Archive for the ‘Business’ category

Core Spaces and The Soul of Ann Arbor

April 16, 2017

It seems to have gone on forever.  But really, only for about a decade.  Now here we are, once again deciding on the fate of the Library Lot – that small precious piece of real estate next to the Ann Arbor District Library.

Rendering of proposed Core Spaces building as proposed to Council.

The Ann Arbor City Council will vote on this resolution on April 17, 2017.   It either will or will not award development rights for the Library Lot (retaining ownership of the actual land) to Core Spaces, which describes itself as “a full‐service real estate development, acquisition and management company”, and further identifies its target markets as “educational”, in other words, student-oriented.  The result will be a 17-story building, bigger than anything we could have imagined 10 years ago.

Feelings are running high and the volume of email to Council must be stupendous.  Just to make the drama more intense, because the resolution disposes of city property, it requires 8 of 11 Council votes (counting the Mayor).  Three CM have made their dislike fairly public (Eaton, Kailasapathy, Lumm).  So each one of the remaining 8 can be the one to make or break the deal.  It is generally understood that Mayor Taylor favors it.  Are all the rest committed to support it, in the face of a great deal of public opposition?  Some, especially those who are new to Council or up for re-election, are likely feeling the heat.

Why is this so important to so many?  Its importance (as measured by heat and light generated) is far more than most tall building development projects downtown.  There are many facets to the issue.  But most of all, this decision is symbolic about the direction that Ann Arbor is headed.  In many ways, it is a battle for the soul of Ann Arbor.

What Do We Want To Be?

This article from the Ann Arbor Observer (2005) outlined many issues and described the Calthorpe public process. (Click for link.)

The battle for the future of Ann Arbor has been the underpinning of our politics for over 10 years. One could argue that it began with the election of John Hieftje as Mayor in 2000, or the renewal of the DDA Charter in 2003.  That launched an emphasis on downtown development that has changed not only the appearance of Ann Arbor’s downtown, but its perceived purpose and use. There was also a shift in the objectives for the city as a whole.  We have often thought our city to be rather special, in a community-supportive, casually fun but also fairly intellectual, colorful but not in an overly contrived sort of way. See our post, What Does it Mean to be an Ann Arbor Townie. In other words, a city to serve its citizens and welcome visitors on our own terms.  But in recent years, a new agenda has been espoused by the majority on our City Council.  This is spelled out at length in The Placemaking Agenda and Ann Arbor Politics. Briefly, it is to transform the city into a cradle of entrepreneurship and enterprise, especially by attracting “talent” (young people who can start or sustain high-tech enterprises).  Much of this is based on the concept of the “Creative Class”, as described by the urbanist Richard Florida in his 2002 book.

One could argue that Ann Arbor is doing very well and is succeeding in this talent-seeking strategy.  We are listed over and over again on national lists as in the top 10 for various qualities.  Maps showing economic success usually show our Washtenaw County as standing out.  But interestingly, Richard Florida himself has had something of a change of heart. Florida’s recent book, The New Urban Crisis, recognizes that the type of “success” we have enjoyed has come with a cost to whole swaths of demographics.  As he says in a recent article,

 As techies, professionals, and the rich flowed back into urban cores, the less advantaged members of the working and service classes, as well as some artists and musicians, were being priced out….I found myself confronting the dark side of the urban revival I had once championed and celebrated…As the middle class and its neighborhoods fade, our geography is splintering into small areas of affluence and concentrated advantage, and much larger areas of poverty and concentrated disadvantage.

And a summary from another article :

America today is beset by a New Urban Crisis. If the old urban crisis was defined by the flight of business, jobs, and the middle class to the suburbs, the New Urban Crisis is defined by the back-to-the-city movement of the affluent and the educated—accompanied by rising inequality, deepening economic segregation, and increasingly unaffordable housing.

Sure enough, a graphic from the article shows that Ann Arbor is #11 on his “Urban Crisis Index”.  Do increasing economic inequality, loss of affordability in housing, and racial/class segregation sound familiar?  Washtenaw County paid good money a couple of years ago for a consultant to tell us this about ourselves.  So, Ann Arbor is succeeding as a business proposition.  Is it losing what makes it successful as a place to live?  As a community in the whole?

(Florida will be keynoting this year’s SPARK meeting on April 24.  It’ll be interesting to hear what he says about our local situation.)

The Importance of the Library Lot

So what does the Library Lot have to do with all this? Because the Library Lot belongs to the entire City of Ann Arbor, and thus presumably its public, and because the project is so wildly out of scale with the downtown historic districts that supposedly make our downtown successful, not to mention the residential neighborhood immediately to the south, and because while this is a public asset, the benefit to the Ann Arbor public has not evidently been a consideration. (No public process has been employed to arrive at this use.) For all these reasons, the debate has been more passionate than for other downtown projects.  The Ann Arbor public continue to assert ownership.  For that reason, it stands as a symbol of the decisions to be made about our downtown, and thus our city.

But many other interests have eyed this choice little bit of real estate for particular ends.  The DDA has had a single-minded intent to increase the magnitude of development in the downtown, generally.  A group of influential insiders put forth a plan as early as 2008 to build a hotel and conference center on the lot, with the DDA’s assistance.  The Library Lot Conference Center controversy and battle is recorded in this series of posts.  The effort was finally killed by Council resolution in April, 2011 after a public campaign by concerned citizens.  Meanwhile, the DDA had constructed an underground parking structure in which part of the structure was specifically reinforced to support the intended hotel.

Projection of desired building density (700 F.A.R) for Library Lot in DDA study, 2013. Purple area is unreinforced “plaza”.

Things slowed down for a bit while the Ann Arbor District Library planned to build a new library.  The new building would not have been on the Lot (the current building would first have been demolished) but doubtless the Lot would have been used for staging.  However, that bond proposal was defeated in November, 2012.   The DDA sprang to the task of planning the immediate area in a project called “Connecting William Street”.  They used a pseudo-public approach (online surveys, public meetings) which unsurprisingly arrived at the conclusion that a tall building was needed on the lot.  The plan met with derision in some quarters and the City Council declined to adopt it.  It was added to the “resource documents” for the Planning Commission in March, 2013.

