County Board Briefed on Audit, Financials

Washtenaw County board of commissioners meeting (April 3, 2013): With a third of the board absent, commissioners were briefed on the county’s 2012 audit – with a look toward changes that will impact future financial statements. The audit was clean.

The county’s finance staff, along with the auditor, Mark Kettner of Rehmann, highlighted several points, including a relatively dramatic increase in the general fund balance over the last few years – from $9.7 million in 2009 to $16.8 million at the end of 2012. Kettner also explained upcoming accounting changes that will require unfunded liabilities from the county’s pension and retirement healthcare plans – now totaling nearly $250 million – to be recorded in a different way, with more disclosure.

The new accounting changes – required by the Governmental Accounting Standards Board (GASB) – won’t begin until 2015, but commissioner Dan Smith (R-District 2) wondered whether the county could implement the changes sooner. It might be possible, Kettner replied, but “I don’t know why you’d want to do it.” He suggested that the board hold a working session to go over the upcoming changes in more detail.

Kettner also pointed out that the changes will affect government entities in different ways. For example, it’s likely that there will be more impact on the city of Ann Arbor, because of how its many “enterprise” funds might be affected and the implications that would have on outstanding bonds. At minimum, the changes will mean more work for finance staff.

Also at the April 3 meeting, commissioners voted to add 39 new jobs in the community support and treatment service (CSTS) department, which provides mental health and substance abuse services to county residents. The work is primarily funded by the Washtenaw Community Health Organization, a partnership between the county and the University of Michigan Health System. Most of the new jobs are union positions. Dan Smith expressed concern about adding to the county’s payroll, but supported the resolution along with other commissioners in a unanimous vote.

The board also took an initial vote to dissolve The Washtenaw Ride. That Act 196 authority is a remnant of a failed attempt to create a countywide transit system last year. Efforts to expand the current reach of the Ann Arbor Transportation Authority are still underway, but don’t require the structure that was put in place under Act 196.

The topic of public transportation was raised later in the meeting as well, as Ronnie Peterson (D-District 6) asked about the county’s role in the southeast regional transit authority (RTA). The RTA was formed by the state legislature last year to coordinate regional transit in the city of Detroit and counties of Wayne, Macomb, Oakland and Washtenaw. There was not uniform support for Washtenaw County to be part of this effort, and it’s not yet clear what the impact will be on the AATA.

In other discussion, Yousef Rabhi (D-District 8) highlighted a proposal in front of the Ann Arbor city council regarding possible ordinance changes governing the Ann Arbor Downtown Development Authority. Depending on what the council decides, there might be implications for the county, he said, so he wanted to put it on the board’s radar. For background on this issue, see Chronicle coverage: “DDA Tax Capture Change Gets Initial OK” and “DDA Ramps Up PR after First Council Vote.”

Also briefly mentioned was a discussion that occurred at a late March county pension commission meeting, raising questions about the new labor contracts that the board approved on March 20, 2013. At issue is whether the county complied with a state law requiring supplemental actuarial analysis before pension benefit changes are adopted. The county administration subsequently conferred with outside legal counsel, and confirmed their view that no new actuarial analysis was necessary.

And although it wasn’t discussed at the April 3 board meeting, the recent labor contracts resulted in another issue related to compliance with state law: Elimination of the county’s healthcare benefits for domestic partners.

When the county’s previous labor contracts were opened for renegotiation, that triggered the need to comply with a state law passed in late 2011. PA 297 restricts public entities from offering domestic partner benefits. For the county, those benefits had been offered to “other eligible adults” who met certain criteria, like sharing the same residence. Nine county employees had been using those benefits, according to Diane Heidt, the county’s human resources and labor relations director. The benefits were eliminated as of April 1.

Heidt noted that even if the contracts hadn’t been renegotiated in March, the benefits would have eventually been eliminated when the previous contracts expired at the end of 2013. She said the administration was very disappointed about the change, and continues to explore other options that serve the employees while complying with state law.

2012 Finance, Audit Reports

The main action of the April 3 meeting related to the county’s financials, including a report from the auditor, Mark Kettner of the accounting firm Rehmann. Chronicle readers will likely recognize his name, as Kettner oversees audits for several local government entities, including the city of Ann Arbor.

Part of the financial presentation included an award to the county. As she has for the past several years, Carla Sledge – Wayne County’s chief financial officer and past president of the Government Finance Officers Association – presented the county with a certificate of achievement for excellence in financial reporting for its fiscal year ending December 2011. The award is based on the county’s timely completion of its state-mandated comprehensive annual financial report, or CAFR. This is the 22nd year that Washtenaw County has received a certificate of achievement.

