecutive full terms and may be reappointed after a lapse of 4 years.
1:156. Powers of the authority.
(2)Beginning with the 2016 tax year the maximum captured taxable value shall be $224,000,000.00. Each tax year thereafter, the maximum captured taxable value shall be increased by 3.5% per annum.
1:156. Powers of the authority
(3E)Tax increment financing seed funds for the Housing Fund shall be budgeted effective tax year 2016 at an amount no less than $300,000.
1:160. Annual Report
The authority shall prepare, file with the State Tax Commission and the City, and publish in a newspaper of general circulation in the City a tax increment financing (TIF) account Annual Report consistent with the requirements of and in the form specified by the State of Michigan within thirty (30) days of receipt of audited financial results. The authority shall submit their capital budgets to incorporate them into the City’s capital improvement plan (CIP). The authority shall at the time they submit their budget for Council approval identify that portion of the budget which is operating and that which is capital projects.
The first change (1:155. Board) was a legitimate compromise, with some councilmembers wanting no term limits and others wanting 1-2 term limits. The Teapublican Caucus2 wanted the board to be comprised of new, inexperienced members so that there will be no push back over any future changes. However, the compromise gives a term of 12 years, which is pretty good, so the change is not all that dire.
It should actually be called the “Leah Gunn” amendment because it is the result of Gunn’s long service that resulted in this rule change. (She has since retired last summer before this amendment was voted on.) The DDA board actually turns over quite frequently with the exception of one or two people over the years. The real motive behind this change was to try to pack the board with the Teapublican sympathizers. But with that said I would like to say that Leah Gunn has done a superb job on the DDA as well as the county commission and she will be sorely missed. She can take comfort in knowing that because of her strength, intelligence, and hard work that the DDA is a success.
The most important change is to the second item (1:156. Powers of the authority). We now have a TIF cap imposed. The maximum taxable value on which the DDA can capture TIF will be set at $224 million with an annual increase by no more than 3.5 percent. 3
What this means is that as the Downtown flourishes, the other tax entities will have less and less obligation to support the downtown, even though all the other tax entities benefit from a strong downtown. (See my previous post “The Tiff over Tif” for more info about this issue.)
Now that this has passed and is now codified, what this means in dollars is:
(as reported by Ryan Stanton in the Ann Arbor news)
“The new cap on TIF revenue will not apply until fiscal year 2016-17. It’s estimated the DDA’s TIF capture will climb to $6.1 million by then — up from $4.5 million — and $303,000 would be returned to other taxing units that year,
About 52 percent of that $303,000 would go to the city, 21 percent to the county, 13 percent to the community college, 8 percent to AAATA and 6 percent to the library. In terms of dollars, that means about $157,560 would go back to the city.”3
Do you see the problem with this? Only 52% of the money refunded due to the TIF cap will go back to the city.
If you are applauding this change, then you are making some assumptions that are completely misunderstood. There will always be infrastructure projects needed downtown. This change does not give priority to other parts of the city; it only puts the onus on the City to fund projects that the DDA used to fund, but now cannot afford. Although the city always had this responsibility, it was secondary to the DDA; the City’s general fund was rarely used to pay for infrastructure projects downtown since the DDA was previously well funded. Plain and simple, the city will now have to fund many of the needed infrastructure projects from the general fund, due to the DDA having limited funding because of the TIF cap.
I get the feeling that many in this city believe that the 52% ($157,560) is bonus money, a windfall. It is not. It is really a 48% liability for the general fund; same projects, less DDA TIF money to cover them.
This just seems so wrong to make this change, but it is what it is as this point. Many residents were convinced by all the rhetoric about how supporting businesses and economic development were bad and at the detriment to the rest of the city. It is the spin on ‘trickle down economics’4 that is so strange. Trickle down economics refers to giving the people’s tax money to businesses in the hope that businesses then give back to society in a greater value. There is an old saying that ‘if you want to feed the birds, then feed the horse more oats’ that puts this theory in perspective. Think about it. You be the judge if you would prefer to have the use of the money outright or after being processed and partially used by others. Trickle down economics does not work.
