The Price of Washtenaw Police Services

At its Wednesday, June 1 meeting, the Washtenaw County board of commissioners will be asked to give initial approval to the price that municipalities will pay for a contract sheriff’s deputy through 2015.

At a board working session on May 19, sheriff Jerry Clayton briefed commissioners about a recommendation from the police services steering committee (PSSC) to set the price in 2012 at $150,594 – the same amount that’s currently charged – with incremental increases over the following three years. By 2015, the price would reach $155,157 per police services unit, an amount that includes overhead and other costs.

For well over a year, the PSSC has been working on the contentious issue of how much it costs to provide sheriff patrols – and how much local municipalities should be charged. In late 2010, the committee brought forward a recommendation to the board that determined the cost of providing a police services unit (PSU) to be $176,108. At its Dec. 1 meeting, the board voted to accept that amount, with the understanding that they’d need to make a much harder decision – about the price that the county would charge for a PSU – at a later date.

That time has come.

The difference between the cost of a PSU and the amount charged – roughly $25,500, based on current figures – would be absorbed by the county. Leaders of two local municipalities – Ann Arbor township supervisor Mike Moran and Pat Vailliencourt, president of the Manchester village council – attended the May 19 work session. Both are members of the PSSC. They argued that the county benefits from supporting deputy patrols by creating a safer environment for residents and businesses, and ultimately strengthening the local economy.

Also during the May 19 working session, Clayton identified other policy issues that the board needs to address – issues that he’s raised a previous meetings as well. They include setting the contract length – Clayton favors longer terms – and developing a policy to handle requests from municipalities to add or subtract deputies.

If commissioners give initial approval to the price on June 1, the resolution would return for a final vote at the board’s July 6 meeting. The board is now operating on a summer schedule, with meetings held on the first Wednesday of the month.

Setting the Price: Background

During his presentation at the May 19 working session, sheriff Jerry Clayton covered much of the same ground he and others have discussed at previous public meetings.

For Chronicle coverage, see:

• “What’s Next for Washtenaw Police Services?” (Jan. 4, 2011)
• “County Board Acts on Budget Items” (Dec. 4, 2010)
• “Washtenaw Board Debates Budget Issues” (Nov. 22, 2010)
• “Washtenaw Police Services: What’s It Cost?” (Nov. 8, 2010)

Clayton began by noting that the police services steering committee (PSSC) was formed out of a desire to do a better job managing the issue of providing police services in the county. He alluded to what the previous sheriff’s administration had done to damage its relationship with the county, saying the PSSC was intended to bring people together to find better solutions to delivering police services, in a collaborative spirit. [Former sheriff Dan Minzey, who was defeated by Clayton in the 2008 Democratic primary, butted heads with the county board and administration over budget overruns and other issues, and sided with three townships that sued the county over the cost of contract deputies.]

The issue of cost versus price was one of the most divisive, Clayton said, and one that undermined the county’s trust and credibility with the contracting municipalities – that’s what the PSSC tackled.

Clayton sketched out a history of how the sheriff’s office has handled contract deputy services over the decades. In the past, prices would be negotiated with each jurisdiction, separately. That evolved to a more formal model in the mid-1980s, based on a report by Susan Kattelus of Eastern Michigan University. The report suggested a formula for establishing the cost of a contract deputy. It included a set of direct costs – salary, fringe benefits, uniform allowance, overtime, liability insurance and training. In addition, it established a 39% indirect cost rate, plus a charge of 33 cents per mile for vehicles used by contract deputies.

This model was used until 2000, when the current approach was adopted. The current model is based on a study commissioned by the county and conducted by the Northwestern University Traffic Institute. Known as the Northwestern study, it found the amount being charged for these contract deputies was too low, and undervalued the true cost of providing these services. The study outlined three alternative costing models, each setting different indirect cost rates – one as high as 94%. [.pdf of Northwestern study]

The study also included a staffing analysis, looking at how many patrols would be required for covering the county. It identified a minimum number of patrols for the contracting jurisdictions, and an ideal number as well. [.pdf of Northwestern staffing analysis chart]

Problems arose when policy issues connected to the report weren’t addressed. Many costs weren’t included – the cost of training officers, for example, or costs associated with hiring – which again led to an undervaluing of the true cost of providing these services. It explains why costs escalated over such a relatively short period of time, as the county started trying to adjust for the true cost. But from the perspective of the townships and villages that contracted for police services, the increases seemed arbitrary, Clayton said, and it was difficult for them to plan their budgets. ”Part of our charge was to move away from that,” he said.