Pete Collinson of the county’s finance department also gave a brief presentation with highlights from the current set of reports. The financial reports presented to the board are:

• Washtenaw County Comprehensive Annual Financial Report (CAFR) for the year ended Dec. 31, 2012.
• Washtenaw County single audit of federal awards for the year ended Dec. 31, 2012.
• Washtenaw County Building Authority financial statements for the year ended Dec. 31, 2012.
• Washtenaw County Department of Public Works projects financial statements for the year ended Dec. 31, 2012.
• Washtenaw County Water Resources Commissioner financial statements for the year ended Dec. 31, 2012.
• Washtenaw County Employees Retirement System (WCERS) financial statements for the years ended Dec. 31, 2011 and Dec. 31, 2012.
• Washtenaw County Money Purchase Pension Plan (MPPP) financial statements for the years ended Dec. 31, 2011 and Dec. 31, 2012.
• Washtenaw County Voluntary Employees Beneficiary Association (VEBA) financial statements for the years ended Dec. 31, 2011 and Dec. 31, 2012.
• Washtenaw County Community Support & Treatment Services (CSTS) financial statements for the year ended Sept. 30, 2012.
• Washtenaw County Employment Training and Community Services Fund (ETCS) financial statements for the year ended Dec. 31, 2012 (conducted by the accounting firm of Stewart, Beauvais & Whipple).
• Washtenaw County Employment Training and Community Services Fund (ETCS) single audit of federal awards for the year ended Dec. 31, 2012 (conducted by the accounting firm of Stewart, Beauvais & Whipple).

Collinson described the process of fiscal review leading up to the audit. Auditors arrive in January and stay for about five weeks, then work with county staff for an additional period to finalize the financial statements. The goal is to make a presentation to the board by the first meeting in April, he said. He joked that an audit “certainly isn’t something we’d choose to do” every year. An annual audit is mandated by the Michigan Uniform Budgeting and Accounting Act (PA 2 of 1968), which requires it for local units of government with a population of 4,000 or more residents.

There are two components to the audit, Collinson explained: (1) an audit of financial statements for all of the county’s funds, including assets, liabilities, revenues and expenditures; and (2) a “single audit” of all federal grants, to see if the county complied with federal requirements attached to those grants. Last year, he noted, the county received about $28 million in federal grants, “so it’s a significant part of our operation.”

The 206-page CAFR is the main document that’s produced as a result of the audit, Collinson said. He noted that the auditor has given the county a clean opinion.

He also highlighted the different sections of the CAFR. For example, a statistical section provides a range of trend data, including employee count, expenditures, revenues and other financial information. “It’s a helpful section to look at the trends over time,” he said. [.pdf of CAFR statistical section]

Collinson said he wouldn’t spend a lot of time on the general fund report, noting that the board had received a detailed update on 2012 year-end finances at its March 20, 2013 meeting. The general fund ended 2012 with a $2.3 million surplus, and a fund balance of $16.8 million – or 16.8% of annual general fund expenditures and appropriations. He characterized that position as very good, and in line with the minimum fund balance recommended by the Government Finance Officers Association (GFOA). It would be good to build on that, he added, but it was impressive to finally reach the minimum. “I didn’t think we’d get there in my years here,” he said.

Turning to the report on all of the county’s fund balances, Collinson noted that some funds are restricted and can only be spent for a limited range of purposes. All county fund balances totaled $102.275 million at the end of 2012. Of that, $31.989 million was unobligated. [.pdf of schedule of fund balances as of Dec. 31, 2012]

He also mentioned the CAFR’s schedule of long-term liabilities over the last five years. Primarily, those liabilities are debt – such as debt related to construction projects – and actuarial liabilities for the pension and retirement healthcare systems. [.pdf of long-term liabilities] The schedule of long-term liabilities shows that total liabilities have increased from $393.9 million at the end of 2008 to $446.6 million as of Dec. 31, 2012.

Collinson also highlighted the county’s state revenue-sharing reserve fund, which had a balance of $4 million at the end of 2012. That remaining amount will be spent in 2013, and the fund will “sunset,” he said. The state has reinstated revenue-sharing at a lower level, with the county getting about $2.8 million for the current year. That amount is expected to increase, he said.

New to the CAFR this year are changes that reflect the county’s implementation of Governmental Accounting Standards Board (GASB) statements 63 and 65. Certain items that were previously classified as assets are now called “deferred inflows.” And certain liabilities are now called “deferred outflows of resources.” In addition, the balance sheet (statement of net assets) is now called the statement of “net position.” Collinson joked that if he read the definition of these terms, it wouldn’t clarify things. He noted that the terms “assets” and “liabilities” have worked well for centuries, but GASB has decided to change the terminology. He characterized these changes as minor, though he noted that “bigger changes are coming down the pike.” [The reference was to implementation of GASB 67 and 68, which was discussed later in the meeting.]

Collinson reported that despite the economy, the county has maintained its AA+ bond rating with Standard & Poor’s, and an Aa2 rating with Moody’s. It’s the second-highest rating possible, he noted. The county administration hopes to secure the triple-A bond rating in the future.

Collinson concluded by introducing Mark Kettner from the accounting firm Rehmann, who reviewed the 2012 audit and answered questions from commissioners.

Kettner noted that the current report was “unmodified” – a new term that’s being used instead of the previous “unqualified.” Both mean that the audit was clean, which is the highest level of assurance for financial statements. He cautioned that “the auditor did not say that everything is OK.” That is, it’s not an opinion on internal controls or the county’s financial position. It’s an opinion that the financial statements are fairly presented in accordance with criteria that meet GASB principles, he said.

Kettner also highlighted some terminology changes that result from GASB’s new “clarity” standards. Like Collinson, he characterized the changes as subtle, adding that it created some “nuisance work” compared to previous statements.

Bigger changes are coming, however. About a month ago, Kettner said he met with county administration and board leadership to talk about the current report as well as upcoming GASB standards 67 and 68. It would take hours to explain, he said, but he summarized it as a very big change dealing with pension plans and retirement healthcare. It will require an extra actuarial report, more disclosure, and recording of liabilities in a different way.

