Title
Resolution to Approve a Public-Private Development Agreement for the Arbor South Project and Authorize the Purchase of up to Three Parking Structures Subject to Availability of Funding (8 Votes Required)
Memorandum
Arbor South is a transformative urban infill project located northeast of the intersection of South State Street and Eisenhower Parkway that will redevelop approximately 17 acres of parking lots and Brownfields into a walkable center of housing and employment. By creating a critical mass of activity, it will catalyze continued redevelopment along the South State TC1 Transit Corridor, replacing acres of parking lots with a high-density, mixed-use neighborhood designed for walkability and seamless transit access.
The development envisions more than 1,000 residential units, including approximately 209 permanently affordable units, a full-service hotel, and roughly 100,000 square feet of ground-floor commercial space, all centered around programmable open space. The project will help fill a critical housing gap, attracting young professionals, empty nesters, and local workers who want to live closer to jobs and amenities.
Transforming one of Ann Arbor’s most automobile-dependent districts into a walkable urban neighborhood requires major infrastructure investment that cannot be supported by the private sector alone. To achieve this, the City and the developer intend to enter into a public-private partnership in which the City will finance, own, and operate three parking structures, while the developer constructs, owns, and operates the private components of the project City-issued bonds would fund the construction and/or acquisition of the parking structures and would be serviced by a combination of (i) tax increment revenue generated by the private development (pending approval of the Brownfield Plan) and (ii) net parking revenue from the new decks. A Special Assessment District (SAD) encompassing the project is anticipated to provide a backstop for any bond payment shortfalls.
This resolution approves a Public-Private Development Agreement (PPA) between the City and the Arbor South developer. The PPA outlines the terms under which the City would own and operate the parking structures and the corresponding undertakings and commitments of both parties. It serves as a roadmap for collaboration but does not obligate the Developer to build or sell, nor the City to purchase, any parking structure. Instead, the PPA establishes the process, responsibilities, and timelines for negotiating the specific purchase terms.
Because the PPA authorizes the potential acquisition of real property, its approval requires an affirmative vote of eight (8) Council members. The PPA also establishes a “not-to-exceed” amount for the City’s potential acquisition of the parking structures; any price over that amount would require further City Council approval.
Execution of the PPA triggers a defined series of next steps and timelines that must occur for the project to advance. Certain milestones, such as approval of the Brownfield Plan and Site Plan approval, apply to the overall project (the “Project Approvals”), while others, such as securing private financing, construction plan approval, and permit acquisition, apply to individual phases (the “Phase Approvals”).
Once both sets of approvals are achieved, the City and Developer will enter into a Commitment Agreement, which formalizes the terms for City purchase of the parking structure associated with that phase. Until such a Commitment Agreement is executed, neither party is contractually bound to construct, purchase, sell, or finance any structure.
This resolution authorizes the City Administrator to negotiate and finalize terms necessary to implement each Commitment Agreement, except for items requiring explicit City Council approval, which include:
1. Brownfield Plan and Brownfield Reimbursement Agreement: establishing the allocation of tax increment between the County, City, and Developer.
2. Bond Inducement and Final Bond Resolutions: authorizing issuance of bonds for each project phase.
3. Special Assessment District Approval: formally establishing the SAD to ensure sufficient tax revenue to service the bond debts.
Additionally, under the current financial structure, City Council is expected to separately authorize the issuance of City bonds to finance an anticipated amount of $18 million for the affordable housing building, backed by affordable housing millage revenue and/or rents.
Budget / Fiscal Impact: Approval of the PPA does not, in itself, have a financial impact on the City. Any administrative expenses necessary to implement the terms of the PPA that fall outside of existing departmental budgets, such as additional legal or consultant fees, will require separate Council approval.
No City funds will be allocated to this project until Council has approved both: (1) a bond inducement resolution authorizing the maximum bond amount for all phases of the project, and (2) a final bond resolution for each specific phase where bonds are to be issued. Certain funding has already been authorized for outside legal counsel and municipal financial advisory services. Additional funding may be authorized by Council through an adopted budget or other appropriation.
