Deal on parking agreement stalled as Ann Arbor DDA discovers it may owe $2M in excess tax revenue
The Ann Arbor Downtown Development Authority could owe $2 million to local taxing jurisdictions from excess tax revenues the DDA captured over the last decade and should not have kept, city officials said today.
The news came as a surprise to the DDA and caused the authority's governing board to delay voting on a new parking agreement with the city this afternoon.
"There certainly are going to be financial implications," said DDA board member Roger Hewitt, adding DDA and city officials have been "crunching numbers furiously all morning and there is uncertainly of exactly what that financial impact would be."
The Ann Arbor DDA could owe $2 million to local taxing jurisdictions from excess tax revenues the DDA captured over the last decade and never should have kept.
Ryan J. Stanton | AnnArbor.com
The taxing jurisdictions that potentially could be owed money include the city and Washtenaw County, as well as entities like the Ann Arbor Transportation Authority, the Ann Arbor District Library and Washtenaw Community College.
The DDA is partially funded through tax-increment financing, also known as TIF, meaning it captures the incremental increase in taxes that result from new construction and improvements in the downtown area. The DDA's last TIF plan was adopted in 2003, amending the original 1982 TIF plan from when the DDA was first created.
The portion of the city code from 1982 that city officials are trying to interpret reads, "If the captured assessed valuation derived from new construction, and increase in value of property newly constructed or existing property improved subsequent thereto, grows at a rate faster than that anticipated in the tax increment plan, at least 50 percent of such additional amounts shall be divided among the taxing units in relation to their proportion of the current tax levies."
The code further states, "If the captured assessed valuation derived from new construction grows at a rate of over twice that anticipated in the plan, all of such excess amounts over twice that anticipated shall be divided among the taxing units. Only after approval of the governmental units may these restrictions be removed."
DDA officials acknowledge TIF income has grown substantially since 2002 due to new developments downtown. It's nearly $4 million annually, up from less than $2.9 million in 2002.
Mayor John Hieftje said the city treasurer brought the issue to the city's attention on Friday, and the city put an assistant city attorney to work on it over the weekend. The DDA received notification of what the city had learned this morning, which is that TIF growth since 2002 may have hit trigger points where tax money should have been reverted to the jurisdictions.
"It has to do with the rate of growth in the TIF, and the TIF really wasn't growing much prior to that," Hieftje said. "So that would have been the trigger, when the TIF started to grow, which coincides with some of the newer buildings that have been built in the downtown area."
Hewitt said the language in the city code is not particularly clear.
"It's open to some interpretations," he said. "So at this point, we are completely uncertain about what impact this will have on our budgets and our 10-year plan going forward. But it will be significant, whatever it is.
"Therefore I think it is imprudent for us to potentially approve a new parking contract with a financial commitment out of the parking fund until we have a clear idea of what impact this will have on our TIF fund."
Hewitt said a large cash payout from the DDA's TIF coffers could deal a blow to the authority, which is running deficit budgets and getting by with limited cash reserves in the coming years as it pays off the new underground parking garage on South Fifth Avenue and other improvements that are being paid for at least partially out of the TIF fund.
"I think we need to sit down with the city and come to a clear understanding of exactly what this means," Hewitt said. "And it's too early to be able to do that at this point."
Hieftje agreed it's unclear what the actual implications will be, but he said it makes sense for the DDA and city to temporarily step back from voting on a new parking agreement.
The agreement that was expected to be voted on today called for the DDA to share 17 percent of downtown parking revenues with the city through 2033.
Given that the city needs to adopt its budget before the end of May, Hewitt said the DDA may need to call a special meeting sometime later this month to get the situation resolved.
Hieftje doesn't think it puts the city in a bind.
"We need to vote on our budget by the end of May, but our budget doesn't start to take action until July 1 so there's certainly time there to amend things," he said. "In any event with this new wrinkle, the city comes out in about the same condition."
Financial figures for the period ending March 31 show the DDA brought in $3.7 million in TIF income in the first three quarters of this year, about $191,589 below budget. Parking revenues came in at $11.3 million, about $660,584 below budget.
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
Stan Hyne
Tue, May 3, 2011 : 1:11 p.m.
Bad as the DDA is the city is even worse. At least the parking structures aren't falling down.
Carole
Tue, May 3, 2011 : 12:46 p.m.
Just another example of incompetence -- DDA needs to be shut down and all of the funds should be going to the city coffers to be expended in an appropriate way -- which to date have left a great deal to be desired by present administrators -- there is no reason we, the tax payers, should be paying to support DDA and all of their offices. Take, take take, and spend, spend spend -- that seems to be the way for government these days.
racerx
Tue, May 3, 2011 : 7:27 a.m.
Wasn't part of the Raj Mahal counting on $2M from the DDA? Still, how can this body, the DDA, exist seperate from the city? If those downtown businesses want to install LED's, let them put up the cost. If they want beautification, directional signs, bike racks, again, have them pay for it. If the city built those parking structures, then the revenue generated from them, should go to the city. Plain and simple. Though it's hard to say if the growth of A2's dtwn would have been created without the DDA is debatable. Where are the Republican's when you need them; smaller government, let the private sector do what it does best, and stop government funding for items that the private sector can do better.
PLGreen
Tue, May 3, 2011 : 2:59 a.m.
Just as I have thought for a long time, the DDA is nothing but smoke and mirrors.
CynicA2
Tue, May 3, 2011 : 2:07 a.m.
... and the Hieftje appoints the DDA. Hmmmmm... so if they make a mess of things (which they appear to have, once again,) we know who to blame. It would be nice to have someone who lives in the real world run for Mayor next time around, so we can rid ourselves of this pariah.
Sandman
Mon, May 2, 2011 : 11:25 p.m.
A USD$2million oops...not now, not ever. Someone is required to lose their job over this blooper. Step up, City Council, and show us that you can hold the DDA responsible for this gross-neglect of personal responsibility. Our city needs money bad, and the tried and true cash cow, the parking fund, has been blind-sided with a debt that they have ignored (tried to look the other way)...this is not the time to throw up a multi-million dollar blunder. City Council must get this money and place the DDA budget on the chopping block, like we have been for years.
aes
Mon, May 2, 2011 : 9:45 p.m.
disband the dda!
Edward R Murrow's Ghost
Mon, May 2, 2011 : 9:37 p.m.
javajolt wrote: "Once the last pot o' money has been depleted - whatever the source, the city is going to have to come after YOU to underwrite its excessive spending and poor budget management. Look for a city income tax to gain steam." Wrong. According to the DDA's 2010-11 budget (<a href="http://www.a2dda.org/downloads/AboutUS/DDABudget_2010_11.pdf)" rel='nofollow'>http://www.a2dda.org/downloads/AboutUS/DDABudget_2010_11.pdf)</a>: Parking revenues = $16 million Parking expenses = $7.4 million Parking budget surplus = $8.6 million In other words, based on the DDA's own budget, parking revenues ALONE gives it $8.6 million every year to fund its pet projects--money that could be going to the city every year. Add to this the $3.7 million in taxes it "captures" from AAPS, AADL, WISD, WCC, etc.. and the DDA has more than $12 million to play with AFTER it runs the parking decks. And yet, it is projecting a $5.7 million deficit this year on a $25 million budget, which will draw down its fund balance from $8.8 million to $3.1 million. Getting rid of the DDA will put the parking decks and their revenue back under city control. It will stop the foolishness of AAPS, AADL, WISD, WCC, etc... sending tax dollars meant for them to this unelected and unaccountable body. And it will mean that these businessmen will need to get off the public dole. And I, for one, am tired of paying taxes that I expect to go to the entities above (and I am MORE than happy to send that money their way) ending up in the hands of this unelected and unaccountable body. And this SNAFU, when piled upon the underground parking garage fiasco, proves that this unelected and unaccountable board no longer deserves our trust. It is time to dissolve the DDA. Good Night and Good Luck
javajolt1
Tue, May 3, 2011 : 1:07 a.m.
One more time...... Read above. I am NOT defending the DDA. Nor am I remotely asserting the DDA would handle that money better than the city. What I am saying is if the city had managed that money all along it would have been long gone anyway. As a taxpayer, I am trying to say the city hasn't been so great at managing our money. So believing it's management of the DDA money would have been a much more effective is simnply not true. All the available evidence supports this. DDA or no DDA. It's really a moot point. Rest assured. The city will eventully get all that money anyway. Then they will be after more of yours.
Edward R Murrow's Ghost
Mon, May 2, 2011 : 11:36 p.m.
java: 1) Look at the numbers and tell me how well the DDA is doing. 2) The term "raid" is freighted with all sorts of baggage. But whatever verb you choose to use, I fail to see how it is more desirable that an unelected and unaccountable board of businessmen have control of their own personal piggybank of taxpayer money than it is for the city's elected officials to have control of those funds. I was willing to tolerate that arrangement so long as it appeared the funds were being used wisely. That, however, no longer is the case (witness this years $5 million deficit--and that is before the question of the tax capture came up--so another $2 million gone). Time to dissolve the DDA. Good Night and Good Luck
jcj
Mon, May 2, 2011 : 11:23 p.m.
javajolt1 "The DDA pays for street improvements, lights (you want your streets lit?) and many other things." I am not convinced the city streets are any better than they were before the DDA was formed. Maybe some nice but unnecessary amenities like planters and fancy lights. But I know we had street lights long before the DDA was formed!
javajolt1
Mon, May 2, 2011 : 10:05 p.m.
