It’s All About The Money

Washtenaw County Board of Commissioners (March 4, 2009): County commissioners spent the bulk of their Wednesday night board meeting on two topics, both dealing with finances: 1) Details about $3 million in federal funds coming to Washtenaw County to rehab or demolish foreclosed properties in targeted areas, and 2) an update from county administrator Bob Guenzel about ongoing efforts to deal with a projected budget deficit.

Neither topic is new to commissioners or Chronicle readers: The federal foreclosure funds were discussed at last week’s administrative briefing, and the budget crisis has been on the table since the board’s Feb. 4 meeting. So commissioners were prepared to ask pointed questions on both issues, and they did.

Foreclosure rehab funds

Mary Jo Callan, director of the city/county office of community development, and Jennifer L. Hall, the office’s housing manager, gave a report on the $3 million received by the county through the federal Neighborhood Stabilization Program (NSP). [Separately, the city of Ann Arbor is receiving $850,000 through this program.] These funds, administered by the U.S. Department of Housing and Urban Development (HUD), are part of the 2008 Recovery Act, not the most recently passed stimulus package.

Hall, who is directly managing this effort, gave most of the presentation and fielded questions from commissioners. Nationwide, she said, HUD used a formula to determine the  areas of greatest need. For the Washtenaw County grant, those areas are Ypsilanti, Ypsilanti Township and southern Superior Township. Need was determined by the number and percent of home foreclosures, the number of homes financed by subprime mortgage-related loans, and the number of homes in default or delinquency.

The funds can’t be used for foreclosure prevention. [The county treasurer's office has other programs for that.] Rather, NSP funds will be used to deal with three types of properties: 1) abandoned properties, 2) “blighted” structures, and 3) foreclosed properties. Specifically, here’s the breakdown of uses:

• $1.9 million to buy and rehab abandoned and foreclosed residential properties within the targeted areas, with the goal of reselling these units to low-income buyers. The bulk of that – $1.12 million – will be split between two nonprofits that are partnering with the county: Habitat for Humanity of Huron Valley, and Community Housing Alternatives. In addition, $60,000 will be used for owner education programs and $740,000 will be invested in multi-unit rental properties.
• $300,000 for a land bank. This project is being set up through the county treasurer’s office and will be used to acquire foreclosed property as a “last resort,” Hall said – for instance, when there are no interested buyers  on the open market.
• $500,000 for demolition of blighted properties. Hall said that Ypsilanti officials have indicated they might use their portion of these funds for properties in the Water Street area, which the city is attempting to redevelop.
• $302,471 for administrative costs, spread over four years.

For this program, eligible applicants to purchase properties can have income no higher than 120% of the area median income (AMI). For a four-person household, 120% of AMI is $98,900. At least 25% of funds must be used for households at 50% AMI or lower.

After her presentation, several commissioners had questions and comments. Commissioner Leah Gunn – who chairs the executive committee of the Urban County, the entity through which these funds were awarded – described the program as “incredibly complicated” and praised Callan, Hall and Damon Thompson, operations manager for the office of community development, for successfully pulling off the application in record time.

Commissioner Barbara Levin Bergman expressed concern that people who get homes through this program will end up in the same cycle of foreclosure. “I want this to work, but it’s sounding a little rocky to me.” Hall said they had the same concerns, and were addressing those concerns with rigorous guidelines. There are also strategies to make the purchase more affordable. If the house is acquired through Habitat for Humanity, for example, homeowners have a 0% interest loan, so their payments are lower. The program also can assist with a down payment. And when rehabbing the properties, they make energy-efficiency improvements on the houses, thus lowering utility bills.

Hall said that over the past 25 to 30 years the city and, more recently, the merged city/county office of community development has worked with about 1,500 households and had only 25-30 foreclosures.

[Later, in a follow-up phone conversation with The Chronicle, Hall said that applicants for NSP funds go through a homebuyer education program, administered by the Washtenaw Housing Education Partners. Then, they'll get one-on-one counseling to look at their income level, assets, debt, credit rating and other factors, making sure they'll be able to take on the financial burden of home ownership. The program also requires that buyers secure fixed-rate mortgages, not the riskier adjustable-rate mortgages. Hall said they expect hundreds of people to apply for this program, but not everyone will be eligible.]

After describing the program as “government at its best,” commissioner Kristin Judge asked how many homes would be part of it. About 45-50 was their best guess, Hall said.

Commissioner Jeff Irwin asked for more details about the rental properties. Hall said there weren’t a lot of multi-family units in foreclosure. They’re looking at three properties, and would be one of several investors in each one: 1) a property that Avalon Housing is acquiring from the Washtenaw Affordable Housing Corp., 2) two other properties that Keybank holds the mortgage on, and that Community Housing Alternatives will be acquiring.

Irwin also asked how the administrative funds would be used. Callan said that since the funding wasn’t a permanent revenue stream, they didn’t plan to hire additional full-time staff. She also noted that because these funds will be targeted to specific parts of the county, “I think these funds will really let us free up other funds for other jurisdictions.”