A TIF capture of revenue in the DDA is NOT trickle down economics or pro-business outright. First of all, Ann Arbor resident’s tax revenue (in non-DDA areas) has not been funding infrastructure projects downtown. The tax revenue from businesses/residents who live within the DDA boundaries have been funding those projects downtown. Now, since the council has amended the DDA ordinance, all money will be pooled and prioritized for downtown and non-downtown projects. Now the non-DDA tax revenue will be subsidizing downtown projects an additional 48%. Projects will not disappear or go away. They will now be paid for from a pooled source instead of the prior DDA only source. Those, out in the ‘neighborhoods’, will get less not more out of this deal.
As growth declines in the future, we may miss some of those extra dollars some councilmembers have so nonchalantly given back to other jurisdictions that they don’t represent. The good of their constituents took a back seat to the good of the Teapublican ideology.
Being Pro-DDA is not being Pro-business in the sense that most think define this term. When journalists, bloggers, and politicians refer to Republicans/Teapublicans as being pro-business they are referring to tax breaks, and less regulation. They want to leave business alone so that it can regulate itself. They want to let the market dictate what business should survive or fail.
Pure Republican/Teapublican viewpoints do not favor a DDA because they want the market to control what happens, even if that is a chain store on every corner. Until the market asks for it and private entities want to develop it, then leave it alone; private investment only, no public investment.
However, being Pro-DDA is the opposite of that. The DDA supports small business and supports companies that ordinarily wouldn’t survive or relocate to this area. It’s goal is to make a strong downtown by influencing what is in the best interest of the community while using the tax revenue from the DDA district only to accomplish this. The DDA wants to invest in the city, using public dollars, for the good of all and not for a profit (e.g. parking structures). Being Pro-DDA allowed the city to save money by forcing other tax entities to pay their fair share to support the downtown that benefits them.
Recently Washtenaw County Board of Commissioners as well as the library have just voted to support a new TIF district in Pittsfield Township because they recognize the value of a TIF system. Yet The City of Ann Arbor just decided to cap its TIF capture. Go figure? Why are we sabotaging our own best interest?
DDAs are good for the community and are progressive. They support local business and act in the best interest of the community, not in the best interest of a corporate bottom line. But as I said before, it is what it is now. We shall see what happens in the coming years..
The third change has to do with mandating the DDA fund a specific amount of dollars to its housing fund. Although this is a good thing on the surface, personally I would rather see this mandate in the general fund so it can be used citywide. I really have no complaint over this, because the DDA appears to have always funded these types of requests over the years so it has no unintended consequence that I can see right now.
The fourth change (1:160. Annual Report) is an addition to the ordinance requiring the DDA to report the TIF annual report in a published newspaper. No big deal. The second part appears to me to be the direct result of council not understanding how the DDA operates or what it actually does. As councilmember Teall said “It rings of micromanagement”. We can now look forward to the council cherry-picking items in and out of the DDA budget with little respect for the decisions of the DDA board as a whole.
I was rather disappointed in most of the discussion that occurred around the table at the meeting. I guess much has been said before. Comments that stuck out to me were CM Lumm saying, “She started out wanting to fix a problem…the problem was that the allocation of TIF funds were not clearly defined”.
However, her result is that the general fund will probably now have to cover 48% more of downtown projects if the DDA runs short of revenue in the future. She did not clear up language as was her initial intent, she changed expectations and results.
CM Kailasapathy went off on a tangent once again about “giving back their share to other tax entities”. She says that it is their money to get back; it is not Ann Arbor’s.
