AATA OKs Smaller Budget, Drives Ahead

County clerk likely to file papers for new transit authority this week

Ann Arbor Transportation Authority board meeting (Sept. 27, 2012): The main business transacted by the AATA board was approval of the operating budget for the coming year, which starts Oct. 1.

Charles Griffith looks at a budget spreadsheet during the Sept. 27, 2012 meeting of the Ann Arbor Transportation Authority board.

Charles Griffith looks at a budget spreadsheet during the Sept. 27, 2012 meeting of the Ann Arbor Transportation Authority board. (Photos by the writer.)

Compared to an earlier draft budget, the one approved by the board was diminished on the revenue side by $800,000 in less-than-expected state operating assistance. Subsequent reductions in expenses still resulted in the need to use $300,000 in reserves to cover the gap. The reduction in state operating assistance for the AATA is related to a dramatic budget decrease by a Detroit transit agency – the state’s formula for making its allocations is sensitive to that.

The meeting’s budget discussion overlapped with conversation about the new transit authority, which is likely to be incorporated next week on Oct. 3. That’s the day after the AATA board is scheduled to meet in a special session, when it’s expected to request formally that the Washtenaw County clerk file articles of incorporation with the state. The new transit authority is to be called The Washtenaw Ride. Before any assets could be transferred from the AATA to The Washtenaw Ride, voters would need to approve a funding mechanism, likely through a millage to be placed on the ballot as soon as May 2013.

AATA board members made a point to stress that the planned operating deficits for the year that’s now ending (about $1 million) and the upcoming year ($300,000) are not sustainable. Instead, those budgets reflect an early implementation of some expanded services – like increased frequency on Route #4 between Ann Arbor and Ypsilanti – which the AATA would like to implement more permanently in the context of the broader governance and service area of a new transit authority. Some currently expanded services might need to be scaled back if the new authority winds up being dissolved at the end of 2014 – a possibility if voters do not authorize the necessary funding.

The incorporation of the new authority has statutory implications. Because the incorporation of a new transit authority will include by default all the jurisdictions in Washtenaw County, the filing of the articles opens a 30-day window for jurisdictions to opt out of participation. That can be accomplished through a vote by a jurisdiction’s governing body.

The possibility of several jurisdictions opting out prompted the introduction of a resolution at the Sept. 27 meeting that was not originally on the agenda. That resolution was meant to clarify that the AATA board is keen to allow all the constituencies to be represented on the new authority that have been represented for about a year on the as-yet-unincorporated board – up to the point when a millage is placed on the ballot. That is, the current AATA board members – who will also serve on the new board – do not intend that their first response to opt-outs would be to alter the new board’s composition.

The articles of incorporation for the new authority specify an initial board membership of 15 members in eight districts. Altering that membership would, by the articles of incorporation, require a 4/5 majority (12 votes). So the resolution floated at the Sept. 27 meeting was intended to give assurance that the seven AATA board members – as future members of the 15-member board – would not want to alter the composition of the new board until a decision is made about putting a transit millage on the ballot. At that point, a change likely would be made to avoid the possibility of “representation without taxation.”

Representatives of three of the seven non-Ann Arbor districts in the new authority attended the AATA’s Sept. 27 meeting and participated in the discussion: Karen Lovejoy Roe (Southeast District); Bill Lavery (South Middle District); and David Read (North Middle District). Lovejoy and Read reacted to the uncertainty that the resolution was meant to address by questioning the timing of the planned incorporation.

Another significant business item transacted at the meeting was the contingent approval of a contract with URS Corp. to continue studying a possible transportation connector between the northeast and south sides of Ann Arbor. The authorization of the contract is conditional on additional local funding – in the amount of $60,000. The $60,000 would be part of a total $300,000 local match for a $1.2 million federal grant. The Ann Arbor city council had voted initially to reject a request that it provide the $60,000, but then reconsidered and postponed the question until Oct. 15. In the meantime, the board of the Ann Arbor Downtown Development Authority has indicated some willingness to make a contribution – $30,000 of the requested $60,000.

The AATA board’s Sept. 27 meeting marked Jesse Bernstein’s final meeting as chair. He’s led the board for the last two years. At the meeting, Bernstein alluded to the tradition of rotating the chairship of the board, a tradition he wanted to continue. The board elected Charles Griffith as chair.

FY 2013 Budget

On the board’s agenda was approval of the FY 2013 budget and work plan. The AATA’s fiscal year runs from October through September.

FY 2013 Budget: Background

The draft AATA budget provided on Sept. 12 to the Ann Arbor city council as a communication item for the council’s Sept. 17 meeting showed a surplus of $22,692 over the budgeted expenses of $33,344,048. The need for the AATA to use $300,000 of unrestricted net assets – to cover the difference between expenditures and revenues – was prompted by notification on Sept. 14 by the Michigan Dept. of Transportation (MDOT) that the formula determining the state’s operating assistance would reduce AATA’s assistance by $803,500.

The possibility of the reduction in funding was known previously. At the board’s Aug. 16, 2012 meeting, Charles Griffith had reported from the performance monitoring and external relations committee on the topic.

About half the reductions in expenses in the final budget, compared to the draft, were made in wage reductions – a total of $294,473. Percentage-wise, the budget for management wages was reduced by 2.79% compared to a 1.24% decrease in non-management wages. That reflects a wage freeze for non-union employees. According to CEO Michael Ford, no reduction in service was required in order to balance this year’s budget. [Google Spreadsheet compiled by The Chronicle showing contrast by category between draft and final budget.]

Last year, the AATA adopted a budget with a deficit of close to $1 million. At the time, AATA board members characterized the strategy as making investments in service expansion in advance of the transition of the AATA to a new authority incorporated under Act 196 of 1986. The AATA has called a special meeting of the board for Oct. 2, 2012 to make a formal request of Washtenaw County to file the articles of incorporation for the new authority under Act 196.

Based on the draft budget projections for the draft FY 2013 budget – which used the first nine months of actual expenses and revenues with seasonal adjustments – the AATA expected to finish FY 2012 with a much smaller deficit of $296,378. That’s about one-third of what was budgeted at the start of last year. But figures through the first 11 months of the year, included in the Sept. 27 board meeting information packet, show that the AATA has thus far incurred a deficit of $1,077,250.

The AATA’s fund balance policy requires it to maintain reserves equal to at least three months’ worth of operating expenses.