He pointed to the current pension fund statement – on page 115 of the CAFR – and noted that the current unfunded actuarial liability of $101 million will be recorded in 2015 as a liability on the county’s governmental-wide financial statements. That won’t have as great an impact as it would if it were required to be booked as a general fund liability, he said. [.pdf of CAFR statement regarding pension fund] “It’s going to be a big pop into the financial statements,” he said.

Two years later, in 2017, the same thing will occur for retiree healthcare – the county’s Voluntary Employees’ Beneficiary Association (VEBA), a 501(c)9 trust established to pre‐fund retiree healthcare benefits. Kettner said the county will be booking that liability – now at about $148 million – on the governmental-wide financial statements. [.pdf of CAFR statement regarding VEBA]

There’s lots of lead time, Kettner said, but he suggested that the board hold a working session, and perhaps include the boards of VEBA and WCERS, to talk in more detail about what this transition will entail.

Kettner praised the county for completing its audit by the end of the first quarter, saying it’s as good as any publicly traded Fortune 100 or 500 company.

2012 Finance, Audit Reports: Board Discussion

Dan Smith (R-District 2) asked if there’s anything preventing the county from implementing GASB 67 and 68 standards sooner than required. There’s nothing to prevent that, Kettner replied, but “I don’t know why you’d want to do it.”

Smith said he’d like to do it in order to get a clearer understanding of the county’s financial picture, because the county will be forced to do it eventually. Kettner likened it to going to the dentist to get a root canal, and being offered the choice of doing it tomorrow or next week – you might want to put it off.

The information about these liabilities is already provided in the CAFR, Kettner noted. The amount might change – either up or down – because different assumptions will be used under the new GASB reporting standards. The county will need to get a new actuarial report that uses a different set of assumptions. But he indicated that those changes likely won’t be dramatic. The main difference will be a greater amount of disclosures, and a booking of the liabilities under the governmental funds.

Kettner added that the county couldn’t implement the changes until it gets the necessary information from the Municipal Employees’ Retirement System of Michigan, a statewide system. Although only a small subset of county employees are enrolled in MERS, that pension system still must be included in the county’s audit. He described it as a “triple whammy” for Washtenaw County, because the county will be required to include information for all three systems: MERS, WCERS and VEBA.

For MERS, the county will have to include information related to the entire MERS system, not just for the small piece of it that relates to county employees. So under the new standards, the county’s financial statements will need to include a listing of all MERS investments and the rate of return for those investments. Then, the county’s financial staff will have to calculate the county’s “slice” of those investments as part of their report. “So it’s going to be rather complicated, and I don’t expect that you’ll have MERS ahead of time,” Kettner said.

Kettner also questioned whether the actuaries hired by the county are prepared to handle this additional workload yet. “I hear what you’re saying,” he told Smith regarding an early implementation, “but I would really advise against doing it.”

Smith noted that if the liabilities are currently on the county’s balance sheet – what’s now called its statement of net position – then the net position would be negative. It would make the statement look significantly different, he said.

That’s true, Kettner replied, but the rating agencies – Standard & Poor’s and Moody’s – are well aware of this information, and they know that actuarial information is based on an educated guess. In addition, it won’t be as big of a hit to the county as it will to the city of Ann Arbor, Kettner said. For a city that has a higher number of enterprise funds – like water, sewer and other utilities – the pension and retirement healthcare liabilities will have to be allocated to those funds. “All of a sudden those funds are going to get significant charges, and it could push them into a fund deficit,” Kettner explained.

The minor impact could be a requirement from the state to do a deficit elimination plan. But there’s potential for greater impact: If those enterprise funds have revenue bonds that are still being paid off, there might be covenants in those bonds stating that the funds can’t operate with a deficit. If that’s the case, Kettner said, then the city would need to figure out how to address it, which might entail rate increases. “That’s not going to go over very well,” he said.

The changes will hit governmental entities differently, he said. For the county, it will hit them in the governmental funds, “and to be honest with you, some people don’t even pay attention to those. Rating agencies are more concerned about your general fund, and any significant proprietary [enterprise] funds.”

Continuing his questions, Smith then highlighted a sentence from the CAFR, included in the notes on the pension system. He read it aloud, and asked Kettner to clarify. That sentence states: “However, for purposes of calculating the annual required contribution (ARC), the System uses the aggregate cost actuarial funding method, which does not identify or separately amortize unfunded actuarial liabilities.” Kettner explained that the county is using a different approach in its calculations to determine an annual required contribution to the pension plan, compared to what’s required as a GASB disclosure.

Smith indicated that he had other questions and comments, but he understood that Kettner’s scope was limited to the report of financial statements, not to the actual financial condition of the county.

Andy LaBarre (D-District 7) asked Pete Collinson to elaborate on his remarks about the county’s fund balance.

Collinson noted that for many years, the fund balance was around $4 million, which would barely cover more than a couple of weeks of operating costs, he said. Former county administrator Bob Guenzel had tried to add to it every year, to build the fund balance slowly. In the last couple of years, the growth in the fund balance has been much greater, he said, from about $7 million to the current $16.8 million. [According to data provided in the CAFR, the general fund balance grew from $7.4 million in 2003 to $9.7 million in 2009, then jumped dramatically to $15.3 million in 2010.] Collinson called it a good surprise to reach that amount.

