Showdown Over Budget Could Lead to DDA Shutdown

In a situation unique in Traverse City history, the Traverse City Downtown Development Authority (DDA) could face a potential shutdown this summer if city commissioners don’t approve the DDA’s 2024-25 budget – a scenario that could impact everything from city parking to downtown events to the farmers market to staffing.

City commissioners are scheduled to vote Monday on approving the city’s budget for the coming year, as well as the budgets of the DDA and Traverse City Light & Power – both of which are component units of government of the city. Each budget – which covers a fiscal year running from July 1 to June 30 – requires five affirmative votes to pass. At least three commissioners expressed dissatisfaction at a May 20 budget discussion with the DDA’s budget, prompting Commissioner Tim Werner to ask City Attorney Lauren Trible-Laucht to provide an opinion on what would happen if the DDA budget fell short of its required five votes and wasn’t approved.

Trible-Laucht subsequently provided a written opinion to commissioners, a memo kept confidential under attorney-client privilege. Mayor Amy Shamroe has requested that commissioners vote to waive that privilege Monday and make the memo public. In advance of its expected release, The Ticker asked Trible-Laucht whether the city could continue to operate without an approved DDA budget. While Trible-Laucht confirmed the city itself could, she declined to comment when asked if the DDA could keep operating, citing her confidential memo.

DDA attorney Scott Howard believes the DDA will face a de facto shutdown without a new budget in place by July 1. “That is definitely a concern,” he says. “It’s never been a situation the DDA has been in, but there is a requirement that the DDA pass and operate under a budget. And before the DDA can adopt it, it has to be approved by the city commission. If we don’t have a budget, we don’t have authorization to spend...the activities of the DDA become unfunded, and then the DDA can’t go forward.”

While the DDA would likely have emergency power to do things like make bond payments, most other areas of spending would come to a halt, Howard says. DDA Interim CEO Harry Burkholder says his understanding is that “it’s not that the DDA goes away, but we’re not allowed to allocate any dollars. And if we can’t spend any money, we can’t fulfill contracts.” Burkholder cites city parking, downtown’s dedicated police officer, trash removal, landscaping and maintenance, the farmers market, capital improvement projects, and downtown events among the areas that could be impacted by a shutdown. Howard adds “there’s a question as to whether you’d be able to spend even for wages and salaries,” a situation that could lead to temporary staff layoffs.

The city charter requires that budgets be adopted at the first regular commission meeting in June. Howard believes a crisis could still be averted if commissioners approve a budget by the end of June, when the fiscal year ends. That would still create a tight approval timeline, however, as the DDA board is set to vote on approving its budget June 21. It can only do so after the city commission approves the budget first. If city commissioners don’t muster enough votes Monday, they could potentially next take up the budget again at their June 17 meeting, which would still allow for a June 21 DDA vote.

Anything later than that, however, would either require the DDA to call a special meeting or carry the process into July, when shutdown impacts could begin, Howard says. Howard also expresses concerns about “audit implications” if the budget process extends past June. Not only is a shutdown scenario unique in Traverse City history, Howard says he’s “not aware of when something exactly like this has happened in the state.”

DDA budget concerns from at least two commissioners – Werner and Jackie Anderson – centered on the future of the DDA’s tax increment financing (TIF) 97 plan. The DDA is pursuing extending the TIF 97 plan, which would be renamed Moving Downtown Forward, for another 30 years as a primary funding mechanism for downtown infrastructure projects and operations. However, a citizen ballot initiative on the November ballot would require a public vote on any proposals to create, modify, amend, or extend TIF plans if approved. With the future of TIF 97 uncertain, Werner said he wanted to see “compromises” in the DDA budget that reflect “the possible winding down of TIF 97.”

Anderson also said she wanted to see a “plan B” or “alternative” budget similar to that proposed by Werner. “Perhaps it’s good to look at this as a pause,” she said. Anderson expressed concern about starting to spend money in the coming year on what could eventually be large, multi-year projects, such as engineering services for riverfront improvements as part of the large-scale Lower Boardman River Unified Plan. Anderson said she was sensitive to “developing plans that don’t get executed,” a scenario she thought possible if TIF 97 wasn’t extended.

Burkholder told commissioners any projects in the 2024-25 budget are either standalone projects or represent “small bites” toward larger projects that would deliver value on their own and don’t commit the DDA to anything beyond next year. When Commissioner Heather Shaw said she disagreed with certain spending categories in the budget, like snowmelt installation, Shamroe pointed out that individual projects come back to commissioners for approval before going forward, providing another layer of checks-and-balances. “Budgets are not just passed in a vacuum and then checks written and we see everybody in a year,” Shamroe said. Trible-Laucht told commissioners they couldn’t amend the DDA budget on a line-item basis but rather approve it up or down.

Several commissioners expressed concern about the implications of not passing a DDA budget. “It feels like we’re undermining the purpose of the DDA board and looking to micromanage it,” Mayor Pro Tem Mark Wilson said. Commissioner Mi Stanley said she believed commissioners weren’t applying the same level of scrutiny to the Traverse City Light & Power budget as the DDA budget, “even though one is a public utility and one is the heart and soul of our community and our economic center.” Added Stanley: “I don’t think it’s very likely that we wouldn’t pass a TCLP budget. I do think that we’re going beyond micromanaging to a direct attack on, and a desire to see implode, our DDA. Having lived through the nineties here and what it looked like before we had some of the revitalization, I certainly don’t want to see a return to that.”

DDA leaders expressed hope to The Ticker that the city and DDA will find a solution to the budget showdown. “I have full confidence that we can collectively come together to approve the DDA budget and move forward to address the immediate needs of this summer, as well as the ongoing and future projects and initiatives that help make downtown a functional and dynamic center for business and economic development and contribute to our unique sense-of-place,” Burkholder said in an emailed statement. DDA Board Chair Gabe Schneider says his board “has spent a lot of time working with the city and city commission to make sure our priorities and objectives are aligned,” and that it’s important to separate discussions about the long-term future of TIF from an annual budget focused only on the next year. “I’d ask that people consider this budget for what it is, which is investing in downtown in the year ahead,” he says.