Budget Round 2: What’s the Big Idea?

On Monday night, the Ann Arbor City Council continued with the second in a series of extra meetings devoted exclusively to budget issues. Much of the discussion was a review of information that councilmembers had deliberated at their Jan. 25 meeting, when the focus was specifically on the community services area.

The community services area comprises the Ann Arbor Housing Commission, planning and development, human services, and parks/recreation. The council had chosen to focus on that area first, because of the community service area administrator’s imminent departure – Jayne Miller’s last day working for the city is Feb. 12, 2010.

But Miller’s new post as director of the Huron Clinton Metro Authority (HCMA) factored into some of the conversation on Monday, ranging from HCMA’s canoe rental fee structure, to the (remote) possibility that HCMA might take over some of the city of Ann Arbor’s parks. It was those larger scope issues the council was meant to address on Monday.

So at Monday’s meeting, city administrator Roger Fraser labeled the occasion as a time to talk about the “big ideas” the council had been presented at their December 2009 budget retreat. And councilmembers did eventually come around to start grinding through the list of ideas.

Rather than organize our account of the meeting based on that list, we’ve identified some themes that might provide an alternate framing of some of the budget challenges. We’ve formulated them as questions: (i) What are the basic philosophies? (ii) Should anything be held harmless? (iii) What do we do with our land? (iv) Is increasing revenue an option?

Basic Philosophy

Speaking from the podium, instead of from his usual spot at the head of the table next to the mayor, Roger Fraser reminded councilmembers of the materials they’d been provided.

[The city is accumulating all of these materials on the Our Town section of its website. From the scanned PDF of the budget impact sheet summary, The Chronicle has created a live spreadsheet.]

Fraser then addressed a variety of issues and responded to questions raised by councilmembers through the course of the meeting, which we categorize as basic philosophy issues.

Philosophy: Does Everyone Share the Pain?

Fraser said that he’d been asked what the impact would be of a 3% wage reduction across all city employees. He told councilmembers that the savings to the general fund would be $1.275 million. Savings in other funds would total $970,000. He cautioned that 75% of the city’s workers belong to unions and many of those are subject to Act 312 arbitration. He was therefore not terribly optimistic about progress with those units.

[The city's recent history with Act 312 arbitration is not good – at its May 4, 2009 meeting, the city council approved the 2006-2009 Ann Arbor Police Officers Association (AAPOA) collective bargaining agreement – the result of a binding arbitration settlement that cost the city $1.6 million.]

Fraser said that the city continued to work on a plan for possible implementation of a wage reduction among city workers not represented by a bargaining unit.

Philosophy: A History of Incremental Staff Reductions

Included in the materials provided to councilmembers is a graph showing the cost savings that had accumulated since 2001 as a result of eliminating 239 positions within the city over time.

Mayor John Hieftje noted that the total impact of savings due to the incremental elimination of full-time positions over the last 10 years was $25 million. He asked that the city’s CFO, Tom Crawford, provide the math used to generate that figure.

Sandi Smith (Ward 1) asked about the contrast between one-time savings versus longer-term savings indicated in the budget impact sheets. Referring to his staff’s general focus on long-term savings, Fraser said, “My generic answer is: That’s what we do.”

Fraser observed that without creative collaboration, it would not have been possible to reduce the number of city employees by 25% over the course of eight years with little impact on services. The ongoing mission, he said, was to figure out different ways of doing things and doing them cheaper. He noted that the filling of any position anywhere in the city now requires his personal authorization.

Philosophy: Becoming More Efficient

Sandi Smith (Ward 1) inquired of Fraser what kind of systematic approach was taken to look at cost savings across service units. Fraser told her that this was an effort undertaken on a recurring basis.

As an example, Fraser cited the city’s customer service unit – in the past it dealt primarily just with water and sewer bills, but now has aggregated all of the city’s customer service functions, dealing with all calls from finance to parking tickets. He said that it was part of the weekly meeting that he had with all the area administrators – Sue McCormick, Jayne Miller and Barnett Jones – to always consider the issue of systematic ways to improve efficiency.

As another example, Fraser pointed to the fact that the fire department now works with public services on training for getting people out of holes – city staff now digs holes used for the training. Fraser allowed that it seemed like a completely obvious thing to do, yet in the past it hadn’t been done that way – instead, the fire department had contracted out to have holes dug. The fire department, Fraser said, is also now a part of a more collaborative site plan review process for new developments. He concluded by saying that identifying systematic efficiencies is really an “ongoing exercise.”

Philosophy: Chipping Away versus Complete Cutting

Sabra Briere (Ward 1) asked Fraser if his philosophy going into this budget process was to continue doing what we’re doing, but do it less expensively. Fraser’s answer: No.

He allowed that the city would continue to focus on improved efficiency but that there were two main categories of issues: (i) things that they can do without, and (ii) things they have no choice about. As an example of something he felt they had no choice but to eliminate were training budgets.

