From Public Process to Private Broker: Selling and Developing the Kline Lot

Jun 30, 2024 | City Council

On the July 1, 2024 agenda, Council considers a resolution directing the sale of the City-owned property at William and Ashley. This parcel is currently a surface parking lot, sometimes referred to as the Kline lot. By resolution, Council directs that the City will engage the services of a private broker, instead of an open bidding process or request for proposals (RFP).

DC-2 (24-1246) Resolution to Endorse the Use of a Broker for the Sale and Development of the Kline’s Lot

HIDING THE BALL

The staff memo in the resolution describes the role of the private broker:

“[The private broker] would advise on the drafting of the scope or vision for a development that best reflects the community’s values without overburdening the scope to the point where it is infeasible for development.”

This determination of “scope or vision” has already occurred. In 2019, this property was designated for development as affordable housing; a previous Council approved a process of public engagement to identify community goals and priorities for the Kline lot. A comprehensive report on the public engagement (including specific options for redevelopment and public support for each) was presented to Council in 2021 and can be found here (see slides 80 through 97):
https://a2gov.legistar.com/View.ashx?M=F&ID=9448604&GUID=03BA75F5-C897-4942-AB5C-FF5DADC2DA3D

That report could have led to a pre-entitlement process and public Request for Proposals (RFP). In an open RFP process, developers would be invited to submit proposals with City staff as the point of contact. All questions, communication and details of submitted proposals would become public records.

The terms of DC-2 describe a very different process: a private broker will receive and assess all proposals and choose or reject specific proposals. City staff will receive the broker’s recommendation, only. The staff memo explains:

“[The private broker] would then work to cultivate interested development companies and work directly with them to sharpen their proposals so they best meet the City’s needs.”

“Once a firm is identified as the best fit, they would bring the proposal forward to staff for evaluation and then eventually to Council for consideration and hopefully approval.”

Only the “best fit” proposal communicated to staff would enter the public record.

The staff memo asserts:

“The only difference between this and a formal RFP is that an RFP is time-limited in that bids must be received by a certain date, opened concurrently, and scored against each other.”

That is one difference but it is not the only difference. An RFP process led by the City is transparent and open because bids are received and assessed by City staff. When Council votes for or against a staff recommendation, the competing bids are part of the public record. General information about each bid is listed in Legistar and details are available via Freedom of Information Act (FOIA) requests. 

This week’s staff memo refers to the possibility of an RFP process, but only under circumstances where the private broker manages and directs all competing offers:

“An RFP could be incorporated if it did not have a date certain for developers to submit a final proposal, if it was clear that the broker was receiving contact from interested developers, and if it was clear that the broker would be working with interested developers to sharpen proposals and determine an ultimate recommendation or recommendations for the City to consider.”

This clarification highlights the primary goal of using a private broker: submitted proposals will be considered in private and only the broker’s recommendation(s) will be made public.

THIRD TIME’S THE CHARM

If approved, this will be the third time in just the last year that a majority of Council has supported the sale of a City asset outside of an open, public bidding process. It will be the second attempt to negotiate the sale of this specific property behind the scenes, without the benefit of competition and transparency.

In 2023, the City engaged in months of private negotiations to sell the Kline Lot. Early meetings were intentionally located off-site and away from City Hall. City staff and consulting attorneys (hired by the City) spent months assessing and refining a proposal from “Sports Illustrated Resorts.” The SI Resorts proposal would have built a sports-themed hotel and conference center on the property at William and Ashley that was previously designated for the development of affordable housing. A majority of Council supported ongoing negotiations with SI Resorts until public pressure forced the developer to withdraw the plan. To learn more about that, see:
https://www.mlive.com/news/ann-arbor/2024/01/sports-illustrated-resorts-withdraws-proposal-for-downtown-ann-arbor-lot.html