In a memorably feckless act (thank you, CM Kunselman), Council passed a resolution in April 2014 to hire a real estate broker.  They put the Lot up for sale.   Although the resolution cites the Connecting William Street project, no further effort was made to establish what the Ann Arbor public saw as the best use for this site.   Further, it accepted the notion that the reinforced portion of the lot would be used for building.  So here we are.

From page 42, Downtown Development Strategies, Calthorpe Associates, 2005

The Calthorpe process, 2005, is often cited as demonstrating that there was a public process followed for the fate of this parcel.  There was a report on Downtown Development Strategies issued (many recommendations have been ignored).  It does not make a specific recommendation on the Library Lot.  However, it calls for building height to be stepped down toward the residential neighborhoods, especially that last block before William.  And it calls for a Town Square.

ADDENDUM: The Library Lot was briefly, but seriously, considered as a site for a new City Hall, a.k.a Municipal Center, in 2006.  Here is the task force report. Community Security and Public Space 2006 The report specifically notes the importance of “an outdoor gathering place” and put the Library Lot high on the alternatives for a new Municipal Center that would include a public space.

 

It’s Not Just About a Park

Admittedly, the idea of a downtown “Central Park” (or Town Square) has been a major theme of the disputes about the Library Lot.  The Library Green Conservancy has been advocating vigorously for a park on the portion of the lot without special reinforcement, and there was that whole problem with collection of signatures on petitions. The DDA has been trying to put a damper on that idea for years.  (The Connecting William Street exercise did not even acknowledge the possibility.)

It’s Not Just About the Parking

The deal has serious implications to downtown parking.  It would give away a substantial part of this expensive structure to a private enterprise. (Some historical details are here: note we will be paying interest for many years to come.)  There are also legal questions that have not been satisfactorily answered.    Read it here.  Finally, it will reduce access to downtown by its customers. Downtown business organizations have objected.

It’s About Our Downtown, Our City

Our social media and comment pages are flooded with anguished complaints and worries about this project.  It is clear that our citizens do not believe this will enhance our experience of our city and that it will likely damage the downtown.  The comments shown below are from my personal social media feeds (Facebook, Nextdoor) and are unedited but anonymous because I don’t wish to make the writers’ identity the issue.  (Click on the boxes to read at full magnification.)

 

 

 

 

 

Note that these comments are all about quality of life and the viability of our downtown businesses.  There is a concern about the resilience of this part of our community, and of course the Downtown is still the center of town, and a location that affects us all.

If Council does vote to approve this deal, they will be going against the express wishes of a substantial number of their constituents.  Based on comments in the media, it seems that they are dazzled by the cash offer.  A complication is that it will supposedly be an assist to “affordable housing”.  But the benefits in that regard are modest.  (One scenario even has the City paying over a million dollars back in order to obtain more units.)  We have not really had a city-based discussion about what we want in “affordable housing” or what our best means of achieving that are.  It seems imprudent to sell off one of our choicest assets for this purpose, especially since so many questions persist about the effects of the parking on both businesses and city finances.  If our city finances are so challenged (and they do not seem to be) we should be looking at savings or new taxes instead of selling off our real estate.

Or – is Council going to go ahead with this because of the dogma of dense development?  In that case, are they considering the health of our present community?  Or are they aiming for a different one?  If the latter, they’d better consider more carefully the consequences of their actions.  A city is a complex ecosystem.  The Council has a solemn duty here.  I hope that they vote to preserve our community.  It has so much good, still.

ADDENDUM: Here is the Ann Arbor News preview of tonight’s vote. “And the consequences of whichever way the council votes could last for generations.”  Yup.

UPDATE: The Council voted to sell the lot, 8-3.  All the usual suspects voted as anticipated.  Here is what Mayor Taylor had to say about it.  

“I love Ann Arbor the way it is. We are not Chicago or Detroit, and I don’t want to be. ”

 

 

 

 

Public Properties, Public Process, and the DDA

December 15, 2012

On April 4, 2011, the Ann Arbor City Council acted to shut down the RFP process that had very nearly led to the development of a hotel and conference center on the Library Lot.  We summarized some of that action in our last post of a chain on the subject.  For nearly two years we had reported on the saga of efforts (originally secret) to install a hotel and conference center as proposed by the Valiant development group atop the new underground parking garage built next to the downtown Ann Arbor District Library.  The posts and other important documents are listed on our Library Lot Conference Center page.

The effort to impose this plan on the citizens of Ann Arbor led to a remarkable uprising of civic fervor.  Its defeat felt like a victory.  But of course that wasn’t the end of the story.  The forces that were behind the idea of a hotel and conference center are still with us.  Now it appears that the concept is about to be brought forward again.

On the same night that Council laid the Valiant proposal to rest, it also passed a resolution directing the Downtown Development Authority to take charge of planning for the disposition of city-owned lots downtown.  This launched what became the DDA’s Connecting William Street process.

Map of the area DDA is planning under Connecting William Street process

Map of the area DDA is planning under Connecting William Street process

I thought that Councilmember Sabra Briere did a good job of putting the history of all this into perspective in her recent constituent newsletter.  Here is some of what she said:

Over a year ago the Council passed two resolutions.  The first one had to do with ending the RFP process for the Library Lot.  This resolution included a statement that any future planning for the library lot would include a ‘robust public process.’  The second resolution requested that the DDA ‘facilitate the process of redeveloping’ five city-owned parcels.  This second resolution outlines a process that the DDA proposed to attempt a consensus on the development potential for each site.  But the final resolution didn’t call for a robust public process, and the Council didn’t question the process outlined in the resolution.  That doesn’t mean that there hasn’t been a public process, but it does mean that some of us have been dissatisfied with the way that process was conducted.

