City Council divide over $4.2 million lot repurchase comes to head

Thursday, April 12, 2018 - 6:32pm

After failing to come to a consensus during its April 2 meeting, Ann Arbor City Council will vote Monday night on a $4.2 million repurchase of the so-called “Y Lot,” the former site of a local YMCA on Fifth Avenue, from local real estate developer Dennis Dahlmann. The proposed repurchase comes as Dahlmann is in the process of suing the city over the property, and some city councilmembers have accused their colleagues of being influenced by campaign contributions from Dahlmann.

The $4.2 million repurchase needs eight votes to pass. At the previous meeting, the vote was split 7-3, with purchase opposition comprised of Councilmembers Jack Eaton, D-Ward 4; Sumi Kailasapathy, D-Ward 1; and Anne Bannister, D-Ward 1. Councilmember Jane Lumm, I-Ward 2, was not present during the meeting but will likely be the deciding vote. Several councilmembers, including Lumm, declined to comment on the ongoing litigation or the upcoming vote, though Lumm has often sided with Kailasapathy and Eaton in split votes — most notably the controversial sale of the Library Lot.

City Council met twice during closed sessions to discuss the litigation and was unable to comment directly on Dahlmann, his proposed settlement or any possible resolution to the litigation.

However, Councilmember Chuck Warpehoski, D-Ward 5, expressed uncertainty about the resolution’s fate despite the majority of councilmembers voting for the repurchase.

“It’s not clear whether we have the votes necessary to repurchase the property,” Warpehoski said. “Right now, it’s all speculation as to what will happen with the property going forward.”

Eaton’s decision to vote against the purchase has led some councilmembers to question the effect of donors on objectivity, especially in light of the fact that Eaton’s and Kailasapathy’s campaigns have received contributions from the Dahlmann family as well as several of Dahlmann’s business associates. Warpehoski said outside funding can threaten democracy.

“Would they have been able to be elected in the first place if they hadn’t had that large amount of funding?” Warpehoski said. “Eaton in particular. It’s not just Mr. Dahlmann himself, but it’s been his business associates, (his) family members who don’t have the Dahlmann last name. I saw at one point that 35 percent of one of his (Eaton’s) elections was bankrolled by the Dahlmann family and their business associates. That’s a significant influence that one business interest has in an election. So even if Mr. Eaton himself isn’t influenced by that, the way that those contributions affect democracy as a whole is something of concern. I can’t speak to what’s going on in each individual’s mind, but when our election system is so swayed by one business entity, that’s a concern for me.”

Councilmember Zachary Ackerman, D-Ward 3, refused to personally comment on Eaton’s funding but instead took to Twitter.

“We may disagree on some issues, but I’ve always respected and understood their values,” Ackerman tweeted regarding Eaton and Kailasapathy’s funding. “This time, I am at a complete loss. Irresponsible.”


Eaton explained his situation, saying when he found out in 2017 City Council was likely headed to a confrontation with Dahlmann, he refused to accept Dahlmann’s contribution to his campaign.

“We both agreed that even though accepting that contribution would still be legal and would not be a conflict of interest, it just creates a bad appearance,” Eaton said. “We wanted to be more ethical than the law requires. I can assure you that a contribution to me does not persuade me, buy my vote or influence me. I have not been affected by the money he gave me.”

Eaton went on to explain many councilmembers have received funding and still voted on matters related to the businesses supporting them.

“If you look at the contributions that other members of council have accumulated over the years, many councilmembers who are interested in recapturing this property have in the past accepted contributions from developers then thereafter voted on matters that related to those individual’s commercial interest,” Eaton said. “It’s not a violation of campaign law, and it’s not unethical for you to vote on a matter that a contributor has an interest in.”

Eaton was the first member at Monday’s council meeting to speak out against the repurchase. Eaton says Dahlmann’s inability to complete the project within the deadline is something the council has been aware of since 2017, yet the council has only just begun to discuss financing the repurchase.

“We’ve known for a long time that it was unlikely he would fulfill his contractual process,” Eaton said. “We didn’t float the idea of how we were going to finance the repurchase. We haven’t talked about anything until it just suddenly came up immediately before the end of the contract. That’s just poor process.”

Eaton expressed concern regarding financing the purchase from the city’s reserve fund, explaining the purchase would cause the city’s reserve fund to drop below 15 percent. He claimed a healthy fund balances somewhere between 15 and 20 percent.

Dahlmann’s inability to finish the project by April is likely the result of the stipulations placed on the property by the council. When Dahlmann bought the lot in April 2014, the city placed several stipulations on the terms of the sale, which Dahlmann said prevented him from adequately developing it. Dahlmann’s development had to be reviewed and approved by the city’s design board to go under construction. Eaton said Dahlmann also claimed when he went to his lenders to borrow money for the project, they raised some significant issues about the bus parking surrounding the entire block. The buses use about three quarters of the street for parking.

The lot has an extensive history, and Dahlmann’s litigation is not the first complaint filed against the city regarding the lot. In 2007, development firm HDC LLC sued the city after the council cancelled the development agreement because of delays likely caused by asbestos concerns within the building that had to be torn down, as well as underground pollution. HDC LLC’s plans included a 13-story building and 14-story towers.

Now, Eaton argues the council never should have bought the property back in 2003.

“In a perfect world, the city would allow the transit center to buy it,” Eaton said. “Instead the city bought the property, blocking in the transit center.”

While Eaton argues the repurchase seems hasty, many councilmembers see the purchase as an opportunity to better the community, whether through capitalizing in the property’s significant increase in value — the property is said to currently be worth over $8 million — or through using the site for affordable housing. Warpehoski says he sees many advantages for the city through the site’s repurchase.

“One of the biggest advantages to repurchasing the property is that we are looking at about over $5 million to help address affordable housing needs, to help address potholes, to help address safety concerns,” Warpehoski said. “There is a lot we could do with that money to improve the quality of life for the community as a whole if it was sold without conditions. On the flip side, if we were willing to take less money for the property but use it as a site to provide affordable or mixed-use housing or to provide other public goods that we want to see in place. For me the chance to walk away from this ability to help fund or provide for community needs just seems like a poor policy decision.”

Similarly, Ackerman says the site’s repurchase offers an opportunity to follow through on community obligations.

“Besides vibrancy, a critical goal needs to be inclusivity,” Ackerman said. “Do we have a downtown where people who work downtown in our restaurants, in our coffee shops (and) in our bars can afford to live downtown? That’s not the case right now and it’s becoming increasingly less the case. As a result, I believe we as a community have an obligation to build housing where people work.”