Title
Resolution to Authorize the City Administrator to Negotiate City Participation in the Arbor South Project, Including Potentially Owning, Operating, and Bonding for Parking Decks
Memorandum
This resolution pertains to the Arbor South development project, which proposes 1,000+ units of multi-family housing, including approximately 210 units of affordable housing, and 30 condominium units. The development project also includes a 150-key hotel, and 85,000 square feet of commercial space. The land is privately owned, and zoned TC1. It represents $469M in private investment.
To facilitate the development, the City is being asked to commit to acquire and develop in phases three parking decks which would be funded by issuing, in three separate issuances, limited tax general obligation bonds ($146M est.), and to operate the decks going forward. The development team is also requesting the City and County support a Brownfield Plan to capture tax increment from the site to fund the retirement of the bonds with any excess TIF being used to offset the cost of additional public infrastructure. The TIF is expected to generate approximately $304M over the 30-year payback period, based on the proposed development program. In support of the request for a Brownfield TIF, the development team is also proposing the establishment of one or more Special Assessment Districts, which would encumber the privately owned components of the project, to protect against a potential shortfall in TIF revenue during the lifespan of the project.
The development team will facilitate the construction of the structured parking decks. The developer and the City will negotiate the point in time at which transfer to the City takes place, but ultimately the City would pay the construction costs as part of its purchase of the decks, take ownership of the parking decks, and operate them going forward.
Budget/Fiscal Impact: Participation in the project will result in the City’s commitment to issue bonds to own the parking decks (and cover the cost of construction) in a phased approach. The City will then be responsible for management and administration of parking operations at the decks, for which the City will likely create a separate parking authority. The financial analysis reviewed by a third party, PFM Group Consulting LLC., using assumptions and financial forecasts, has projected that the forecasted parking revenue and TIF capture is sufficient to cover debt service and parking operational costs, including infrastructure upgrades in the project area. Establishment of one or more Special Assessment District(s) on the development is expected to provide a financial backstop to ensure sufficient revenue to service the parking structure bonds should TIF revenue fall short.
Staff
Prepared by: Milton Dohoney Jr., City Administrator
Reviewed by: Atleen Kaur, City Attorney
Marti Praschan, CFO
Approved by: Milton Dohoney Jr., City Administrator
Body
Whereas, TC1 zoning encourages the densification of certain Ann Arbor corridors;
Whereas, The development of housing options of all types is being encouraged by Council to help address the housing shortage;
Whereas, City of Ann Arbor policy calls for the creation of placemaking;
Whereas, The gas station on property that is part of the Arbor South development would likely qualify the development for a Brownfield TIF;
Whereas, The Arbor South proposal is pending Planning Commission review but is expected to meet TC1 zoning requirements;
Whereas, The analysis conducted by PFM indicates that there is sufficient TIF and forecasted parking revenue to cover the debt service on the bonds and enable the City to support area infrastructure needs beyond just the Arbor South project;
Whereas, City of Ann Arbor participation has been requested in the form of a commitment to construct, own, and operate the parking decks, and to fund the costs of construction of the parking decks by issuing limited tax general obligation bonds;
Whereas, The parking decks, if ownership is agreed to by the City, would be built over time in a phased approach to coincide with other elements of the Arbor South development;
Whereas, The City administration sought third party consultative assistance on the feasibility of owning and operating the parking decks;
Whereas, The City was advised that owning and operating the parking decks represented the strongest participation by the City for the facilitation of the Arbor South project; and
Whereas, The City of Ann Arbor will endeavor to negotiate a separate development agreement and other related agreements with the development team and bring them forward to City Council for consideration;
RESOLVED, That the City Administrator is authorized to enter into the next stages of negotiating appropriate agreements with the developer of Arbor South, including a development agreement, and to present those agreements to Council for consideration;
RESOLVED, That City Council authorizes the City Administrator to take the necessary steps to bring to Council multiple phased bond issuances (currently estimated at three) at the appropriate times to support construction of the Arbor South parking decks;
RESOLVED, That City Council authorizes the City Administrator to take the necessary steps to develop one or more Special Assessment District(s) on the Arbor South development to protect against any potential future shortfall in Brownfield TIF revenue and ensure sufficient revenue to service the Arbor South parking deck bonds without using General Fund money, and to present the Special Assessment District(s) to Council for approval; and
RESOLVED, That the City Administrator is authorized to take all necessary actions to implement this resolution.
Sponsored by: Mayor Taylor