415 W Washington: A “Unique Opportunity” for a Campaign Donor

Jun 2, 2024 | City Council

This week, City Council will consider a resolution directing City staff to enter into negotiations to sell the City-owned property at 415 W. Washington to a campaign donor without any open bidding or RFP process, This property has a long history, but the last few years are key to understanding the significance of this particular decision.

BACKGROUND

April 20, 2020

City Council considered a resolution directing City staff to review and recommend development pre-entitlement for 415 W. Washington. In discussion, Council Member Zach Ackerman explained:

I think this is really respectful to those residents who did have concerns about that process because instead it flips it. It puts a lot more public input into the design of the project and then we go to the world. We go to developers around the country and say this is what the community aspires for in realistic terms. Now you come and partner with us.

Council postponed the resolution in order to address concerns about accommodating the Treeline Trail.

https://www.mlive.com/news/ann-arbor/2020/04/plans-for-blighted-ann-arbor-historic-district-property-tabled-by-ann-arbor-city-council.html

https://a2gov.legistar.com/LegislationDetail.aspx?ID=4414274&GUID=FF0FFBAD-E26E-4148-985B-4CC210477EEC

July 6, 2020

Council considered the resolution again. The director of the City’s Community Services area, Derek Delacourt, explained several possible outcomes following pre-entitlement, all of them leading to an open process of “request for proposal” (RFP) or bidding among multiple developers.

If we move forward with this as an entitlement and we finish that process and at the end of that process there is a set of supplemental district regulations and an area plan, think similarly to the DTE project that you just passed. We would then put that out as an RFP, which is normally what we would do before we ever did any of this. We would take that finished project and put it out as an RFP and see and hope that we we get solid development offers from private development partners, or if Council said we are only interested in a long term land lease structure, we would limit that RFP response to land lease structures. If Council said we only want co-op, if we came back and recommended there was two or three different ownership structures, if there’s an affordable millage, we would tailor that RFP around those criteria with that finished entitled project and basically put it out for bid. Then we would know what we had as far as a development process or a partner or a price or available funds

So there’s still a lot to be resolved through this process that would determine it, but the point in time would be at the end of that entitlement and when we put this site out for RFP, seeking an actual partner and at a competitive price.

In public comments at the same meeting, local developer (and neighborhood resident) Joe Lambert asked for an opportunity to present a proposal for 415 W. Washington that would address concerns raised by neighbors. In response to Lambert’s request for three months to offer a proposal, Delacourt explained:

As staff we would never recommend handing over any exclusivity on a publicly owned site without some type of RFP process or consideration by Council

We have from day one on the site told developers we’re not interested in talking with them about this site because we’ve made assurances through our entire public engagement process that this would not be a developer driven process&

But if Council were to offer him exclusivity, or if you were asking if we should set aside the entitlement process to give him a window to do this on a non-competitive basis. That wouldn’t be our recommendation.

Council Member Julie Grand agreed:

I think it sets a very dangerous precedent on sitting on the property to ask us to vet and essentially sole source with a private developer who comes in at the last minute.

The resolution was approved and staff was directed to move forward with pre-entitlement for 415 W. Washington.

https://www.mlive.com/news/ann-arbor/2020/07/ann-arbor-moves-forward-development-plans-for-blighted-historic-district-site.html

https://a2gov.legistar.com/LegislationDetail.aspx?ID=4414274&GUID=FF0FFBAD-E26E-4148-985B-4CC210477EEC

March 20, 2023

The current City Council unanimously approved PUD Zoning and Supplemental Regulations for 415 W. Washington. The approved terms allow for the development of residential and mixed uses as permitted in the D2 zoning district including residential, commercial and office uses. The PUD will require a minimum of 15 designated affordable housing units or 15% of the total units or a contribution in lieu of units, whichever number is greater.

In discussion, City Council member Disch emphasized the value of having City staff set expectations and requirements for this property:

We are often in the situation of leaving it up to the developer who is an interested party to give us their opinion on what can and can be done. In this case, staff from multiple departments have provided counsel and they have reached agreement.

Council Member Jenn Cornell Erica Briggs (citation corrected 6/7/2024) emphasized the same point, that the standards and type of building was agreed on and established:

I hope that we’re all in agreement in terms of the types of building that we would wanna see built on this site in terms of general direction that we would want a developer to come back to us with.

https://www.mlive.com/news/ann-arbor/2023/03/ann-arbor-advancing-plan-to-redevelop-blighted-site-across-from-ymca.html

https://a2gov.legistar.com/LegislationDetail.aspx?ID=6054963&GUID=41B151CE-10DE-4380-811B-79A5ADFADB3E

NEGOTIATION WITH A SINGLE DEVELOPER

This week, Council will vote on a resolution (CA-9), directing City staff to begin six months of negotiation with a single developer (4M) for the “possible sale” of 415 W. Washington.

CA-9 (24-0981) Resolution to Approve Entering into a Six-Month Negotiating Period for the Possible Sale of the 415 W. Washington Site

The company 4M is co-owned by Dr. Margaret Poscher and Heidi Poscher, who sometimes uses the name Heidi Mitchell. Heidi Poscher/Mitchell has given a total of $8,750 to the campaigns of current Council Members, the Mayor and the Mayor’s political action committee (PAC).