Yousef Rabhi (D-District 8) called the CAFR interesting, but noted that “the weeds can get tall pretty quick.” He was glad the county has a staff that’s “able to wade through those weeds” and provide answers to questions that commissioners might have. The work that the staff does is very valuable, he said.

Later in the meeting, Dan Smith made some additional comments on the CAFR, reflecting more on the county’s financial condition. He praised the staff, saying that even though many people were involved, the documents were unified with a consistent style that made it seem as though the same person wrote it.

Smith highlighted page 178 of the CAFR, with a chart comparing the county’s principle taxpayers in 2003 through 2012. [.pdf of Washtenaw County's top taxpayers] The county has a much broader tax base now than in 2003, he noted. Nine years ago, the top 16 taxpayers made up 9.89% of the county’s tax base. Now, that percentage is down to 6.88%. In 2003, several taxpayers represented more than 1% of the tax base. In 2012, no taxpayers are paying more than 1% of the county’s tax base. “I think that bodes well for the long-term future of the county,” Smith said.

The county’s top five taxpayers in 2003 were Pfizer, Visteon, General Motors, Detroit Edison and MichCon. By 2012, three of those – Pfizer, Visteon and General Motors – were not even in the top 16. The top five taxpayers in 2012 were Detroit Edison, McKinley Associates, Toyota, MichCon and Ford.

On pages 184-185, Smith pointed to a list showing the total debt across the entire county, including school districts, libraries, municipalities and other government entities. [.pdf of direct and overlapping debt table] The debt totals about $1.3 billion. If you divide that amount by the number of county residents, it works out to just $3,773 per person, Smith noted. If it was divided by parcels or taxpayers, that number would go significantly higher, he added. [Debt-per-capita is a factor weighed by bond rating agencies.]

Smith also highlighted page 23 of the audit for the office of the water resources commissioner. The office uses a straight-line amortization schedule of 50 years for its infrastructure. He noted that some of the county drains are well beyond that age, so there’s a building infrastructure deficit. It’s already clear that there are problems with roads, he said, and some of the county’s drains will likely start to collapse and fail as well. He pointed to a situation in Superior Township last year where a drain had not been maintained and it slowly sedimentized. The 50-year amortization schedule roughly equates to the lifespan of the county’s drainage infrastructure, Smith noted.

In wrapping up the discussion of financial reports, county administrator Verna McDaniel thanked the staff for their work. She thanked Dan Smith as well “for appreciating the CAFR to the extent that he does.” She joked that because she knew he would read the CAFR closely, “I read this darn thing front-to-cover myself.”

Outcome: This was not a voting item.

Jobs for Mental Health Services

A resolution was on the April 3 agenda to create 39 new jobs and reclassify 76 others for Washtenaw County’s community support and treatment service (CSTS) department.

CSTS is a county department employing about 300 people, but it receives most of its funding from the Washtenaw Community Health Organization, a partnership between the county and the University of Michigan Health System. The WCHO is an entity that receives state and federal funding to provide services for people with serious mental illness, developmental disabilities and substance abuse disorders. WCHO contracts for services through CSTS. Although staffing has remained fairly constant in the last five years, demand for services has increased by about 40%. These jobs are being created to provide the capacity to meet that demand.

The new jobs include client service managers, support coordinators, mental health professionals, mental health nurses, management analysts, administrators and a staff psychiatrist. All of the reclassified positions are client service managers. Of the 39 new positions, 30 of them are union jobs, represented by AFSCME.

According to a staff memo, the changes will add $14,255,535 to the CSTS 2012-2013 budget, bringing the budget total to $41,822,489. Of that, WCHO is providing $38,692,815, including revenues from grant pass-throughs. Other revenues include $165,190 from the Haarer bequest and $246,846 from a contract with the Washtenaw County sheriff’s office.

Jobs for Mental Health Services: Board Discussion

Yousef Rabhi (D-District 8) said he supported the move. There’s a lot of need that often goes unmet in other communities, but the county rises up to the challenge, he said. CSTS has been seeing more customers, even though its staffing level has been relatively flat, he said.

The need for more staff is crucial, Rabhi said, because it means better service for people in the community. It will also mean a net increase in union jobs, he noted, which he said he is very supportive of. He also praised the fact that some of the people who have been doing these jobs on a temporary basis will now have permanent, full-time positions. “And as a temporary employee, I can tell you that being a temporary employee is no fun.” [Rabhi works for the city of Ann Arbor's natural area preservation (NAP) program.]

Even in the face of shrinking government, Rabhi said, this proves that government is still relevant and necessary for this kind of service, because there is no private market to provide it. “We need to be there for those folks,” he said.

Felicia Brabec (D-District 4) said she wanted to echo Rabhi’s comments. It’s an important move for mental health stability in the community, for residents as well as workers. She asked for an explanation of where the money to fund these positions is coming from.

Tim Florence, CSTS medical director, reported that WCHO is the funder for these kinds of mental health services, and CSTS is the service provider. No county general fund dollars are being used.

Ronnie Peterson (D-District 6) wondered if the additional staff would be serving a specific geographical region. He said he’s interested in “providing services where services are needed.” Florence replied that WCHO/CSTS are responsible for providing all medically necessary services for county residents on Medicaid. Recently there has been a push to engage in more outreach, he said, especially in areas where there might be opportunities to expand services. Those areas include the 48197 and 48198 zip codes, he said. [That's a reference to the Ypsilanti area, which is part of Peterson's district.] But the services are provided to anyone in the county, he added, regardless of location.

