The Ann Arbor Downtown Development Authority adopted a revised budget for the upcoming fiscal year on Wednesday in response to directives from the City Council to put more money toward affordable housing and replacing deteriorating streetlight poles on Main Street.

The revised budget also factors in newer revenue projections from the city assessor's office, showing the DDA collecting more than $4.5 million in taxes for the fiscal year beginning July 1.

• Download the budget

In other action, the DDA board agreed to allow the developer of the Varsity high-rise being built on Washington Street to lease five more parking spaces in the city's Liberty Square parking garage. That comes on top of two spaces already approved by the DDA in January.

Brad Moore, associate architect for the Varsity high-rise project on Washington Street, appears before the Downtown Development Authority board on Wednesday on behalf of the developer to request five additional parking spaces for the project to be leased from the Liberty Square parking garage. The DDA board approved the request.

Ryan J. Stanton | AnnArbor.com

The DDA is planning to issue a $400,000 grant in the coming year to support four affordable housing units in Village Green's new Ann Arbor City Apartments being built at First and Washington.

Those four units are expected to be affordable to residents with incomes at or below 60 percent of the average median income, making $885 the maximum monthly rent payment for a one-person household.

The DDA's budget is broken down into four funds — a tax-increment financing or TIF fund, a housing fund, a parking fund and a parking maintenance fund.

All funds combined, the DDA is projecting revenues of nearly $24 million, including $19.4 million in parking revenues. Budgeted expenses total $23.8 million, leaving a $194,010 surplus.

At the end of the fiscal year in June 2014, the DDA is projected to have cash reserves of $3.5 million, including $2.1 million in the parking maintenance fund, $633,484 in the parking fund, $382,495 in the housing fund, and $370,521 in the TIF fund.

The $400,000 transfer from the TIF fund to the housing fund represents a $300,000 change from the $100,000 previously budgeted by the DDA. The DDA also is increasing TIF capital costs from $300,000 to $568,343 to budget for replacing the light poles on Main Street between Huron and William.

"The council resolution asked that we provide $300,000 for the light poles, but we're just showing you $268,000, which is the differential," DDA Executive Director Susan Pollay told board members on Wednesday. "We're working with city staff on the remaining amount."

Pollay said the total cost of the light poles is estimated at $516,000. She said a resolution will be going to the City Council within the month asking for approval to cover the remaining amount from the general fund, and then the project could come back to the DDA for approval in July.

Sandi Smith and John Mouat were the only two DDA board members to vote against the revised budget on Wednesday. Smith said she had a problem with the City Council telling the DDA to transfer an extra $300,000 to the housing fund without a specific project ready to be funded.

"I just find this very challenging right now to say that we accept what council has proposed here by moving this arbitrary amount of money over to housing without a project," she said.

The DDA regularly doles out housing fund money to support affordable housing initiatives in and around the downtown. Last year, it gave $150,000 to help support Dawn Farm's transitional housing program, and another $560,000 for improvements at Baker Commons, a low-income public housing facility managed by the city's Housing Commission at Packard and Main.

"We've been working pretty hard to contribute to affordable housing, but not having a real clear path of how we do that," Smith said. "And it's been a struggle over the last eight years that I've been sitting at the Partnerships Committee and trying to do this — to find solid projects and a method of investing in affordable housing in downtown Ann Arbor — so this seems to be very arbitrary."

Roger Hewitt, the DDA board's treasurer, reminded Smith state law is pretty clear on the DDA's budget needing approval from the City Council.

"The law is the law," he said.

Board member Keith Orr commented that it seems odd the City Council is trying to micromanage the DDA's spending. He said it was with reservation he voted in favor of the revised budget.

Mayor John Hieftje said he's hopeful the city's general fund will be able to cover balance of the cost of replacing the light poles, but he's not sure how other council members will feel.

He and other DDA board members said it's an urgent need. DDA Chairwoman Leah Gunn called it "an emergency."

Gunn said the issue of funding downtown beat cops — another budget item the City Council has asked the DDA to consider — will be discussed by the DDA's Operations Committee at 11 a.m. June 19. She said the date of the meeting has been changed from June 26.

Varsity parking approved

The Varsity high-rise was required by the city to provide 76 parking spaces for tenants. But now with DDA approval, seven of those spaces will be leased from the Liberty Square parking garage.

Under a city policy approved by the City Council in 2012, new developments in the downtown that must provide some amount of parking as part of their site plan requirements — but are unable to or unwilling to provide those parking spaces on site — can lease offsite public parking spaces.

Under the originally approved site plan, the Varsity was going to provide 70 spaces in the building plus two "car-sharing spaces," which counted for four spaces apiece. That gave it 78 spaces, which was two more than the 76 required by city ordinance.

The developer later decided the car-sharing concept was infeasible and went to the DDA several months ago to replace those two spaces with two leased spaces. But under that arrangement, the developer was still four spaces short of the required 76.

The reason five more spaces had been requested by the developer was because another space in the building was lost due to conflicts between piping and handicap-accessibility requirements.

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.