Staff
Prepared by: Joseph R. Giant, Director of Economic Development
Reviewed by: Milton Dohoney Jr., City Administrator
Marti Praschan, CFO
Atleen Kaur, City Attorney
Approved by: Milton Dohoney Jr., City Administrator
Body
Whereas, City Council has a goal to improve the affordability of living in the City by increasing the housing supply, particularly the supply of affordable housing;
Whereas, The Arbor South project proposes approximately 1,000 units of housing, including 209 units of affordable housing to be owned and operated by the Ann Arbor Housing Commission;
Whereas, The project includes additional benefits to the community, including enhanced bus stops, traffic infrastructure improvements, future easements for geothermal installations for the Ann Arbor SEU, and tax increment financing revenue for sewer infrastructure improvements in the area;
Whereas, The City’s participation in this project through the purchase and operation of up to three parking structures to be paid for with brownfield tax increment financing revenue will facilitate construction of the project; and
Whereas, Per Section 1:321 of City Code, the City Administrator has recommended that an appraisal is not necessary at this time because appraisals will be obtained prior to the purchase of each condominium unit containing a parking structure, once the cost of construction is determined;
RESOLVED, That City Council approves a public-private development agreement with the developer of the Arbor South development in substantially the form attached, and the Mayor and Clerk are authorized and directed to sign the public-private development agreement after final approval by the City Administrator and City Attorney;
RESOLVED, That City Council approves the purchase of up to three condominium units containing parking structures in the Arbor South development, consistent with the approved Arbor South site plan and the public-private development agreement, subject to availability of funding through City bonds, a budget appropriation, or other authorized funding source, and for prices not to exceed the following:
Phase 2 Parking Structure Condominium Unit: $ 59,977,430.00
Phase 3 Parking Structure Condominium Unit: $ 51,776,700.00
Phase 5 Parking Structure Condominium Unit: $ 54,635,870.00
RESOLVED, That the City Administrator is authorized to execute commitment agreements to purchase each parking structure condominium unit upon a determination by the City Administrator for each commitment agreement that (1) the requirements of the public-private development agreement are being met, (2) the purchase is prudent and beneficial to the City, and (2) the purchase price is appropriate, commensurate with the public benefits received, and within the not-to-exceed amounts stated in this resolution;
RESOLVED, That City Council approves the acceptance of all easements necessary for the City and the public to access the parking structure condominium units and for utilities and other necessary services for the parking structure condominium units; and the acceptance of all easements required by the approved Arbor South site plan as amended;
RESOLVED, That City Council approves the granting of all easements on, over, through, or beneath the City’s parking structure condominium units necessary for the operation of the Arbor South project, including utilities, access, and maintenance;
RESOLVED, That the Mayor and Clerk are authorized and directed to sign the commitment agreements, easements, and all other related and necessary agreements, including any agreement necessary for implementation of the Arbor South site plan, after approval by the City Administrator and City Attorney;
RESOLVED, That, per Section 1:321 of City Code, an appraisal is not necessary at this time, as appraisals will be completed at the time of each commitment agreement as provided in the public-private development agreement;
RESOLVED, That, regarding construction or purchase of the proposed public parking structures, per Section 1:324.5 of City Code City Council determines that the public-private development agreement and the commitment agreements provide the best value to the City in a manner that is consistent with the values expressed in the criteria set forth in Section 1:325(1) of City Code because the developer has agreed in the public-private development agreement to use scoring that is substantially similar to the City’s criteria and the proposed parking structures and related public improvements will be subject to a reasonable opportunity for competitive bidding using that scoring; and
RESOLVED, That the City Administrator is authorized to take all appropriate actions to implement this resolution, including execution of all appropriate documents and exercise of all determinations permitted to the City under the public-private development agreement and all commitment agreements, such as termination, exercise of options, satisfaction of due diligence, satisfaction of contingencies, or granting of extensions.
Sponsored by: Mayor Taylor