Title
RESOLUTION TO PUT FORWARD THE DDA DEVELOPMENT AND TIF PLANS TO CITY COUNCIL FOR CONSIDERATION
Memorandum
TO: DDA Board
FROM: Maura Thomson, Executive Director, Ann Arbor DDA
SUBJECT: DDA Development and Tax Increment Financing Plan
The purpose of this memo is to outline key elements contained in the final draft of the DDA’s proposed Development and Tax Increment Financing (TIF) Plan. At the September 3, 2025 Board meeting the Board will vote to forward the Plan to City Council for consideration.
DDA PURPOSE – WHY DOES IT MATTER?
The pandemic illustrated that downtowns continue to be fragile and need support as they change and evolve. The DDA is the only funding tool the City has that is focused on supporting the downtown experience for all people and responding to evolving needs. Our work has been guided by a commitment to the City's values and using infrastructure investments as a tool to meet these needs.
CREATING A NEW DEVELOPMENT & TIF PLAN
The DDA is currently operating under a Plan established in 2003. A new Plan is necessary to respond to the evolving needs of downtown particularly in a post-pandemic world, to align with City goals and values, and to comply with updated statutory requirements. Work to create a new Plan began in June 2023. Multiple planning efforts, including the Downtown Area Circulation Study, the MDOT Jurisdictional Transfer Study, and the City’s Comprehensive Plan, and public engagement efforts informed the proposed Plan. Through these efforts 150 projects and programs were identified and then prioritized using the City’s CIP strategic value ranking system.
DDA BOUNDARY EXPANSION
Existing DDA Boundary
The DDA boundary was established in 1982 and consists of 67 blocks downtown. The DDA boundary must be contiguous.
Aligning DDA Boundary with Needs
Boundary exploration began by considering City values and priorities, infrastructure needs, and evolving trends adjacent to the existing DDA District. The DDA identified opportunities to achieve goals by investing in public spaces, the street environment, connections to the river and existing businesses, utilities, affordable housing, and maintenance of infrastructure that is unique to downtown (i.e., public seating, tree grates, pavers, streetlights, etc).
Recommended Boundary Expansion Areas
Two areas directly to the north and three areas to the south of the DDA’s existing boundary were identified to have the greatest needs and opportunities. Through further analysis and discussions with City Administration, two areas to north are recommended for boundary expansion (Expansion Area 1).
MAP A – DDA Boundary Expansion Recommendation
DDA TIF CAP ADJUSTMENT
TIF Purpose
The Ann Arbor DDA is funded by TIF - a public financing tool that municipalities use to leverage tax dollars for infrastructure investment within a defined district. Tax Increment Financing (TIF) is the only regional revenue-sharing tool in Michigan used for this specific purpose.
Ann Arbor TIF Status Quo – Limitations
A standard DDA TIF redistributes 100% of tax revenue growth due to inflation, property sale, and improvement to the DDA for reinvestment in downtown public infrastructure. The Ann Arbor DDA TIF was always limited, capturing revenue growth from property improvement only. In 2013, City Council implemented a cap, further limiting revenue growth by 3.5% annually starting in 2017. This limits the amount the DDA can invest in downtown and the funding leveraged to support evolving needs. The cap will reduce the funding available to invest downtown by $4M or 28% in FY26. Under this model, that percentage will be nearly 50% by FY33.
Aligning Funding with Need & Opportunity
The DDA began by considering City values and priorities, identified need, and funding models for other DDAs. Not many DDAs in Michigan differ from the standard TIF model, and the Ann Arbor DDA is the most restricted. The Grand Rapids DDA provides an alternative example that allows all taxing units to benefit while maintaining a focus on downtown infrastructure. Following a change to state law, the Grand Rapids DDA implemented a gainshare model – sharing a percentage of TIF with increases at set intervals. The amount shared begins at 10% and gradually increases to a maximum of 25%. By using a percent share instead of a cap, this approach ensures that everyone's revenue grows together.
Recommended Gainshare Model – Original and Expanded District
The DDA recommends shifting to a TIF gainshare model. In FY26, 28% of TIF revenue will be above the DDA’s cap. We recommend locking in the amount of TIF revenue distributed to the City and the other taxing units at 30%, creating a 70% / 30% share of the total TIF capture. Under this model, the DDA will capture a portion of future tax revenue, and everyone shares revenue growth and risk. This approach allows the DDA to help solve complex challenges downtown, including a full time Downtown Service Team, while ensuring no taxing units suffer revenue loss. City Council capped the DDA’s revenue through a change to City Code and has the authority to revise City Code.
Body
Whereas, Michigan Act 57 of 2018 requires all DDA’s create a Development Plan and TIF Plan (the”Plan”);
Whereas, The Ann Arbor DDA’s Plans were last updated in 2003 and expire in 2033;
Whereas, Downtown has evolved and a new Plan will address opportunities and needs in pandemic recovery and beyond:
Whereas, In June 2023 the DDA’s Capital Projects and Program Manager began conducting initial research on DDA’s across the state to inform the creation of a new Ann Arbor DDA Plan;
Whereas, To ensure a cohesive public engagement process and policy direction, DDA staff recommended using the City Planning RFP selection process and consultant team for the Plan work;
Whereas, In March 2024 the DDA Board authorized a contract with Interface Studios, the consultant team the City selected for Comprehensive Plan Services, for DDA Development and TIF Plan services;
Whereas, The DDA’s Capital Projects and Planning Manager led the project, with assistance from the public, community stakeholders, and City and DDA staff;
Whereas, The process to create the new Plan incorporated multiple City planning efforts, public outreach events, and key stakeholder meetings to identify needed projects and programs based on the City of Ann Arbor’s value-focused was informed by numerous and extensive public engagement opportunities to identify conditions, goals, and recommended implementation measures;
Whereas, The Plan will support the future vision for Ann Arbor as it continues to evolve and grow;
Whereas, The statutory process for Plan approval requires City Council to approve a Resolution of Intent to set the public hearing for the Plan;
Whereas, The Plan is currently under legal review;
RESOLVED, the DDA Board authorizes the Executive Director to put the DDA Development and TIF Plans forward to City Council for consideration, upon legal direction to do so.