Andy LaBarre (D-District 7) asked Florence to explain the restructuring that occurred in 2002, and wondered if there would be another restructuring locally as part of a broader statewide initiative. It was his understanding that Washtenaw County is being left untouched by a statewide restructuring, “and I think that speaks to our strength in terms of this service provision,” LaBarre said.

Florence explained that the WCHO is the community mental health service provider for this county, going back to the year 2000. The county board and University of Michigan formed this freestanding entity to provide mental health and substance abuse services to people with Medicaid, as well as to the uninsured. In 2002, there was a change made by the state Dept. of Community Health, which provides funding to WCHO. The state created PIHPs – pre-paid inpatient health plans – which basically set up a managed-care structure for these services, Florence said. The WCHO became the PIHP for Washtenaw County, as well as for other surrounding counties. The WCHO contracted with CSTS, which actually provided the services.

Now, the WCHO is trying to ensure that CSTS has the tools it needs – including administrative resources – to deliver these services, Florence said. There are some functions previously provided by WCHO that will move over to CSTS, he explained. Regarding the broader statewide restructuring, the number of PIHPs has decreased, he said, but Washtenaw County has been untouched by that change. He felt the county could help inform the state about ways to integrate mental and physical healthcare, which he called a wave of the future.

Florence noted that CSTS is serving about 40% more people today than it was 5 years ago, but staffing hasn’t increased.

Dan Smith (R-District 2) expressed concern about adding to the county’s employee base. The county isn’t close to being out of the woods financially, he said, and in the not-too-distant future there will be about $250 million impacting the county’s bottom line. [The reference was to an upcoming change in how pension and retirement healthcare liabilities will be accounted for on the county's financial statements.]

The current budget is based on continued declines in tax revenues, he noted. With the additional CSTS jobs, plus the two jobs added in information technology and water resources [on a vote taken at the same April 3 meeting], the total county headcount will reach about 1,375. That will be the highest headcount since 2008, he said. The county could be faced with the “unsavory” prospect of letting people go, he said, which no one wants. He also noted that the employees with union positions could have various bumping rights. [A “bump” is a union term referring to reassignment based on seniority.]

“I’ll be supporting this,” Smith concluded, “but I am still very, very cautious and leery about increasing the county’s headcount at this time.”

Peterson pointed out that the funding is revenue-driven, coming from dollars that are outside of the general fund. Public health services have avenues for resources that haven’t been available before, he said. These are long-term dollars from outside the general fund, Peterson added, and that’s why he’s supporting it.

However, Peterson also noted that he had in previous years raised concerns about the creation of the WCHO. He said he’s an advocate of mental health services, but he believes only one entity should be responsible for the delivery of services. The costs should be directly related to delivering services, not for administrative overhead, he said. “There are two separate entities here,” he said. “I won’t get into how much these two separate entities cost, because I don’t want to put somebody on the spot.”

Florence explained that all services provided by CSTS are those delegated to it by the WCHO. To date, there were a limited number of services that hadn’t been delegated, however, including “front door” services like intake and assessments, as well as crisis care and 24/7 phone access. Those services will now be transferred to CSTS, he said. Peterson replied that he was glad to hear it.

Outcome: Commissioners unanimously gave initial approval to the creation and reclassification of CSTS jobs. Commissioners Alicia Ping, Rolland Sizemore Jr. and Conan Smith were absent. A final vote is expected on April 17.

New Jobs in IT, Water Resources

Final authorization to create two new jobs – in IT support and water resources – was on the April 3 agenda. The items had received initial approval on March 20, 2013.

The water resource specialist will work in the county’s office of the water resources commissioner, Evan Pratt. The job is authorized at a salary range between $30,515 to $40,253. According to a staff memo, the position is needed due to heavy drain construction activity and an increase in soil erosion application inspections. The job is described as a revenue-generating position, bringing in an estimated additional $41,337 in each of the first three years, and a minimum of $15,000 annually after that. The staff memo indicates that the office has identified reductions within its budget to offset the increased cost of the position.

Pratt had attended the March 20 meeting and told commissioners that the construction activity is primarily in the city of Ann Arbor, which is paying for the work. He had described the change as “budget neutral,” saying this was the most cost-effective way to proceed, by shifting some responsibilities elsewhere within his office.

The IT system support technician was authorized at a salary range between $37,464 to $52,355. According to a staff memo, the new position is needed to provide back-up for the IT help desk and other staff support. It will be funded from IT contracts and a structural reduction of $32,647 in the tech plan appropriation.

Outcome: The creation of two jobs in IT and water resources won unanimous final approval, without discussion. Three commissioners – Alicia Ping, Rolland Sizemore Jr. and Conan Smith – were absent.

Public Transit: Dissolving The Washtenaw Ride

Taking a step officially to end an effort that stalled last year, commissioners were asked to give initial approval to dissolve a countywide public transit authority known as the Washtenaw Ride.

The Act 196 authority, created in mid-2012 and spearheaded by the Ann Arbor Transportation Authority, never gained traction and was for all practical purposes ended late last year when the Ann Arbor city council voted to opt out of the transit authority at its Nov. 8, 2012 meeting. Of the 28 municipalities in Washtenaw County, the city of Ypsilanti is the only one that hasn’t opted out.