The PSSC drilled down to look at the true cost of providing deputy patrols, identifying direct costs that are passed on to the contracting municipality, and deciding what percentage of indirect costs and overhead should be paid for. Clayton noted that one reason why they now refer to a police services unit (PSU) rather than a contract deputy is to capture the fact that there’s more involved in providing police services than just the deputy. Part of the issue is also to consider what it would cost a township or village to establish and maintain its own law enforcement agency – what costs would they be responsible for?

Based on the work of identifying costs – with specific categories for direct, indirect and overhead costs – the PSSC used those same categories in calculating the price, Clayton said. These categories can now serve as a framework for setting prices for future contracts as well.

Setting the Price: Recommendations

At the May 19 working session, Greg Dill, director of administrative services for the sheriff’s office, described the details of the price recommendation. [.pdf of 2012-2015 cost/price recommendation for police services]

He reiterated that the pricing categories are based on the cost categories that commissioners approved in December of 2010. Salary and fringe benefits are the primary drivers of increases in the coming years, he said. The biggest unknown is the cost of fringe benefits, he said, which includes health care. In consultation with the county’s human resources department, the recommendation assumes a 9.5% annual increase in fringe benefits.

The pricing in 2012 will remain unchanged from the 2011 rate of $150,594, which was a 4% increase over 2010 rates. The rationale is that costs didn’t increase by 4% this year, Clayton said, even though the price did.

In each of the following three years, the price per PSU increases about 1%: to $152,100 in 2013; $153,621 in 2014; and $155,157 in 2015.

Clayton noted that the pricing is based on the assumption of 74 contract deputies. If the number of contract deputies changes – either increasing or decreasing – that will impact the costs, he said. Within the pricing model they’ve developed, they can absorb some modest changes without increasing the county’s contribution, he said. What does it mean in terms of the number of vehicles needed, for example, or the number of supervisors? But it’s unclear what the tipping point would be to trigger a greater county contribution – or whether they’ve already reached it.

In 2011, the county’s contribution to contract patrols is 14.49% – or $1,888,036. That’s the difference between the cost of 74 PSUs ($13.03 million), and the price that contracting municipalities are paying ($11.14 million). That percentage contribution drops slightly to 13.9% in 2012 ($1.799 million) then increases to 21.16% by 2015 – or $3,081,068. The average contribution is about 17% during the four-year period from 2012-2015, Clayton said.

The county general fund will not bear that increase, Clayton said. That’s because the $1.3 million difference between the county’s contribution in 2012 and 2015 will be absorbed by the sheriff’s office, he said. They’ve committed to handling the price increases internally, he said – it’s appropriate, because they’re responsible for the county’s public safety, which they believe is crucial to its economic health.

Clayton outlined additional policy questions that the board would need to address: (1) the length of future contracts; and (2) the process and metrics related to setting future cost increases and decreases.

Longer contracts would create stability for the contracting municipalities as they plan their budgets or decide whether to seek voter approval for a police services millage, Clayton said. It would also provide a greater sense of job security for deputies, he said. The hope also is to eventually align labor contracts with the budget cycles of the county and local municipalities.

Clayton suggested that they start having a conversation about four-year contracts, with renewal every two years.

The board’s next steps would be to consider and hopefully adopt the PSSC’s recommended contract price, Clayton said, then implement the total police services “financial architecture” – including mechanisms for adjusting prices based on increases or decreases to the number of contract deputies, the length of the contracts, and the determination of the county’s contribution.

Clayton also told commissioners that his office is working with a consultant from Michigan State University on developing a benefits/values metric for police services – a way to calculate, using empirical data, the value of the contributions by the county and the local municipalities toward public safety.

Setting the Price: Commissioner Comments, Questions

Conan Smith asked about the difference in annual cost increases for a PSU of about 4%, compared to price increases of only 1%. How is that sustainable? he asked. They’re establishing a pattern of growth that has to stop at some point.

Greg Dill pointed out that almost 100% of direct costs are passed through to the contracting municipalities. That includes the biggest costs and variables – salaries and fringe benefits.

Clayton added that although the sheriff’s office will absorb the differential between cost and price increases through 2015, beyond that, they’ll have to revisit it. They’ll be having ongoing discussions with the contracting municipalities about the issue.