In April 2023, City Council rezoned the City-owned property at 415 W. Washington to Planned Unit Development (PUD). Council approved a conceptual plan for the property that would permit residential and mixed use while requiring public open space and affordable housing.
https://a2gov.legistar.com/LegislationDetail.aspx?ID=6054963&GUID=41B151CE-10DE-4380-811B-79A5ADFADB3E&FullText=1

That PUD zoning and conceptual plan could have formed the basis of a public RFP, open to any developer interested in building on the site. Instead, earlier this month (6/3/24), Council directed staff to negotiate the sale of 415 W. Washington to a single developer (4M LLC). Council approved a plan to give 4M LLC up to 18 months of exclusive negotiation rights without the benefit of an open, public RFP process. To learn more about that, see:
https://a2gov.legistar.com/LegislationDetail.aspx?ID=6702495&GUID=3D3CACBD-3295-476D-9A9A-6FC3EB058FAE

https://a2elnel.com/post/415-w-washington-a-unique-opportunity-for-a-campaign-donor

https://www.mlive.com/news/ann-arbor/2024/06/sale-of-blighted-property-could-lead-to-new-housing-in-ann-arbor.html

PLACEMAKING INSTEAD OF HOUSING

This week, in answer to questions to the agenda, staff acknowledge the possibility that the Kline lot at William and Ashley could be sold and developed without any affordable housing at all:

“If the property were sold to a private developer and the site is developed without any housing that is affordable to households at 60% AMI or less, then it would make sense for the developer to contribute funding to the City’s affordable housing fund and/or the City to contribute sales proceeds to the affordable housing fund to meet the City’s affordable housing goals.”

Staff also emphasize that subjective ideas around “placemaking” will guide decisions around use of this site.

“The goal would be to pursue a development that substantially achieves housing development in pursuit of affordability, sustainability, placemaking, and tax base improvements as much as is feasible, with each being a co-equal priority. Placemaking is an important part of the City’s interests. However, placemaking is about more than just the aesthetic qualities of the building—which are subjective and can vary from person to person. Whether a building is architecturally interesting, or a good stylistic contribution to the built environment in the downtown, is often times in the eye of the beholder. Placemaking is, however, more about the use of the property than its visual aesthetic, though these concepts are not completely unrelated. Making a place means building something that people are likely to use, to use in diverse ways that encourage activation of the sidewalk and street space and is considered a destination for individuals looking for a downtown experience. Activation is the key, and design aesthetics should be viewed in that context.”

https://a2gov.legistar.com/View.ashx?M=F&ID=13061839&GUID=4386498C-C454-4DDF-AC6C-11F9DF4BFC96

The new goal of “placemaking” for a “downtown experience” opens the door for proposals similar to the Sports Illustrated Resorts conference center. The City would rely on the recommendations of a private broker; strong public support for housing (especially affordable units) could be set aside entirely.

COMMITMENT TO HOUSING

As recently as five years ago, City leaders actively promoted public investment in affordable housing, In 2019, City Council directed the use of City-owned properties – including the Kline Lot – for the development of affordable housing units. In 2020, City Council asked the community to approve a millage to fund the construction of affordable housing units on those properties. 

The Kline Lot illustrates the current Council’s pivot away from direct public investment and intentional development of affordable housing in our community. Despite clear public support for it, the Kline lot might not be developed with affordable housing, particularly if there is an opportunity for “placemaking.” The terms of its sale may or may not result in any funds to support affordable housing though staff acknowledge that “it would make sense.” 

This week’s resolution signals a more remarkable shift: Council aims to greatly reduce public transparency around redevelopment and disposition of large City assets. 

In 2023, details about the Sports Illustrated Resort proposal were made public through Freedom of Information Act (FOIA) requests. The FOIA requests revealed months of communication between City staff and attorneys working to negotiate a deal with a single developer. In approving DC-3, Council guarantees that the next plan for sale of that property will be negotiated outside of public view and without a paper trail of public records. 

To learn more about past policy to commit and assess this property for affordable housing, public opposition to the Sports Illustrated Resorts proposal, and information that was revealed in FOIA requests, see: