Councils approve LDFA for Tecumseh, Adrian

On Tuesday, Sept. 2, both Ann Arbor and Ypsilanti city councils passed resolutions allowing the Adrian/Tecumseh SmartZone (TASZ) to become a satellite Local Development Finance Authority (LDFA). In order for the Ann Arbor/Ypsilanti SmartZone (AYSZ) LDFA to receive an extension, whether it is for five or 15 years, the LDFA had to collaborate with a satellite SmartZone. The AYSZ has three years remaining before any extension takes effect; however, the two cities are rushing to submit plans to the Michigan Economic Development Corporation (MEDC) first. Currently, there are five other cities applying for two available extensions in the state. The Houghton/Marquette SmartZone has already received an extension. “The existence of a SmartZone is just one economic development tool available to us,” Ann Arbor City councilwoman Sally Petersen said during Tuesday’s meeting. “In fact, it’s essential our city engages in economic development activity to promote job growth.”Petersen continued, saying the LDFA had served 231 unique businesses in the last five years, creating a self-reported 426 jobs. “We found the Adrian/Tecumseh application to be the superior one,” said Eric Jacobson, AYSZ board treasurer. “We were impressed they were committing $7.8 million toward their SmartZone over 15 years, focusing on agricultural innovation, which is very complimentary to what we are doing here in Ann Arbor. This is also an area that is attractive to the state.”The TASZ was in competition with Brighton in becoming the satellite SmartZone, which was decided on August 21 at a previous meeting of the AYSZ board. In its current plan, funds generated in Ann Arbor and Ypsilanti stay in those respective cities; however, the MEDC has mentioned they would like Ann Arbor to spend $3 to $6 million in Ypsilanti, even though the city produces no TIF [tax increment financing] capture for the SmartZone.“So they are not doing us a favor,” said councilwoman Sumi Kailasapathy. “Basically, they are saying take your dollars and transfer them there.” Kailasapathy noted that Ypsilanti has three seats on the AYSZ board, generates no TIF capture, yet may receive $3 to $6 million going forward. Jacobson iterated that was a possibility, but clarified that the TASZ would not be receiving any funds from the AYSZ. Councilman Stephen Kunselman said the other communities running, like Detroit and Kalamazoo, could be more deserving than Ann Arbor because they have a need for job creation. He said Ann Arbor benefits from University of Michigan’s economic engine in the area, calling the pursuit of an extension greedy. “We’re in this as a state,” Kunselman said. “If Detroit doesn’t get better, we don’t get better.”Councilwoman Jane Lumm countered saying Tecumseh and Adrian need the development as well. Lumm did express concern that she hopes the AYSZ would listen to council’s concerns about the need for greater transparency in the future. Councilman Mike Anglin also thought a smaller-step should be taken with pursuing the five-year extension. Councilwoman Sabra Briere clarified that if the AYSZ does not receive the 15-year extension, then the five-year plan was a fallback option. Councilman Jack Eaton said he would also support a five-year extension, even though it was in the hands of the MEDC and Michigan State Treasurer, saying council has only seen “fuzzy” justification for the AYSZ’s results, and planning for 15 years in the future is speculative for the price tag. Ann Arbor Mayor John Hieftje approved of allowing the TASZ to join as a satellite SmartZone. He even went as far to say that spending some AYSZ money in Ypsilanti would be a good idea, that it would “lift all boats,” he said. Even with dissenting votes from Anglin, Eaton, Kailasapathy and Kunselman, the resolution passed with seven supporting votes. Now approved, a TIF plan will be created in partnership with the MEDC before final approval on the extension. A SmartZone operates by capturing the incremental tax revenue in local taxes along with the six percent school tax.Money captured from the incremental tax revenue can be used for public right-of-way projects that directly benefit the business in that district. The money captured from the six percent school tax can be used to entice new companies to the area with training and support programs. The money taken from the school is replaced by the state, so there is no detrimental effect on school revenue. The TASZ will operate independently of the AYSZ.