Private Public Partnerships

There are many comments on the blogs that indicate the financing of many Ann Arbor development projects are misunderstood. These are the comments of the nature:

"The developer is willing to risk his money to build something. The citizens should welcome this because the city will get more tax revenue”

This may be how projects were financed many years ago, but it is not the way most of the current Arbor projects are proposed. Today, the developer typically has very little of his own money invested in the project. Therefore the primary challenge is to get the project funded. In order to get funding the developer needs an approved project.

The first step is to form an LLC for the specific project. This requires some legal support time and it should not be a surprise that many developers are from the legal profession rather than construction. Each project is done as a separate legal entity so if there is an injury, or lawsuit, the bankruptcy of this LLC will not affect the other assets of the developer.

The second step to create some concept drawings. The developer may have to pay for these or it may be possible to get someone to do the work for the promise that they will be paid to do all of the necessary detail work later if the project is built.

Now the developer's work begins. The developer must have the stamina to endure a great many meetings with city staff and Council members. He must convince them that his is a great project and that the city should provide funding. The city funding can take many forms. The developer may ask that the city build a parking structure that serves as the foundation for his building. (First and Washington and the Library Lot) He may ask that the city issue bonds to pay for part of his building or an associated one. (The hotel proposals for the Library lot.) Maybe the city needs to provide street and sewer modifications to handle the increased load of the project. The DDA estimates that $5.3 million of cost of the underground parking structure is to support the development over the parking.

If the city agrees, the developer still needs to find the rest of the funding for the project. But, say, the city has agreed to fund 1/3 of a $50 million project, now the developer only needs to find $33 million more. The amount of the investment and the risk is less than if the entire $50 million were from private investment, so this becomes much easier.

When the developer gets funding one of the first things he does is make a cash draw to pay his development fee. At this point the developer has made money, or at least covered his cost. Present day private-public development projects are usually structured so that the developer makes money before the project is built. The developer would prefer that the project succeed, but once the project is funded the developer will not lose a substantial amount even if the project fails.

The private investors? If their investment is $33million for a project that costs $50 million to build, the project only has to make the normal return on a $33 million investment project to make these investors happy.

The city? The way the agreements are usually structured the city issues bonds and uses the taxes from the building to repay the bonds. But the city bonds are backed by all the taxes of the City not just the taxes from the developer's project. If the project fails and does not generate sufficient taxes to repay the bonds the city must repay them from other taxes.

And if the project succeeds? Then all the taxes for the next 25 to 35 years will go to pay the bonds and interest. The city will not receive any additional revenue during this time. Yet the city will provide police, fire protection, and other services such as road maintenance. This means that there will be proportionately less money to provide service to the regular taxpayers.

A US House Committee on Oversight and Government Reform concluded that:

"The public justification for public financing, including construction financing with tax exempt bonds, is that this is an investment that brings jobs and consumers to a city’s downtown. Academic research on the value to economic development, however, has universally concluded that sports stadiums, convention centers and hotels do not increase economic activity in downtown areas."

This is consistent with my experience. I have been to many conferences, but the purpose is to learn something, or to present your information and leave, not to party. Most of the time is spent at the hotel or at the conference. There are some junket or boondoggle conferences but they are in Las Vegas, Orlando, Hawaii etc. I cannot see Ann Arbor competing as a destination for these. I am not sure we would want to.

Who wins, besides the developer? Really very few. The public-private development projects are lose-lose propositions for the citizen taxpayer. If the project is successful we lose a little, if it it fails we lose big.

Sierra Club Statement to Council on the FITS Parking Structure

Good Evening Mayor Hieftje, members of Council, City Administration.

I appear before you tonight as a member of the Executive Committee of the Huron Valley Group of the Sierra Club representing 3000 members in the area.

At our December 14, 2009 meeting we passed a resolution in opposition to recent city actions concerning Fuller Park and the proposed Fuller Intermodal Transportation Station.