Below is a summary of Heidi Poscher/Mitchell’s recent history with Ann Arbor local government:

February 2019

Poscher/Mitchell sought approval for a site plan to redevelop homes on Henry Street. In that process, she reassured the Planning Commission that the new housing units would not become short-term rentals (STRs or “AirBnB”). As soon as the Henry Street site plan was approved by City Council, she announced her intention to develop STRs there.
https://www.mlive.com/news/ann-arbor/2019/02/group-living-with-co-working-space-for-young-professionals-coming-to-ann-arbor.html

https://a2gov.legistar.com/LegislationDetail.aspx?ID=3853549&GUID=F54CD7AD-FEE8-43FB-B010-FB7BFF706495

September 2020

A majority of City Council approved a staff-recommended ordinance regulating STRs and banning dedicated, full-time investor properties in residential neighborhoods. Mayor Taylor was in the minority, opposing the ordinance.
https://www.mlive.com/news/ann-arbor/2020/09/ann-arbor-bans-dedicated-airbnb-short-term-rental-properties.html

Poscher/Mitchell and other investors threatened to sue the City over the proposed STR ban.
https://www.mlive.com/news/ann-arbor/2021/01/airbnb-property-investors-may-sue-ann-arbor-if-council-doesnt-lift-pending-ban.html

December 2020

In their first month of public service, newly elected members of Council directed staff to prepare amendments to the ordinance regulating STRs in order to “enable the continued operation of preexisting short term rentals.” 
https://www.mlive.com/news/ann-arbor/2020/12/new-ann-arbor-council-looks-for-way-to-keep-airbnb-houses-in-neighborhoods.html

https://a2gov.legistar.com/LegislationDetail.aspx?ID=4733989&GUID=7AA9862B-49AD-4541-9831-4FE461B4AF9E

April 2021

Mayor Taylor led a majority of Council in approving amendments to allow Poscher/Mitchell and other investors to maintain their STR businesses in residential neighborhoods.
https://www.mlive.com/news/ann-arbor/2021/04/ann-arbor-mayor-urges-council-to-cut-losses-on-short-term-rentals-and-move-on.html

https://a2gov.legistar.com/LegislationDetail.aspx?ID=4892427&GUID=B937507A-2A1C-4FEB-8F94-9692ED9EBB88

December 2022

Mayor Taylor (with the approval of Council Member Travis Radina) announced his intention to appoint Poscher/Mitchell to the Renters Commission as non-voting “Landlord.” It was withdrawn after members of the Renters Commission raised concerns.

See “Version 1” (“Heidi Porcher”): 
https://a2gov.legistar.com/LegislationDetail.aspx?ID=5946031&GUID=B03BE187-3F09-48F6-A847-D64DE6F917CA

September 2023

City Council unanimously approved a rezoning for SouthTown in order to permit Poscher/Mitchell to develop yet more STRs. As happened in 2019, Poscher/Mitchell offered assurances: no more than 30% of SouthTown would be full-time dedicated STRs.
https://www.mlive.com/news/ann-arbor/2023/09/you-had-me-at-density-ann-arbor-oks-8-story-southtown-development.html

https://a2gov.legistar.com/LegislationDetail.aspx?ID=6312253&GUID=410FA52E-92DB-42BA-98F5-4A2E0A257C44

October 2023

Poscher/Mitchell was among the first reported donations to the Mayor’s PAC, giving $5,000. Using the name “Heidi Mitchell,” she donated an additional $1000 to CM Jen Eyer.

November 2023 to April 2024

The Mayor’s PAC distributed the following:

  • $1000 to CM Jen Eyer
  • $750 to CM Erica Briggs
  • $1000 to CM Lisa Disch
  • $1000 to CM Travis Radina
  • $500 to Mayor Christopher Taylor
  • $1000 to Council Candidate Jon Mallek (Ward 2, unopposed)

For more on the Mayor’s PAC, see:
https://www.mlive.com/news/ann-arbor/2023/10/ann-arbor-mayor-starts-new-pac-called-ann-arbor-for-everyone.html

Link to campaign finance reports for the PAC:
https://campaignfinance.us/washtenaw.mi/iCommitteePortal.php?iCommitteeID=129759

CONCLUSION

The staff memo attached to this week’s resolution acknowledges:

In most instances staff would issue an RFP or partner with a real estate agent to pursue a development team for the site. In this case, the recommended developer meets many of the local community’s desires and offered a unique opportunity to provide a carbon neutral building.

https://a2gov.legistar.com/LegislationDetail.aspx?ID=6702495&GUID=3D3CACBD-3295-476D-9A9A-6FC3EB058FAE&Options=&Search=&FullText=1

The resolution in CA-9 is much more than simply a “unique opportunity.”

Attachments on Legistar include a proposal letter from Dr. Margaret Poscher (spouse of Poscher/Mitchell) dated March 2024. In that letter, Dr. Poscher introduces a possible purchase price of less than half of the 2019 appraised value: 

we propose to move forward into a due diligence period with a target transaction price of no less than $2.5M up to the 2019 appraised value of $5.5M.

https://a2gov.legistar.com/View.ashx?M=F&ID=12979957&GUID=5403E3E3-8DDE-4FFA-A1C6-239777A0DF57

An open, competitive process would be set aside for the benefit of a campaign donor who offers to buy it for potentially three million dollars less than an appraised value from five years ago. 

For anyone eager to see this property cleaned up and redeveloped, this resolution also opens the door to significant delay. City staff is directed to execute a purchase agreement by December 31, 2024. However, 4M is granted an additional “exclusive due diligence period of 12 months after execution of the purchase agreement” in order to conduct “necessary investigations, complete development entitlement, and other activities.” City staff is given six months to negotiate terms and price with 4M, but then 4M is granted an additional year to determine whether it’s even feasible. 

If approved, this resolution sets aside all previous plans for the sale of this City-owned property. City Council will vote on whether a large campaign donor should have exclusive options on a City-owned property for up to 18 months.