Really? It would be nice if CM Kailasapathy represented her constituents and worried about her constituents paying more than their fair share instead. Remember the concept of a DDA TIF capture is that all tax entities benefit from a strong downtown and should contribute accordingly. She thinks we, in Ann Arbor should contribute more, while the other tax entitles get refunds. I don’t know how anyone can vote for her with that attitude.
(Unless of course that has to do with the AAATA system. Then all municipalities should have to give equally regardless of usage. But I digress….)
Then at the end of the discussion, Christopher Taylor came through with the perfect speech. Watch it here:
Here are some excerpts from his CM Taylor’s statement:
“This is a very bad idea. It will strip the DDA of over 50 million dollars in spending.
“There will be less money in Ann Arbor, to be spent in Ann Arbor”
“It is not a compromise; it is a power play. It is appropriate to call it what it is.”
“ No one believes that this is good for the downtown or the DDA.”
He then goes on to speak about the threats made to local business owners and says they were told:
“If they speak up, they will be punished. That there will be more harder rules made, that there will be more money taken, that there will be consequences.”
“This is arrogance and narcissism. It is bad for the city, bad for Ann Arbor and bad for the downtown.
This was a very powerful statement. I was relieved to at least here a councilmember vocalize the truth, even if there was not enough votes to oppose the DDA ordinance changes. CM Teall then chimed in with exactly how I was feeling at the time. She thanked CM Taylor for “ calling it like it is”. Kudos to CM Taylor and CM Teall who voted against this ordinance change.
So the Teapublican Caucus was able to convince the non-DDA areas, which they now refer to as “the neighborhoods”, that this very bad deal was in their best interest. We now have a mentality of the downtown vs. the neighborhoods (the rest of the city), which is not very productive for future issues in the city.
However, coming up this week will be a good test of whether the council is “pro-neighborhood”. The repeal of the crosswalk ordinance will be brought up for a vote on Monday, December 2. What could be more pro-neighborhood than being pro-pedestrian? Alas, the Teapublicans will show the residents what they really mean by being pro-neighborhood. Will they outright repeal the ordinance or will they only tweak it to improve it? Will they do anything to stop speeding motorists through the neighborhoods? Will the desire of speeding motorists trump those who like the pedestrian ordinance, who acknowledge some of the flaws, but want to improve it? Only time will tell.
(see my post To cross or not to cross..that is the question for more information on the pending crosswalk repeal)
It would be nice if the councilmembers used some critical thinking skills while pondering these issues. Many of them appear to look at everything as black and white. There is a great video making the rounds on email and Facebook. It explains quite well how critical thinking and reasoning works.
“Reasoning should be based in sound, consistent logic, not on emotions/social pressure. Truth of factual claims is not determined by the emotion that accompanies them OR the fact that they should may be believed by certain social groups.”
“Black and white thinking often reflects underlying intolerance of ambiguity. Leaping to flawed conclusions because you can’t tolerate the ambiguity of not knowing is not about truth or curiosity but about comfort.”
Hopefully, when discussing and examining the problems with the crosswalk issue (as well as all other issues) that all councilmembers will use critical thinking.
Hhmm… maybe I should change the tagline of my blog to Truth, Logic and Critical Thinking should always be at the forefront?
In specialibus generalia quaerimus
2 The Ann Arbor City Council Teapublican Caucus is made up the following councilmemebrs: Mike Anglin, Stephen Kunselman, Sumi Kailasapathy, Jane Lumm, and Sally Peterson. (Based on his campaign platform and rhetoric, I assume Jack Eaton will be welcomed into this group once he takes office in November.)
3 Ryan Stanton, “Disagreement remains over whether changes to Ann Arbor DDA will help city”, Ann Arbor News, Nov 20, 2013.
4 “Trickle-down economics” and the “trickle-down theory” are terms in United States politics to refer to the idea that tax breaks or other economic benefits provided by government to businesses and upper income levels will benefit poorer members of society by improving the economy as a whole. http://en.wikipedia.org/wiki/Trickle-down_economics