The April 3 resolution was similar to one that county commissioner Dan Smith (R-District 2) had considered bringing forward in November of 2012, though he decided not to pursue dissolution at that time. [See Chronicle coverage: "End of Road for County Transit Effort?"] The April 3 resolution would rescind the board resolutions that created the transit authority, and request that the state legislature also take action to dissolve the Washtenaw Ride, in accordance with Attorney General Opinion #7003. That AG opinion stated that “the dissolution of a transportation authority organized under the Public Transportation Authority Act requires an act of the Legislature and may not be accomplished by the unilateral action of the city in which it was established.” [.pdf of AG opinion 7003]

The county’s role in creating the transit entity had been laid out in a four-party agreement with Ann Arbor, Ypsilanti and the AATA, which commissioners approved on Aug. 1, 2012 in a 6-4 vote. Subsequent revisions involving the other entities resulted in the need for a re-vote by the county board, which occurred on Sept. 5, 2012.

There are two other transit efforts now under way. Washtenaw County is part of a southeast Michigan regional transit authority (RTA) created by the state legislature late last year. The RTA was formed to coordinate regional transit in the city of Detroit and counties of Wayne, Macomb, Oakland and Washtenaw.

Separate from the RTA effort, the AATA has been meeting with representatives of the county’s “urban core” communities to discuss possible expanded public transit within a limited area around Ann Arbor. It would be a smaller effort than the previous attempt at countywide service. The AATA hosted a meeting on March 28 to go over details about where improvements or expansion might occur, and how much it might cost. [See Chronicle advance coverage: "Costs, Services Floated for Urban Core Transit."]

Outcome: The initial vote to dissolve The Washtenaw Ride was approved unanimously, without discussion. Three commissioners – Alicia Ping, Rolland Sizemore Jr. and Conan Smith – were absent. A final vote is expected on April 17.

Public Transit: Regional Transit Authority (RTA)

The issue of public transit was also raised later in meeting, during one of the opportunities for communications from commissioners. Ronnie Peterson asked about the regional transit authority (RTA): When was the board going to discuss the county’s role in that effort, or in any alternative approaches to public transit?

Yousef Rabhi replied that he had attended the recent meeting of “urban core” communities, facilitated by the Ann Arbor Transportation Authority. The group – which included representatives from Ann Arbor, Ypsilanti, Ypsilanti Township, Pittsfield Township and other municipalities – talked about how to fund and govern expanded public transit. He noted that the Act 196 authority “did not work out the way most people had hoped, so we’re looking at new ways of funding it.”

Rabhi also hoped the RTA had a role to play, and said he was working with the county’s representatives on the RTA board – Richard Murphy and Liz Gerber – to make sure the opportunities for this county are fully explored under the new RTA structure.

Peterson asked whether the county board needed to take any action, or will there be any discussion about their involvement in the RTA or in any alternative to the RTA? Rabhi replied that the county’s involvement is governed by the state law that created the RTA. At this point, Washtenaw County is part of the RTA and the county board doesn’t need to take any action. The RTA board’s first official meeting is on April 10 in Detroit, he said, although the board met informally last month. Rabhi said he attended that meeting as well, and was the only elected official there from the four-county region and Detroit. Compared to other RTA board members, the Washtenaw County representatives have a lot of background and experience in transit, he said. “They bring a different voice to the table, which I think will be valuable.”

The effort is being staffed by SEMCOG and other partners, Rabhi said, and has about $6 million in federal funding. The RTA board is discussing how to build sustainability within the organization and move forward.

Peterson wondered what the impact was on the AATA. It’s debatable, Rabhi replied. “I think the full implications of the legislation have yet to be determined.” He said he was working with the county’s RTA representatives and state legislators “to ensure that AATA is fully protected so that we can continue to have a robust transit system here in Washtenaw County, and potentially expand that transit system to the urban core areas.” The RTA was created to connect regions, Rabhi noted – like how to get from Ann Arbor to Detroit, and from Detroit to Mount Clemens. “But getting from Ann Arbor to Ypsilanti, that’s our task,” he said.

Responding to another query from Peterson, Rabhi said the county’s only obligation to the RTA at this point is to appoint two board members, which happened in December of 2012. [The appointments were made by the county board chair at the time, Conan Smith, and did not require confirmation by the full board.] If the RTA board decides to put a tax proposal on the ballot, or to pursue a vehicle registration fee, then voters of Washtenaw County will have an opportunity to weigh in on that, Rabhi said.

Regarding a possible transit tax to support the RTA’s efforts, Dan Smith said he wanted everyone to be clear about how that would work. If the RTA board decides to put a tax proposal on the ballot, the entire RTA region votes on it as a whole. That area – covering four counties and Detroit – has a population of over 4 million, he noted, although he added that there are fewer registered voters than that. Even so, Washtenaw County is a relatively small piece of that, he said, with a population of about 348,000 residents. So Washtenaw County voters “probably won’t have a whole lot of say-so” in the outcome of a millage vote, he said.

Andy LaBarre noted that in order for the RTA board to put a tax proposal on the ballot, a super-majority of that board would need to approve it. There’s also the option for a single county veto, he said. For example, if both representatives from Washtenaw County voted against putting a tax proposal on the ballot, it wouldn’t move forward. LaBarre hoped all of this information could be clarified at a future working session.

