Positions Open: New Transit Authority Board

Articles of incorporation for a new Act 196 transit authority, called The Washtenaw Ride, were filed with the state last week, on Oct. 3, 2012. The Ann Arbor Transportation Authority had hoped the new authority’s board would convene on Oct. 11, but that meeting was cancelled because key appointments to that board have not yet been made.

It was previously assumed that the seven Ann Arbor appointments to the new authority’s 15-member board would serve simultaneously on AATA’s board. Now, it appears that different appointments will be made.

Responding to an emailed query from The Chronicle, Ann Arbor mayor John Hieftje wrote late Friday afternoon: “On Monday night [at the council's Oct. 15 meeting] I will put out a call for applications to serve on the 196 Board. I will not be appointing anyone to that board who would also sit on the AATA Board.”

An application for all city boards and commissions is available on the city clerk’s website.

An informal 15-member group has been meeting as the board of the unincorporated authority for around a year. Some members of the AATA board and many others had assumed that upon incorporation, the informal group would become automatically installed as the board of the new Act 196 authority. However, that won’t be the case. Ann Arbor’s seven representatives to the new authority’s board first need to be nominated by the mayor and confirmed by the city council – under terms of a four-party agreement ratified between the cities of Ann Arbor and Ypsilanti, Washtenaw County and the AATA.

More significantly, according to several sources, the apparent current view of the Ann Arbor city attorney’s office is that service on the AATA board is not legally compatible with simultaneous service on the board of the new transit authority. So appointing seven Ann Arbor members to the new authority’s board would require nominating seven individuals who are different from those who might continue to serve on the seven-member AATA board.

Another issue apparently identified by the city attorney’s office is the fact that Act 196 of 1986 refers to an additional 30-day window for a jurisdiction in the county to opt out of inclusion in the new transit authority – a window that has not yet opened. Letters of notification sent by the AATA in late September to all jurisdictions in the county referred to a statutory 30-day window starting with the filing of the articles of incorporation. But Act 196 also requires that the new transit authority itself notify jurisdictions, which also triggers a 30-day window for opting out. The statute makes clear that it’s the later of the two windows that is relevant. Because the new transit authority does not yet have a seated board, it has not yet acted to notify jurisdictions countywide.

In any case, some jurisdictions have already opted out of the new Act 196 authority. The Northfield Township clerk’s office responded to a Chronicle phone query with confirmation that on Oct. 9, the township board decided to withdraw from the new authority on a 4-0 vote. The Chronicle has as-yet-unconfirmed reports that the boards of Salem Township and Manchester Township have also voted to opt out.

Another wrinkle: The change in composition of the Ann Arbor city council after the Nov. 6 election. Councilmember Stephen Kunselman (Ward 3) has told The Chronicle that he would like to pursue the possibility of Ann Arbor opting out – and he thinks there might be six votes on the new council to accomplish that. If Ann Arbor opted out, it would effectively end the initiative.

Delay in Decision: Implications for Board Makeup

The question of whether the same individual could simultaneously serve on the boards of the two transit authorities has been under discussion by attorneys for the city of Ann Arbor and the AATA for the past week. On Oct. 8, mayor John Hieftje – in a response to an emailed query from The Chronicle – could not offer anything definitive on the board compatibility question. And AATA board chair Charles Griffith wrote on the same day that “… we are still seeking clarification with [legal counsel] but are confident we will resolve and move forward. We do think that the city’s best interests are served by ensuring continuity from one entity to the next.”

In the interest of promoting continuity, it’s conceivable that some members of the current AATA board could resign their positions on that board, in order to become eligible for appointment on the new Act 196 board. Hieftje’s statement would allow for that possibility.

Boards for both organizations will need to exist until a possible transfer of assets is made from the AATA to The Washtenaw Ride. That transfer can’t happen until all conditions of the four-party agreement are met – including a voter-approved funding source for expanded services that are to be offered by the new transit authority.

Ann Arbor’s regular appointment process for a board or commission stipulates that candidates are nominated by the mayor, then confirmed by the full city council. That confirmation can’t take place until at least the next regular meeting of the council after the nomination has been made – unless approved by an eight-vote majority on the 11-member body. Based on Hieftje’s written statement, nominations for Ann Arbor’s members to the board of The Washtenaw Ride could not be made any sooner than Nov. 8 – the next council meeting after Oct. 15.