Briere then asked Fraser what he thought should be the city council’s guiding philosophy in approaching the budget. Fraser said that city council should focus on the big ideas. The relevant questions, he said, were: (i) Should we continue to do things the same way? and (ii) Which things can we do less of?

There are areas that cannot sustain a 7.5% cut, Fraser said, without having a negative impact on the quality of service. Some things, Fraser said, they will have to stop doing, period. “Tonight,” Fraser said, “I’m asking you to begin a conversation about which of the things we do should we not continue to do. We’re at a danger point, a tipping point. Incremental change is no longer healthy.”

He continued, saying, “My general rule is: we should do things the best way possible. If we can’t do that, we shouldn’t do it at all.”

Carsten Hohnke (Ward 5) noted that the budget impact sheets with which the city council had been provided built to the total dollar amounts, but it is less clear what the subjective impact on a service would be due to the savings indicated in the sheets. Hohnke asked where, in the city staff’s opinion, the service areas were that would fall below the line of providing the service well, if an additional 7.5% were cut.

Fraser replied that he did not have a complete evaluation present that evening. The data was raw right now for a reason – it was to get a first-blush reaction from the city council, he said. Which ideas have traction and which don’t have traction?

Purely as a hypothetical example, Fraser said, if $200,000 were taken out of the parks program, that is money that can be put towards other priorities. If the city council says that the community cannot tolerate a safety services reduction, then by taking $200,000 out of the parks program, they would be giving him some ability to address a concern for safety services.

Philosophy: Long-Range Planning

Mike Anglin (Ward 5) said he thought part of the difficulty was having only a two-year budget planning cycle. He said that longer-term planning was needed and pointed to the Stadium Boulevard bridges as an example of something that might have been addressed with better long-term planning.

Fraser told Anglin that he didn’t agree with that perspective on the city bridges, noting that the project had been in the city’s capital improvement plan (CIP) since the last decade. The city had planned in advance for that, but it was a matter of reductions in federal and state support for those kinds of capital projects, he said. That lowered support had been driven in part by the Bush administration, which had continued a philosophy of reduced government that had started in the Reagan era. Fraser also pointed to the state fuel tax as problematic, because it is calculated on a cents-per-gallon basis, not a percentage. We’re selling less fuel, he said, which means there’s less Act 51 money.

Mayor John Hieftje, responding to the idea of better long-range forecasting and planning, asked who would have predicted five years ago that the state would have the kind of current economic conditions that it does. Fraser then appealed to the 2006 forecast, which saw the city reaching an equilibrium between its expenses and property tax revenues, with no additional reductions required. Now, however, projections were that property tax revenues will not reach their 2007 levels again until the year 2015. The decisions that are made today, Fraser said, the city will have to live with for another five years at least.

Holding Harmless

The budget impact sheets include preliminary reports from service units, breaking down what effect various decisions would have on the budget. Included in those sheets are breakdowns of the savings that would come from laying off an additional six firefighters beyond the 14 positions already slated for elimination as a part of the FY 2011 budget plan: $653,080. [The city adopts budgets one year at a time, but plans in a two-year cycle.] The recent agreement between the city and the firefighters union prevented the early layoff of those 14 positions.

Also included in the budget impact sheets are the savings that would result from eliminating 17 positions in the police department – three of which are vacant: $1,608,317.

As the conversation turned to safety services, Fraser held up a pie chart, showing the breakdown of safety services as a part of the city’s budget: police, fire, and the district court make up about 61% of the budget. If police and fire services were held harmless, Fraser said, the impact on the rest of the budget would require an 18% reduction.

The theme of what, if anything, should be held harmless in the budgeting process ties together the topics in this section.

Holding Harmless: Fire

Mayor John Hieftje began by saying that he wanted to set up parameters. They needed to staff the fire department adequately to ensure that three people were on the scene as quickly as possible, so that they met the safety criteria for entering a burning building– that was his position, he said. They should take that and work backwards to determine adequate staffing levels.

A bit later it was clarified that, in fact, four people are required on scene in order to enter a burning structure – two to enter the building, and two to remain outside. However, acting fire chief Greg Hollingsworth made the point that “it takes more than four people to fight a fire, so that’s not the biggest concern.”

Fraser indicated that when a new fire chief is hired, he or she might bring some interesting ideas about how to provide adequate fire services. With respect to the hiring of a new fire chief, Fraser said that two finalists had been identified and that a hire would be imminent.

[Among the interesting ideas could be the idea of cross training police officers as firefighters – which would make them public safety officers of some stripe, along the model used in Kalamazoo. However, the International Association of Firefighters has generated several white papers outlining problems with the public safety officer approach.]

Carsten Hohnke (Ward 5) expressed interest in seeing what kind of metrics for response time were used and how that stacked up against other communities. He asked for information about number of firefighters per square mile or the number of fire stations per thousand residents or whatever the relevant metrics might be. Sabra Briere (Ward 1) said she was interested in seeing how the joint dispatch system was working as that got off the ground.

