April Fools Day Gift To Developers: Office of Economic Development

Mar 31, 2024 | City Council

Four resolutions on the April 1, 2024 agenda will direct the City Administrator to establish a “fully resourced and staffed” Office of Economic Development to accelerate and promote development in the City (DC-1) and adopt other policies to accelerate and promote development in the City. Lifting the “burden” of administrative process is framed as a time and cost savings to private developers that will eventually result in affordable housing. Open public meetings — including public hearings for the benefit of residents —are framed as “inefficiencies.” New policy also anticipates more direct public subsidy: lifting requirements that developers pay for the cost of improvements to community water infrastructure, traffic safety, stormwater systems, and solid waste (DC-2). Additionally, Council hopes for changes in State law so that more tax abatements can be offered for market-rate development that is all electric or carbon neutral (DC-3). These resolutions are consistent with the approach of the current City Council: requiring and expecting less of the profit-driven investors who build in our community. A fourth resolution will establish a Council committee to prepare a charter amendment that would make it much easier for the City to sell, lease, or purchase real estate (DC-4). 

DC-1 (24-0511) Resolution to Direct the Establishment of an Office of Economic Development and Directing the City Administration to Prioritize Housing Development at all Income Levels to Support Housing Affordability, Sustainability, Tax Base Development, and Placemaking as the City’s Strategic Priorities for Land Development

DC-2 (24-0512) Resolution to Direct the City Administrator to Implement New Processes and Programs for Housing Development at all Income Levels to Support Housing Affordability

DC-3 (24-0513) Resolution to Direct the City Administrator to Implement New Processes and Programs to Support Sustainability in the Built Environment

DC-4 (24-0514) Resolution to Direct the City Administrator to Implement New Processes and Programs to Support Placemaking and Tax Base Improvements

The four resolutions are late additions to the agenda. Sponsors Lisa Disch (Ward 1), Jen Eyer (Ward 4), Erica Briggs (Ward 5), and Jen Cornell (Ward 5) added all four resolutions to the agenda on the afternoon of Good Friday, right before the Easter holiday weekend. Council member Dharma Akmon (Ward 4) has since added herself as a cosponsor of DC-3. The resolutions are meant to be considered together, as part of a broader policy of deregulation for the benefit of market rate development and serving private developers as “customers.” From DC-1:

The city shall support housing development at all income levels in an effort to support housing affordability, and in the review of land development proposals shall lean toward solutions and review standards that expedite approval of projects, demonstrate flexibility and creativity in an effort to provide good customer service for land development applicants, and are permissive for the development of housing as much as is feasible under adopted zoning and land development regulations;

BACKGROUND

The four resolutions are explained as being consistent with a written report and Council discussion that occurred at two previous meetings: December 11, 2023 and February 12, 2024. Relevant slideshow presentations shared during these meetings:

December 11, 2023 City Council Planning Session
https://a2gov.legistar.com/LegislationDetail.aspx?ID=6439132&GUID=2308D3CD-BA4F-42DE-B6DF-FF41F6538345

February 12, 2024 City Council Work Session
https://a2gov.legistar.com/LegislationDetail.aspx?ID=6506097&GUID=8E8C29BF-DDFB-497B-8057-E87D172FD436

Public information about the first of these meetings is limited, as it was not recorded. From the City description of the December meeting:

City Council Planning Session This meeting will not be broadcast on CTN or Zoom. Public commentary can be made in person only.

https://a2gov.legistar.com/MeetingDetail.aspx?ID=1062201&GUID=B98A229C-43CC-440E-9FCC-F722C6BEE0E7

You can read Ryan Stanton’s MLive report on the December meeting here:
https://www.mlive.com/news/ann-arbor/2023/12/ann-arbor-may-start-fast-tracking-developments-as-part-of-new-city-strategy.html

According to posted minutes, both Mayor Taylor and Council Member Harrison were absent on 12/11/23. The presentation from that meeting anticipated “Individual meetings with Councilmembers” and “Work sessions in the beginning of 2024 to further discuss the Report.”

