Ludington City Council Special Meeting 10-24-19: Runaway TIF Train Rolls

[XLFD]

Introduction

Unlike most Ludington City Council meeting recaps, there is not a video for this one.  That's too bad, because the only chronicler of the events that happened there was the local newspaper's reporter, Noah Hausmann, the city clerk, and myself, and neither of us will ultimately agree on what actually transpired shortly after 5 PM on the afternoon of October 24, 2019 at Ludington City Hall's council chambers.  

The special meeting was called for the sole purpose of adopting an ordinance that approved the establishment of an amended Tax Increment Financing (TIF) Plan to replace the plan which would expire the following day.  Had they not passed the ordinance, any TIF plan passed in the future would have to adopt a new baseline which would give them considerably less revenue over the length of the plan; the old baseline looked at property values in the downtown district in 1989, the TIF difference between that and a new baseline of 2019 would be about $70,000 per year.

What are TIF plans?  These are obscure schemes adopted to effectively let a public or private entity 'tax' local taxing authorities, so they can complete projects that reportedly have a public purpose.  In this case, the local Downtown Development Authority (DDA) has had a TIF over the last ten years that has 'captured' about $70,000 per year in tax money proportionately divided between the city (COL, 45%), the county (COM, 27%), the community college (WSCC, 23%), and the transit authority (LMTA, 4%).  

That money relates to 12% of the money that the property owners of downtown district of Ludington pays those four authorities in taxes each year.  This money, if not taken by the DDA for their purposes, would be used by those authorities in providing their important public services.  This suggests that whatever the DDA uses the funds for, it better be as important as providing emergency services (fire, police, EMS, dispatch) and funding the jail, library, senior center, Oakview, police pensions, and soldier relief.

The Special Meeting Comment

The meeting started shortly after five, with Councilor Winczewski absent and Councilor Bourgette running late.  If you don't count the city beat reporter from the paper, I was the only person from the public to show up.  Six councilors, the mayor, the city manager, the city clerk and city treasurer and the TIF Plan author, Community Development Director Heather Tykoski-- eleven officials-- all seemed ready to pass the TIF Plan regardless of content or legality. 

I would get the chance to illustrate why it was deficient in both content and legality in the first public comment.  The main problem was I had eleven minutes or more of contentions and was limited to the usual three minutes.  I was able to finesse about a minute extra and here is the gist of what I had to say and some of which I wasn't able to get to, I provide some screen shots of relevant state law and the TIF Plan that was passed.

I covered the basic timeline of what the DDA, the council and the Development Area Citizens Council (DACC) had done in accordance with this plan.   I reiterated a main contention that the DACC needed to be established by the city council at least 90 days before the public hearing on a TIF plan, the council finally did that on September 9th, only 14 days before the unlawful public hearing on September 23rd.  

The DACC met only on September 20th, I was there, they talked for over an hour on downtown topics but never really discussed anything about the 45(46) year TIF Plan, and didn't have any votes for amending or recommending anything.  Their chairman, Melissa Boggs, would write an E-mail on October 10th speaking totally on behalf of the DACC said they unanimously agreed with the resulting elements of the plan and that 'since there were no comments on the plan made at the public hearing, no further changes were recommended'. 

If they had not met as a body since the public hearing, how did she know what the DACC recommended after the hearing?

The DACC was actually required by law to present its findings and recommendations within 20 days after the public hearing, but it cannot do that unless it formally meets to make those decisions and gives the general public the reasonable opportunity to be heard.  

The chairman's E-mail does not satisfy those sections of law, especially when one considers that the 45(46) year plan unveiled at the public hearing which would capture about $9.4 million did not match the 15(16) year plan capturing only $1.1 million that would come before the council in the ordinance.  Besides the 30 year difference and the projected $8.3 million difference in the two plans, the expenses and overall spending plan remained the same, roughly $5 million.  Section 214 of the TIF act explains what happens when a TIF plan needs to be modified after a public hearing:

Changing the plan that dramatically would require a second public hearing even if the first hearing hadn't been held 76 days too early like it was in this case.  And this TIF plan needed a bit more amending, since it didn't include a lot of material.  Look at section 217(2):

Now look at the TIF Plan considered on October 24th, where it says the development can be actualized by getting $68,700 per year, that would be only $1.1 million over 16 years:

But when you add up the $2.5 million for Legacy Park, $2 million for alleys and parking lots, and about $500,000 for miscellany (the plan under-adds the actual sum of the project by about $240,000), you have a $5 million project.  You cannot even finish half of Legacy Park if you just use their numbers.  This is probably why there is no timeline, no stages of construction or anything too specific, because the project is just economically impossible.  It costs over four times as much as it brings in and they have exactly no alternative in the plan to finance that $3.9 million deficit.

Because the project has no time projections, no stages delineated, and no financing of a severe deficit in revenues, the city council has a duty to reject the plan by section 219, which references the previous section where three deficiencies were noted:

Sadly, I stressed to the council that since a $1.1 million (at best) 16 year TIF Plan could not finance a $5 million project without a boost of $3.9 million which was not foreseen, financed, or explained by the plan they must send the plan back to the drawing board in order to follow lawful procedures.  They would not have it.

The Buttery Rebuttal

When the ordinance went up for discussion by the council (there being no other business), Councilor Johnson tried to interject that Legacy Park was in line to get funding from the Michigan Economic Development Corporation (MEDC) which (he never mentioned) recently had its budget dramatically slashed the funding for the type of program she is looking at was chopped by 60%.  Good luck in getting $2.2 million for reworking a street right of way, when their budget for the whole state is $16 million.