Also at its Sept. 27 meeting, the board was asked to approve its work plan for the upcoming year. Key goals include the implementation of the transit master plan (including new governance under Act 196 and securing voter-approved funding), negotiating a new labor contract, building a replacement for the Blake Transit Center in downtown Ann Arbor, and developing a new model for paratransit services.

The work plan also calls for continued cooperation with the Ann Arbor Public Schools to expand student transportation options.

FY 2013 Budget: The MDOT Formula

What AATA board members described as a “change” in MDOT’s formula appears not to be so much a change in the allocation formula as it is a case of the formula’s peculiar sensitivity to the financial situation in other transit authorities in the state.

In slightly more detail, which still glosses over much of the formula’s complexity, the amount of funding MDOT had available to allocate to transit agencies statewide this year was the same as last year – $166.6 million.

Transit agencies are divided into two groups based on population: (1) urban areas with populations over 100,000; and (2) urbanized areas with populations under 100,000 and non-urbanized areas. The first split of the $166.6 million was a proportionate allocation between those two groups. That proportion is based on the total of eligible expenses in each agency’s submitted operating budget.

Ann Arbor falls into the first of those groups – along with the transit authorities in cites like Kalamazoo, Grand Rapids, Lansing, and Detroit. This year, the FY 2013 budget for the Detroit Dept. of Transportation (DDOT) dropped from $159 million to $124 million – a reduction of $35 million. That meant a proportionate drop for DDOT’s group – to which Ann Arbor belongs.

Consequently, instead of last year’s $122.2 million allocation, the group that includes Ann Arbor received about $4 million less – $118.5 million.

In a phone interview with The Chronicle, Jean Ruestman – manager of the program administration section in MDOT’s office of passenger transportation – described that first split as the one that had the most impact on the AATA’s allocation of state operating assistance. That initial reduction – for the group of transit agencies to which the AATA belongs – was further amplified by another provision in the formula.

The formula provides a “floor” that guarantees a transit agency at least the amount of state operating assistance it received in 1997. Because of the drop in its budget, DDOT’s strictly proportionate share within its group this year would have been less than the 1997 “floor” – by $8 million. So the formula required that DDOT be made whole with respect to that floor. If the “floor” provision did not exist, that would have resulted in $8 million more for non-DDOT members of the group to split up. [.pdf of briefing memo on MDOT allocations]

FY 2013 Budget: Ford’s Report

Michael Ford, the AATA’s CEO, reviewed the timeline for the evolution of the budget. At the September planning and development committee meeting, a balanced budget had been reviewed with a small surplus. Later on that week, the AATA had received official notice from MDOT about the reduction in state funding of around $803,000. That possibility had been mentioned at the previous month’s committee and board meetings, he noted. The AATA had reached out to legislators and the MDOT staff to try to convince them to alter the formula. Ford characterized the MDOT’s actions as unexpected, given that the legislature had approved the same amount of operating money in the last several years. So the AATA had expected the state’s allocation to the AATA would be similar to what it had been in the last years.

However, Ford said, MDOT had acted in a way that had resulted in a significant reduction in funding to the AATA. The balanced budget presented to the board that evening reflected spending cuts, a wage freeze for AATA non-union employees, and the use of some federal funds now available for day-to-day operations. No reduction in service is planned, he stressed. The ability to use federal funds in this way, he said, was made possible through a recent transportation bill approved by the U.S. Congress – called Moving Ahead for Progress in the 21st century (MAP-21).

Another key part of the plan to balance the budget in the face of the reduction in state operating assistance is the use of $300,000 of reserve funds – funds that are intended to be used to address unforeseen financial setbacks. AATA will continue to work with its peer transit authorities, Ford said, to lobby the legislature.

Legislation was introduced last week that could restore that funding. Ford said he would keep the board updated on the progress of those efforts. In the meantime, he was asking the board for their support of the balanced budget that night.

Later during board deliberations, Eli Cooper was keen to see the legislative effort maintained. Cooper appreciated the fact that the staff was shouldering the burden of the $800,000 in reduced funding. But he ventured that the AATA is not alone in Michigan, so he wondered what the AATA and the Michigan Public Transit Association are doing to coordinate to make sure that the state continues to be a good partner in providing transportation for all the citizens of the state.

Ford reiterated that legislation has been introduced in the last week. Lansing, Grand Rapids, Kalamazoo and about 10 other urban systems are “in the soup” with the AATA with respect to the reduced funding. Cooper wanted those efforts to be redoubled to make sure that legislators understand the difficulty that it’s creating for transit organizations across the state.

FY 2013 Budget: Board Deliberations

Charles Griffith wanted to hear more details about how the budget had been balanced to respond to the reduction in state operating assistance.

David Nacht and Sue Gott.

AATA board members David Nacht and Sue Gott.

Ford described the staff as actively involved – having met at least three times to go through the budget with a fine-toothed comb. He characterized it as a team effort. Each department gave up something, he said. Some of it related to staffing, consulting, IT, or communications. It was a matter of looking through every department and asking them what they could give up to help balance the budget.

Ford described a phase of organizational analysis that would be put off, and noted that wages as well as bonuses had been affected. “That’s not always a great topic to talk about,” he said. Bus parts, electrical use, water use, postage – every nook and cranny of the budget had been examined to see what could be given up to “stem the tide” for right now, Ford said.

Nacht characterized the current phase of the organization as an “investment phase.” The AATA is taking federal dollars – not local Ann Arbor transit tax dollars – and using those to invest in some services that provide opportunities to demonstrate what can be accomplished in the direction of countywide service, he said. That works in the short term and in a fiscally sound manner, but it’s not a long-term sustainable approach, he allowed.

The long-term use of those federal dollars, Nacht said, will need to be allocated in other areas to maintain “our bread-and-butter operations for the taxpayers of Ann Arbor” and for the other jurisdictions with whom the AATA has purchase-of-service agreements (POSAs). He felt the staff had done an admirable job in dealing with the situation – which had not been a complete surprise, but was nonetheless a bit of a shock, he said – to maintain the investment in the countywide initiative, to honor the investment of the Ann Arbor taxpayers, and to keep the budget in a fiscally sound prudent manner.

Chris White, AATA manager of service development offers some clarification. In the foreground is board member Sue Gott.

Chris White, AATA manager of service development, offers some clarification. In the foreground is board member Sue Gott.