Only one work session occurred (2/12/24). No meeting minutes have been posted, but the recording indicates that Council Members Watson, Ghazi Edwin, and Cornell were absent. You can watch the CTN broadcast of the 2/12/24 meeting here:
https://www.youtube.com/live/kBR_MM1rOOU

NEW POLICY

The whole of a written report, called “ A New Approach to Economic Development “ can be found at this link (referred to in this essay as the “Report”):
https://a2gov.legistar.com/LegislationDetail.aspx?ID=6455353&GUID=9953264D-8091-454D-8178-7E569BF0A22C

By resolution this week, City Council endorses the findings, conclusions, and recommendations of the Report, which articulates four priorities:

  • Housing development at all income levels, promoting development of all kinds
  • “Placemaking” initiatives through the “disposition and acquisition” of real property
  • Protection of the tax base through acquisition of property
  • Redevelopment and transformation of “inefficient structures”

Specific recommendations from that Report can be found in the four resolutions on this week’s agenda:

DC-1

  • Funding and staffing a new City department around “Economic Development”
  • Establishing a fund specifically for the purpose of acquiring real estate and potentially ‘flipping’ it or doing land swaps.

DC-2

  • Delaying public engagement until after site plans are complete
  • Eliminating public review of site plans at the Design Review Board
  • Eliminating public hearings for site plans at the Planning Commission

DC-3

  • Lobbying for changes in State law to allow more local tax abatements for private development 

DC-4

  • Eliminating the 8-vote supermajority requirement for approval of land sales/leases/acquisitions

REDUCED TRANSPARENCY

The City’s current planning process includes multiple points of review at open public meetings of the Design Review Board, City Planning Commission, and (sometimes) City Council. For larger developments, a “Citizen Engagement Meeting” is also required. That engagement meeting occurs early in the process and is advertised to the surrounding neighborhood, so that residents can offer feedback to the developer before the completion of a site plan. The site plan is then considered by the Design Review Board, which may recommend changes or revisions in advance of a public hearing and approval at the City Planning Commission. (Where there is a rezoning, these site plans are also subject to a public hearing and final approval at City Council.) 

Site plan revisions are currently discussed at open, public meetings of the Design Review Board. The report recommends eliminating these meetings of the Design Review Board, so that staff will no longer have to “notice and advertise them, prepare agendas and packets, attend them, compile minutes from them, and document the comments of the board members into cohesive feedback for applicants.” The Report argues that by delaying public engagement until after the site plan is complete, community input is more likely to be incorporated in site plan revisions. In short, the report claims that delaying public engagement will offer a benefit: allowing feedback to be incorporated into the process of site plan revision. At the same time, the Report recommends that the process of site plan revision should no longer happen in open, public meetings, but rather behind the scenes among staff.

In January 2022, a majority of Council delegated final approval of most site plans to the Planning Commission and staff.

New recommendations acknowledge that change and go further; the report proposes eliminating Council approval for development agreements between the City and private developers. These agreements are contracts between the City and property owners, stipulating conditions and requirements. The Report recommends that these could be approved by City staff and the Planning Commission (Mayoral appointees), in order to make these transactions “more efficient and strategic.” 

Public hearings are dismissed as “merely performative measures that frustrate community members and favor the status quo.” The Report recommends eliminating public hearings. E.g. For land divisions, City ordinances require notification of neighbors as well as a hearing before the Planning Commission. The report recommends for land divisions that this notification to neighbors and public hearings at the Planning Commission be eliminated. For single family annexations and rezoning, the report recommends eliminating review and public hearing at the Planning Commission, because “Council is capable of deciding this issue.”

FINANCIAL BENEFIT TO DEVELOPERS

The first of this week’s four resolutions explains: 

Whereas, This requires the City of Ann Arbor to maintain its strong commitment to subsidizing affordable housing development, but also to create an environment where market rate housing development becomes more permissive and less burdened by city administrative processes;”

Recent decisions contradict Council’s reassurance that it will “maintain its strong commitment to subsidizing affordable housing development.” In the last two years, that “strong commitment” has included:

Waiving a requirement for the inclusion of affordable housing in order to award an additional $5 million in tax breaks to a private developer:

Repealing a 2019 ordinance that required the development of (or financial support for) affordable housing downtown:

The immediate consequence to repealing that ordinance: the loss of affordable housing units. In February 2024, Council unanimously approved a new development at 333 E. William Street. A staff report on that development explains:

This project was originally designed to utilize the premium floor area options provided in Section 5.18.6, which are eliminated by Ordinance ORD-23-32… Without premiums, the project will be physically identical, but the developer has chosen to no longer include affordable housing units.