Amen to that, Sabra.  Not that the DDA hasn’t been working very hard at their task.  They appointed a special committee to review options.  The proceedings have duly been documented at their site on Connecting William Street.  They have conducted a survey and a number of public interaction events.  They employed a consultant (actually, a couple of them).  Here is the overview provided by AnnArbor.com.  But there are some major disconnects with their approach and the “robust public process” that was initially promised.  They have to do with the “the scorpion and the frog” relationship of the DDA and Ann Arbor residents.  The DDA board is composed of people whose primary interest is in developing the downtown to a maximum density and real estate value.  Residents often want a downtown that serves their needs, and consider that publicly owned lots should have a public purpose.   (The group, Public Land – Public Purpose, formed in response to the Valiant proposal, stated the point succinctly.)  These two goals are at odds.   This has been especially evident in the resistance of the DDA to the idea of a downtown park or open space.  (Ann Arbor’s Suburban Brain Problem was an early post with an admittedly snarky tone on that subject.)  In the meantime, a group (the Library Green Conservancy) has been advocating forcefully for open space, indeed, a “central park” in the downtown, on the Library Lot.  At DDA Partnership Committee meetings, the idea of a hotel on the Library Lot has resurfaced.  This is presumably supported by the Lodging_Analysis conducted by their consultant.  (This document appeared on the Connecting William Street web page at one time but has since been removed.)

Here is some more reflection from CM Sabra Briere’s newsletter:

One of the significant conflicts is about ‘density.’  For some, density is a catch phrase that indicates new construction in order to facilitate more folks living downtown.  This increase in the number of people living downtown has been something the City and its residents have talked about for decades.  At first, people talked about loft apartments.  Then, they built more condominiums.  Most recently, the increase in new residents has been due entirely to new student highrises – there are now nearly 5000 people living in downtown Ann Arbor, which is a pretty significant number in the last decade – nearly 2000 more – than there were in 2000.  All of these new residential units are supposed to help provide the means for local businesses to remain open while making the street scene more active and the cultural life more varied.
But most of us don’t really want our downtown defined by student use.  That’s one of the messages I’ve heard in the meetings on Connecting William Street.  We want a downtown that’s a magnet for children and seniors, with places for folks to sit and read their – I almost wrote newspaper – electronic device, buy a pair of shoes, have lunch, sit and watch the world go by, drink our coffee and go to a meeting or a lecture.  We want a downtown that holds events and activities we might want to attend; that we might want to show our guests, that we might want to brag about.
And for some, that means a respite from density – an offset, as it were, that’s cool and green and calm and refreshing.  Something that sounds like a park.

Now the issue (0f how we dispose of downtown parcels) is coming to a potential decision point.  The DDA is poised to present the Connecting William Street plan to a working session of the Council on January 14.

Note that the DDA has two public events scheduled before that:

• Wednesday, December 19th, 6:00 p.m. – 8:00 p.m. at the Downtown Library (343 S. Fifth Ave) in the Multi-Purpose Room
• Thursday, January 3rd, 6:00 p.m. – 8:00 p.m. at the DDA office (150 S. Fifth Ave., Suite 301)

There will be much to discuss, and a need for citizens to come to attention on this subject.

AATA: Moving Us Where? The Big Picture

December 12, 2011

The move toward a countywide Transit Master Plan has so many moving parts (pun is apt) that it is easy either to get mired in details of a thread or alternately to have the eyes glaze so that the generalities are all that register.  As AATA prepares to ask the City of Ann Arbor, the City of Ypsilanti, and Washtenaw County all sign on to a 4-Party Agreement which will begin the process of creating the new county authority and enacting the TMP, let’s just step back and look at the big picture of what the outcomes will be.

First, here’s what is coming up in the very near future.  (See the pdf with more description here.)

AATA's diagram of the 4-Party Agreement and county authority process. Click for larger.

Note that Washtenaw County will be asked to file articles of incorporation for a new authority. That will start a 30-day clock ticking during which any of the townships that have currently signed Act 7 (Urban Cooperation Act) agreements may decide to “opt out” of the county plan.  (Currently 4 townships have declined to participate, Lyndon, Sylvan, Salem and Bridgewater.)  After the 60 days is over, there is no longer a window for any of the participants to opt out.  The new county authority  (called the 196 Board because it will be incorporated under Act 196) will be able to call for an election, and is currently expected to ask voters throughout the county (unless in an opted-out township) to approve a millage on a ballot next year.

Now, see that box that says “5-year transit program”?  That is the package of services that the new authority will be promising to the voters in return for a millage.  Because of the limitations of Act 196, only a 5-year millage can be put on the ballot.  (Ann Arbor and Ypsilanti have perpetual, or charter, millages that do not require another vote.)  The entire TMP (as shown on the Moving You Forward website) is for 30 years.

A Financial Task Force has been assigned the task of figuring out how to pay for the services listed in the expansive TMP.  But though the slide in the AATA presentation indicates that there will be a “white paper” available in January, in reality the task force is struggling to make sense of the budgets presented to it.  The full group will not have had any of its scheduled meetings since the first meeting on October 28.  (See our discussion of that meeting and events surrounding it.)  A subcommittee has been meeting instead.  The members are asterisked below (click on image for larger view).

The subcommittee has pinpointed a number of questions that also highlight the priorities given to the different services in the plan.  In the next post we’ll enumerate the categories and look at budget numbers.

UPDATE: The next meeting of the full Financial Task Force has been scheduled for January 27, 2012.  It seems unlikely that it will produce a White Paper in January.

Fuller Road Station and the Mayor’s Letter

July 28, 2011

The story first broke on AnnArbor.com the night before, but by mid-morning on July 28 many Ann Arbor citizens had received a letter from Ann Arbor’s Mayor, John Hieftje.  The letter begins,

As you may have heard, the City of Ann Arbor is considering whether to invest with the University of Michigan and the Federal Government in a multi-modal transportation facility on Fuller Road—the Fuller Road Station (FRS). I write today to give you some important background information.

The news report has attracted a number of comments.  They help to make one point clear: Fuller Road Station is not just one issue.  It is a complex of issues, with separate histories, policy implications, visions of the future, suppositions, and mass of facts and details behind each one.

It is also emerging as a strong political theme in Ann Arbor.  Thus its future, and the justification for our city embarking on this adventure, have become enmeshed with the politics of the August primary, in which three candidates (two incumbents) question the venture and three support it.  The Mayor has favored the candidates who support the FRS and the timing of his letter just before the primary election (next Tuesday, folks) seems curious.

Our mayor very rarely writes us directly, and his letter deserves careful study and scrutiny.  But first, let’s consider the different issues.  (Listed in no particular order.)

