Investing in Downtown

American cities like Ann Arbor share similar 20th Century stories:  People came to downtown stores to do their shopping and, in the first half of the century, downtowns were the retail and business centers. The second half of the century saw the decline of downtowns, with suburban sprawl and shopping malls. Southeast Michigan has a unique window on this because Oakland County’s  A. Alfred Taubman is a shopping mall pioneer and started his mall development company in 1950.

Politically, Ann Arbor’s downtown neighborhoods are like any others and do not have separate city council representation or governance. But downtown is different because of its importance to the city’s economy. When downtown started to wane, so did the city as a whole. The first inkling of this was in 1982. Downtown parking garages were crumbling and too expensive to fix with funds from general city taxes alone. Using a fairly new state-sanctioned mechanism, the city established a Downtown Development Authoritly that could concentrate taxes in the downtown. The city then turned the parking system over to the DDA so that parking garages could be maintained and parking could become more efficient.DDA Photos 016

As it became more and more evident that downtown is now the engine that drives the city’s economy, the DDA has shifted some of its focus from parking to infrastructure development that can encourage commercial and residential growth downtown. Parking is still an important tool for economic development because, for most businesses seeking to relocate downtown, the first question is about parking for employees or customers. The DDA has been able to use parking to encourage new business, run the system without losing money, and return $3.5 million per year to the city for its general fund.

Another source of funding for the DDA is Tax Increment Financing, or TIF. For a very detailed and accurate description of how TIF works, a good source is the Middle of the Left blog. Basically, I see TIF as a kind of titration. A very small percentage of tax monies – the increment or “delta” from increases to tax values from new buildings or renovations – are calculated by the city’s assessor and transferred to the DDA to be spent in the downtown, which also includes South University and a small dog leg down South Main Street. These taxes are titrated from the taxing authorities: Washtenaw County, the city of Ann Arbor, Ann Arbor District Library, and Washtenaw Community College. Ann Arbor’s DDA does not use any public school taxes.

TIF money is an investment in downtown, the core of the city. Were it not for TIF, improvements to the downtown would be on a list with all other city projects. And, these downtown projects would have no political advocate because no ward encompasses all of the downtown. Sometimes progress can’t afford to be last on a list. One example is Zingerman’s Deli. Zingerman’s is arguably one of Ann Arbor’s most recognizable landmarks and brings thousands of shoppers to the Kerrytown commercial area.

Zingerman’s wanted to expand right around its Kerrytown footprint because it believes in character and believes in downtown Ann Arbor. Even so, the company got little help from the city or the city council, especially when the Historic District Commission got in the way with “protection” for a burnt-out but “historic” house on the property. Zingerman’s needed some matching funds in order to leverage state brownfield money that can be used to remedy not only environmental problems but also urban blight problems. The DDA stepped in and provided sidewalk improvements (you’ll see them if you go to the deli this week) as the needed local contribution to the state funding. Zingerman’s can stay in Kerrytown and thousands more customers can contribute to the local economy. It has been a worthwhile investment for the DDA and for the city.

One would think that investing in downtown would be a goal city leaders could embrace. Indeed, the council at its January 2013 retreat identified economic development as a priority. It did not, however, allocate any money to implementation of that priority. Shortly afterwards, some of the councilmembers sought to actually stop investing in downtown by capping the amount of TIF the DDA can capture. A resolution on the November 7 council agenda would do exactly that.

Councilmembers Kunselman and Kaliasapathy are leading the charge on this, but can’t explain how investing less money in the downtown can help the city. Councilmembers Lumm, Petersen and Anglin are similarly inclined to spend less money on the city’s main economic engine. They have somehow failed to pay attention to the wayfinding signs and are headed in the wrong direction.