https://a2gov.legistar.com/View.ashx?M=F&ID=12531673&GUID=3F586420-5619-498F-8EFC-28D5F22000BB

“DEAL MAKING”

Some of this week’s new proposed policy will require a public vote and charter amendment. Ryan Stanton of Mlive reported on the 2/12/24 presentation given by City staffer John Fournier:

Fournier suggested the city should pursue ordinance changes to eliminate regulatory hurdles and amend the city charter to allow the city to more easily engage in real estate transaction

and

The charter amendment Fournier recommended would repeal a section that says the city can’t buy, sell or lease property without an eight-vote supermajority approval by council.

and

“We can’t really take seriously a commitment to get housing prices under control or to develop TC1 districts or anything like that as long as this provision of the charter is still in effect,” he said. “We need more flexibility to engage in the acquisition and the disposition of property.”

https://www.mlive.com/news/ann-arbor/2024/02/ann-arbor-voters-may-decide-part-of-citys-new-development-strategy.html

Recent events show us what could happen by removing this eight vote requirement. In 2023 and early 2024, the City quietly negotiated with private developers to build a Sports Illustrated Resorts themed conference center and million dollar time-share condos on a City-owned property sometimes called the Kline Lot. 

In 2019, the Kline lot was designated by a previous Council as a location for the development of affordable housing. The public learned about the SI Resorts idea only after several months of private meetings had already taken place behind the scenes. 
https://www.mlive.com/news/ann-arbor/2023/09/sports-illustrated-resorts-eyeing-ann-arbor-for-hotel-and-conference-center.html

In response to public outcry, three Council members (all up for re-election this year) sponsored a resolution requesting more process and discussion about disposition of the Kline lot. The three sponsors failed to persuade a single colleague to vote with them, which signaled that a supermajority (eight votes) was still likely to approve the project. 
https://www.mlive.com/news/ann-arbor/2023/10/ann-arbor-officials-divided-on-next-steps-with-sports-illustrated-resorts-idea.html

Negotiations with promoters of the SI Resorts conference center continued for another three months before a fourth council member finally relented and expressed opposition. 
https://www.mlive.com/news/ann-arbor/2024/01/a-hard-no-ann-arbor-officials-ready-to-vote-down-sports-illustrated-resort-proposal.html

In the months of private deliberation around this poorly-conceived idea, the City spent over $30,000 on lawyers in addition to hours and hours of staff time. 

A previous City Council quite intentionally set aside City-owned properties (both 350 S. Fifth and the Kline Lot) for use as affordable housing, referring to how such a policy would spare the Housing Commission the cost of land acquisition. In August 2023, Council reversed that policy by “selling” the City-owned property at 350 S. Fifth to the City’s Housing commission at full market value. I.e. Council forced the Housing Commission to assume the full cost of land acquisition, shifting $6 million in affordable housing budget back into the general fund. For the months that it considered the SI Resorts proposal, Council came close to reversing prior policy to develop affordable housing on the Kline Lot. The current eight-vote requirement for purchase, sale or lease of City property is what ultimately ended the SI Resorts deal.

This week, Council considers approving and adopting a report that casually re-writes the history of affordable housing initiatives around City-owned assets. The Economic Development report declares that a previous Council did not “bind any of these parcels to a specific type of development or level of affordability” and argues that flexibility is more important for the purpose of “deal making.” Moreover, Council may ask the community to amend the City charter, removing the eight vote requirement that prevented the SI Resorts project from moving forward.

CONCLUSION

Ongoing work on updating the comprehensive land use plan theoretically centers community members and residents (current and future) and is not yet complete. This week’s resolutions advance sweeping changes that prioritize private developers: deregulating land use to serve developers as ‘customers.’ In advance of determining land use regulation that benefits residents and community, Council plans to move forward with new policies that benefit investors and developers. Proposed new policy will promote more public subsidy of private ventures, add a whole new department to the City budget in order to fund “deal making,” and reduce transparency and accountability to the public. Potential changes to the City charter would make it significantly easier for public, City-owned assets to be bought and sold, without an 8-vote supermajority approval of Council.

The implementation date on these resolutions is December 31, 2025. In four resolutions, Council directs nearly two years of staff work. Approval of these resolutions will direct the City Administrator and staff to move forward immediately and include necessary budget amendments in the upcoming FY2025 budget process.