1. Ann Arbor’s finances.  What is the likely effect of embarking on the long-term project of a “multimodal” station?  Will it prove to be neutral, more or less, a plus because of economic activity and other indirect effects, or a fiscal morass?

2. Parking and traffic issues.  Much of the immediate project is for a parking structure that will largely serve the UM Health Care complex.  Is this a good thing, from the viewpoint of transportation planning, and also for the city?

3. Ann Arbor parks and ordinances regarding use of parkland.  A ballot issue forbade the sale of parkland without a public vote, but this project skirts that by a long-term lease.  Should this be permitted, and further, is this a dangerous precedent for disposing of parkland by other means than a direct sale?

4. The future of commuter rail from Ann Arbor (the station would become part of the AATA’s Transit Master Plan that presumes commuter rail will connect Ann Arbor both to Howell and to Detroit).   To the extent that this idea justifies construction of the Fuller Road Station, is it likely to happen?

5. On a related note, what about “high-speed rail”  in Michigan?  Is that going to happen and to what extent does construction of the Fuller Road Station depend on Ann Arbor being part of such a system?

6. And while we are on that question, what is the position of Amtrak in all this? The current service to Chicago is popular and there is an existing station.

7. What are our hopes and dreams of a future transportation system?  As we have already noted,  trains have a powerful emotional pull.  (See Train of Dreams and Train of Dreams II.)  Our mental picture of what the future should hold for transportation that frees us from the automobile is a powerful driver in these decisions.

8. Our relationship with the University of Michigan.  We are very nearly a company town.  To what extent does “it’s good for the UM” also translate to “it’s good for Ann Arbor”?  Are there times when our interests diverge?

9. What is the appropriate public process for this decision and has it been followed?  (See What, Exactly, is a Robust Public Process. It isn’t about the FRS but addresses some of the points.)

The Mayor’s letter touches on many of these themes.  In the next post we will go through his letter point by point and attempt some analysis.

UPDATE: The post was edited to add the last point after publication.

 

The End of the Story for Now

April 1, 2011

Sometimes events move faster than blogs.  When this draft was begun, it was intended to be a point-by-point dissection of the Valiant Partners’ Letter of Intent.  (Instead, it was published here.) As we previously explained, this was forwarded to the Ann Arbor City Council after the March 8 RFP advisory committee meeting and then discussed at a March 14 working session.  With strong support from outgoing City Administrator Roger Fraser, the Council was scheduled to act on the proposal on April 18 (shifted to the 19th in recognition of the first day of Passover).

The inexorable progress of this really appalling proposal inspired a grassroots effort that has resulted in (only two weeks after the working session) a website, a Facebook page, over 700 yard signs, and a growing list of supporters, many of whom have been working hard to lobby councilmembers, place yard signs, comment in the media, make campaign buttons, and plan for the public hearing that was to precede the council’s vote.

Composite showing the proposed hotel and the breach in the wall of the excavation that caused a sinkhole. Graphic by the Ann Arbor Chronicle

Meanwhile, the proposal was receiving critical news coverage, beginning with a very fine summary by Ryan Stanton of AnnArbor.com.  It was followed by a stunning analysis of the question by Dave Askins of the Ann Arbor Chronicle.

Both of these journalists were picking up signals that support on Council for the project was waning.  It didn’t help, as we say in politics these days, the “optics” of the situation that a sinkhole opened up behind the Earthen Jar restaurant, joining several other such incidents and allowing the Chronicle to reflect on the accuracy of the original soil analysis used in the engineering of the structure.

Line drawing of the hotel from the Valiant proposal used as icon on button

The design itself was very unpopular with the public.  While a tall slab-like hotel was apparently necessary to use the space efficiently and to achieve all objectives, it unwittingly provided some great graphics for the opposition campaign.

Now it looks as though this unlovely chapter may be coming to an end.  A resolution, apparently prepared with direct involvement of Mayor Hieftje, has appeared on the April 4 council agenda.  It would terminate the RFP and reject the letter of intent.  (Note that a final LOI was never seen; only the draft presented earlier.)  According to the Chronicle’s breaking news story,  the resolution is sponsored by not only the mayor, CM Christopher Taylor and CM Sabra Briere, but also by proposal supporters CM Stephen Rapundalo and CM Sandi Smith.  Since several other councilmembers have expressed open opposition to the proposal, the chances that this resolution will pass seem good (though I never celebrate till the vote is over).

So the undead will be buried.  Autopsy to follow.  But here is a thought.  Imagine that all this staff time, money on various levels, hours and hours of meetings, citizen engagement and most of all, psychic energy, could have been spent on a positive civic direction for the City of Ann Arbor.  At a time when our city is facing so many challenges (as is our state, and indeed our country) and there are so many questions for us to answer, it is a shame and a waste that it was allowed to come to this point.

UPDATE: For some ancient history on this issue, read our post “The Old Y, the Conference Center, and the Inside Track” in which we relate evidence that Fraser was discussing this project with the developers long before council ever heard of it.

SECOND UPDATE: At the City Council meeting on April 4, 2011, the resolution terminating both the Valiant proposal and the Library Lot RFP was passed 8-2 (Stephen Rapundalo, the chair of the committee, was a co-sponsor but was absent).  One of the highlights of the discussion was when CM Sandi Smith tried to amend the clause calling for a “robust public discussion” by deleting the word “robust”.  (She failed.) Apparently she found that word to be threatening.  This is disheartening, since she is a prime mover on the Council and the DDA behind the assumption by the DDA of planning and RFP generation for the same area (report by AnnArbor.com); that responsibility was awarded by the Council at the same meeting.

A report of the action terminating the RFP from AnnArbor.com is here.

Another Library Lot Study Surfaces

March 25, 2011

We recently noted the arrival in Council members’ mailboxes of an authoritative study on the viability of conference centers generally and the Valiant proposal specifically.  This study, informally referred to in these parts as the Skelton report, predicted that the Valiant proposal would generate a money-losing hotel and conference center.

Now a second report has followed the (electronic) mailbox route to Council’s desk.  It is the mysterious report that we cited in our original complaint about the Roxbury report’s failure to do any real economic analysis.  This is the report that was actually commissioned by Valiant Partners and it is a good one, professionally and competently done.  The report, dated April 14, 2010 and executed by PKF Consulting (a New York firm), uses a different set of data and perspectives from the Skelton report to examine how competitive a conference center as described in the project proposal would be.  (They were working from the larger 30,000 square foot center originally proposed.)  The conclusions and analysis are thought-provoking reading in themselves.  It does not appear to be a “push” report, making a sales case, but rather to be an honest study based on the best assumptions available.

A quick overview of the conclusions: they state that the conference center (as a whole) would be competitive in the Ann Arbor market, and might even draw some new business.  But mostly it would be more attractive for some events than currently available venues.  The report writers also say that the debt burden anticipated would mean that it would be necessary to charge rates at the high end of the market.  They state emphatically that it is not a financial feasibility study and make no predictions about whether it would actually operate at a profit.

The report was available to the Roxbury group, but when the consultant, David Di Rita was asked about it, dismissed it as a “paid for” study that could not be credibly used by his firm in making an assessment – as he also dismissed the Skelton report as being “paid for” by the opposition.  It is too bad that he didn’t instead give us an intelligent comparison and reconciliation of the two reports.

This post will be updated.

But What is the True Intent of the Valiant LOI?

March 18, 2011

The continuing saga of the Ann Arbor Library Lot and the effort to build a hotel and conference center there.  For more, see this page.

As was ably reported by the Ann Arbor Chronicle,  the March 8 RFP Advisory Committee meeting resulted in the committee’s transmittal of the Letter of Intent produced by the consultant to the City Council for its consideration.  The consultant, David Di Rita, who looked remarkably lizardlike in his olive-green suit and French cuffs (sorry, I stared at him for two hours and the room was overheated) showed the value of a legal education as he threaded his way through the explication of what is after all a very vague and troublesome document.  The committee looked and sounded a bit troubled by it and had some fairly pointed questions.  The chair, CM Stephen Rapundalo,  even used the subjunctive “were we to approve this…”, but in the end, with vigorous advocacy by DDA director Susan Pollay and outgoing City Administrator Roger Fraser, the committee sent the Letter of Intent on to Council.  (Here are the minutes of the meeting.)  The room was crowded – a small conference room with no chairs left and people left in mostly stunned silence after learning that there would be a City Council working session the next week (March 14).  (The urgency of the proposal was made clear by an aside from Pollay, who said “we thought this would be decided on Monday” [the Council meeting on March 7]).

At the March 14 working session (also very well attended and televised), there was another rehearsal of the LOI by Di Rita (who has been criticized by a local attorney, Tom Wieder, for his history and qualifications).  Ryan Stanton of AnnArbor.com reported that “Ann Arbor City Council members will be asked in the coming months to make one of the most difficult decisions of their political careers.”  Stanton accurately captured both the tension among council members and the intense interest of the audience.  Note: the meeting was chaired by Mayor Pro Tem Marcia Higgins.  Mayor John Hieftje and CM Christopher Taylor were absent.

The outcome of the meeting, announced by Man in Charge Roger Fraser  (didn’t council and the mayor used to set the agenda?), was that there would be a vote of the Council on April 18 to approve a revised version of the Letter of Intent.  If approved by Council, it would commit the City to serious negotiation and a decision on a development agreement within four months.  While the development agreement (similar to a sales agreement for real estate) would be the final commitment by the City, the LOI binds it in many ways.  But CM Stephen Rapundalo showed real determination and courage (though it earned him a scowl from Fraser) by insisting that the April 18 meeting would include a public hearing.  This was not a given – technically, a public hearing is only required under certain circumstances, usually an ordinance change or property disposition.  So CM Rapundalo deserves, in my opinion, kisses and roses for this stand.  (Or chocolates, whatever.)

Nevertheless, the cumulative effect of the two meetings was that many members of the public left with heightened feelings of outrage about the way the Valiant proposal has succeeded in besting all tests of reason to make it this far.  (My name for it is the “undead”.)

This feeling of outrage has resulted in the beginning of a full-blown campaign.  One outcome is a website hosted by Citizens Against The Downtown Conference Center.  (As of this writing, still in embryonic condition.)

The next post will examine the LOI in detail and its implications.

UPDATE: The Council meeting date has been changed to April 19, to avoid the first day of Passover.

We Must Stop Meeting Like This (Library Lot)

March 6, 2011

Note: if you are looking for a list of Library Lot posts, visit Library Lot Conference Center page.

What passes for drama among those interested in following the Ann Arbor Library Lot issue came and went with the postponement of the March 3 RFP Advisory Committee meeting.  It has been postponed until March 8, in case you didn’t get the notice.  If you did get the notice, you are among a privileged few, since it was not posted on the RFP website.   Here is the official notice, duly posted with the City Clerk’s office but not transmitted further.

The group of Ann Arbor citizens, Public Land – Public Process (see statement of purpose)  has been working for over a year to address the Library Lot issue.  A group statement was prepared and we (yes, I’m one) requested the favor of making a public statement through one of the committee members, but it was not approved.  Thus, the statement was published on our group blog.

Tom Wieder is a prominent attorney who has been involved in Ann Arbor politics and issues for approximately 30 years.  He has long opposed a conference center and recently joined the PLPP group.  He has put together a hard-hitting review of the city’s consultant, The Roxbury Group, and the recent process.  His statement (prepared for the March 3 meeting but also refused a hearing) is now published on the group blog.  It contains some thought-provoking information.

UPDATE: The City of Ann Arbor sent out a reminder of the meeting change today, March 7.

SECOND UPDATE: The Ann Arbor Chronicle published a very complete account of the RFP Advisory Committee meeting. The committee voted to send the letter on to Council, and a Working Session is scheduled for 7:00 on March 14, where Council can ask questions (but others cannot speak).

What’s in the Box (Compiled)

March 2, 2011

An edited, compiled summary of posts on the Roxbury report and the Valiant proposal for the Ann Arbor Library Lot.

Local in Ann Arbor has been following the saga of the effort to put a conference center on the Ann Arbor Library Lot since June 2009.  See the Library Lot Conference Center page for a complete list of posts. After the November 23, 2010 RFP Advisory Committee meeting where the Roxbury report was presented, we began what became a seemingly endless series on the report and the revised proposal from Valiant Partners LLC.  Now that a decision on this proposal is possibly drawing near, we present this slightly condensed form of the “What’s in the Box” series on the Roxbury report and the revised Valiant proposal that it discloses.