Asked to clarify some remarks made by Jesse Bernstein, Chris White, manager of service development at the AATA, stressed that the AATA is not deferring any capital replacement – and that the AATA’s capital replacement program is intact. The federal money that has been redirected for operating expenses would have gone to implementation of the transportation master plan, White said.

Nacht stressed that it’s important for the public to understand what will happen if the AATA does not receive additional funding to support countywide service. If that happens, the steps the AATA has taken to provide additional services outside of the Ann Arbor service area – steps that are moving in the direction of countywide service – might need to be curtailed. As an example, he gave the more frequent service now offered from Ypsilanti to Ann Arbor along Washtenaw Avenue, which is not an inexpensive service, he said. But that service can be offered now, Nacht said, as an investment to demonstrate to the broader community that the AATA can readily handle that service and perform it admirably, and hopefully persuade a significant number of people to become riders.

But Nacht said without additional funding, the AATA is not in a position to sustain into the indefinite future the projected level of service that it’s going to be offering the public outside of Ann Arbor in this next fiscal year. At some point, Nacht cautioned, the AATA will have to curtail its operations in order to preserve its ability to provide operations for the Ann Arbor taxpayers.

Bernstein pointed out that the AATA does get millage funding from the city of Ypsilanti, and receives money from Pittsfield Township and Ypsilanti Township through purchase-of-service agreements. But he allowed that right now, the name of the authority is the Ann Arbor Transportation Authority, and currently that is the AATA’s core responsibility.

Nacht responded to Bernstein’s point by saying that the contributions that the AATA gets from its POSA partners are not sufficient to cover the current level of investments that the AATA is making in services that go in a countywide direction. He noted that there had been some discussion at the Ann Arbor city council table about commuter service from Chelsea and Canton into Ann Arbor. For the upcoming budget, he noted that the AATA is not using one cent of Ann Arbor taxpayer dollars to provide that service. [Up to now, the AATA has in part used local tax dollars to subsidize that service.] Federal dollars are being used to subsidize that service. But that allocation of federal dollars to those countywide services can only be done responsibly for a limited amount of time, he allowed. At some point, the AATA will have to scale back – if the community decides not to support those endeavors.

Nacht also said that in spite of the cutbacks in funding, he was proud of the fact that the AATA is not ignoring what’s going on in its core area. AATA staff are working on an expansion of service in the southeastern part of Ann Arbor – the Packard and Platt area, he said. And the FY 2013 budget contains funding for expanded operations for fixed route bus service in the Packard and Platt area.

FY 2013 Budget: Board Deliberations – Reserve

In the context of using $300,000 of the fund balance reserve, David Nacht said that in his capacity as treasurer he’d been very concerned about the reserve situation. He had kept an eye on it as the talks continued. He had received confirmation from Phil Webb, the AATA’s controller, that Webb expects there will be reserves to cover three months’ worth of operating expenses at the end of the coming fiscal year. Nacht felt comfortable that the amount of reserves is a reasonable and appropriate number, saying he felt that by historical standards, it was a very conservative number.

AATA board member Roger Kerson

AATA board member Roger Kerson.

Roger Kerson wanted to know how much three months of operating reserves is, measured in dollars. The answer he got from Webb was about $8 million. Webb noted that even if the state operating assistance went to zero, it would not mean that all of the AATA’s revenue sources would disappear. So the question of how long the AATA could run if all revenue were to be eliminated was not easy to answer.

Eli Cooper also inquired in more detail about the reserve balance. Looking at the budget sheets for the last couple of years, the expenses had exceeded revenue – $400,000 in 2011, $1 million in 2012, and now another $300,000 in 2013. He asked for additional clarification on the projected balance at the end of 2013.

Nacht characterized the AATA as an organization with a $32-million-a-year operating budget. Historically, the organization has run balanced budgets or budgets that had slight surpluses, he said. The fiscal management by staff has been terrific, he said. The board has been willing to make cuts as necessary in order to keep things fiscally sound, he said. The last couple of years, the organization has been moving explicitly in the direction of dipping a little bit into the reserves in order to invest in the direction of the countywide program. And there’s still no question that it’s reasonable to expect the organization will have three months of cash and reserve at the end of fiscal 2013, Nacht concluded.

However, he felt that a more serious conversation would be necessary if there is not additional funding at the end of the year, in order to plan for fiscal year 2014. The organization would need to look at things more programmatically, and would have to look at contributions by other partners. Nacht did not feel that the AATA needed to have that conversation right now. Past prudence is benefiting the community now, he contended, because the AATA is able to have a sustained period of investments.

Cooper came back to the initial draft budget with its $20,000 surplus as contrasted with the $300,000 deficit in the now-proposed budget. He sought confirmation from Nacht that the AATA could maintain its policy position on the minimum reserve balance, and continue to provide the service it’s currently providing, and still meet all of the organization’s financial responsibilities. Nacht’s answer to Cooper: “Absolutely.”

Nacht noted he had served on the board for nine years. It’s a predictable cash flow – because the AATA knows when it receives big chunks of money from the city, and the AATA knows what its expenses are like. And the organization has a fair amount of control over the timing of big-ticket items, he said.

The $800,000 drop was a shock, but in the context of a $32 million budget, it’s not an enormous piece, Nacht felt. Bernstein agreed with Nacht that the AATA staff is doing an excellent job in managing the money. But he felt that the AATA is now at the end of its ability to fund anything else beyond the regular service. Further, said Bernstein, if the AATA gets hit with more surprises like the $800,000 reduction from the state, the AATA might have to look at cutting back on some of those investments that have already been made. Bernstein noted that the board has a policy of not providing service for which it could not pay.

Nacht’s response to Bernstein was somewhat more optimistic in tone. Nacht felt there would be serious conversations about the core status of some new offerings. But he felt it might be realistic to bring other partners on board to contribute. The AATA already partners with other organizations like governmental entities. Other transit systems have had success partnering with nonprofits, he said – hospitals and educational institutions, for example.

As the AATA demonstrates the value of its services and as it attracts more riders, fares could be adjusted for particular kinds of services, Nacht ventured. He allowed that there are federal regulations, as well as market forces that apply to all of that, and there is due process involved. He wasn’t suggesting that fare increases would just be sprung on people. But he stressed his hope that rather than simply cut back on a service, the AATA would take a more flexible approach – which included generating more revenue and controlling expenses so that the organization can continue to do what it’s trying to do.

Nacht did not want to just say, “We ran out of energy and we swam into the ocean and now are just going to drown. We’re not going to do that.” The AATA is also looking to see which investments will bear fruit, Nacht said. The transportation service between downtown Ann Arbor and Detroit Metro Airport – AirRide – is bearing some initial fruit, Nacht said. If that changes, and people stopped riding AirRide, then that’s not something the organization should keep. But right now AirRide seems like it’s a good success, he said.

FY 2013 Budget: Board Deliberations – What Got Cut?

Roger Kerson wanted to know what the biggest ticket items were for the reduction to the budget. Michael Ford told him that wages and consulting were among the big bigger items. Jesse Bernstein asked for a listing out of all the cuts.

Sue Gott wanted to know some examples that might have been on the board to cut, but had instead not been cut. She wanted to know what items would have been cut if reserves had not been available to use. Ford and Bernstein initially indicated a somewhat unclear understanding of Gott’s query. Ford eventually pointed to the desire not to cut any service from existing levels. So it appears that if no reserves had been available, the AATA would have opted to reduce service levels.

FY 2013 Budget: Board Deliberations – Work Plan

Nacht characterized the work plan as very sound, but felt that if there are additional fiscal shocks, then the board would need to look at adjusting the work plan in order to continue to run the organization in a fiscally sound manner consistent with its fiduciary duty to the larger community.

Outcome: On separate votes, the board approved the FY 2013 budget and work plan.

Future of the Board(s)

Two items considered by the AATA board related directly or indirectly to the planned formal request next week – at a special meeting of the AATA board scheduled for Oct. 2, 2012 – that the Washtenaw County clerk file articles of incorporation under Act 196 of 1986 for a new transit authority to be called The Washtenaw Ride.

Not on the agenda that was included in the board’s information packet was a resolution meant to give reassurance that representation on the new board would continue to be as inclusive as possible, even if some jurisdictions opt out of the new transit authority.

The second related item was the board’s meeting schedule.

Future of the Board(s): Background

The incorporation of the new authority under Act 196 of 1986 has statutory as well as contractual implications.

On the statutory side – because the incorporation by Washtenaw County of a new transit authority will include by default all the jurisdictions in Washtenaw County – the filing of the articles opens a 30-day window for jurisdictions to opt out of the arrangement. That can be accomplished through a vote of a jurisdiction’s governing body – a township board or city council, for example.

The contractual side is already reflected in the filing of the articles. That is, the request made by AATA to Washtenaw County to file the articles of incorporation would be handled under a four-party agreement – which was ratified earlier this year by the AATA, Washtenaw County, the city of Ann Arbor, and the city of Ypsilanti. That same contractual agreement would then govern the transition from the current AATA to The Washtenaw Ride.

The transition would potentially not take place at all, unless a voter-approved funding source for the expanded services were identified by the end of 2014.

The drafted resolution considered by the AATA board at its Sept. 27 meeting was meant in part to address possible concerns about what might happen if a large number of local governments in Washtenaw County opt out of the new transit authority.

The membership of the new authority’s board can be altered only with a 4/5 vote on the 15-member board – based on the articles of incorporation. So the resolution discussed by the AATA board at its Sept. 27 meeting would have, in some sense, expressed the position of current AATA board members as follows: When they become Act 196 board members, they would not go along with a restructuring of the Act 196 board, even if several jurisdictions opt out during the 30-day period – until the point of asking voters to approve a millage.

According to its articles of incorporation, the new authority will have a 15-member board, representing eight different districts in Washtenaw County. The Ann Arbor and Ypsilanti districts include just their respective cities – each city a single jurisdiction. Those two cities are not expected to opt out. Another single-jurisdiction district – Pittsfield Township – is not expected to opt out. But other districts include multiple jurisdictions. For example, the Northeast District includes four townships: Northfield, Superior, Salem and Ann Arbor. Some, or even all, of those townships could theoretically opt out.

The articles of incorporation spell out what’s supposed to happen when every jurisdiction in a district opts out:

The directors shall revisit the Board make-up if
(a) either Ann Arbor or Ypsilanti City reduces or fails to contribute its charter millage to the Authority;
(b) if another community levies a millage and contributes it to the Authority; or
(c) if all communities within one of the Act 7 districts withdraw from the Authority.
The Board make-up shall also be reviewed and be subject to change by two-thirds of the directors after each census to assure appropriate attention to population distribution. [Note: The articles were amended in all other references to changes in membership to require a 4/5 majority vote. It's not clear if this instance was intentionally left intact or if it reflects an oversight.]

It’s essentially the Section 4.02(c) condition that the AATA board’s Sept. 27 resolution was meant to address.

Once incorporated, the Washtenaw Ride would still not have any assets or be able to offer any service. That transition would depend on voter approval of the funding source. The AATA has indicated that a possible scenario for funding is to ask voters in Washtenaw County to pay for the new transit authority with a property tax of 0.584 mills – in an election that could come as early as May 2013.

Based on discussion at a Sept. 25 meeting of Ann Arbor’s district advisory committee (DAC) – which helps advise the as-yet-unincorporated authority – a transition to a new authority could take several months. Even if a millage vote were to be held in May 2013 and approved by voters, it would still likely take until Sept. 30, 2013 – the end of the AATA’s fiscal year – to complete the transition.

So the AATA board will need to continue to meet in its current guise through the end of a meeting schedule approved on Sept. 27. The general pattern is to meet on the third Thursday of the month, with a starting time of 6:30 p.m. The meetings are held in the fourth-floor boardroom of the downtown Ann Arbor District Library, located at 343 N. Fifth Avenue. So possibly the last-ever meeting of the AATA board is scheduled for Sept. 19, 2013. [.pdf of AATA FY 2013 meeting schedule]

Future of the Board(s): Meeting Schedule

Jesse Bernstein noted that the board is looking at some potential changes in governance in the coming year. He wanted to underscore the fact that the meeting schedule is the current AATA board’s commitment to continue its work.

At such time that there is a transition to a new board, it will set up its own schedule and agenda, Bernstein said. The AATA board is also committed to having district representatives from the new authorities sit with it during its meetings.

Outcome: The board unanimously approved the FY 2013 meeting schedule.

Future of the Board(s): Public Commentary

Jim Mogensen told the board during public commentary that he did not think it was a good idea to incorporate a new Act 196 authority next week. He cited cultural as well as structural reasons. He explained the cultural side of things by telling the board what he had told the University of Michigan board of regents on a previous occasion: “One of the roles of senior staff is to allow the regents to believe that they are making the decisions, without allowing them to screw things up too much.”

The University Michigan is such a large organization that decisions of the regents become a technical thing, Mogensen said. In the same way, he said, the AATA has a very technical culture and has approached the transition in a technical way. On the other side, Mogensen said, if you look at the Ann Arbor city council or the Washtenaw County board of commissioners, they have a different culture that governs how things operate. The entire transition process of the AATA reflects a clashing of those two kinds of culture, he contended.

Mogensen felt it had taken the last 4-5 months to get things sorted out, and that things were still, in fact, being sorted out. People haven’t entirely processed what is going on, he said. So he did not think it was a good idea to proceed with incorporation of a new authority next week – which was not to say that he felt it would never be a good time to do that.

On the structural side, Mogensen felt it’s important to think carefully about purchase-of-service agreements. If a jurisdiction has such an agreement, he said, that did not mean it was in fact purchasing transportation. If board members didn’t understand what he was talking about, he advised, they could look at the operating statement and looked under the “fixed route” column: The expenses listed under purchased transportation show zero dollars. They are purchasing other kinds of transportation, but not fixed route transportation.

So he asked board members to consider a scenario where Ann Arbor Township decided to opt out of the Act 196 authority. Would we still have service to Washtenaw Community College? What’s happening with the purchase-of-service agreements, he said, is more like “opting in” than not. He felt like that had not been entirely sorted out.

Future of the Board(s): Act 196 Incorporation – CEO’s Perspective

On the topic of incorporation, AATA CEO Michael Ford said in his oral report to the board that he felt the time is right. The five-year transit program, guided by the 30-year master plan, envisioned clear benefits for all local governments and citizens in the county, he said. Ford wanted to be clear that the AATA would continue its relationship with each local government in the county – whether it participates in the Act 196 process or not. To get to the point where the process is today, he said, the AATA has conducted extensive outreach over the last year and a half or longer – listening and responding to questions, concerns and requests. Deletions and adjustments have been made to the plan, he said, in light of that input.

The “big ask,” Ford said, is for the whole team – the AATA board and the district representatives – to make a request of the county clerk next Tuesday, at the Oct. 2 special meeting, to incorporate. Ford indicated that the request would be for the Washtenaw County clerk to start the incorporation process on Oct. 3.

Future of the Board(s): Act 196 Incorporation – Resolution of Reassurance

In the latest round of district advisory committee (DAC) meetings, Bernstein reported, uncertainty had been expressed by many people about what might happen under different scenarios where different jurisdictions might opt out. Bernstein was keen to emphasize throughout the ensuing discussion that he was optimistic about the level of participation.

The resolved clause of the resolution read:

Now therefore be it resolved, the Act 55 [current AATA ] board members and the district representatives agree and commit to maintain the current representation of the new Act 196 board until such time as we have to present a service plan to the committee and request a millage.

Bernstein felt it was important to pass such a resolution because it was important to say to new partners: We’ll be with you as long as we can; and we’re not going to just arbitrarily and quickly make decisions.

Left to right: David Read and David Nacht.

Left to right: David Read and David Nacht.

The AATA wants to keep the district representatives at the table as long as it possibly can – to continue having their input and their linkages to their communities – even those that might have initially opted out.

Bernstein hoped that even if some communities initially opted out, that by the time the newly-incorporated authority decided to put a millage on the ballot, the full participation of the county could be achieved. Bernstein reported that Ypsilanti mayor Paul Schreiber, who serves as the city of Ypsilanti district representative on the as-yet-incorporated Act 196 board, had indicated his support of the resolution.

Representatives of three of the seven non-Ann Arbor districts in the new authority attended the AATA’s Sept. 27 meeting and participated in the discussion – Karen Lovejoy Roe (Southeast District); Bill Lavery (South Middle District); and David Read (North Middle District).

Read contemplated the possibility that a district representative “loses its constituency” because all of the municipalities in the district opt out. Do we actually have to dismiss that member from the board? he wondered. Is it written into the Act 196 statute or Act 7 or the articles of incorporation?

Bernstein told Read that he hoped that situation would not arise. What the resolution is trying to convey is that the current AATA board wants to keep everybody at the table as long as possible. If there were a situation that led by law to a required membership change, the change would have to be made. But if that change could be avoided or delayed, that’s what the resolution would do, Bernstein said.

Lavery said it sounded like a positive action, and one that would help in the educational effort. Lovejoy Roe indicated a generally positive attitude toward the resolution.

Karen Lovejoy Roe expressed some concerns about the representation on the future board of the new authority. Looking on is board member Anya Dale.

Karen Lovejoy Roe expressed some concerns about the representation on the future board of the new transit authority. Looking on is AATA board member Anya Dale.

Sue Gott wondered if input from the AATA’s legal counsel might be needed to understand clearly if the resolution works in the spirit of Act 196. Bernstein felt it was important to state what the board would like to see happen – and if there are legal issues that arise, those can be dealt with. As long as there is one jurisdiction that has not opted out of the district, then the representative of that district could represent the district, Bernstein said – at least that was Bernstein’s understanding from the AATA’s attorney.

Like Read, Charles Griffith felt there was not actually any requirement that representation be removed from any districts as a consequence of jurisdictions opting out. The new board would have the ability, he observed, to change the membership, which would require a 4/5 majority vote. So there are already protections, he noted. Bernstein allowed that the resolution might amount to “belt and suspenders.” Still, he felt it was important to make the statement now.

Eli Cooper was not comfortable with the wording of the resolved clause, saying that he didn’t feel he could resolve something on the behalf of others. So he wanted references to the district representatives. David Nacht expressed concern about making a resolution that might not be legally enforceable. He felt it would be better for the board to say exactly what it wants to do. He suggested replacing the existing resolved clause by the following: “We support the concept of representation of those communities on the 196 board that are currently represented.”

Nacht was concerned that the entire resolution might be legally void. Still, he wanted to make a record that is supportive of what Bernstein wanted to accomplish. Bernstein responded to Nacht by saying he felt the issue was about timing – when the board felt it was appropriate to take action on adjusting the Act 196 board membership. He wanted to go on record as saying that they would wait as long as possible before making those adjustments.

The conversation at the table continued at some length. Roger Kerson felt it made sense to let everybody keep coming to the meetings rather than cutting people off at some early stage. Lovejoy Roe expressed concern that representatives of districts that had opted out would be making decisions about levels of service and the timing of a millage.

Read wondered if it made sense to pursue incorporation as early as next week. He said he was concerned about a possible “rush to incorporate,” but allowed that for many people it’s not a rush to incorporate, but rather more a feeling that “finally we’re getting it done.” He felt there needs to be a way of figuring out how to keep the board balanced based on population.

Nacht drew an analogy to the first Constitutional convention, where no one had any idea that there would be political parties and that such political parties would dominate political life. The Constitutional convention has been held on the issue of transit, he said.

Outcome: Eventually the resolution was withdrawn, with the possibility that it would return on Oct. 2 when the board will meet in a special session to formally request that the Washtenaw County clerk file articles of incorporation for the new transit authority.

Connector Study

At its Sept. 27 meeting, the AATA was asked to give conditional authorization for a $1.5 million contract for further study of a transportation connector between the northeast and south sides of Ann Arbor.

Connector Study: Background

The authorization is conditional on additional local funding – in the amount of $60,000. The $60,000 would be part of a total $300,000 local match for a $1.2 million federal grant.

The corridor runs from US-23 and Plymouth southward along Plymouth to State Street and farther south to I-94. This alternatives analysis phase of the study is to result in identifying a preferred choice of technology (e.g., bus rapid transit, light rail, etc.) and the location of stations and stops.

The Ann Arbor city council voted on Sept. 4, 2012 to reject the $60,000 request, but reconsidered that vote two weeks later on Sept. 17, 2012. On reconsideration of the vote, the council decided to postpone a decision until Oct. 15.

In the meantime, some of the requested $60,000 might actually be provided by the Ann Arbor Downtown Development Authority. Initial indications to the AATA were that the DDA’s budget constraints would not allow a contribution to the local match. But at a Sept. 26 meeting of the DDA’s operations committee, it was decided that the full DDA board would be asked to consider a connector study funding resolution at its Oct. 3 meeting. The DDA resolution would specify a $30,000 total contribution by the DDA, in two $15,000 payments to be made in each of the next two years. Members of the DDA’s operations committee wanted to make the $30,000 contingent on the city of Ann Arbor providing the other $30,000.

So the original resolution included in the Sept. 27 AATA board information packet specified the city of Ann Arbor as the source of that $60,000. However, the resolution was altered to specify more generally some other local funding – to accommodate the possibility that the Ann Arbor DDA might make a contribution as well.

The $60,000 is a portion of $300,000 in local funding that has been identified to provide the required match for a $1.2 million federal grant awarded last year to the AATA for the alternatives analysis phase. The breakdown of local support was originally intended to be: $60,000 from the city of Ann Arbor; $150,000 from the University of Michigan; and $90,000 from the AATA.

The timeline for completion of the study, which would be done by URS Corp., would be about a year and a half. Part of the AATA board’s rationale for moving ahead with the contingent authorization of the contract relates to the time that has elapsed since receiving a bid from URS to do the second phase of the study. According to an AATA staff memo, URS has held the price for the work at the original bid price – for now.

A feasibility study for the corridor costing $640,000 has already been completed by URS. That initial study concluded that some type of improved high-capacity transit system would be feasible – which could take the form of bus rapid transit, light rail transit, or elevated automated guideway transit. That study had been funded through a partnership with the city of Ann Arbor, the Ann Arbor DDA, University of Michigan and the AATA. Chronicle coverage of that feasibility study includes: “Transit Connector Study: Initial Analysis“; “AATA: Transit Study, Planning Updates“; and “Washtenaw Transit Talks in Flux.”

Connector Study: Board Deliberations

Reporting from the planning and development committee, Anya Dale reviewed the history and status of the project. She noted that to some extent it’s important to get the project moving – because even though the contractors held the original bid price, costs have been increasing. She hoped that it would go back to the city council and there would be more discussion about it.

Jesse Bernstein said he thinks there is a “movement afoot” to see if the Ann Arbor DDA might contribute to the funding of the study. So the language had been simplified to refer just to a local share instead of the city of Ann Arbor specifically, he said. He noted that $150,000 is coming from the University of Michigan and $90,000 from the AATA, with the remaining $60,000 from a local share. That total of $300,000 is the local match for a $1.2 million federal grant to conduct the analysis, he said. It would run from northeast Ann Arbor through the university and downtown Ann Arbor to Briarwood Mall and possibly beyond, he said. He characterized it as a very major corridor. He reminded his board colleagues that the feasibility analysis had shown that the utilization in the middle section of the corridor would justify a fixed-rail type technology.

David Nacht makes a point during the meeting.

David Nacht makes a point during the Sept. 27 AATA board meeting.

Eli Cooper asked for an amendment to one of the whereas clauses to mirror the same consideration as the amendment to the resolved clause – to refer more generally to a local share.

David Nacht described it as “rather unfortunate” that the project has become the subject of politicization at the Ann Arbor city council. It’s not inappropriate for the city council to consider the issue in a serious way, he allowed. Consideration of transit in Ann Arbor is an appropriate thing for the city council to consider, he continued. But the city council had actually done that in the past, he contended. The AATA, University Michigan, the Ann Arbor Downtown Development Authority and the city of Ann Arbor – those four partners – had been working for “not months, but years” in a direction to try to figure the project out collaboratively, he said.

If you’re a taxpayer, Nacht said, you want the government, whoever they are, to do something with that money they’re collecting. He called it a “wonderful thing” that different units of government – the AATA, which gets a lot of federal money; the University Michigan, which is a “separate beast”; the DDA, which is a creature of the city with its own tax base; and the city – are working together with a coherent vision of figuring out what is the best bang for the taxpayer buck. How can we move people around efficiently in order to help get people to and from work, to and from school? What is rational and efficient? he asked.

The connector project study uses federal dollars with a small amount of local dollars, he pointed out. That’s because the feds say: If you really want to improve transit, let us know you care – by putting in some local money to study it. And so up to this point, a lot of work had been done to do that. “This is not controversial, it shouldn’t be controversial,” Nacht concluded.

Nacht asked Eli Cooper to put on the public record some comments about why the study is so important. Cooper responded to Nacht by noting that the connector project was one of several strategies that was included in the transportation master plan update adopted by the city council in 2009. The process for updating the plan had included consideration of what Cooper called the “do nothing” alternative. It would be possible to allow the community to continue to grow without making investments in enhanced transportation, he ventured. And the decision not to fund the study amounts to a decision not to invest, he said.

The analysis of the “do nothing” alternative that went into the city’s 2009 transportation master plan update showed that there would be an erosion in the quality of life – congestion on many, if not all, of the radial corridors serving the downtown. That erosion of the quality of life was deemed to be unacceptable in the course of the planning process, so a variety of different alternatives were studied – connector-type service, enhance local transit, or ideas for bringing commuters in from greater distances – all to relieve the stress and strain on local streets. All those kinds of elements were woven into the fabric of the city’s transportation master plan.

Now is an opportunity to recall the importance of these investments, Cooper said. He noted that questions had been asked by Ann Arbor city councilmembers who were not familiar with that background, so he would be providing that to them on Oct. 15 when the council reconsiders the connector study funding. Cooper said it’s important for city councilmembers to understand the relationship between the various initiatives, the investments, the timing of those investments, and the anticipated benefit of making those investments. So he will be presenting to the council a scenario for what might happen if the city council decides not to make those investments.

Questions also been asked about how the connector relates to commuter rail and how that relates to the transportation master plan. Cooper noted that the 2009 transportation master plan lays out a long-term strategy that describes how all of the various initiatives fit together to result in the maintenance or enhancement of the city’s current quality of life. He characterized the various initiatives as “the lubrication that keeps the transportation system moving.” And by the “transportation system,” he stressed, he did not mean simply buses, but rather pedestrians, bicyclists, automobiles, buses and trains. As a city staff member, he felt he needed to do a better job in making sure that the policy leaders, who are worrying mightily about the investment, can understand what the costs are of failing to act. He needs to make sure they also understand what the benefits are of moving forward. He couldn’t predict where the council might decide, but the information would be framed for them at their Oct. 15 meeting, Cooper concluded.

Outcome: The board unanimously approved the conditional contract for the connector study.

Routine MDOT Processes

In front of the board for its consideration was a resolution to authorize the AATA’s chief executive officer to sign and execute contracts with the Michigan Dept. of Transportation (MDOT) without seeking a separate board resolution – as long as the contracts are less than $1 million.

According to the staff memo accompanying the resolution, there are 10-15 separate agreements between MDOT and AATA. A staff analysis of the resolution allows that there’s a risk to the practice – that the board might not be aware of the contracts that the CEO is executing. That risk is meant to be mitigated by a new practice of reporting all such contracts to the board’s performance monitoring and external relations committee.

Also on the agenda for the board’s consideration was a grant agreement with MDOT for a contract of over $1 million. MDOT is providing the local match – which totals $2.414 million – for AATA’s FY 2012 federal Section 5307 grant. [.pdf of FY 2012 expenditures for Section 5307 program]

At the meeting, the two items were summarized as part of the performance monitoring and external relations committee report. The report was given by Roger Kerson, who had been the only board attendee at the committee meeting that month. There was not a lot of debate on any of the resolutions, he quipped: “Most days I agree with myself, but not every day.”

On the blanket authority given to the CEO for contracts under $1 million, Kerson noted that this authorization is done on an annual basis. It turns out to be a more efficient way to run the routine business – given that in the course of the year there are up to a dozen or so such agreements. The board gets a report of each agreement that is executed, he noted.

Outcome: Both votes related to MDOT contracts were unanimous.

CEO Severance Clause

Not originally on the board’s agenda was an item related to CEO Michael Ford’s compensation agreement. David Nacht reported that a committee of the board, consisting of Roger Kerson and Sue Gott, is negotiating with CEO Michael Ford on his new compensation agreement.

Left to right: Eli Cooper and Michael Ford.

Left to right: Eli Cooper and Michael Ford.

There is no new agreement yet, Nacht reported. The compensation agreement contains a severance clause, and Nacht said that Ford was willing to work without a written compensation agreement, but wants to make sure that his severance clause stays in effect even though there is no new compensation agreement. So Ford had asked that the board vote on that – and Nacht felt that it was a reasonable position for Ford to take.

The resolution the board considered extended the severance clause in the compensation agreement for the next year, or until such time as a new compensation agreement was made, which would supersede the resolution.

Eli Cooper indicated that he couldn’t support the resolution – because he was not familiar with the contract or with the compensation agreement and their terms. He explained that he was appointed after those agreements were made, he did not feel he had enough information to make a decision.

Outcome: The board voted, with dissent from Cooper, to extend the severance clause in the CEO’s compensation agreement.

Election of Officers

The AATA elects board officers to one-year terms in sync with the fiscal year, which runs from October through September. Jesse Bernstein has served as board chair for the last two years and will continue to serve on the board. The board was asked to consider a nomination of Charles Griffith as chair.

Griffith is climate & energy program director for the Ecology Center. He has already served for six years on the board, and his current appointment lasts another four years. He was re-appointed to the board on May 2, 2011 to a five-year term after first being appointed on Sept. 19, 2006.

Election of Officers: Board Deliberations

As is typically the case, David Nacht reported, an elections committee was established – consisting of himself and Charles Griffith. The first thing that happened, he said, was that Jesse Bernstein had indicated to the committee that he was not interested in continuing as chair of the board. A “strenuous effort was made” to get Bernstein to reconsider, but Bernstein had “stuck to his guns,” Nacht said.

Nacht explained that it wasn’t the case that Griffith was being nominated because Griffith had been on the elections committee. It was due to the fact that Griffith is a senior member of the organization, Nacht said. Griffith has served as an active board member for many years, but has not served as chair, Nacht observed. He noted that he himself had served a stint as chair of the board. And Griffith is willing to serve as chair, Nacht continued.

Nacht said he had spoken outside of Griffith’s presence with various people on the board, e-mailed with various people, and heard comments from a variety of people. And it’s the committee’s recommendation that the board put forward Griffith as the chair, Nacht said. But Nacht felt it was important to take nominations from the floor in case anyone else wanted to offer to serve.

No one else made a different nomination, so Bernstein offered some explanation for his decision not to continue as chair. He has served for two years as chair, and he believed the position needs to be rotated: “My feeling is we really need to rotate that and give everybody a chance at the joy and happiness of being in that role.” That was his rationale for not wanting to serve a third term as chair. It was organizational and procedural and had nothing to do with anything else, he said.

The vote for Griffith as chair was unanimous, with Griffith abstaining.

