Traverse City commissioners rejected a proposed TC Downtown Development Authority (DDA) budget Monday for the coming year – starting the clock on a potential downtown shutdown that could begin right as summer tourism peaks during the National Cherry Festival. A confidential memo from City Attorney Lauren Trible-Laucht released Monday confirms that unless a new budget is approved, the DDA can’t expend any funds starting July 1 – including paying employees, putting on events, and covering contracted services ranging from running the farmers market to collecting garbage to managing citywide parking.

Three of the seven commissioners – Tim Werner, Jackie Anderson, and Heather Shaw – voted ‘no’ on approving the 2024-25 DDA budget, blocking its passage since the motion required five affirmative votes to pass. Commissioners approved all other aspects of the city budget, including the general fund budget and the Traverse City Light & Power budget. Werner, Anderson, and Shaw previously expressed dissatisfaction at a May 20 meeting about the proposed DDA budget, with Werner requesting an opinion from City Attorney Lauren Trible-Laucht on what would happen if commissioners failed to approve it.

Trible-Laucht’s written opinion – shared with the board in an attorney-client privileged memo – was released Monday after commissioners voted to waive their privilege and make it public. Trible-Laucht wrote that the city charter requires commissioners to approve all city budgets – including the DDA budget – by the first Monday in June. The board’s failure to approve a DDA budget Monday, accordingly, means commissioners are now in violation of the city charter.

Trible-Laucht continued that both the city charter and Michigan’s Uniform Budgeting and Accounting Act state that funds “may not be expended except as authorized by the approved budget.” For the purposes of budgeting, both the DDA and Traverse City Light & Power are treated as city departments, she wrote. If commissioners fail to approve a budget, essential services like police, fire, water, and wastewater could “continue to function under the previous budget,” Trible-Laucht wrote. “However, DDA services and possibly some TCLP services are not essential.”

That means the DDA cannot make any expenditures “unless and until a budget was adopted,” Trible-Laucht said. “This would include paying employees, projects, contracts, events, and so forth.” The wide-ranging ramifications of a DDA shutdown prompted downtown business owners, DDA board members, and commissioners who supported the budget to plead with the three opposing commissioners to clarify their positions or change their votes Monday – in addition to more than 100 emails sent ahead of the meeting to the board.

My Secret Stash owner Karen Roofe, who also sits on the Downtown Traverse City Association (DTCA) board – the voluntary merchant association that contracts with the DDA for its help with events, downtown gift certificate sales, and other promotional efforts – circulated a petition called “Save Downtown Traverse City” highlighting programs that would be at risk under a shutdown. The list includes everything from the farmers market (including WIC and senior food programs) to parking enforcement to trash removal to downtown events. Roofe told commissioners Monday that downtown merchants in the DTCA were reliant on – and paid fees for – DDA staff to help run those programs. “If the city fails to renew DDA funding, our residents, visitors, business owners, and entire region will pay the price,” the petition states.

Red Ginger owner Pam Marsh, a former DDA board member, told commissioners that business owners put their “blood, sweat, tears, and money into downtown” and “count on our local government to stand up for us, to represent us.” After both Werner and Anderson said they were unhappy with the DDA budget because they felt it didn’t reflect the reality that tax increment financing (TIF) 97 could soon go away, Marsh said commissioners were putting “too much focus on the TIF part.” TIF 97 will remain in place through at least 2027, Marsh noted, and contains funds that still must be spent over the next few years even if TIF 97 isn’t renewed. In the meantime, “we need a budget to continue moving forward,” Marsh said.

Debbie Hershey, who is chair of the city planning commission but spoke Monday only as a city resident, said there was no “logical, legal, or moral reason” for commissioners to reject the DDA budget. Flirting with a shutdown is a path that will “continue to divide the community,” Hershey said. DDA board member Ed Slosky said the DDA has been discussing its budget in open meetings since February and said no commissioners had reached out before now to share concerns, nor did they ask Mayor Amy Shamroe – the commission’s representative on the DDA board – to pass along any criticisms. “To me, it’s almost like a financial circus,” he said.

Echoing comments from Werner and Anderson, Shaw said she also wanted to see a budget “that seriously considers the possibility that TIF 97 won’t be extended.” Shaw also objected to using TIF funding for marketing contracts she believed would help the DDA “campaign” for TIF 97’s renewal. Multiple DDA representatives objected to that characterization, noting it’s illegal for the DDA to campaign on such an issue. The DDA can distribute informational material, however, educating the public on what TIF is and how it’s used. That was the intent, DDA Vice Chair Scott Hardy said, adding that if there’s “one issue in this community” that needs clearer information around it, it’s TIF.

Shamroe said Shaw’s concern about how marketing was being funded was at least a concrete example of something that could potentially be addressed in the DDA budget within the tight four-week deadline. She pressed Anderson and Werner to be more specific in their criticisms so that DDA staff and board members could try and address their concerns and get to a budget that can be approved by June 30. The city commission won’t have a regular meeting again until June 17 and must approve the budget before the DDA board can meet and vote to adopt it. “Please help us in the process to not shut down the downtown, and include the entire public in what is being sought here,” Shamroe asked the commissioners.

Anderson and Werner declined to elaborate further on their concerns, with Anderson remaining silent and Werner only reiterating that he’d met with DDA representatives to share his views and that they “know where I stand,” adding his position “is very well known.” Werner also scoffed at the idea of a shutdown, saying the responsibility was on the DDA to “read the room” and get to a budget that can be approved. “They will find a way to get to five votes,” he said.

Shamroe, however, said she was “genuinely concerned about us meeting that mark” of commissioners and DDA board members agreeing on a budget in four weeks. “I do not guarantee there will not be a shutdown,” she said. City Manager Liz Vogel said that to help expedite the process, commissioners should email her specific concerns with the DDA budget, which she will compile and get to DDA Interim CEO Harry Burkholder.

The potential shutdown could come up again as a topic Friday, when three candidates – including Burkholder – will interview to become the next DDA executive director. “Facing a potential shutdown of the DDA, even if (the candidates) might not take up the position until after this has been hopefully resolved, I’d expect they’d be aware of what’s going on,” Shamroe told The Ticker after the meeting.