We are outraged over the notion that the city, very recently after passionately assuring the public that the city’s parkland would never be sold to outside interests without a vote of its citizens, would turn right around and spend hundreds of thousands of its dollars and study a proposed permanent car structure to be built ON CITY PARKLAND to be leased by the university on a long-term basis.

Very clearly this violates the spirit if not the fine print legal definition of the city’s ordinances. It is a breach of trust by the city with its citizens to protect and maintain its parks for present and future generations to enjoy, and it establishes a terrible precedent.

Granted, the current site, a portion of what is currently Fuller Park south of Geddes Road west of the Huron River Bank, had been leased to the university for surface car spaces – with an agreement that lease moneys would go to City Parks and Recreation operations.

The use of public lands designated as parks should be dedicated exclusively for city parks use, not for other purposes.

The use of parkland, for well, parking, with all due respect ladies and gentlemen, is not really a parks and recreation use. Yes, parking exists at park facilities, but parkland for the sake of parking is another matter. Let’s get real here.

We can smile at that but we have a very serious issue.

Any disposal of parkland by the city either by sale, reassignment of purpose, or lease must come with the consent of a vote by the citizens, not council

Furthermore, we are also deeply angered by the city spending hundreds of thousands of dollars on consultant fees to study building a car structure on city parkland while city administrators threaten closure of existing park facilities on the basis of lack of funds.

We also question if the city made any real efforts with the university in obtaining this arrangement to build a permanent car structure to pursue a potential land swap for such a massive project, if the revenues for parks and recreations operations was even discussed, or whether a perceived convenience by city officials trumped due diligence in pursuing this agreement with the university. Something of this nature really required a more public process than what was apparently conducted here.

It is our parks that make Ann Arbor that special place for everyone, a value that can’t be quantified. It is the inherent responsibility of the city to take care of its parks for future generations.

I should note that the Sierra Club is certainly supportive of many efforts, private and public to encourage non-automobile transit. I also note that this current proposal contains little in the way of concrete plans for non-automobile transit – its focus is on the 900-car parking structure, with most of the parking going to University staff parking and only approximately 200 spaces for a proposed train station.

We DO NOT approve any disposal of existing city parkland, whatever the motivation or goal, either by sale, lease or reassignment without a public vote and will fight any present and future efforts to use Ann Arbor city parks and their assets other than for the purposes for which they were entrusted by citizens to the city to look out for.

On behalf of the Sierra Club I thank you for your time and strongly urge you to reconsider these actions to destroy city park infrastructure.


James D’Amour
2771 Maplewood Avenue
Ann Arbor, MI 48104

A Greenway for Bloomington, Indiana

The Bloomington, Indiana "Bicycle and Pedestrian Transportation & Greenways System Plan"  (click here) and B-Line Trail information (click here).

What Will Ann Arbor Look Like in the Future?

We currently have an important opportunity for input on what Ann Arbor will be like in the future, as the city is on the verge of approving changes to the Ann Arbor zoning ordinance for downtown. Many of the proposed changes could have an impact on surrounding neighborhoods. The zoning and parking amendments are the first of three documents that are being amended that are going to have an effect on downtown and surrounding neighborhoods. 

Click here to read article.

Beautiful Greenway Built in 2 Years, 3 Months

 

Ann Arbor has an opportunity to create a Greenway in the Allen Creek corridor and recapture the rich history that existed at the turn of the century. This video shows what a determined city half way around the world did to create excitement and eliminate serious environmental problems for their citizens.

Byoung-Suk Kweon, Ph.D. joined the UofM Faculty in the Fall 2007, moving here from Texas A&M University. She provides a short introduction (click here) for this amazing project completed over a 2 year, 3 month time frame! 

For a larger version of the film click here. Video courtesy of Seoul Metropolitan Government.

Majora Carter, a MacArthur awardee, gave a presentation last year about another greenway--the South Bronx Greenway. 

Atlanta's greenway: The Beltline and it's connection to The Silver Comet trail system.

The proposed Ann Arbor Greenway