The Politics of Overstepping Boundaries: DDA $500,000 Subsidy to Avalon Housing and Three Oaks Contrary to Municipal Code Governing DDA’s Boundary, and State Laws Governing Act 197 Entities

It was reported on January 6th in a post on AnnArbor.com that the Board of the Ann Arbor Downtown Development Authority has agreed to give half a million dollars in funding to the Near North Main development project. The deal reached with Avalon Housing and its for-profit partner, Three Oaks, stipulates the DDA will give an initial $400,000 with an additional $50,000 if the development project receives a Silver LEED certification, or an additional $100,000 if the project receives a Gold LEED certification.

This latest taxpayer giveaway to Avalon Housing and its for profit partner Three Oaks comes on the heels of a two-year break on property taxes given to Avalon Housing by the Ann Arbor City Council in December 2009. That resolution passed without discussion, and the information packet given to Council contained no data concerning the total amount of tax relief Avalon (and other non-profit affordable housing providers) in the city would receive.

Reporter Ryan Stanton wrote in his piece about the $500,000 gift from the DDA to Avalon, “In a resolution of support, the board stated the DDA is committed to participating in projects that stimulate new, converted, or renovated housing with the goal of a ‘diverse and vibrant downtown residential base.’

The DDA has no legal authority to give Avalon Housing and Three Oaks $500,000 to subsidize the Near North Main Project. The DDA boundary stops short of the parcel of land on which the project is located. To spend the money for a development project outside its boundary is in direct conflict with both the City’s own municipal code governing the boundary of the DDA, as well as an opinion from the Attorney General of Michigan that makes clear that DDA’s must operate within their set boundaries. 

DDA officials claimed that “….Near North technically will be outside the authority’s jurisdiction, but the 39 new housing units are within the quarter-mile radius of the DDA-approved district within which it might provide DDA Housing Fund support. Many tenants who will reside in the apartments also will likely work, shop, or use the downtown for other purposes.”

The DDA has no power under the auspices of either the Ann Arbor municipal code under which it was created, or state laws which govern the creation and operation of an Act 197 entity, to extend its boundaries for any purpose. 

Furthermore, the DDA Housing Fund was established in 1997 with the understanding that it would be used to support the overall housing goal of the DDA to encourage residential development in the downtown and help facilitate a balanced housing environment in the downtown. Interestingly, Michael Appel of Avalon Housing approached the DDA Partnerships Committee for the $500,000 gift. The Partnerships committee was created to funnel money to private developers to mitigate their costs of development in Ann Arbor. The Near North Project is a collaboration between Avalon, and a for profit developer. That Avalon alone stands and asks for the $500,000 hand-out for “affordable housing” is a deceptive tactic on the part of Avalon Housing. Of the 39 units in the development, 14 will be designated as “affordable housing.”  The money for which Avalon Housing begged from the taxpayers will benefit Three Oaks, the private developer, equally, and be given over to the $11 million dollar development. 

The municipal code under which the DDA was initially created and under which it is operated (Ord. No. 14-82, 5-1-82) clearly defines the “downtown” boundaries within which the DDA may operate and exercise its power: “The boundaries of the downtown district in which the authority shall exercise its powers as provided by Act 197 are hereby established as shown on the downtown districts map which accompanies this chapter and which, with all notations, references and other information shown thereon, shall be as much a part of this chapter as if fully described herein.” 

The DDA boundary map from the DDA’s web site clearly shows that the Near North Main Project, located on a 1.19 acre parcel of land at 626-724 North Main, falls outside of the boundary within which the DDA is empowered to operate.

Click here to download a map that shows the location of the Near North Main project. As you can see, the project rests just north of the DDA boundary line.

What to do? Click here to email Mayor Hieftje (who sits on the DDA Board that approved the giveaway) and our City Council members, and demand that the DDA rescind its giveaway of $500,000 to Avalon Housing and its for profit partner Three Oaks. 

This is not about affordable housing; that’s just a window-dressing for what is yet another six-figure pay-off to a developer. This is about abuse of authority, misuse of taxpayer money, political pay-back and political connections. Such pay-offs to developers should be stopped within the boundary of the DDA, but they should certainly never be allowed outside of the legal boundaries in which the DDA is empowered by municipal code and state law to operate.

Short URL: http://www.a2politico.com/?p=2542

7 Comments for “The Politics of Overstepping Boundaries: DDA $500,000 Subsidy to Avalon Housing and Three Oaks Contrary to Municipal Code Governing DDA’s Boundary, and State Laws Governing Act 197 Entities”

  1. One correction: All the units are termed “Affordable” under the current HUD criteria, but 14 will be “supportive” for very low income residents needing various services. The other units are “desirable” close to downtown presumably for downtown workers who make less than $30K/year. This is the components that troubles me. Avalon is trying to stay afloat by edging closer to market rate, but doing so it is also moving away from its mission. I can understand their bind, but am also starting to question the non-profit private entity provider model for the provision of these services. Perhaps we should revisit the necessity of public health and social services infrastructure. The problems are too great for little NGOs to solve. This may be another example of privatization failing to perform as promised.

    Through-out the “public input” period, the potential tenants of the “affordable” units were presumed to be young. What happens if a 72yr old granddad widower applies for a unit? Will people be vetted for age and employment location? Is this legal?

  2. A2P, could you give us a reference to the Attorney General’s opinion you mentioned?

  3. DDA is merely council fun money? Why not fund those laid off firefighters so the first truck that arrives can rescue people?

  4. I don’t know whether your points about state law are correct, but the DDA charter, as renewed in 2003, has this statement: “The DDA Renewal Plan maintains the original DDA district boundary as set forward in 1982. In an effort to accomplish its mission, it is understood that the DDA may elect to participate in important projects outside the DDA District.”

    Hypothetically, I guess that could be anywhere, within the city or even outside it, as long as they could show that it fulfilled one of the plan’s goals.

    It would be interesting to see a legal test of this policy.

    • State laws governing Act 197s don’t give any DDA the ability to do what the reauthorization did. The reauthorization is in conflict with state law which strictly limits DDA activity to within boundaries. The purpose of the DDA as per the municipal code is this: “….To create a public body corporate to act in the best interests of the city to halt property value deterioration, increase property tax valuation where possible in the business district of the city, eliminate the causes of that deterioration, and to promote economic growth pursuant to Act 197 of the Public Acts of 1975.”


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