Murrow....you missed the point of the post. Add up the other expenses covered by the DDA OTHER than the upkeep of the parking garages, then recalibrate your math. You may think the DDA is unnecessary, but at least be honest about exactly what it does. The DDA pays for street improvements, lights (you want your streets lit?) and many other things. I'm not arguing for or against the DDA - I'm arguing whether there would be a penny there if the city was managing that cash from the start. My guess is it would have been raided long ago and my point about a coming city income tax would be valid. How do I know this? Because discussion about a city income tax has ALREADY been resurrected. If you think the city can spend the money better than the DDA, that's an opinion. Not a fact. Every penny the city takes from the DDA - it drops into the general fund - and spends. Eliminating the DDA doesn't magically eliminate the expenses for which it was responsible. That responsibility will move to the city... and how are we doing there?? The only reason the city is begging the DDA for money is because the DDA HAS money. If the city had been managing this money all along, there wouldn't be any left. That was my point.
Craig Lounsbury
Mon, May 2, 2011 : 8:24 p.m.
It warms the cockles of my heart to read of quasi-governmental agency's arguing over which bucket "our" money was supposed to go in. I will eagerly await the outcome....is it possible taxpayer money can actually be moved from one bucket to another?
javajolt1
Mon, May 2, 2011 : 8:22 p.m.
DDA or no DDA......that's not the question. Once the last pot o' money has been depleted - whatever the source, the city is going to have to come after YOU to underwrite its excessive spending and poor budget management. Look for a city income tax to gain steam.
BornNRaised
Mon, May 2, 2011 : 8:18 p.m.
So the past article that basically said, "Give us more money or we'll lay off more police and firefighters" Is holding true. Once again, more mismanagement by 'officials' and workers suffer the consequences. Great job Ann Arbor, you should be proud.
Alan Goldsmith
Mon, May 2, 2011 : 7:42 p.m.
"The taxing jurisdictions that potentially could be owed money include the city and Washtenaw County, as well as entities like the Ann Arbor Transportation Authority, the Ann Arbor District Library and Washtenaw Community College" Once again, the City under the Mayor's direction, can't even ADD up to seven digit figures and have stolen two million dollars it seems from the library, AATA and the County. Since the Mayor's lapdogs are the ones appointed to the DDA and anyone who speaks up is tossed from the Board, just who will take the blame for this? Not the Mayor, who never takes responsibility for anything. Just how 'comfortable' are you feeling now Mr. Mayor? Time to abolish the DDA and sent these tax dollars back to the City at large and the organizations that should have gotten them in the first place and stop the hundreds of thosands for ugly signs, 'ART' bike racks, high dollar salaries for DDA staff and all sorts of 'cool' stuff. Time to call in the Department of Justice?
a2grateful
Mon, May 2, 2011 : 7:35 p.m.
DDA thought it ruled. Now, it finds that it should be sharing the tax collection (crown) revenue with the city, Washtenaw County, Ann Arbor Transportation Authority, Ann Arbor District Library, and Washtenaw Community College. That's great news for these entities! Just think how many bad and stupid decisions DDA has made in their unaccountable spending spree. Maybe we'll be spared some nonsense in the future. Thank goodness for the "new" awareness of the 1982 code language. Way to go city clerk Jacqueline Beaudry!
dextermom
Mon, May 2, 2011 : 7:32 p.m.
OOPS...
Edward R Murrow's Ghost
Mon, May 2, 2011 : 7:25 p.m.
Time to disband the unelected and unaccountable DDA. Good Night and Good Luck
jcj
Mon, May 2, 2011 : 11:16 p.m.
@cinnabar It may not fix everything. But when elected city officials make stupid decisions we have no one to blame but ourselves for voting them into office. When these appointed Zars make stupid decisions we have no recourse!
cinnabar7071
Mon, May 2, 2011 : 8:17 p.m.
Like thats going to fix anything.
1bit
Mon, May 2, 2011 : 7:14 p.m.
So, in essence, we have created a system so complex the we don't understand it?
Cash
Mon, May 2, 2011 : 7:32 p.m.
Perfectly right!!! LOL
1bit
Mon, May 2, 2011 : 7:15 p.m.
"so complex the" should be "so complex that" But it would've been too easy if I just typed it correctly.../sigh