LaBarre, who chairs the board’s working sessions, continued by telling Peterson that the topic of the RTA will be on the agenda for a working session in August or September. By that time, he hoped they would have more information about what the RTA intends to do, so that the county board can talk about more specific roles that Washtenaw County can play.

Peterson said he appreciated Rabhi’s involvement in support of regional transit, but felt it was important to have a discussion about this issue by the full board.

Public Hearing for Urban County Plan

Commissioners were asked to set a public hearing for April 17, 2013 to get input on the Washtenaw Urban County‘s five-year strategic plan through 2018 and its 2013-14 annual plan. The hearing will be held at the county board of commissioners meeting at 6:30 p.m., in the boardroom of the county administration building at 22o N. Main St. in Ann Arbor.

The Urban County is a consortium of Washtenaw County and 18 local municipalities that receive federal funding for low-income neighborhoods. Members include the cities of Ann Arbor, Ypsilanti and Saline, and 15 townships. “Urban County” is a designation of the U.S. Dept. of Housing and Urban Development (HUD), identifying a county with more than 200,000 people. With that designation, individual governments within the Urban County can become members, entitling them to an allotment of funding through a variety of HUD programs. The Urban County is supported by the staff of Washtenaw County’s office of community & economic development (OCED).

Two HUD programs – the Community Development Block Grant and HOME Investment Partnership – are the primary funding sources for Urban County projects.

Outcome: Authorization to set a public hearing on April 17 won unanimous approval, without discussion.

Communications & Commentary

During the evening there were multiple opportunities for communications from the administration and commissioners, as well as public commentary. Here are some highlights.

Communications & Commentary: Retirement System

During the time set aside for liaision reports, Dan Smith (D-District 2) gave a brief update on the late March meeting of the Washtenaw County Employees Retirement System (WCERS) commission. He noted that the stock market is doing very well, and that has had a positive impact on the balances in the WCERS account. The commission is starting to begin the discussion about doing some explicit inflation hedges, he said. There’s a concern that in a few years, inflation might start to inch up a bit, and at this point there are no explicit hedges against that.

Smith also reported that there had been a discussion about possible PA 728 pension change requirements in the recently approved labor contract.

Smith was alluding to an issue related to the precedent-setting agreements reached in mid-March with 15 of Washtenaw County government’s 17 bargaining units. The new contracts, approved by the board on March 20, aimed to protect unions before Michigan’s right-to-work law took effect on March 28, and cut legacy costs for the county. All but one of the new agreements run for more than 10 years, through Dec. 31, 2023.

The issue raised at the WCERS meeting was whether the process of securing new contracts violated Public Act 728 of 2002. In relevant part, PA 728 states [emphasis added]:

A system shall provide a supplemental actuarial analysis before adoption of pension benefit changes. The supplemental actuarial analysis shall be provided by the system’s actuary and shall include an analysis of the long-term costs associated with any proposed pension benefit change. The supplemental actuarial analysis shall be provided to the board of the particular system and to the decision-making body that will approve the proposed pension benefit change at least 7 days before the proposed pension benefit change is adopted. For purposes of this subsection, “proposed pension benefit change” means a proposal to change the amount of pension benefits received by persons entitled to pension benefits under a system.

The county’s new labor contracts state that employees hired after Jan. 1, 2014 will participate in a defined contribution retirement plan, instead of the current defined benefit plan – the Washtenaw County Employees’ Retirement System (WCERS). In defined benefit plans, retirees receive a set amount per month during their retirement. In defined contribution plans, employers pay a set amount into the retirement plan while a person is employed. The most common defined contribution plan is the 401(k). Similar changes in retiree healthcare plans will also affect new employees.

Although current employees will keep their defined benefit plan, anyone hired before Jan. 1, 2014 – including current employees – will be offered a one-time opportunity to transfer their WCERS employee account to the newly created defined contribution system. That decision must be made within a window between Jan. 1, 2014 and Feb. 28, 2014.

The county did not conduct a supplemental actuarial analysis related to these new contracts. Dan Smith, who cast the lone vote against the contracts, had cited a lack of information about the impact of the changes as one reason why he didn’t feel comfortable supporting the agreements. From The Chronicle’s report of the March 20, 2013 meeting:

A 10-year contract “severely binds future boards and dramatically eliminates the flexibility that they have to respond to situations that may face them seven or eight years down the road.” There are some benefits to that as well, [Dan] Smith noted, but he’s not able to find enough data or information that would make him comfortable with that length of time. It would be different with a two-year contract, which gives the county the chance to respond to changing conditions, he noted. With a 10-years contract and the unknowns surrounding the costs and benefits of the various provisions, “I’m just not comfortable moving forward with that at this time.”

D. Smith also cited concerns about legal questions “that continue to nip away at this.” He wished the legislature would just leave this issue alone, but instead they continue to pick at it “week after week after week.” He didn’t know how it will play out, but “I do know that if we did this contract in the traditional way … we wouldn’thave a bull’s-eye on our back for that.”

Responding to a follow-up query from The Chronicle, county administrator Verna McDaniel stated via email that the county had sought outside legal counsel on the issue. She indicated that the county’s position is: There was no need for an actuarial analysis because no changes were made to the existing pension benefits, and the law does not require an analysis for the new defined contribution system that will be offered to employees hired after Jan. 1, 2014.

