The Ypsilanti Courier
A Heritage Newspaper
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Council members eye Water Street, income tax plan
By Dan DuChene, Staff Writer
PUBLISHED: May 24, 2007
City Council members listened to two presentations at last week's meeting, one on the Water Street Project and, the second dealing with income tax proposals.
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Karen Hart, Ypsilanti's planning director, presented the Water Street situation to Council. Presenting them with all options, she said she will make a formal recommendation on how to act at City Council's next meeting, scheduled for June 5.
Faced with a total $1.4 million worth of payments in fiscal year 2009 and 2010, the city could lose more than $1.3 million worth of grants and loans if there is no development on the sight within the next six months.
She presented three issues with the project needing attention. The issues are the debt shortfall, private investment and barriers to redevelopment. Each area had several options.
In light of the debt shortfall, Hart presented three options to Council: The city would need to generate at least $2 million in cash to cover the city's expenses until Water Street generates taxes to pay for itself. To do this, she said the city could sell off assets (including Water Street itself), or present a millage proposal to voters.
The other option for the shortfall would be refinancing the debt a second time, which, she said, would increase the size of the debt, be hard to do in the current economic climate and possibly harm the city's credit.
"The whole point of assembling the land was to find somebody to develop it," Hart said after the meeting. "The primary goal is to find out how to get a project built there."
Other than attempting to issue a third request for developers, Hart said the city could hire a national broker to handle the site.
The company could find someone to purchase the property as a whole, separate parcels, auction to the highest bidder or some combination of those.
"I think we need an infusion of cash from somewhere else where they have cash," Hart said.
The remaining issues with Water Street are the current roadblocks to developing the site.
To make the site marketable, Hart said buildings needs to be demolished, contamination needs to be cleaned and rezoning could be done before a developer moves in.
Hart wouldn't comment on what she will recommend to council next month.
"I'm going to give them my recommendation," she said after the meeting. "I have some thoughts, but I haven't solidified them.
"There aren't a whole lot of realistic options. It's highly unlikely there will be enough development on the site to generate taxes this year. Whether we have development or not, we're probably going to have a shortfall anyway—in the front end."
Despite the challenges the city faces with Water Street, Hart said she still remains optimistic about the project's future.
"I look forward to the day when we can look back and forget," she said to council. "It's important to do it right, but there's many ways to do it right."
Council takes another look at income tax proposals
After Hart made her presentation, Jason Wicha, Ypsilanti's management intern, presented Council with the four proposed income tax plans.
Though the basics of the proposals remained intact, there were some added variables and discussion points.
The first plan calls for a 1 percent tax for residents and .5 percent tax for non-residents with a 2-mill property tax rollback and $1,000 exemption per household dependant. The second plan lays out a .8 percent tax for residents and .4 percent tax for non-residents with a $1,000 exemption and no property tax rollback. The third plan lays out the same rates and exemption as the first, but calls for a 4-mill property tax rollback. The final plan sets the same rates as the first, but with no property tax rollback and a $3,000 exemption.
Both at the meeting and after, officials addressed some initial complaints about the tax.
Steve Pierce, an opponent to the income tax, has said the property tax rollback would mean no real value for residents collecting the state's Homestead Property Tax Credit. He said the rollback would only help affluent property owners and absentee landlords in the city.
At the meeting, using SEMCOG figures of the average family income and property value, the impact on the tax credit was displayed as minimal, with an average $15 change annually.
However, renters in the city are concerned a property tax rollback, coupled with an income tax, will have a larger effect on them.
Denise Cutlip, a Downtown Ypsilanti renter, said her landlord would not pass along the savings of a rollback to his renters, but would raise her rent.
"Please understand," Cutlip said, "if there is an income tax my landlord's going to have to pay on the income he makes here. He will pass that along to me in the form of a raise in my rent.
"So, I will be taxed twice."
Another concern among some Ypsilanti residents is an income tax would just go to feed the mounting debt of the Water Street Project.
"That's never even been discussed," Ypsilanti City Manager Ed Koryzno said after the meeting.
Koryzno said the income tax is expected to go toward maintaining and possibly enhancing expenditures in the city's general fund.
Ypsilanti Mayor Paul Schreiber agreed. He said he hopes city services can be restored with an income tax passed.
A cut of the city's budgeted Ann Arbor Transportation Authority bus service, recreation dollars and 14 police officers lost from past year's numbers are all things Schreiber said he would like to see restored. He said the increase in services, coupled with a rollback, could attract people to the city.
"I think we need to treat (Water Street) independent from an income tax," Schreiber said.
Though Koryzno said an income tax had only been discussed to impact the general fund, he said he couldn't rule out the use of the tax for Water Street.
"I can't guarantee what the future will be," he said.
City Council has approved using general fund revenue for Water Street expenses twice in the past. Totaling $305,000, Council approved the amount to cover costs with previous developer Biltmore and consulting fees for developing a work plan for the site.
Matthew Harshberger, Ypsilanti's police chief, said he had heard rumors that the drop from 54 officers in the late 1990s to the current 40 was due the loss of a grant from the Clinton administration, and not completely due to a budget shortfall in the city.
"I do know that we had several grants going on in the 90s," he said.
"Those positions were cut down," Harshberger said. "I've been trying to find out how many of those positions were grant positions."
City Council will discuss the income tax proposals at its budget meeting 7 p.m. Thursday in council chambers. An ordinance with ballot language expected to be hashed out within the next two months.
The city hopes to have the issue on the Nov. 2007 ballot.
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