Washtenaw County Board of Commissioners working session (April 22, 2010): At their Thursday meeting, commissioners were briefed on proposed changes to the county’s Natural Areas Preservation Program, which would help the county protect more land that’s being used for farming.
The proposal comes as the board prepares to place a renewal of the 10-year NAPP millage on the November ballot. The current millage, which raises about $3 million annually to preserve natural areas in the county, expires at the end of 2010.
Also at Thursday’s meeting, commissioners heard a report on internal controls used within the county government, both in finance and other areas. This has been topic that commissioner Wes Prater has pushed the board to address for several months.
Highlights from a draft report were presented by staff of the county’s new energy and economic development department. The report includes data on job losses, education, housing, transit and other factors, and presents four strategies for improving the county’s economy. Tony VanDerworp, who leads the department, explained that the report is required by the U.S. Dept. of Commerce’s Economic Development Administration so that the county can apply for grants from the EDA.
Finally, Verna McDaniel, incoming county administrator, said she plans to hold a meet-and-greet for candidates of the deputy administrator job on May 5 before that evening’s board meeting, to get commissioners’ feedback on a potential hire.
Natural Areas Preservation Program
Susan Lackey, executive director of the nonprofit Legacy Land Conservancy, and Bob Tetens, director of Washtenaw County Parks & Recreation, briefed commissioners on a proposed change to the ordinance governing the county’s Natural Areas Preservation Program (NAPP). The change reflects two broader strategic goals: incorporating farmland into NAPP’s land preservation efforts, and clarifying the county’s use of the purchase of development rights (PDR) to preserve land, in addition to outright acquisition [.pdf of NAPP ordinance revised draft].
NAPP is funded by a 10-year millage that expires at the end of 2010. The 0.25-mill tax brings in about $3 million annually – since the program began in 2000, the county has acquired over 1,800 acres of land, establishing 17 new nature preserves.
Several months ago, Lackey said, she and others involved in local land preservation began talking with county parks officials about how farmland fits into the county’s current land preservation strategy. Discussions included the possibility of using the purchase of development rights as an alternative to buying the property through the NAPP program. [The county has a separate ordinance, passed in 2007, for a PDR program aimed at securing grants from the Michigan Agricultural Preservation Fund. The Legacy Land Conservancy helps oversee that program.]
Using PDR to preserve farmland has several advantages, Lackey said: 1) it allows the land to continue to be actively used as farmland, by the owner or others; 2) it keeps the property on the tax rolls; and 3) it enables the county to tap federal grants through the federal Farm and Ranch Lands Preservation Program (FRPP). The county is the most successful in the state at bringing in FRPP dollars for land preservation, through the Ann Arbor greenbelt and other programs.
County parks officials, the Legacy Land Conservancy, the Ecology Center and conservation consultant Barry Lonik have worked to draft changes to the ordinance, to incorporate farmland more clearly as a type of natural area. The draft adds “agricultural purposes” as a definition of natural areas, and adds the category of “agricultural land” in the section that defines criteria for NAPP purchases:
B. Agricultural Lands
- Characteristics of the farmland: prime and unique soils, size, percentage of property in agricultural use, scenic historic or architectural features, scenic view.
- Potential for development pressure: adjacent land uses, adjacent land use designation, amount of road frontage proximity to public sanitary sewer/water.
- Leverage: Percentage of funding from other sources, including willingness of landowner to accept a percentage of the appraised value of the development rights on the property.
- Open space value: Proximity to existing private and/or public protected land, regardless of use.
The draft language specifies the county’s Agricultural Lands Preservation Advisory Committee as the group that would advise the county about farmland PDR deals. The idea is to take some of the pressure off of the Natural Areas Technical Advisory Committee, which currently advises the NAPP program, Lackey said. The proposed ordinance changes would eliminate references to a “planning advisory board.”
Also, language has been added stating that 75% of purchases would be natural areas and 25% agricultural development rights. This reflects the reality of the county’s current land acquisitions, Lackey said – they’ve bought active farmland in the past, because the parcels also included natural areas that they felt were important to protect. The problem is that the land then comes off the tax rolls, she said, and it’s a headache to manage. The county has to find a farmer to farm the land, or convert it to another use.
Lackey reminded commissioners of the 1998 county millage that was defeated – it would have raised funds for PDR deals on agricultural land and open space. Since then, she said, things have changed. The Ann Arbor greenbelt millage was passed in 2003 – land in the greenbelt is protected through PDRs, and people have a better understanding of what that means. Farmers are also more comfortable with the PDR concept, she said.
Natural Areas: Commissioner Comments, Questions
Several commissioners expressed support for the ordinance changes, the millage renewal and the NAPP program in general. The tone was markedly different from a meeting earlier this year, when some commissioners had raised questions about the renewal. [See Chronicle coverage: "County Natural Areas Tax Up for Renewal"]
Mark Ouimet said it was critical that voters understand what the changes are – to know what the county is transitioning to. He noted that when the countywide schools millage was on the ballot last fall, many people were confused because the millage would have been administered by the Washtenaw Intermediate School District. People didn’t understand that legally, WISD was the only entity that could collect the millage, then redistribute it to local school districts, he said. That confusion contributed to the millage’s defeat, he said.
