Ann Arbor DDA accepts advice of its attorney not to redistribute additional excess tax captures
The Ann Arbor Downtown Development Authority's governing board emerged from a one-hour closed door meeting with its attorney today and unanimously decided on its answer to a lingering question: It won't be returning any additional tax revenue to local taxing units.
DDA officials hope today's decision, on the advice of attorney Jerry Lax, puts to rest an issue that first surfaced in May, when it was discovered that the DDA collected too much money since 2004 through tax-increment financing in the downtown district.
The DDA is partially funded through TIF — or tax-increment financing — revenue, meaning it captures the increase in taxes resulting from new construction and improvements downtown.
Joan Lowenstein
In May, city officials stumbled across a forgotten section of the city code from 1982, which states if TIF revenue grows faster than expected and hits certain targets, the DDA is supposed to kick back excess money to the taxing units the funds are being diverted from.
According to the DDA's calculations, nearly $1.2 million in excess TIF money was captured since 2004.
About $711,767 of that was owed to the city, but the City Council voted in May to forgive the DDA, citing other financial support the city has received from the DDA over the years.
Meanwhile, the DDA agreed in May to return about $473,000 to three taxing units: Washtenaw County, Washtenaw Community College and the Ann Arbor District Library. DDA officials say checks already went out to those three units to repay them for the excess captures.
But the Ann Arbor Chronicle has continued to question the DDA's calculations, arguing that potentially hundreds of thousands of dollars more might be owed to the various taxing units. The DDA, with its vote today, decided it won't be changing its calculations.
"I thought the interpretation that the attorney made was consistent with the ordinance," said Mayor John Hieftje, also a voting member on the DDA board.
The nine members present for the vote were Hieftje, Chairwoman Joan Lowenstein, John Splitt, John Mouat, Newcombe Clark, Gary Boren, Keith Orr, Leah Gunn and Roger Hewitt.
Based on the opinion of the DDA's attorney, there is no requirement to redistribute any of the TIF payments, said Lowenstein, who also is an attorney.
"It's very simple really, and it's confirmed by state statute," she said. "What the state statute says is that you just can't collect TIF and sit on it. And if you do that, you have to redistribute it to the taxing units. But if you're spending the TIF, as we are, then no distribution is required."
Lowenstein said most of the TIF money the DDA has captured over the years has gone into construction of parking garages and streetscape improvements downtown. She said city ordinance clearly states that if there is bond indebtedness, the DDA's first obligation is to pay off the bonds that are used to improve the downtown.
"And after that, if there's money left over, if the DDA is not spending the money, then it goes back to the taxing units," she said. "And that's not the case here."
Asked why the same argument wasn't applied in the case of the $473,000 already redistributed, Lowenstein said DDA officials hadn't come to that realization yet. After reading the law more closely, she said it appears the same argument would apply, but the DDA isn't going to go back now and ask for its money to be returned.
Lowenstein said she's unsure if any of the taxing units will oppose the DDA's decision, but she doesn't think there would be any legal basis to challenge it anyway.
She also acknowledged the DDA's fund balance would dip uncomfortably low if the DDA had to make additional payments to the taxing units.
"We now are in a pretty tight time because we have taken on some big projects, so any dip in what we get from TIF would be substantial," she said.
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 e-mail newsletters.
Comments
snapshot
Sat, Jul 30, 2011 : 2:07 p.m.
Another agency dedicated, not to serving the community but to creating an empire at taxpayer expense using every bureacratic "trick in the book". Another example of "A Mockery to Democracy".
Lets Get Real
Thu, Jul 28, 2011 : 5:33 p.m.
Who are these people? We are investing in "streetscapes" and parking garages? We've still got a hole on Ashley and the disaster under the library lot should not be an accomplishment to hold up as a model. The put up high priced fancy lighting fixtures to be used for target practice and call it a beautiful streetscape. More like street-escape. Driving and parking downtown is a joke. Bus transportation doesn't support weekend visitors using it - 1 hour between runs - not does it support people who work late or evenings or want to head downtown to eat or shop - after 6 pm the bus is a joke. Things have been torn up for so long, that my friends, acauaintences and business associates have elected to go to the restaurants on the fringe with ease of access and parking. Bet it is a banner year for Mike Roddy and Paesaneo's, Ari and Paul at Zingerman's Roadhouse, and Mediterrano/Carlyle's. Can't blame people for staying away. Wake up DDA. The money you are grabbing is OUR money. How can you give back to some and not to others? Because you were too incompetent to read and know in the first place? It will put us at a low level of reserves? Too bad - all of our budgets are tight right now - live with it. Spend less, and when you do spend, choose projects that contribute to substantial project that contributes a better functioning in the city not superficial, pretty, pretty, useless self-celebrating stuff.
Carole
Thu, Jul 28, 2011 : 11:47 a.m.
Agree wholeheartly with the first three comments. The DDA needs to be disbanded. All tax revenue should be going to the city, the city should be mature and professional enough to distribute those funds as needed to keep the city running smoothly and safely. What do we as citizens need to do to get this organization disbanded? At least we can vote to change council members and mayor - and it is about time to do so. Really dislike the following: -the fact that the city, which is in the hole according to them, forgave over $700+ DDA owes them -- how many firefighters and police officers would that support. -the city agreed to a 19% rate for parking revenue and agreed to provide coverage for any over runs DDA may have in a fiscal year. -according to one article, it was brought to the attention to council that DDA has been in the red for the last several years. Disband DDA - use those tax dollars for supporting the various needs of the citizens of Ann Arbor -- it is time to do so.
