SmartZone Program Gets Ann Arbor Nod For 15 More Years

Revenues derived from yearly property value increases within the downtown districts of both Ann Arbor and Ypsilanti will continue to be reinvested in growing the local economies of both cities by helping private companies create jobs in the Ann Arbor/Ypsilanti “SmartZone” after the city council decided to extend the program another 15 years this week.

The program began in 2002 with an estimate to create 700 highly desirable new economy jobs by 2018; a goal that the program is largely on track to realize with a tally of 646 jobs created in the Michigan Economic Development Corporation designated SmartZone encompassing the largest business centers within Washtenaw County.

These areas within the SmartZone, including the Satellite SmartZone of Ypsilanti’s Downtown Development Authority district, have experienced considerable property value increases and will continue to see exponential increases according to projections for TIF funding from the property value increases within the districts.

Since 2002 the TIF has raised $21 million in financing from the district’s property value increases, while the projection for the next 15 year period of the program starting after 2018 is for more than $60 million in funding from which more than 1,600 jobs could be created for the state, not necessarily the Washtenaw itself in the longterm as the literature provided to Ann Arbor City Council from the Local Development Finance Authority admits that while few companies fostered by this specific program move out of state, many do move from Ann Arbor-Ypsilanti to elsewhere in the state of Michigan.

There was some philosophical debate among council-members as to the reason for property value increases within the area where the LDFA captures these TIF monies for assistance to fledgling private entities through outreach efforts led by Ann Arbor SPARK, or in some cases indirectly by funding improvements in the district such as investing beyond what the private sector does in pushing the boundaries of high speed communications infrastructure that these companies would rely on to operate.

“These are monies that if we didn’t otherwise have a SmartZone, we would otherwise not receive,” said Council-member Graydon Krapohl, who serves on the LDFA board. He argued that these public dollars derived from the property value increases within the district go into something like SPARK and come out the other end with accompanying private funds and value adds from such organizations that further bolster the local private sector and also further accelerate the value of the district’s property.

smartzone
smartzone

Sumi Kailasapathy and Jack Eaton, both of whom opposed the extension, pushed back against Kraphol’s notion.

Kailasapathy highlighted the portion of the LFDA extension document that brought up the number of companies that leave the region in recalling a meeting two years ago where an entrepreneur mentioned selling his company that SPARK and the LDFA supported in its infancy for $29 million.

“That’s problematic for me,” she said. “This is like socialization of cost and privatization of benefits. You walk away, ‘Oh, this is my money – I made it.’ No, you made it on the backs of taxpayers, so I’m sorry this is not my model of how society should be run.”

Eaton questioned how much credit LDFA and SPARK are entitled to for Ann Arbor’s strong economy.

“We would continue to have a healthy economy even if we didn’t have the LDFA and SPARK,” he said. “So I really am concerned about making that long of a comittment and that large of a dollar commitment to something that may or may not be necessary. This community has a rather healthy venture capital sector, so even if the public sector didn’t throw money at economic development, there’s plenty of investment money in this area.”

Their colleague Jane Lumm, who in the past might have joined her two fellow council-members in their opposition to the extension, indicated she would vote in favor of it due to her previous concerns about transparency and reporting being addressed over the course of the first LDFA TIF term began with the program’s inception.

“I believe it’s in the best interests of Ann Arbor to extend the SmartZone and LDFA,” she said. “I’m confident we’re past the transparency and reporting challenges now that LDFA and Spark have heard the concerns and what we’re seeing is the frequency and quality of the reporting is much improved.

“I am convinced by not taking advantage of this opportunity for an extension we would be disadvantaging Ann Arbor and Ypsilanti vis a vis other cities and communities in Michigan, and potentially placing our future economic growth at some risk.”

Council-member Chuck Warpehoski characterized the program as a necessary hedge against future departures or closures of large employers such as Pfizer and Borders, both of which left the region hurting in the past decade and beyond.

“I do believe that if we don’t invest in the economic health of our region, we wont see the growth (and) we wont see the job creation that helps us fund our schools, that helps us fund our solid waste millage, and helps us fund our community services,” Warpehoski said, adding that he appreciated the fact that Ypsilanti’s zone gets 10 percent of the overall TIF capture regardless of whether or not the property value increases that the TIF funding capture is derived from warrants that apportionment.

Council-member Ackerman pointed to the $60 billion spent in public money on university research in the county as something he considered when voting to extend the LDFA’s TIF. Of that amount only $4 billion in funds was from private entities. He believes this balance will shift away from public funding due to the current political makeup of the federal government in the wake of the 2016 election.

“Of those public dollars most came from the Department of Defense, Department of Energy, the National Institute of Health and the National Science Foundation and with the current administration all of those entities except for one are seeing or could potentially see drastic cuts,” Ackerman explained. “In that void it is not unlikely that private institutions are stepping in to fund public research, and when you look from computer science to biomedicine to energy policy, private interest in public research is a threat to impartiality.”

Aside from keeping research of important advances in technology close to the benefit of the public as a whole, Ackerman said he supports the extension because the program it will support is an important carrot-on-a-stick to keep companies in the area.

“When you are an emerging company coming out of Michigan, you’re going to go where the money is, and the only reason that money is coming here is because companies have been steadfast in deciding to stay here and part of the reason is we have an eco system and a local economy that’s vibrant and part of that is being intentional and part of that is showing that there is a public partner here,” Ackerman said.

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No, Eaton, Sumi.

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