I. What’s not in the Roxbury Report pointed out that the report provides no market feasibility study of the Valiant and Asquest proposals, though that was asked for in the RFP for a consultant.  Instead, the report says:

“It should be noted that this report does not include and is not intended to serve as a feasibility study for the concepts included in the two proposals. Accordingly, for purposes of this report, it is generally assumed that the overall concepts included in the uses for the Library Lot contained in each proposal are valid and supportable from a market and demand standpoint.”

II. The New Valiant Offer for the Conference Center compares the revised proposal from Valiant with its original cost proposal.  Note that the revised proposal exists as a single sheet (Attachment B to the Roxbury report) that was prepared by Valiant. Here are two summary tables from the post:

Element

Ownership or Operation

Original

Revised

Hotel
Valiant or partner 150 rooms 150 rooms
Residential Condominiums
Individuals 12 units 6 units
Conference Center
City or nonprofit 32,000 square feet 26,000 square feet
Office
Valiant or partner none 48,000 square feet
Public Open Space
City? Unclear Ground level plaza, roof of conference center Ground level plaza only

Element

Original

Revised

Primary mortgage
Privately financed mortgage for $28 million.  All other debt and city payments subordinated to it. No change indicated
Bond
30 year Full Faith and Credit (city backed) bond for $8.1 million 30 year revenue bond issued by EDC (Economic Development Corporation) for $6.9 million
Condos
12 units, av. price $750,000; city receives 10% as sold for est. total $900,000City tax receipts est. at $75,000 per year 6 units, av. price $1.2 million, city receives 10% as sold for est. total $720,000City tax receipts est. at $60,000 per year
Taxes
No property taxes for conference center (assumed)Property taxes from Hotel/Retail dedicated to cost of construction bond 

 

No property taxes for conference center (assumed)No change and reference to a TIF bond indicates dedication of the tax stream to bond 

Tax treatment for office portion not discussed

Ground rent (and air rights) payable to city
Self-liquidating Purchase Mortgage, value based on net operating income in 3rd year, estimated at $348,784 per year No change indicated in amount but dedicated to debt service for the EDC bond.  (No payment to city.)
Parking
A substantial revenue and expense item in pro forma No change
Other
“PILOT” of $250,000 No such payment

III. A series on Feasibility of the Valiant Proposal.  (Note that links to the original posts are labeled Part A, etc.)

Part A.

1. The Hotel Business discusses the unrealistic projections for both Average Daily Rate and occupancy.  The Net Operating Income, or NOI, is based on these projections.

So, for example, in Year 2 (2014), they assume 72.5% occupancy and ADR of $193.46, for a RevPAR of $140.25. With 150 hotel rooms, total room revenue for that year is estimated at $7,165,283. (The calculation is somewhat confused by the inclusion of suites with different occupancy and rate profiles.)  There is additional income from food service, suites, and parking. After expenses, the Net Operating Income (NOI) in Year 2 is estimated to be $2,627,869.  This just exceeds the payments due on the mortgage ($2,483,010) by $144,859.

2. The Conference Center discusses some of the costs and liabilities of the conference center operations, which are not funded by Valiant’s proposal.

So who will put forward the upfront money to furnish and staff the conference center?  How will operating expenses be covered in its early years, before a smoothly running calendar is in place?  (Most conferences book a year or more in advance.)  Who is responsible for setting up the nonprofit and who will appoint its board?  What will be the source of its own operating budget?   None of these questions are addressed in the Valiant proposal, though it does state that the city will own the conference center.  Thus it appears that the city will bear the full responsibility and cost for these operations, at least in the short term.This is especially a concern because articles continue to be published with negative news about publicly supported convention centers, with most operating at a loss and failing to bring the positive results expected.

Part B.

3. The Parking Question addresses at length the underground parking structure being constructed beneath the Library Lot and how the parking spaces there affect the cost and use of the hotel and conference center.  It lists three problems: (1) Loss of use for the public, including local businesses; (2) Loss of the city’s Federal subsidy; (3) Loss of revenue and cost to the system.

Clearly, it is not a benefit to the city to have Valiant remove some of the parking spaces from their dynamic management by the DDA.  Yet we are caught in a Chinese finger puzzle here.  Without the parking spaces, the hotel and conference center are not likely to be successful.  But the cost of supplying them is dreadfully great. (In Year 2 for the hotel, the 650 spaces are costing $4,780 per each just for that one year, and Valiant’s 75 spaces would cost $358,534, but they have only budgeted $152,319.)

Part C.

4. The Ground Rent discusses the formula for the payment to the city for leasing ground and air rights.  In the revised proposal, that Ground Rent would actually not be paid to the city, but instead would be used to pay for the bonds.  (The bonds are to pay for construction of the conference center.)

a. Calculation of NOI The Net Operating Income is based on hotel revenues.

So for example, in Year 2 (2014) the Total Revenue is $13,753,971, from which expenses and administrative costs are deducted to obtain a Gross Profit of $3,702,862.  After subtraction of management fees, insurance and taxes, we finally arrive at a NOI of $2,627,869, which is about 19% of the gross revenue.  Obviously, if the revenue is below what is projected (as we predict), and assuming that the expenses and fees would remain nearly the same, the NOI could approach zero rapidly.

b. Calculation of Ground Rent: The Ground Rent is the amount that would theoretically be paid to the city for a 75-year lease of the land, or alternatively as an outright purchase of the land.  It is based on the NOI, as plugged into a very complicated formula.

A calculation is shown here to illustrate that if hotel revenues fall below expectations and NOI approaches zero, no Ground Rent would be paid.

c. Subordination of the Ground Rent to the First Mortgage: But even if the NOI is sufficient to pay the Ground Rent, another complication is that the developers would have financed the hotel with a first mortgage of approximately $28 million.  They state very explicitly that the Ground Rent must be subordinated to the mortgage: in other words, if the profit from the hotel is not sufficient to make both the rent and the mortgage payments (estimated at $2,483,010 per year), the Ground Rent will not be paid.  (Even by their estimates, Year Two falls short, since there is only $144,859 left over after paying the mortgage.)  Yet, in the updated proposal, the Ground Rent amount is increased to $775,000 (no explanation about the increase).

d. Use of the Ground Rent to Pay for the Bonds: But in the reconsidered proposal presented as a table in the Roxbury Group report,  the city would not actually receive the Ground Rent as cash.  Instead, it would be used to pay for the bond (confusingly noted as an EDC bond and a TIF bond in two different places) and to put money into reserve.