Alan Goldsmith
Thu, Jul 28, 2011 : 10:47 a.m.
"She also acknowledged the DDA's fund balance would dip uncomfortably low if the DDA had to make additional payments to the taxing units." Lowenstein, another stellar ex member of Ann Arbor CIty Council, a lawyer herself, doesn't grasp stealing money is...stealing money? MY bank account is uncomfortably low too. Can I mistakenly underpay my summer property taxes and tell the City I'm using Lowenstein logic? This is what you get when you stack the DDA Board with political hacks appointed by the Mayor and Council.
A2comments
Thu, Jul 28, 2011 : 10:40 a.m.
Asked why the same argument wasn't applied in the case of the $473,000 already redistributed, Lowenstein said DDA officials hadn't come to that realization yet. After reading the law more closely, she said it appears the same argument would apply, but the DDA isn't going to go back now and ask for its money to be returned. Wow. They distributed money, hundreds of thousands, without knowing if they had to? Someone needs to be fired for incompetence.
Trepang674
Wed, Jul 27, 2011 : 11:09 p.m.
It's hard to follow even after Lowenstein offers her foggy logic, but isn't this our money - eventually, it seems it will have to come out of our pockets. Lower the parking fees...?? Lower the tax on the downtown businesses...??
a2grateful
Wed, Jul 27, 2011 : 9:35 p.m.
Ideas: 1) Voters change the city charter and disband the DDA 2) Government entities swindled out of their revenue sue the city and DDA for their just revenues. Due diligence should produce some interesting audit info. Of course, the city salivates and says; "Bring it on, baby!" Those entities could respond, "Class action or multi-plaintiff suit, baby!" Could be interesting. . .
1bit
Wed, Jul 27, 2011 : 9:20 p.m.
I'm growing increasingly irritated with the usage of non-elected and unaccountable committees determining how tax dollars should be spent. It's here locally with the DDA, it's in the new healthcare law with an medicare payment advisory commission, and it's in Harry Reid's proposal for a 12-person commission in this debt-limit nonsense going on in Washington. What it comes down to is simple, our representatives don't want to compromise with each other to make decisions in the best interests of all of us (i.e. global utility) versus the best interest of individuals (i.e. individual utility). ERMG, who I'm assuming will say it, has got it right here that it's time we got rid of the DDA and our representatives became potty-trained and learned how to prioritize and manage our tax dollars.
1bit
Thu, Jul 28, 2011 : 1:51 p.m.
I like my analogies, but agree with you on the tweeting thing and replacing the DDA for a transparent and accountable office. Two out of three ain't bad.
Maxwell
Thu, Jul 28, 2011 : 3:02 a.m.
Totally lame analogies - not quite as bad as tweeting while breathing, but you're getting there. I do agree that the DDA needs to be shut down. It should be replaced with a transparent government office of "Business Development" that reports directly to the council.
annarboral
Wed, Jul 27, 2011 : 8:41 p.m.
If the citizens of Ann Arbor had any sense they would vote to eliminate the DDA. No one elects these people and yet they are empowered to spend millions annually. If commercial developmewnt makes sense then it doesn't need government financing. The DDA is a "slush fund" the politians use to do whatever they want. The money should go into the city budget or (would you believe) an actual reduction in taxes.
Dr. Rockso
Wed, Jul 27, 2011 : 8:22 p.m.
Lawyers, Thieves, Politicians and the DDA. Not a whole lot of difference between the bunch.
deb
Wed, Jul 27, 2011 : 8:12 p.m.
I despise the fact that an entity that is funded purley from public revenue (taxes, publicly owned parking structures) holds closed door meetings.
Ron Granger
Wed, Jul 27, 2011 : 8:02 p.m.
Why does this remind me of arguing with my kid over why he won't get an allowance this week? Disband the DDA. Let's call it the "D-DDA" campaign.
Mick52
Wed, Jul 27, 2011 : 7:37 p.m.
"Asked why the same argument wasn't applied in the case of the $473,000 already redistributed, Lowenstein said DDA officials hadn't come to that realization yet." Typical Lowenstein: makes no sense. We haven't come to hat realization yet. I gotta remember that one for the next time I am caught with my hands in the cookie jar. "Sorry Honey, I haven't come to that realization yet." "I ran the stop light, officer? Sorry I have not come to that realization yet." That should work, huh? If the dough is still in the pot, it hasn't been spent yet. Give it to who it belongs to. I do not agree with Forever that DDA needs to be disbanded but I am leaning that way because it appears to be a pawn of the city council. I want to see DDA officials elected, not appointed, so they have some protection from council interference and spend TIF funds on what it is supposed to be spent on, not used to bail out the city budget.
Forever27
Wed, Jul 27, 2011 : 7:09 p.m.
This is exactly why we need to disband the DDA. They are an entity that has no obligation to taxpayers, yet continues to "capture" tax dollars to invest in their own projects. Everything they do can be done by the city council, which actually has to answer to voters. The DDA is a scam of epic proportions.
jcj
Wed, Jul 27, 2011 : 6:57 p.m.
Lowenstein said she "doesn't think there would be any legal basis to challenge it anyway." Surprise! Surprise! She said city ordinance clearly states that if there is bond indebtedness, the DDA's first obligation is to pay off the bonds that are used to improve the downtown. "And after that, if there's money left over, if the DDA is not spending the money, then it goes back to the taxing units," Right! They will spend like crazy now!