Wes Prater questioned the 75/25 split between natural areas and farmland preservation. He said he could see that PDRs of farmland would benefit the county, since landowners would continue to pay taxes. He thought a larger percentage for farmland would be fine.
Later in the meeting, Irwin also raised the issue of the 75/25 allocation, asking if they had flexibility to alter those percentages. What if a particularly attractive parcel of farmland was available? Tetens and Lackey said the flexibility is there – the percentages are looking at overall preservation, not just in one given year.
Echoing Ouimet’s comments, Barbara Bergman said she didn’t want to vote on adding it to the November ballot until the community had a descriptive ordinance, so that residents would know exactly what they were voting for. Lackey said they knew it was important to be transparent.
Ken Schwartz asked what the timeline was for bringing these changes to the board for a vote. Tetens said they hoped to put the ordinance changes on the May 5 agenda of the Ways & Means Committee, on which all commissioners serve. Typically, resolutions are voted on first at Ways & Means, then a final vote is taken at the regular board meeting two weeks later.
Tetens said they hoped to discuss putting the NAPP millage on the November ballot at the board’s June 3 or July 8 working session. The board would need to vote at one of its regular meetings to approve putting the item before voters.
Schwartz said he strongly supported the county’s land preservation efforts – all six of the townships he represents in the northeast part of the county have had land purchased by NAPP. He was also supportive of incorporating more farmland through the purchase of development rights. What’s happening in Washtenaw County is unique, he said, citing NAPP, and Ann Arbor’s greenbelt and natural area preservation programs. They need to advance the successes they’ve already had in land preservation, he said.
Leah Gunn reminded Tetens and Lackey that they’d need to do more than just an informational campaign. “We’ve got to run a political campaign,” Gunn said.
In response to a question from Jessica Ping, Tetens clarified that the millage was 0.25 mills – it would be a renewal, not a new millage. He said it initially generated about $2.6 million annually and got as high as $3.6 million – due to increased property values – but had since dropped back down.
Internal Financial Controls
Wes Prater has brought up the issue of the county’s internal financial controls at several meetings over the last few months. At the board’s Feb. 17, 2010 meeting, he proposed forming a new committee that would review the county’s internal financial control policies. From The Chronicle report of that meeting:
Prater said he believes the county has a systemic problem regarding internal controls. He pointed to the arrest earlier this month of a county employee working in community mental health – part of the Washtenaw County Health Organization – who was charged with embezzling more than $100,000 over the past 16 years. In light of those allegations, he said, they needed to act urgently to protect the dollars of their constituents. He noted that the auditors don’t conduct an audit of internal financial controls, and that the board needs to act to prevent something similar from happening in the future.
His motion to form a new committee was tabled until the board’s March 3 meeting, with other commissioners asking for more information from the administration about what controls are currently in place. Prater later agreed to push back discussion of a committee until after the board could hold a working session on the issue – that happened on Thursday.
Pete Collinson, interim finance director, began by giving a general definition and overview of internal controls. He noted that it’s not just a concern of the finance department, but it encompasses every function and employee in the organization. While the governing body is ultimately responsible, the controls are primarily management’s purview, including design, implementation, monitoring and reporting.
Collinson outlined five components of internal controls, and gave examples of how these apply within Washtenaw County government.
- The organization’s “control environment”: He characterized this as the “tone at the top,” with the governing body, management and HR policies all setting the stage for integrity and ethical behavior throughout the organization. Examples include HR policies on employee conduct and honesty, regular discussions at the board’s bi-weekly meetings and working sessions, and communication between the chair of the board and the auditor.
- Risk assessment and monitoring: The county operates 35 different “businesses,” Collinson said, some with greater risk than others – the jail staff, for example, or public health employees. The county’s risk management staff is doing an extensive analysis of all department’s exposure, he said, and will identify strategies to deal with that, such as insurance or contract provisions. Areas that will be analyzed first include parks & rec, facilities, the sheriff’s department, courts and administration.
- Control activities: There are 260 policies and procedures outlining county business practices that in some way involve internal controls, Collinson said. Examples include building security and access, ID tags placed on equipment, restricted access to computer systems, requiring two signatures on invoices prior to payment, and supervisor approval of timesheets, among others.
- Information and communication: It’s important for communication to flow up, down and across the organization, Collinson said. This goes back to the “tone at the top,” he noted – top administrators must communicate that internal controls are taken seriously.
- Monitoring: There are several ways to check whether internal controls are being followed, Collinson said, including annual audits, periodic reviews of petty cash balances, and regular reviews of offices that take cash over the counter, among others.
Collinson concluded by saying “I know that internal control is not the most exciting in the world” – but he noted that it’s vital to making sure the county government operates in an orderly, ethical way.
Internal Controls: Commissioner Comments, Questions
Several commissioners thanked Collinson for giving a broad overview of internal controls, not just focusing on the financial piece. Leah Gunn said she thought their workforce took the topic seriously.