So under the city’s regular appointment process, confirmations would then come no sooner than the council’s Nov. 19 meeting – which will be the first meeting of the newly-constituted city council following the Nov. 6 election. Departing from the council will be three councilmembers who could have reasonably been expected to support the nominations made by the mayor: Carsten Hohnke (Ward 5), Sandi Smith (Ward 1) and Tony Derezinski (Ward 2).

So the additional lag in time has potential implications for the actual makeup of the new authority’s board.

Opt-Out Window

The additional time lag also has implications for the possibility that Ann Arbor itself would opt out of the new authority, as well as for the timing of any millage vote. More detail on that is included below.

Incorporation under Act 196 initially includes by default every jurisdiction in Washtenaw County. But the statute provides more than one way of opting out of inclusion.

Opt-Out Window: Which Window?

The working assumption for many observers has been that the trigger of a 30-day timeframe for a jurisdiction to opt out was the event of incorporation. But the language of the act itself ties a possibly different timeframe to the notification of jurisdictions in the county. [.pdf of Act 196 of 1986]

Section 8. (5) A political subdivision or other entity that is part of a public authority under this act may withdraw from the public authority until the expiration of the thirtieth day following the date the public authority is incorporated or until the expiration of the thirtieth day after receiving notification under subsection (7), whichever is later, without meeting the conditions listed in subsection (1) or (2).

And according to the statute, the notification in subsection (7) is properly done by the new authority:

Section 8. (7) An authority that forms under this act on or after May 1, 2006 shall notify all political subdivisions or portions of any city, village, or township that are included in the authority that the political subdivision or portion of the political subdivision is included in the authority. The authority shall include in this notification notice of the right to withdraw from the authority under this section. The political subdivision or portion of the political subdivision that is notified has 30 days after receiving the notification to withdraw from the authority pursuant to subsection (5).

Although the AATA sent letters of notification on Sept. 27 to every jurisdiction in the county – of the intent to file the articles of incorporation – that does not satisfy the requirement in subsection (7). Those letters did satisfy a requirement in the Washtenaw County board of commissioners’ resolution ratifying the four-party agreement – commissioners had required that notification letters of an intent to file be sent.

When the new transit authority eventually sends out letters of notification to all jurisdictions – stating that those jurisdictions are included in the authority – only at that point will the later relevant 30-day window open.

Opt-Out Window:  Implications for Ann Arbor’s Participation?

If Ann Arbor board appointments are delayed for another few weeks and the relevant 30-day window does not open until December or later, it’s conceivable that the complete picture of which jurisdictions are participating in The Washtenaw Ride might not be finalized until next year.

The extension of the 30-day window well past the November election also has implications for the possibility of the city of Ann Arbor opting out of new Act 196 authority. While the current edition of the city council almost certainly does not have the six-vote majority necessary to opt out, the council will seat three new members after the election. Carsten Hohnke (Ward 5) and Sandi Smith (Ward 1) chose not to seek re-election, and Tony Derezinski (Ward 2) did not win the Democratic primary in August.

The council approved the four-party agreement on just a 7-4 vote – and three of the seven votes of approval were cast by outgoing councilmembers. Ann Arbor councilmember Stephen Kunselman (Ward 3) has told The Chronicle that he would like to pursue the possibility of Ann Arbor opting out – and he thinks there might be six votes on the new council to accomplish that.

If the city of Ann Arbor opted out of the new Act 196 authority, that would effectively end the initiative. The four-party agreement does not appear explicitly to contemplate the possibility that Ann Arbor would opt out. But by its terms, the city would withdraw from the agreement if Ann Arbor opted out – because as residents of a non-participating jurisdiction, Ann Arbor voters would necessarily fail to approve any millage that the new Act 196 authority requested. Excerpted from the four-party agreement:

If Ann Arbor voters fail to approve the NEW TA [transit authority] Act 196 funding source before December 31, 2014, regardless of whether it is approved or not by the other voting jurisdictions, then the City shall withdraw from this agreement without penalty, shall veto any attempted termination by AATA of the AATA-City operation agreement, and shall refuse to designate and/or assign its millage under Section 3(a).

