ANN ARBOR, MI — A five-story condo development rejected by City Council last September is being proposed under new zoning and received initial approval this week.

Still in question, though, is how much money the developer will have to contribute to Ann Arbor’s affordable housing fund to qualify as a planned unit development, also known as a PUD.

The developer argues the amount requested by the city — over $300,000 — could kill the project, and city officials are now taking a closer look at that concern.

Council voted 11-0 Monday night, April 6, to give initial OK to PUD zoning for The Garnet, a 10-unit building proposed just north of downtown at 325 E. Summit St.

A vote on final approval is scheduled for May 4.

While the development remains much the same as when it was rejected last year, it’s now proposed as a PUD project, which requires public benefits.

That’s to appease council members who previously argued “campus business district” zoning wasn’t appropriate.

The PUD regulations state 15% of residential units must be dedicated as affordable housing for people with incomes at or below 60% of the area median, or a payment in lieu can be made — calculated based on a city formula.

The developer offered to contribute $88,200 when submitting the new PUD plan, based on requirements in place at the time the development was initially proposed.

But city staff has determined $317,331 is required since the PUD proposal was submitted after city code changes increased the affordable housing contribution requirements.

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The project is proposed by a company registered to local developer Kelly Anderson of KLA Development.

The company paid $900,000 to buy the property in 2018 and development costs are estimated at $4.5 million.

City officials have heard from the developer, via project architect Brad Moore, the project would not be economically viable if a $317,331 payment is required.

As they initially approved the PUD proposal Monday, some council members expressed hopes a solution can be worked out before final approval. Some questioned if the payment amount could be reduced, though that’s not settled yet.

Planning staff recommended denial of the PUD proposal, saying it doesn’t meet the intent of PUD zoning and the benefits could be accomplished under the campus business zoning.

The Planning Commission recommended approval in February, based on the fact that the developer was offering other benefits not outlined in the PUD regulations.

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The developer has agreed to pay for an environmental cleanup of the property, estimated to cost between $200,000 and $300,000.

The proposed building also includes a green roof to help reduce the city’s “heat island effect” and provide a pollinator-friendly environment, in addition to reducing the building’s cooling and heating load and carbon footprint.

Along with at least 18 bicycle parking spaces, the building would include a minimum of 11 car parking spaces, each prepped for electric vehicle charging stations.

The development team argues the project puts new city residents close to jobs, shopping, public transit and other venues and amenities, taking cars off the road, reducing traffic congestion and carbon emissions.

It also argues housing density is a public benefit since the city has a housing shortage.

Significant improvements to onsite stormwater management also are cited as a benefit.

Council Member Jane Lumm, I-2nd Ward, said she’s glad to see the project back as a PUD and she thinks it offers sufficient benefits.

Though he supported the PUD request, Council Member Jeff Hayner, D-1st Ward, said he thinks some of the listed benefits can’t lawfully be used to justify PUD approval and he’s concerned about setting a precedent.

Council cast a split 5-5 vote on the previous zoning request and rejected the project last September, though not because of concerns about actual building plans.

Several neighbors sent letters of support for the project, but council members had concerns about campus business zoning outside the University of Michigan campus area.

Council Member Julie Grand, D-3rd Ward, suggested Monday night the development should have been approved last September and the city instead has given the developer the runaround, driving up costs.

“This whole process just honestly kind of breaks my heart. Everyone liked this project,” she said.

“This is a weird, bizarre scenario in which a proposal that residents liked, that many members of council liked, that respected the historic nature of its context, cleaned up $300,000 worth of pollution on site and provided some added housing to the Kerrytown neighborhood in a green and sustainable manner was not approved based on preferences around zoning,” said Council Member Zachary Ackerman, D-3rd Ward.

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Ackerman asked the city’s staff if there’s a legal means to reduce the developer’s affordable housing contribution.

“Through the ordinance requirements, there is not,” City Planning Manager Brett Lenart responded.

But if council is interested in reconsidering the formula for calculating contributions, it could consider ordinance changes, Lenart said.

“The formula that was recently adopted by City Council from the Housing and Human Services Advisory Board, that could be reconsidered,” he said.

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Lenart said the city’s planning staff didn’t come to its position lightly, and he acknowledged it has a significant impact on the project. He said he’d continue discussions with the city attorney’s office and work to “uncover every possible stone."

Grand said she hopes this is a lesson that a PUD is not always the solution if council doesn’t like a particular zoning.

“I think we have to recognize our own contributions to the rising cost of housing when we drag a process out like this,” she said, expressing hopes the city can find a solution.

“Because I think it’s a great project and it’s exactly the kind of missing-middle development that also has a really significant benefit of doing environmental remediation.”

Council Member Anne Bannister, D-1st Ward, also shared concerns about the city’s process and whether it’s working effectively for developers trying to do modest-size projects.

“This isn’t just the only project that has had … big problems, lots of time spent engineering, working, having meetings for years to reach a brick wall like this,” she said.

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