Wes Prater asked Collinson for suggestions on how the administration can better communicate to the board about its internal control practices. He said they receive very little information, other than annual audits. Though he said he doesn’t want to micromanage, there needs to be a process in place, since the board has an oversight role. Specfically, Prater cited concerns with credit card use and filling out time sheets on computer.
Verna McDaniel, who’ll be stepping into the county administrator’s job next month, said credit card purchases are closely monitored. Any unusual purchases are brought directly to her attention, she said, and she talks to the purchaser personally. She also suggested that the board be provided with “exception” reports – a listing of transactions or items that fall outside of normal business practices. This might alert them to areas where they might need to “raise the bar” on internal controls, she said.
Collinson clarified that although time sheets are submitted electronically, they still require supervisor approval before being forwarded to payroll.
Prater said a lot of this information was new to him, and useful.
Mark Kettner of the accounting firm Rehmann Robson, which handles the county audits, was on hand as well for the presentation. He emphasized the role of the board as setting the tone for the organization, and letting management know their expectations.
Gunn said in all her years of service she’s never encountered any commissioner or top manager who wasn’t ethical – unlike some other governments she could think of, she said. She was proud of that.
Mark Ouimet recalled that he did a stint in the auditing department as he worked his way up the food chain during his career in banking. The key to internal controls is discipline, he said, and problems usually arise when someone gets lax. He asked Collinson whether there was a regular schedule of monitoring, and whether management was comfortable with that protocol.
Collinson said they should strengthen their communication with top administrators about the schedule of internal audits, to ensure that everyone is comfortable with the level of monitoring. Ouimet observed that when there aren’t any problems, it’s easy to think you can cut back on internal controls. But cutting back then opens up opportunities for abuse, leading back to a refocus on internal controls – which is where they are today, he said.
Later in the meeting, Prater requested another working session related to finance – focusing on the county’s debt, liabilities and unfunded liabilities.
Comprehensive Economic Development Strategy (CEDS)
Tony VanDerworp, the county’s director of the department of energy and economic development, gave a presentation on a draft version of the county’s Comprehensive Economic Development Strategy, known as CEDS. This specific report is required by the U.S. Dept. of Commerce’s Economic Development Administration in order for the county to apply for funding from the EDA [.pdf file of CEDS report].
The rationale for requiring this report, VanDerworp said, is to fit requests for specific grants into a broader economic development strategy. EDA grants are available for incubator facilities, research park infrastructure, revolving loan programs and a range of other projects.
VanDerworp highlighted several facts in the report:
- The county’s median age in 2008 was 33.1 years – that’s younger than the state or national levels. [It was then noted that it was commissioner Mark Ouimet's birthday, which prompted some age-related ribbing.]
- For the first time in recent history, Washtenaw County’s population dropped in 2008, falling by 0.2%. The county’s population is estimated at 347,376 people.
- The county has seen a loss of over 15,000 jobs since 2003, including a loss of 4,200 jobs in 2008. Major losses have come from the closing of Pfizer’s research operation in Ann Arbor. Ypsilanti and Ypsilanti Township have been hit by the closing of GM’s Willow Run plant and Automotive Components Holdings (formerly Visteon). VanDerworp said the most recent forecast by UM economists George Fulton and Don Grimes calls for a slight job gain this year, with a more normal growth rate – a couple thousand jobs annually – in 2011-12.
- The county is highly educated, with 93.4% of adults having at least a high school diploma – higher than the state (87.6%) or national (84.5%) levels. But there are still educational attainment issues, VanDerworp noted. Graduation rates in some districts are poor: 51.8% in Willow Run and 66.8% in Ypsilanti for 2007. That’s important to address, he said, because jobs in the future will require a higher level of education, and at least a high school degree.
- The report lists four general strategies that the county needs to pursue: 1) grow companies by converting innovative ideas into action and attracting investment to the region, 2) develop the talent needed for growing economic sectors, 3) develop quality-of-living assets needed to retain and attract talent, and 4) revitalize the eastern portion of the county. There are six pages of specific projects designed to meet those goals.
VanDerworp said they hoped to get feedback from commissioners. Next steps include forming a steering committee to finalize these strategies before sending the report to the EDA for approval. The document will be updated annually, he said.
Mike Finney – CEO of Ann Arbor SPARK, the county’s main economic development agency – spoke briefly following VanDerworp’s presentation. He said they’re looking at EDA funding to help move the community’s economic fortunes forward, and it looks promising. In March they’d been visited by John Fernandez, the Obama administration’s assistant secretary of commerce for economic development, and that was followed up by a visit from an official who oversees this area for the department, working out of the Chicago office. Finney said he thinks they’re in a position to start tapping these federal resources.
CEDS Report: Commissioner Comments
There was little discussion or comment on the CEDS report. Leah Gunn said she was astounded by seeing how many employees work for the University of Michigan – about 46,000 people, including workers at UM’s health system. She noted that the university was truly an economic driver for the state.
Gunn also wondered why the Ann Arbor Transportation Authority wasn’t listed as a partner. She suggested that someone talk with the AATA’s CEO, Michael Ford.
Jessica Ping praised the report, saying it made the county look good. It also highlighted the importance of small businesses in the economy, she said, and their role in the local economic recovery.