Nacht went on to describe the two other board officer positions – treasurer and secretary. He noted that he himself had been serving as treasurer for the last few months at the chair’s request – and he was willing to continue to do that, though he had no tremendous to desire to do so. “If anyone else likes to spend a lot of time looking at numbers, I would absolutely be honored to cede….” Nacht continued: “Are there any nominations from the floor. Please?” About entertaining nominations, Bernstein quipped, “David, that’s my job.” Nacht was then elected as board treasurer by unanimous vote.

Nacht described the office of secretary as largely ceremonial – but allowed that theoretically it might not be ceremonial because the signature on a document might prove to be important for some reason. Nacht said that for the position of secretary he had sent an e-mail asking for interest in serving in that capacity. The first response he received that he saw was from Anya Dale. Nacht also noted that a willingness to serve as secretary had been indicated by Eli Cooper. However, Nacht reported that Cooper had deferred to Dale. Based on that, the elections committee recommendation was for Dale as secretary. Dale was elected unanimously as board secretary.

Outcome: The board elected Charles Griffith as chair, David Nacht as treasurer, and Anya Dale as secretary.

The AATA board has two working committees: the planning and development committee, and the performance monitoring and external relations committee. Membership was not decided at the Sept. 27 meeting. Griffith said he knew he was going to be nominated as chair, but he did not want to be presumptuous – so he had wanted first to talk to board members individually about their interest in serving on the two different committees of the AATA board. But he wanted to make the committee appointments as soon as possible. He thanked everyone for their support. He said he was humbled but also reassured, because he would be serving with two former chairs – Nacht and Bernstein. He felt he would get plenty of guidance and corrective action if he strayed off course: “We’ll have an exciting year, I think.”

Communications, Committees, CEO, Commentary

At its Sept 27 meeting, the board entertained various communications, including its usual reports from the performance monitoring and external relations committee, the planning and development committee, as well as from CEO Michael Ford. The board also heard commentary from the public. Here are some highlights.

Comm/Comm: Ridership

In his report from the performance monitoring and external relations committee, Roger Kerson said that even though the news about the budget had not been good, that had been counterbalanced by news about ridership. It’s increasing in every area, he reported. Part of that is due to a national trend of increasing use in transit.

Comm/Comm: New Website

The new AATA website is getting close to completion and would be ready to be unveiled soon, Roger Kerson reported from the performance monitoring and external relations committee. He felt that timed well in terms of the implementation of the transit master plan – because riders would have more and better ways to access information about bus arrivals, departures and scheduling.

Comm/Comm: LAC

The local advisory council (LAC) is a group that provides input and feedback to AATA on disability and senior issues. Cheryl Weber noted that there had been some continued discussion at the last meeting about the ability of riders to bring groceries onto vehicles. The group had received a visit from a representative of the University of Michigan Health System in response to concerns that LAC has expressed about access to the hospital. The driver appreciation program has yet to be implemented, but Weber hoped that it would be put in place in some form in the near future.

Comm/Comm: Advocacy for Most Vulnerable

During public commentary at the start of the Sept. 27 meeting, Thomas Partridge advocated for the rights of the most vulnerable residents of Ann Arbor, Washtenaw County, and the state of Michigan. They should have access to affordable public transportation, including accommodations for disabled people and senior citizens, he said.

During public commentary at the conclusion of the meeting, Partridge said he was an advocate for those who need public services the most – middle-class residents, senior citizens, and disabled people. Because the meeting had run long, and was pushing towards the nine o’clock closing time of the Ann Arbor District Library, Jesse Bernstein limited closing public commentary turns to one minute instead of the usual two minutes. Partridge objected to that, as did Carolyn Grawi, who followed Partridge to the podium at the conclusion of the meeting.

Grawi is director for advocacy and education at the Center for Independent Living. She congratulated Charles Griffith on his election as chair and thanked Jesse Bernstein for his service as chair for the past two years. She also thanked members of the community who had attended the district advisory committee meetings representing the disability community.

Present: Charles Griffith, David Nacht, Jesse Bernstein, Eli Cooper, Sue Gott, Roger Kerson, Anya Dale.

Next special meeting: Tuesday, Oct. 2, 2012 at 6:30 p.m. at the Ann Arbor District Library, 343 S. Fifth Ave., Ann Arbor.

Next regular meeting: Thursday, Oct. 18, 2012 at 6:30 p.m. at the Ann Arbor District Library, 343 S. Fifth Ave., Ann Arbor. [Check Chronicle event listings to confirm date]

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  1. September 30, 2012 at 10:32 pm | permalink

    Was there any discussion about the role the new authority’s board would have in running the operation, apart from scheduling a vote?

    I find it disturbing that there is a move to keep non-participating communities on the new board. I wonder what effect such a move will have on the Ann Arbor community’s acceptance of the millage.

    My new post [link] is an attempt to provide an overview of all the different transit programs and processes in play. I hope that it might serve as a reference.

  2. October 1, 2012 at 9:05 am | permalink

    Does this mean we will go another year without functional shock absorbers?

    The “MDOT Formula” makes no sense to me. If Detroit’s transit budget is reduced by 22%, shouldn’t their State share also be reduced by 22%, leaving the Ann Arbor share unchanged?

  3. October 1, 2012 at 9:21 am | permalink

    Re: “shouldn’t their state share also be reduced by 22% …”

    Jim, I take your comment to be one about policy not the a question about the application of the formula. In other words, I understand your comment essentially to be: Good policy would dictate that this is the way it should work – namely, that state assistance reflects the budget of individual transit agency.

    But for readers who understand it to be a question about the application of the formula, then this part of the article provides the answer:

    The formula provides a “floor” that guarantees a transit agency at least the amount of state operating assistance it received in 1997. Because of the drop in its budget, DDOT’s strictly proportionate share within its group this year would have been less than the 1997 “floor” – by $8 million. So the formula required that DDOT be made whole with respect to that floor. If the “floor” provision did not exist, that would have resulted in $8 million more for non-DDOT members of the group to split up. [.pdf of briefing memo on MDOT allocations]

    I think the rationale for the floor was to protect a transit agency from the growth of a peer agency’s budget, not a radical decline, which is what happened this year.

  4. October 1, 2012 at 3:24 pm | permalink

    Thanks, Dave. It just seemed odd to me that AATA’s budget should get cut as a result of DDOT reducing their budget. I guess I’ll have to think about whether that makes good policy sense.