In response to a query from commissioner Ronnie Peterson, Callan said they expected to receive additional NSP funding from the 2009 federal stimulus package, which has allocated $2 billion nationwide for the program. Unlike the 2008 funding, which was distributed based on a HUD formula, the 2009 funds will be awarded on a competitive basis.

County budget update

As part of ongoing discussions related to the projected budget deficit, county administrator Bob Guenzel gave an update on efforts to address this issue. He reported that he’d had a long, productive meeting with department heads. He passed out several documents that they’d discussed at that meeting, including a chart that showed a range of funding scenarios, department by department, if across-the-board cuts were made. The chart showed the amount of funding that would be reduced if departments cut their budgets by 5%, 10% and 20%. A 20% cut for the trial court, for example, would mean $1.36 million in cuts out of a current $6.8 million budget. For the sheriff department’s corrections budget – by far the largest on this chart, at $14.66 million – a 20% cut would reduce that budget by $2.9 million.

Guenzel stressed that these documents are intended as tools, and not as recommendations for across-the-board cuts. He said he’d heard “loud and clear” from commissioners that they want cuts to be strategic, not across-the-board, but he said the chart allows departments to see the implications of the different levels of funding cuts that might be required.

The chart did not include all of the county’s operations, and several commissioners queried Guenzel about that. Commissioner Barbara Levin Bergman asked why police services funding wasn’t included in the chart, referring to the contracts that the county has with several townships to provide sheriff deputy patrols. Guenzel said he didn’t include that funding because the board has already made a contractual commitment with the townships for fiscal 2010, so that’s off the table. Bergman said that it’s not set for 2011, and she felt it should be included on this kind of public document. Guenzel said he would add it.

Commissioner Wes Prater agreed with Bergman, and noted that the chart represented $73 million out of the county’s $104 million budget. He wanted to see the entire general fund budget represented, including the entire amount for the sheriff’s department. Guenzel said they’d provide that information.

As he has in the past, commissioner Mark Ouimet stressed the importance of managing cash flow, and said it was crucial to ensure that the county was getting use of its capital as quickly as possible. He praised the documents showing the impact of various budget cuts, saying it was a good place to start wrapping their minds around what these cuts will mean.

Commissioner Ronnie Peterson urged the administration to start talking about “early nipping” of the budget, rather than waiting until July. [The administration plans to make a formal proposal to the board for budget reductions in early June.] Guenzel agreed, noting the county did have a hiring freeze in place. He also said that employees aren’t retiring or taking other jobs at the rate they have in the past – the implication being that the county didn’t have as much opportunity to shrink its payroll through attrition.

Later in the meeting, commissioner Conan Smith presented a draft proposal to the board for a series of community forums they plan to hold about the budget. The forums are planned for late May and early June, but no dates have been set. Smith said for these forums they’d be partnering with community groups like the local chambers of commerce, nonprofit agencies and others.

Stimulus package update

Verna McDaniel, deputy county administrator, gave an update about the administration’s efforts to coordinate among departments with regards to anticipated federal stimulus funding. She said they’re communicating with state legislators as well as Congressmen John Dingell and Mark Schauer, and are tracking which county departments are applying for and/or anticipate receiving funds. For example, the Head Start and the Employment Training & Community Services (ETCS) groups expect to get significant stimulus funding. The goal is to get a handle on how the county will be affected by this funding, McDaniel said. At this point, however, ”there isn’t a lot of super-solid information about amounts,” she said.

Guenzel said they’d prepare a status report for the board within the next couple of weeks.

Public commentary

Tom Partridge was the only person to speak during the four times allotted for public commentary, and he spoke twice. He said it was not permissible to require speakers to state their address or citizenship before they spoke. [The county asks speakers to state their name and address before making a public comment.] He then directed his first remarks toward commissioner Conan Smith, who chairs the board’s Ways & Means Committee. Partridge said the board, as well as all elected bodies, should form a code of ethics that would prohibit officials from holding paid public office while also having positions within political parties. He asked Smith to choose: either serve as county commissioner or as chairman of the Ann Arbor Democratic party [a position Smith was elected to earlier this year].

In his second turn, Partridge chastised the board for being overly pessimistic, and called on them to reject the worst-case scenario when planning their budget. He said he listened intently for big ideas during their meeting, but said he heard none. These times require forward-thinking programs, he said, such as ones to bring about the rapid expansion of public transportation.

Present: Barbara Levin Bergman, Leah Gunn, Jeff Irwin, Kristin Judge, Mark Ouimet, Ronnie Peterson, Jessica Ping, Wes Prater, Ken Schwartz, Rolland Sizemore Jr. (who attended the Ways & Means Committee, but had to leave before the regular board meeting), and Conan Smith

Next board meeting: Wednesday, March 18 at 6:30 p.m. at the County Administration Building, 220 N. Main St. The Ways & Means Committee meets first, followed immediately by the regular board meeting.  (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 comment sessions are held at the beginning and end of each meeting. [confirm date]