But that's even a baseless argument, you cannot put speculative money like hoped-for grants in these plans.  Maybe Heather is buying lottery tickets every week with DDA funds and expecting a big win sometime over the next 15 years.  Heather did divulge that the new engineers came back with a $2.3 million estimate for Legacy Park construction, just a few years after the original designer had said it would be a $780,000 project.  Numbers don't matter to some.  

City Attorney Richard Wilson pointed out that the other taxing authorities had some say in getting the number of years knocked down from 45(46) to 15(16), even though they had nobody speak at the public hearing, and I haven't found anything in the county's or WSCC's minutes that had those boards even consider the issue.  The city council definitely didn't.  This was a purely executive decision made in secret squirrel style, and the city manager ignored a FOIA request that was due the day before this special meeting asking for records concerning the dramatic change of the plan after the silent public hearing.  

Nobody addressed the multiple violations of state law or the insufficiency of the TIF Plan.  The ordinance unanimously passed.

Denouement

I pointed out the simple fact that the city's general fund would not be raided for $31,000 to $36,000 every year if the plan did not pass, this would go towards services and projects throughout the city rather than being limited to the downtown.  As such, it was an additional tax burden for those outside the district, as they inordinately have to cover that deficit.  I pointed out financial reports from 2008 and 2017 showing that the DDA was taking in and spending over 4 times as much as they did before this last amended TIF went into effect, but providing the same list of events.

Heather defensively said that the downtown district pays an additional millage that others do not pay.  Okay, but the DDA millage is totally swallowed up by the DDA, not spent on any other part of the city or for city services, so what's the point?  Brandy Miller got rankled by my use of the word 'burden', but maybe she can explain why the distant community college is losing $15,000 each year of tax income just because somebody wants to change James Street Plaza once again. 

As can be seen by the minutes of that meeting the only councilor asking pertinent questions was the fifth ward councilor, who asked why the plan was presented and ran through at the last moment, in typical Heather and Richard fashion, the DACC was blamed for not having a quorum on their first meetings, even though those 'DACC's were not lawfully formed or staffed.

Noah Hausmann would wait a day until he published a fairly long article in Saturday's paper, about 36 column inches worth of material.  As typical, they avoided any of the controversy over the subject relying only on reporting falsely on the plan; it was as if Heather wrote the story, it was that inanely slanted away from actual coverage.

[Du Wright]

Well that's the funniest graphics of a cat sitting upright eating vegetables? Can't quite figure out any symbolism, except the play on words.

One to Eleven is highly outnumbered, and there are probaby more where they came from. I highly commend your courage, and thanks for keeping up with this, XLFD. Did the new city manager come through with the FOIA request? Or was it more SSS (Secret Squirrelly Stuff)?

According to the minutes, Councilor Bourgette also asked some interesting questions. Maybe the light is starting to shine, especially when we will soon be squeezing pennies at the city budget talks. Why is the DDA spending like there is no end to the money?

[XLFD]

I was modifying a meme theme (the meme's history) that was popular this spring and has recently resurfaced this fall in a subtly different way by having the 'yelling woman' read a sign or license plate one way and the smirking cat reading it another way.  Being an editor at a prestigious Ludington website, I have to keep up with trending memes.

Councilor Bourgette asked an important question about the $2 million being spent on alleys and parking lots-- there is absolutely no description of what alley/lot is going to be handled nor any time for their replacement.  As I have said before, the worst downtown parking lots are measurably better than our average city street; I will add that some of the alleys downtown are in such rough shape because the businesses that use and rely on them have not bothered to go through the process that people outside the downtown go through often to pave or repave their alleys.  Ryan Reed and others have a 'DDA entitlement' mindset in that they believe the taxpayers or grants should pay (pave) for as many of their business expenses as possible.

Bourgette and Lenius should be a little skeptical of the DDA, being business owners (current and past) of motels that exist outside the DDA and who have still somehow survived without all of the subsidization.

[Du Wright]

Thanks for the explanation and lesson in memes, XLFD!

[XLFD]

No problem.  BTW, early this morning the FOIA request was finally fulfilled; here's a thanks to our readers at city hall.  It opens a couple of more lines of concern.

[AQUAMAN]

It's strange and funny, in a warped way of thinking, how these city officials keep up the illegal and unethical ways of conducting city business on a never ending basis. Doesn't matter how many times or years this continues, it goes on and on endlessly. Good reporting and factual info. again X, your reporting keeps us alert and informed of what really goes on behind the scenes everyday.

[Willy]

Many thanks for your work in bringing this to the public's attention ,X. It's to bad the City officials don't listen to you. They may actually learn something and do things the legal way. It's just so frustrating to see this kind of legislation and the nose in the air attitude by the people who are put in charge of keeping Ludington on the straight and narrow. When you think of it, this all boils down to one person, That person would be Ludington's legal council. Everything the CIty does is filtered thru him. He gives the green light for any and all actions taken by the City. The players come and go in this dance of debt that keeps spiraling out of control but legal council is the real problem and is the gum that keeps getting stuck on everyone's shoes. What Ludington really needs is good, honest legal representation. The problem is that the legal advise fits right in with the devious nature of all the corrupted people in charge who keep piling debt on the backs of taxpayers. 

[Freedom Seeker]

Too true on the Moneypit Park, Willy. Thanks for the graphics. Legal counsel does seem to be a problem, but will probably not get better until we have enough on the City Council who can understand a little legal common sense and move for change. The other directive is the lack of ethics, maybe not led by the city council, but a blind eye turned to when the light finally is exposed. Meanwhile those lacking ethics or too inept to do their job legally probably like things just the way they are.