Copyright M Live Michigan
ANN ARBOR, MI — Ann Arbor leaders have a big decision to make when they meet this week: whether to put hundreds of millions of dollars in tax revenue into a development described as “a second downtown on the city’s south side.” After months of negotiations between the city and the development team, a public-private development agreement for the proposed Arbor South project at State Street and Eisenhower Parkway is on City Council’s agenda Thursday, Nov. 6. Also up for approval is a brownfield plan outlining how $300 million or more in new property tax revenue expected to be generated by the development would be captured and used for reimbursement of project costs such as new public parking decks and other infrastructure. The total private investment in the project is estimated at $406 million, while the brownfield plan shows a “total not to exceed” amount of nearly $374 million. The development team, which includes Ann Arbor’s Oxford Companies and Ohio-based Crawford Hoying, has plans for over 1,000 new apartments and condos, including over 200 apartments designated as affordable housing, plus retail, restaurant and office space, public plaza space and a hotel. The city is asked to issue bonds to finance three parking decks with nearly 2,500 spaces to serve the development. City-reimbursable parking structure costs, listed as “Priority 1” in the plan, are estimated at $185 million, while “Priority 2” reimbursable items like utility and roadway work are estimated at over $160 million, all including 5% interest. The total reimbursement of eligible costs over 30 years is projected to be about $300 million. Items eligible for reimbursement in the plan exceed the total projected tax capture and that’s to allow for future flexibility to cover more if the tax revenue grows beyond projections, according to a city memo. In addition to $345 million in potentially reimbursable expenses, the plan shows nearly $29 million could go into local and state brownfield funds and fees. The city’s administration is recommending council approve the deal. “Given the size of our community, it will be rare that we have an opportunity to do a project that has the magnitude of impact that Arbor South offers,” City Administrator Milton Dohoney said. The city’s housing needs are significant, Dohoney said, and the city desperately needs real examples of placemaking that complement urban walkability and transit. The city took the rare step of issuing a press release Monday to tout the project ahead of council’s vote on it, saying it would help redevelop one of the city’s busiest gateway corridors, South State Street, into a mixed-use, walkable neighborhood designed around transit access and public open space. The development at the northeast corner of State and Eisenhower would replace a gas station, expansive surface parking lots and an old parking structure described as obsolete. The Ann Arbor Housing Commission would own and manage the 209 apartments proposed to be reserved for households with incomes up to 60% of the area median. Without the partnership Arbor South offers, it would have taken much longer and would have been more expensive for the commission to find vacant land for sale near public transit, retail and jobs and to secure financing to build those units, Executive Director Jennifer Hall said in a statement. “Among the greatest advantages to this model is that the Housing Commission is a mission-based owner and property manager,” Mayor Christopher Taylor said in a statement. That means, unlike a traditional market-rate development, every effort is made to “screen in” residents who are often otherwise “screened out,” Taylor said. Critics of the deal have described it as pay-to-play politics, noting Oxford CEO Jeff Hauptman has made thousands of dollars in campaign donations to the mayor and some of his council allies. Hauptman and Crawford Hoying COO Jeremiah Thomas laid out their proposal at a City Council work session last November. In the year since, a majority of council members have been supportive of exploring it, but at least two council members remain fundamentally opposed to the proposed deal. Council Member Dharma Akmon, D-4th Ward, said she’s impressed by the scope of the project and what it could deliver in terms of housing. The plan’s low parking ratio and the removal of acres of surface parking are steps in the right direction, she said, but she can’t support the city owning or financing new parking decks via tax increment financing, also known as TIF. The corridor needs a broader rethinking focused on transit, safety and livability, Akmon said. Developers should plan for their own parking needs, while the city directs its limited TIF resources toward investments that strengthen the corridor like transit, bike and pedestrian infrastructure, she said. Due to the complexity of the project, the city engaged a financial advisor, PFM Consulting. Based on PFM’s analysis, the project would not be financially feasible without city participation, according to a staff memo provided to council. Some of the captured taxes would go toward environmental remediation. Other infrastructure improvements would result in area-wide benefits, according to the staff memo, which also argues the parking decks ultimately would support a denser, more vibrant neighborhood. The estimated $160 million for “Priority 2” items includes water, sewer and stormwater infrastructure, roadways, bicycle paths, sidewalks, traffic signs, landscaping, electric vehicle chargers and other work such as burying power lines and relocating and installing new gas lines. It also mentions plans for a bus rapid transit stop and other pedestrian improvements. If approved by council, the plan would go to the Washtenaw County Brownfield Redevelopment Authority and then the County Board of Commissioners for adoption. About $25 million in the brownfield plan is dedicated for “a future city-constructed utility improvement.” The development team told council in a Sept. 17 memo it is agreeing to provide the city an easement for future installation of a geothermal energy system on the site, potentially to support the sustainable energy utility the city is launching. The land for that could be worth millions, according to the developer. Also in line with city sustainability goals, the development team indicated all rentable units will be all-electric and condo buyers will be given a fully electric option, while rooftop solar will be incorporated on all private buildings at the developer’s cost and solar canopies will be installed on all parking structures. The design for the Housing Commission apartments also includes geothermal heating and cooling, solar and onsite space for community rooms and social services. The development team indicated it would directly contribute $7.5 million to the affordable housing during the first phase of the project and ensure about $3 million of utility and access infrastructure is made available at no cost to the commission. The development team also estimated it would forgo more than $10 million in cash flow over the life of the project from the affordable housing. And it has promised to provide free bus passes to residents of the affordable housing for the first five years at an estimated cost of $250,000. Thomas said his team has been in conversations with a lot of stakeholders at the city, including the sustainability office, the Housing Commission, the planning and engineering departments, transportation staff and TheRide, while also working to address feedback from council members. The negotiated deal represents input from dozens of people, he said. “I feel pretty proud of the work that we’ve put in to address a lot of the policy considerations that are core to the city,” he said. The affordable housing goes beyond the city’s typical 15% requirement by 53 units, he said, and those could be permanently operated by the commission in accordance with city goals. The overall development is designed not only to meet city goals, but also what consumers want out of a place where people are going to live, work and enjoy restaurants and entertainment venues, Thomas said. He doesn’t look at the proposed deal as a public subsidy of private development, he said. “What we’re doing is we’re committing to build new private improvements that are going to produce new tax dollars that are going to fund parking garages that are ultimately going to be owned by the city,” he said. One of the city’s sustainability goals is to reduce driving in the city by 50%. Thomas said he understands some council members’ concerns about longterm driving patterns. “We believe that the plan that we’ve put in place is a step in the direction of a more walkable community, of a community that is less reliant on vehicular traffic to access the city,” he said. Council Member Erica Briggs, D-5th Ward, said she still has significant concerns about the deal. It would be the largest brownfield plan in city history and place city general fund dollars at risk unnecessarily to fund parking decks with no guarantee the affordable housing will be built, she said. No money from the city’s general fund would pay for the project, according to the development team. A special assessment district is proposed to cover any shortfall and protect the general fund. “The project should be self-sustaining from a city investment perspective,” Thomas said. Want more Ann Arbor-area news? Bookmark the local Ann Arbor news page.