Smith asked whether the sheriff’s office felt that a 20-21% contribution from the county was realistic and appropriate, and whether Clayton expected it would hold steady at that level beyond 2015.

Clayton said he couldn’t project the future, but hoped it would hold steady. He also wanted to cast the conversation in terms of value, from an objective viewpoint. What is the county truly getting for the amount they invest, and if that value is greater, should they invest more than 20%?

Smith asked for Clayton to talk in more detail about what those value metrics entail. One way to look at it, Clayton said, is from the perspective of the total value of the county’s tax base and property values. If property values in Washtenaw County total $4 billion, and the county invests $10 million in police services – it’s like an insurance policy, he said. What’s the value-add of that insurance? You look at what you’re trying to protect, and whether your investment is worth it. That’s just looking at property and equipment values, Clayton noted – it doesn’t even address the value of human life. How do you quantify that?

Wes Prater said he felt good about where they stand – it’s been a slow process, he said, and was very difficult with the previous sheriff. Things started turning around when Clayton took office, said Prater, who’s been working with the PSSC on this issue. He’s pleased to hear the sheriff make a commitment about containing costs – it’s the first county department to make that commitment for the next four years, he said. Prater hoped other municipalities would come on board by contracting for sheriff’s deputies.

Prater, whose district covers the southeast part of the county, said he felt like only two police forces are needed: the city of Ann Arbor police department, and the sheriff’s department. It was a conclusion that he and former sheriff Ron Schebil had reached years ago “during one of our more intellectual conversations,” he said, but it’s a long-term solution.

Kristin Judge – who represents District 7, covering Pittsfield Township – said she’d like to see at least three public safety agencies in the county, including the Pittsfield Township department of public safety. Clayton said he agreed 100% – he had no interest in absorbing Pittsfield Township’s department.

Judge said that while her district is in Pittsfield, she represents residents in the entire county. The price for a PSU needs to be set so that it’s affordable, and all residents feel safe. She noted that public safety and human services go hand-in-hand – a point also made by Alicia Ping earlier in the meeting.

Rob Turner noted that the county has many communities with unique personalities. Without the county’s help, these smaller communities would literally become lawless zones, he said. In some areas, that’s happening already, he said – his business in Scio Township has been broken into seven times in the past five years. There’s only so much protection that a township can afford, but it’s beneficial to have all parts of the county safe, both for residents and for businesses, he said. People shouldn’t have to move into the city just to feel safe.

Yousef Rabhi joked that as much as he and the other Ann Arbor commissioners would welcome people to move to their city, he recognized the importance of the other vibrant communities in the county.

Rolland Sizemore Jr. asked how the $7,500 in overhead costs for a PSU compared to other counties. Clayton said it was hard to compare, because other counties calculated costs differently. However, he said he’d argue that overhead costs are lower in Washtenaw. Sizemore then clarified that the main reason some municipalities wanted their own police departments related to issues of local control – it wasn’t that they could do it at a lower cost.

Dan Smith said he appreciated all the work that the sheriff’s office and PSSC had done. He noted that many township residents do put a high premium on public safety – Northfield Township, which is part of his district, passed two public safety millages last year, and another one this spring, he said.

The county is in a position to help provide public safety for communities that have vastly different circumstances and resources, D. Smith said. On one end there’s Salem Township, which doesn’t levy any property tax, he said, while Manchester’s tax rate is high. He said he appreciated the work that had been done to show how direct costs relate to price – it makes clear that there’s a relation, and that’s helpful.

Looking at the cost projections, D. Smith noted that the scary one relates to benefits – it’s a huge increase, from $45,820 per PSU in 2012 to $60,159 in 2015. Clayton said the county’s projections are 12-12.5% increase per year, but they’ve budgeted a roughly 9% annual increase for the contracts. Kelly Belknap, interim deputy county administrator, said the cost of benefits also depends on what happens at the state level, but that the administration is comfortable with the 9% proposed in the pricing recommendation.

Clayton noted that if the board agrees to a four-year contract that’s renegotiated every two years, they could adjust fringe benefit costs if needed, to reflect the true cost increases.

Prater said they needed to thank the Police Officers Association of Michigan (POAM) and Command Officers Association of Michigan (COAM) unions, which agreed to concessions that are expected to save $5.6 million over the next four years – it’s greatly appreciated, he said. Had they not stepped up, he said, the county would be in even more financial difficulty. Clayton acknowledged that the unions had taken a different stance than in the past. He said he knew that some people thought the county should have gotten even greater concessions, but the fact is that the actions by the unions did play into the contract price.

Turner said he’d attended a recent memorial service for law enforcement officials, and saw firsthand the closeness and camaraderie of all the departments throughout the county. Even though they are separate entities, he said, they come together as a team. He said the Chelsea police chief, Ed Toth, had great things to say about Clayton. It’s the connectedness among police departments in the county that makes residents safer, Turner said, and the connecting thread is Clayton.

Clayton said the county benefits from having great police chiefs, who are easy to work with. That prompted other commissioners to give shout-outs to their respective police departments: Alicia Ping for Saline, Dan Smith for Northfield Township, and Yousef Rabhi for Ann Arbor and the University of Michigan.

Clayton joked that since Ronnie Peterson – who represents Ypsilanti – wasn’t at the working session, he’d commend the Ypsilanti police department on Peterson’s behalf. Clayton said it’s not in the interest of the sheriff’s office to eliminate any of these other police departments.

Setting the Price: Two Municipalities Weigh In

Conan Smith asked Ann Arbor Township supervisor Mike Moran and Manchester village council president Pat Vailliencourt to share their views on the pricing recommendation. Both are members of the police services steering committee (PSSC), which unanimously recommended the proposed contract deputy prices.

Moran noted that the county was well aware of decreases in state revenue-sharing – the portion of the state sales tax that’s allocated to municipalities. For Ann Arbor Township, state revenue-sharing has dropped 30% between 2002-2010. The township contracts for four deputies, he said, but the total from state revenue-sharing and the township’s general fund operating millage combined can’t cover those costs anymore, he said. The same is true of other townships, including Superior, Ypsilanti and Dexter.

When they started the discussion about the cost and price, Moran said, it was the hope of the contracting municipalities that the price could be dropped significantly from the 2011 rate. But fiscal reality and the sheriff’s leadership regarding shared sacrifices, he said, led them to the current recommendation. It allows them to share the cost obligations, while being able to budget for future increases and provide public safety to their communities, Moran said.

Moran said they’ll accept the recommendation and work to make it sustainable beyond 2015.

Smith asked whether they’d consider looking at 3% increases in 2016, for example, for both the county and the contracting municipalities. Moran said he’s hopeful that the economy will start turning around, though he noted it will be a very slow climb out of their current situation. He pointed out that before Ann Arbor Township passed a public safety millage, they had to dip into their reserves to cover costs, starting in 2006.

Smith noted that conversations in the community and around the board table often contrast investments in human services with public safety. It seemed to him that residents of the townships and villages put a high premium on public safety, and are willing to invest in it by voting for special millages to cover costs.

That’s true, Moran said. They also recognize that the county has an obligation for public safety services as well, though it’s never been clear what that level of support should be. Right now, the county pays for 12 deputies out of its general fund. He said he thinks the county recognizes that they couldn’t provide sufficient public safety to the entire county with just those 12 deputies – the county needs the 74 contract deputies as well.

Vailliencourt of Manchester shared her perspective as well, describing the village as a unique, beautiful corner of Washtenaw County, with about 2,000 residents. They previously contracted for four deputies, she said. Now, they partner with Lodi and Bridgewater townships for three deputies. In spite of that, costs are still going up, and Manchester residents pay 7 mills already, she said. It’s not that they don’t want to pay their fair share – it’s that they don’t know how much more they can bear.

She said when the PSSC began meeting, she didn’t have much hope that they would come up with a workable solution. Her biggest fear had been that there’d be “police-free” zones in the county, because the divide between the county administration and the contracting municipalities had been so huge. They’ve come far, she said, and setting the cost and now the price are significant steps. But there’s much more to do, Vailliencourt added. One question is what value do the 74 contracting deputies bring to the rest of the county, and at what price point will the contracting municipalities be unable to continue paying. Regarding that last point, she said, “Manchester’s there.”

C. Smith said it’s important to remind people that there’s a difference in capacity among communities in the county. At the heart of it, people need to feel safe, no matter where they live, he said. The power of collaboration with the county is that the county can help soften the financial blow while strengthening public safety. He praised Clayton for bringing rationality to the conversation, and said he’s excited by the values-oriented approach that the sheriff’s office is developing.

The fact that they’ve agreed on the cost of a police services unit is a good foundation, Smith said. Setting the price can’t be a specific calculus, he added, and it’s important to recognize the value of the county’s investment in public safety. “You’ll have my support for the pricing model,” he said.

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