Presumably, if the NOI was not adequate to pay the Ground Rent, the bonds have a risk of going into default.

Part D.

5. The Bonds

a. Then and Now summarizes the change from the original Valiant proposal.

Source Original Revised Comment
Bond type Full faith and credit municipal bond Economic Development Corporation bond The developers say that the EDC bond will be issued on the basis of their credit
Bond amount $8 million $6.9 million Square footage of conference center also reduced (32 K to 26K)
Ground Rent about $350,000 $775,000 No explanation for increased amount
Property tax – hotel/retail $250,000 “plus” not included This is also referred to as a PILOT
Property tax – condos $75,000 $60,000 number of condos reduced from 12 to 6
Upfront sum from condo sales $900,000 “plus” no change indicated This amount also to support conference center initial development

b. The Bond Alternatives discusses implications of using Economic Development Corporation bonds instead of full-faith-and-credit municipal bonds.  The city’s treasury is not at risk.

So what is an Economic Development Corporation bond and how does it work?  Municipal Economic Development Corporations are established under the authority of Michigan Act 338 of 1974. Actually, Washtenaw County has two, the Ann Arbor Economic Development Corporation (established in 1978), and the Washtenaw County Economic Development Corporation (established in 2001).

c. Where does the money come from? quotes Stephen Lange Ranzini (a member of both local EDC boards) about sources for EDC bonds.  Federal funds from the Recovery Act have lapsed.

Generally, in the absence of such exterior funding (as the Recovery Act money), the money to finance the EDC bonds must come from a bank, via a mortgage or simply a loan. Ranzini confirmed that in such a case an applicant would have to present an irrevocable letter of credit from a bank in order to be considered for bond issuance.

d. What happens if the debt payments are not made?

If a bank is to loan money to the Valiant partnership with bonds as the repayment mechanism, there must be a clear plan for how bond payments will be made.  The picture is more complicated since the idea is to finance a public facility (the conference center).  Here is what Ranzini said about this:

“Private individuals would need to secure credit from a bank (which would issue the letter of credit backing the bonds). The bank would of course use the public facility and other assets (such as corporate and personal guarantees of the sponsors) to secure their loan. These guarantees might be unsecured or secured but that is up to the bank’s credit committee to decide how much risk the bank is willing to take.”

So in other words, either the Valiant partnership would have to be able to persuade a bank to issue a letter of credit (and remember that an irrevocable letter of credit is absolutely binding) based on their own personal credibility and assets, or – as seems possible – the conference center itself might be required to assume some responsibility if the promised revenue does not materialize.

Part E.

6. Taxes Notes that much of the “return” to the City that Valiant promises is in tax revenue and examines each source.

(1) Payroll tax – but this goes to the Federal government for Social Security and Medicare.

(2) Sales tax – but the city does not collect those directly, and state revenue sharing is being cut.

(3) Accommodations tax – which goes to the county and the CVB.

(4) Property taxes:  But the proposal is mostly silent on the subject of property taxes. Property taxes are not included in the “benefits” summary and it appears clear that the developers do not expect to pay them.  Some possible explanations are advanced.

Part F.
7. The  Valiant Partners LLC As their proposal states, this group of four men (or three men and the principal of a corporation) came together in April 2008 to “to plan, design and develop the Ann Arbor Town Plaza mixed-use project”.  But they are not actually a partnership.  They are a Limited Liability Company (est. in Connecticut).  Here is what the IRS says about LLC-form businesses:  “LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.”  While members of a general partnership are liable for all actions and debts of the partnership, members of an LLC are not vulnerable to having their personal assets at danger.

(Review of individual resumes) So unlike another development company that has worked in the Ann Arbor area, Joseph Freed & Associates, whose website states that they are “entrepreneurial real estate company that develops, acquires and operates retail and mixed-use properties nationally with dedication to long-term value creation”, this is a group of three deal-makers and a hotel chain, with no long-term involvement in specific projects.  (Freed was the developer of Ashley Terrace in Ann Arbor, which has been in foreclosure according to AnnArbor.com.)

Here is the team’s balance sheet from the proposal:

As you can see, the amount of cash the group actually had on hand when they submitted the proposal was about $38,000.  My interpretation of the other figures is that they had collectively spent $327,000 on the project up to then (including the money in the cash account) but had some debts (slightly over $100,00) outstanding.

The rest of the post discusses what Valiant would hope to gain from the project and implications for their holding the bond debt.

As commented by Roxbury, the Valiant LLC does not itself have the expertise to actually manage the fine details of bringing the project to completion, but would have to depend on its consultants, including an as of yet unnamed project management group.  We don’t know where that expense would be assigned, as it was not part of the original project budget.

In sum, it looks from here as though there is considerable risk to the city in getting into a business relationship with this group.

Parking and the Limits of Downtown

February 25, 2011

Downtown Ann Arbor is the subtext for many of the intense debates about our city’s future.  In part this is because of its role in defining both the image and the life of the city.  In part it is because of its proximity to the main University of Michigan campus and the strong student presence that results.  And in part it is because there is money to made by exploiting the very concept of Downtown.

This has meant that much recent conflict has been over the attempt to expand the limits of downtown, both in concept and in real ways, like denser development outside downtown’s currently planned borders (which are essentially the Downtown Development Authority’s district border).  Thus the debate over Heritage Row (proposed for a residential neighborhood in a near-downtown area) has had many online commenters calling that area downtown.  A similar effect has been seen with the Near North development, where several houses in a near-downtown residential neighborhood are to be razed, with a substantial contribution from the DDA (though the location is outside their district).  Many people, especially those in their 20s and 30s, who would like to find decent, affordable (in the general sense) housing near the downtown and campus, have been resentful at what they see as an artificial distinction, while near-downtown residents feel embattled (see our early post on these two neighborhoods).

