Tim Parham & Ben Stupka
UP 504/Campell
March 21, 2007

Are DDAs Being Used In Areas without Downtowns?

Background­­­­­______________________________________________________________

The State of Michigan has enabled its municipalities to use several different economic development programs as tools for revitalization.  One of the most powerful tools is the ability to establish a Downtown Development Authority (DDA).  This allows a municipal governing body to establish an autonomous board that uses tax increment financing and taxing authority (usually 2 mills for all businesses in the district) to direct investment and marketing in their downtown areas.  The legislation restricts the use of the tool to areas experiencing depreciation in property value, but does not specify that it be in a downtown area.   However, an Attorney General’s Opinion from 1989 states that “a municipality may establish a downtown development authority upon a factual finding of a deterioration in value of a significant number of parcels in the downtown district within which the authority is to exercise its powers.”   This confusion is the center of our research inquiry. 

Many municipalities in Michigan are in dire need of this tool to help them finance the maintenance of infrastructure, attract businesses and concentrate revitalization in their downtown.  However, it is apparent that many newly formed and non-urban areas are being allowed by the State to use the same economic development tool and in many cases this has led to the construction of a “downtown” where there previously was not the population or infrastructure to support one.  The unchecked proliferation of DDAs is a contributor to urban sprawl because it allows areas experiencing new growth to unnecessarily build “downtowns” in areas that have few if any of the characteristics of a downtown, attract businesses and inevitably residents away from the revitalizing downtowns.   

Overview________________________________________________________________

We intend to create a variable to measure the presence of existing downtowns in 30 randomly selected DDAs in Michigan.  This variable will allow us to begin to analyze the broad relationship between state-wide tax incentive programs and urban sprawl.  We plan to compare the presence of a downtown to the density and population growth/decline in the area.  The end result will be data that shows whether DDAs are being used to fund revitalization of existing downtowns, as they were intended or new growth in areas without any downtown at all.

Research Question:  Are municipalities without existing downtowns using DDAs?

This is an important question because DDAs are a powerful economic development tool in Michigan.  Their use across a broad spectrum of municipalities has created an imbalance in the ability of distressed communities to compete against newly formed downtowns.  Good Jobs First, a Washington DC-based economic development research group has studied similar inefficiencies of various tax abatements available in Michigan, but they did not study DDAs. 

Research Hypothesis:  Areas with a low “downtown presence score” will have a higher growth rates and lower housing density then areas with a high “downtown presence score”.  This should provide evidence that DDAs should be reserved for areas with existing downtowns; rather than being used to help areas that are already growing.

Methodology_____________________________________________________________

Unit of analysis: Sample of 30 Michigan DDAs

Model:  DDA downtown presence score
This will include:

• A score based on municipal distinction (i.e. city, township, village)

      - Township = 0
      - Village = 1
      - City = 2

• The DDA being within a distinct downtown central business zoning district (municipal zoning ordinance)

      - No Central Business District (CBD) in zoning ordinance = 0
- DDA not with in downtown Central Business District (CBD) zoning district = 1
      - DDA within downtown CBD zoning district = 2

• Dominance of pedestrian-oriented infrastructure (visuals from municipal websites and personal knowledge of the areas)

      - Little to no pedestrian-oriented infrastructure = 0
      - Pedestrian-oriented infrastructure (crosswalks, sidewalks, etc.) = 1

• Presence of the municipality’s public buildings within DDA boundaries (master plan)

      - No public buildings within boundaries = 0
      - Public buildings within boundaries = 1

• Diversity of business uses within the DDA boundaries (master plan)

      - Single-use businesses = 0
      - Multiple business uses = 1
      - Multiple uses including residential = 2

• DDA area is in the geographic center of the municipality (Google Earth)

      - Not in the geographic center = 0
      - In the geographic center = 1

*The available data will dictate if and/or how we weight the scores.  It may be necessary to adjust the scoring to more accurately depict the most important indicators of downtown presence.  Weighting the scores differently will also allow the disparity between DDAs scores to be evident.

The DDA downtown presence score will assign a value to each variable.  The sum of these values will indicate the overall presence of a downtown where the DDA boundary lies.  The higher the score the more actual the downtown is for any given DDA.  For example, if a DDA is in a township (0), is not in an area with a distinct downtown zoning district (0), does not have pedestrian-oriented infrastructure (0), does not have any of the municipality’s public buildings (0) and has only a single-use business service (0), and has DDA that is not at it geographical center (0) will score a zero. 

Sources:

• Maps of DDA boundaries
• Municipal Zoning Ordinances and Master Plans
• Citizens Research Council
• Michigan Economic Development Corporation
• Google Earth and other Mapping Software

Possible Sample:  In determining the sample we will reserve the right to select or deny a DDAs inclusion in the project based on the availability of information from that municipality.  It has become evident that while some municipalities have a DDA they may not have a web page for the authority.  Furthermore, we believe that some DDAs may be harder to obtain information about than others due to geographic location, population size, and other factors. 
Current Sample list:

• Ann Arbor
• Alpena
• Battle Creek
• Blissfield
• Calidonia
• Clay Township
• Delhi Township
• Escanaba
• Farmington
• Grand Rapids
• Greenville
• Rockford
• Holly
• Highland Township
• Ithica
• Jonesville
• Kentwood
• Kalamazoo
• Lansing Township
• Ludington
• Milford
• Mt. Clemens
• Northville
• Paw Paw
• Plymouth
• Portage
• Royal Oak
• St. Louis
• Troy
• Ypsilanti

Final Results:  We want to test the downtown presence score against each municipality’s population growth and housing density.  We predict this will show that areas without a downtown by our definition will experience higher growth and have lower density.  This will show that DDAs are being used in areas that 1) are growing and 2) do not have existing downtowns.  This discovery will call into question the requirements for a municipality to use DDA.