Opt-Out Window: Implications for Millage Vote Timing?

The AATA has indicated that a possible funding scenario is to ask voters in Washtenaw County to fund the new transit authority with a property tax of 0.584 mills. A millage proposal might be put on the ballot as early as May 2013.

But given the now-extended timeframe for seating the new board, a May 2013 millage vote presents an increasingly challenging timeframe for an effective millage campaign to be mounted.

Even before the additional delays were apparent, Tom Heywood, director of the State Street Area Association, feared that a millage would not pass if voted on that soon – because he thought there would not be adequate lead time for a millage campaign. Heywood made the remarks at a Sept. 25 meeting of Ann Arbor’s district advisory committee (DAC), which helped advise the unincorporated authority and will continue to do that.

Incompatible Offices

It’s been widely assumed that the current seven members of the AATA board would serve as Ann Arbor’s representatives to the new transit authority’s board. However, according to multiple sources, the view of the Ann Arbor city attorney’s office appears now to be that simultaneous service on the two boards is disallowed, because such service would violate the state’s statute that characterizes incompatible offices. [.pdf of Act 566 of 1978 (Incompatible Public Offices)]

Incompatible Offices: Transit Authority Exemption

By way of background, the statute on incompatible offices provides an explicit exemption from applying the statute’s key clause (Sec. 2) for certain types of transit authorities. The Washtenaw Ride and the AATA don’t have the kind of relationship to each other that is exempted by the statute. But the argument that simultaneous service is not allowed on the two boards doesn’t depend on the failure to meet the exempted condition. Here’s the specific exemption:

Sec 3. (11) Section 2 does not prohibit a public officer or public employee of an authority created under the public transportation authority act, 1986 PA 196, MCL 124.451 to 124.479, from serving as a public officer or public employee of another public transportation authority if each public transportation authority has members consisting of identical political subdivisions.

For reference, Sec. 2 is fairly short:

Sec. 2. (1) Except as provided in section 3, a public officer or public employee shall not hold 2 or more incompatible offices at the same time.

It’s clear that the two transit authorities in question – the AATA and The Washtenaw Ride – don’t meet the condition for the exemption in subsection (11), because they consist of different political subdivisions. From that, however, it does not necessarily follow that the two offices are incompatible.

But because the exemption criterion is not met, the definition of “incompatible offices” as provided by the statute has to be applied.

And according to the statute, here’s what “incompatible offices” means:

‘Incompatible offices’ means public offices held by a public official which, when the official is performing the duties of any of the public offices held by the official, results in any of the following with respect to those offices held:
(i) The subordination of 1 public office to another.
(ii) The supervision of 1 public office by another.
(iii) A breach of duty of public office.

So the question becomes: Are the offices of AATA board member and Washtenaw Ride board member incompatible under (i), (ii), or (iii)?

Incompatible Offices: Subordination, Breach

It seems clear that if the two offices are incompatible, then it’s not because of (ii) – because AATA board members will not be supervising Washtenaw Ride board members, or visa versa.

But under (i) or (iii) it’s now apparently the view of the Ann Arbor city attorney’s office that simultaneous service on the two boards is not allowed. The new transit authority’s board might be analyzed as subordinate to the AATA board, because the new authority has no assets. And without assets, the new authority’s board cannot perform the most basic of duties assigned to it by Act 196 – notifying jurisdictions in the county that they are included in the authority, which starts the 30-day window for opting out. In order to complete that required task, the AATA would presumably need to appropriate money to the new transit authority to cover the cost of materials and postage associated with that notification. That could conceivably make the new authority’s board dependent on, and therefore subordinate to, the AATA board.

A breach of duty generally would result from a conflict in the fiduciary responsibilities between offices. The two entities – the Washtenaw Ride and the AATA – are separate, so it’s conceivable that there’s a separate fiduciary responsibility to them. But it’s also conceivable that a counterargument could be made – that in this case, the fiduciary interests of the two entities are completely aligned.

The fact that the discussion among the various legal counsel extended over several days is consistent with a divergence of views on the matter. But Hieftje’s statement – that he’ll seek applications so that the new authority’s board can be filled without requiring simultaneous service on the AATA board – makes the matter essentially academic.

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