Downtown, the experience of life or leisure there, and its cachet are a limited resource that we are trying to sort out among ourselves.  It is partly a realm of the imagination and it is also a sum of gritty decisions and choices.  Some of the most difficult of these involve parking. Whether a visitor, a downtown worker, or a resident, we all want easy access to downtown and easy walkability to our destination.  That is one reason that near-downtown neighborhoods are so appealing; one can simply walk downtown.

The DDA has been managing parking in the downtown since the early 1990s, and doing a very fine job of it, too.  (See discussion of parking on the DDA website.)   Unfortunately, this has also led the DDA into a thorny thicket where many competing interests are vying for this precious resource.  It also has led to demands from the City Council for a big share of the parking revenue (as reported by the Ann Arbor Chronicle).

This week’s DDA committee meetings had several examples of the interaction of downtown’s future and the parking question.  Its Economic Development and Communication committee hosted Mary Kerr, President of the Ann Arbor Convention and Visitor’s Bureau and Jennifer Owens,  Vice President of Business Development, SPARK.  The committee is trying to establish the DDA’s place in the local ecosystem for marketing Ann Arbor and especially its downtown.  Their question to both could be paraphrased as: how do you see the importance of the downtown in your work, and what should happen to make the downtown even more attractive from an economic development standpoint?

Kerr’s answer was that tourists and conventioneers love Ann Arbor’s downtown, and it forms an important part of their impression of the community.  (She repeated this several times, with variations.)  But she mentioned that they would like to be able to walk from their hotel into the downtown (currently most hotels are at the outskirts).    She said that parking was not a complaint for most.  Yet clearly from her comments, the easy access to downtown was an important part of the experience.

Owens, on the other hand, said that parking was a major impediment to having businesses locate downtown.  Potential business owners are frustrated with the lack of easily accessible parking spots.  They expect to pay for them, of course, but those monthly permits (generally awarded on an annual basis; there is a waiting list for most structures) are hard to come by.

As I explained in a 2006 article published by the Ann Arbor Observer,  parking permits do not really pay their freight.  The charges for these permits are supported by hourly parkers, and by the growth in the system, which is nearly nil.  (As we explained in a recent post, the costly payments for the roughly $50 million underground parking structure near the library are now being picked up by the tax increment financing; an indication that the parking system is no longer paying for itself.)  The DDA has tried over the years to minimize the number of downtown workers actually demanding downtown parking. It has been a leader in promoting “alternative” [i.e., nonauto] transportation to and around the downtown and  is now the main supporter of getDowntown, which provides almost free bus passes and promotes bicycling and walking.

But Owens was very clear that the high-tech companies who SPARK is wooing  wanted parking, not mass transit.  “These are people who earn very high incomes.  They are not going to take the bus.”  Her message to DDA was simple.  If you want to bring more businesses downtown, it is parking, parking, parking.

An example was cited by DDA’s executive director Susan Pollay.  She noted some complaints about parking from a recently relocated business. MyBuys, which was at 101 North Main Street, has now expanded and leased the former Kinko’s space (as reported by AnnArbor.com) on East Liberty. MyBuys (which is now employing DDA board member Newcombe Clark), was lured to Michigan by a $3.9 million tax credit from the Michigan Economic Development Corporation and some local assistance from the City of Ann Arbor and SPARK.  Apparently many of their employees are relatively low-income and can’t afford to pay a lot for parking.  But in their old location, they were near enough residential neighborhoods that they could park there and walk to work.  Now they are in what is probably the most heavily parking-impacted area in the city, State Street.  The Liberty Plaza parking structure is already wholly parking permits (mostly commanded by McKinley) and Maynard often fills up in high-demand times. They are boxed in by the UM campus and nearby residential streets are already highly impacted.  MyBuys is complaining about the lack of parking for employees, and as Pollay said, she gets the message that it should be free.  (They are doubtless casting an envious eye on the deal given to Google, which got city-subsidized parking from the General Fund; see this discussion.)

So in a sense, what defines downtown is: anywhere within walking distance, especially if you can leave your car there.  At the DDA’s Bricks and Money committee meeting, staff member Amber Miller presented her parking district study that would, in its broadest application, put anywhere in Ann Arbor that is within walking distance under the “parking management” of the DDA.  Miller, who is a recent graduate of the UM urban planning program, argued hard for her more expansive view (see the explanation and excellent graphics by the Ann Arbor Chronicle).  This would draw a 3,300 foot “buffer” around the downtown, reaching far into residential neighborhoods.  (I was startled to see that my house, 2 miles from State Street and thus just walkable, was just inside the boundary.)  In her concept, all of this area was possible parking for downtown and thus a reasonable area for the DDA to manage.

From the committee packet; click for larger image

 

Miller also called out streets (not visible in this reproduction but called out in the Chronicle’s account, and colored purple in the projection shown at the meeting) that qualified under more restrictive criteria, including a nonresidential use for some parcels and not eligible for the Residential Parking Permit program.  Committee members were reluctant to endorse the more expansive boundary, or even all the more distant and more obviously residential streets that qualified under the more restrictive guidelines.  Roger Hewitt warned of a political firestorm. He said that putting streets like Sunset Road, for example, under the DDA management, would cause political problems that wouldn’t be warranted.  The consensus of the committee seemed to be to offer to manage the “purple streets”, but maybe not even all of them. Miller, chagrined, pointed out that “land uses might change” (striking fear in this neighborhood advocate’s heart), but wiser heads apparently prevailed.  Pollay also hastened to point out that the DDA would not necessarily plan to put parking meters on all streets under its management.

Regardless of the outcome of this immediate plan, it is clear that not just the neighborhoods immediately adjacent to downtown but also all those within any reasonable walking distance are not being regarded as excluded by all those plan boundaries (Downtown Plan, Calthorpe Plan, etc.) but are gradually being withdrawn into the economic entity that is Ann Arbor’s Downtown.  There will be many more debates to come.

Postscript:  Owens told an amusing story about bringing representatives from a Santa Barbara company to Ann Arbor in July.  They were charmed.  Wonder how much parking opportunity will be necessary to retain that charm during Ann Arbor’s winter?