Communications & Commentary: Retreat Follow-up

Ronnie Peterson (D-District 6) asked about the follow-up to a board retreat held on March 7. [See Chronicle coverage: "County Board Priorities Emerge at Board Retreat."] He noted that the board has set a course for the next 10 years on one of the budget’s largest components – labor costs. The 10-year contracts are rare in the state, he noted, but now the other budget components must be put in place for the county’s long-term stability. [For background on those labor agreements, see: "New Labor Contracts Key to County Budget"]

Yousef Rabhi (D-District 8) said he has received a report from the retreat’s facilitator, Mary O’Hare, but he hasn’t had a chance to review it yet so he hasn’t sent it to other commissioners. He plans send it out and possibly schedule a presentation on it. Rabhi added that it’s essential to have another retreat and a more focused discussion. That will likely happen in May, he said.

Andy LaBarre (D-District 7), chair of the board’s working sessions, reported that he would send out a revised schedule of upcoming sessions, and asked commissioners to let him know if there were topics they’d like to discuss.

Peterson said he hoped there would be time at the retreat for commissioners to get to know each other and learn about their priorities. Rabhi replied that he’d gotten feedback from a few commissioners, who felt that the last retreat wasn’t focused enough on the board’s priorities. So the format for a second retreat will be different, he said, with more opportunity for commissioners to share their thoughts.

Communications & Commentary: Ann Arbor DDA

Yousef Rabhi (D-District 8), one of the commissioners representing Ann Arbor, told the board that he wanted to make everyone aware of discussions happening at the Ann Arbor city council regarding funding for the Ann Arbor Downtown Development Authority. The council’s action could have implications for the county, he said, so he wanted to put it on their radar.

Commissioner Kent Martinez-Kratz (D-District 1), whose district covers Chelsea and other parts of the county’s west side, asked Rabhi to elaborate. What might the implications be for the county?

Rabhi said his understanding of the proposal is that the funding mechanism would change so that the DDA would capture fewer tax revenues in its district, and more dollars would come back to the county. The downside, he added, is that there would be less money for the DDA to do their work in downtown Ann Arbor. It’s just something to be aware of, Rabhi said.

For Chronicle coverage related to the proposed Ann Arbor DDA ordinance changes, see: “Planning, DDA: City Council to Set Course?” “DDA Tax Capture Change Gets Initial OK” and “DDA Ramps Up PR after First Council Vote.”

Communications & Commentary: Land Bank

Ronnie Peterson reported that he had asked county administrator Verna McDaniel to be involved directly with the new land bank committee. He’s also asked that she extend an invitation to communities that have been greatly impacted by the economic downturn, with neighborhoods that have seen home values drop – including Ypsilanti, Ypsilanti Township and Superior Township. He has asked that the meetings of the land bank committee be public, so that anyone can attend.

By way of background, at its March 20, 2013 meeting, the board voted to form a committee that will explore the feasibility of creating a land bank. The resolution named three people to the committee: Peterson, county treasurer Catherine McClary, and Mary Jo Callan, director of the county’s office of community & economic development. The committee is directed to report back to the board by Aug. 7, 2013.

A land bank is a mechanism for the county to take temporary ownership of tax- or mortgage-foreclosed land while working to put it back into productive use. “Productive use” could mean several things – such as selling it to a nonprofit like Habitat for Humanity to rehab, or demolishing a blighted structure and turning the land into a community garden.

Communications & Commentary: Waste Knot Awards

Yousef Rabhi highlighted the upcoming annual Waste Knot awards, on Thursday, April 11 from 5-7 p.m. at Weber’s Inn. The Waste Knot program encourages businesses and organizations to increase waste reduction and recycling activities.

Responding to a follow-up query from The Chronicle, Jeff Krcmarik – the county’s environmental supervisor – reported that this year the county is also partnering with the Community Partners for Clean Streams and recognizing the 2012 Environmental Excellence Award winners. The event’s guest speaker will be Josh Bloom, a building contractor who specializes in LEED-certified buildings. Locally, Bloom designed and built the new LaFontaine auto dealership in Dexter.

Communications & Commentary: Thomas Partridge

The only speaker during public commentary was Thomas Partridge, who criticized commissioners for not adopting a comprehensive, people-oriented agenda that focuses on the most vulnerable people in the county, including the disabled, senior citizens, mothers with children, and everyone who suffers from the difficult economic climate. Yet meeting after meeting, commissioners bring county managers and outside contractors, like the auditors, to make presentations, he said, while not sending resolutions to the state legislature calling attention to the waste of requiring annual audits. There are many unmet needs, he said, including needs for affordable housing, and accessible public transportation to that housing.

Present: Felicia Brabec, Andy LaBarre, Kent Martinez-Kratz, Ronnie Peterson, Yousef Rabhi, Dan Smith.

Absent: Alicia Ping, Rolland Sizemore Jr., Conan Smith.

Next regular board meeting: Wednesday, April 17, 2013 at 6:30 p.m. at the county administration building, 220 N. Main St. in Ann Arbor. The ways & means committee meets first, followed immediately by the regular board meeting. [Check Chronicle event listings to confirm date.] (Though the agenda states that the regular board meeting begins at 6:45 p.m., it usually starts much later – times vary depending on what’s on the agenda.) Public commentary is held at the beginning of each meeting, and no advance sign-up is required.

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