Christopher Taylor (Ward 3) asked for clarification of the statement in the budget impact sheet concerning high-rise fires. Hollingsworth explained that present staff levels did not address fires in high-rises. The budget impact sheets indicate that the proposed reduction of an additional six firefighters would drop levels below national models to effectively staff for and safely fight an average-sized home fire.

Mike Anglin (Ward 5) asked Hollingsworth to explain what the impact on insurance rates would be from the kind of reductions the city was contemplating. Hollingsworth said the impact would most likely be seen on commercial property. The ratings depended not just on the quality of the fire department but also on other factors, like the water system, he explained. But he allowed that, yes, there was a potential for the reductions to have an effect on insurance rates. Marcia Higgins (Ward 4) wanted to know what the impact would be on response times in her ward on football Saturdays if a fire station were closed. “How will you get to us?” She asked for best estimates.

Holding Harmless: Parks Millage and Parks General Fund

A couple of related “big ideas” involve the parks maintenance and capital improvements millage and its relation to the city’s general fund. First a bit of background on that millage.

Before November 2006, the city levied two separate millages at 0.5 mill each – one for parks maintenance and the other for capital improvements. Within the combined millage, taxes are collected at a rate of 1.0 mill, but money is allocated to maintenance or capital improvements on a more flexible basis than the previous 50-50 split that was legally enforced by the specialized purpose of each millage.

However, there’s not complete flexibility to allocate money to maintenance or capital improvements within the unified millage. Percentage allocation is guided by a city council resolution passed in October 2006. The resolution specifies a range of 60% to 80% for maintenance, with the remainder going to capital improvements.

But there are some “hold harmless” clauses in the resolution as well. The resolution also calls for any reduction in the overall general fund to be reflected no more severely in parks programs supported by the general fund than in other general fund activities. For example, if the general fund were to suffer a 7.5% reduction, then parks programs supported by the general fund would suffer no greater a reduction than 7.5%.

Subsequent to the passage of the millage, in preparation of the FY 2007 budget, the city initially calculated the baseline for general fund parks activity without the Leslie Science and Nature Center – which had been spun off by the city as an independent nonprofit. The reasoning was that the item itself was no longer in the general fund, so it was not a matter of the general fund being reduced. However, in response to public criticism, funding was put back into parks programs to bring funding to the level it would have been with the Leslie Science and Nature Center as a part of the calculation.

Another “hold harmless” clause in the resolution on the administration of the parks maintenance and capital improvements millage affects the city’s natural area preservation program (NAP).

3. The Natural Area Preservation Program budget be established at a minimum of $700,000 for first year of the millage budget and that it receive a minimum 3% annual increase for each of the subsequent five years of the millage to enhance the stewardship of increased acreage of natural park areas;

It’s likely that the clause was intended to ensure that funding for NAP kept pace with funding increases to other areas, as millage revenues increased due to increased property values. But the effect of the clause now, as millage revenues decline, is to hold NAP harmless – and even to increase NAP’s budget.

The distribution of funds to various park-related tasks – which is specified in Attachment A accompanying the resolution – includes the stipulation that mowing and snow removal for parks be funded exclusively out of the general fund. The millage fund, then, is “held harmless” against mowing and snow removal costs.

Related to the idea of reducing general fund support for park maintenance is an increase use of volunteers for that activity.

On Monday night, Marcia Higgins (Ward 4) stated that a mechanism was needed in order to expand the volunteer program. Mayor John Hieftje pointed to the Adopt-a-Park program as that mechanism. Higgins, though, said she was thinking more of a ongoing, every day eyes-on-the-park mechanism. Roger Fraser noted that they would need to do marketing, education, and recruitment, and that meant staff resources.

In response to a suggestion from Sandi Smith (Ward 1), Jayne Miller said that the idea of having an organization like Project Grow put in gardens and be responsible for maintenance of the surrounding area in some parks would likely be met with strong opposition. In trying to do that over the last few years, there had been extreme negative feedback from neighbors next to parks, she reported, noting “I was shocked by that.” Neither Smith nor Miller were able to offer an explanation for the negative reaction. However, Margie Teall (Ward 4) suggested that one of the objections is that people use parks and they want to be able to continue to use them the way they are.

Holding Harmless: Partial Reallocation of the Greenbelt Millage

The open space land acquisition millage, authorized by voters in November 2003 to be levied from 2004 through 2034 at a rate of 0.5 mill, is also commonly known as the greenbelt millage. Its expenditures are guided by the city’s greenbelt advisory commission.

Rather than wait for millage proceeds to accumulate, the city issued a bond in order to have a substantial amount of cash on hand for potentially large or numerous land acquisitions. In August 2005, a bond was issued for roughly $20 million, with debt service on those bonds – around $1.2 million annually – to be paid by the greenbelt millage proceeds. The millage currently generates around $2 million in revenue.

Of the bonded amount, around $8 million has been obligated through purchase of development rights or land acquisition deals, leaving around $12 million in an unobligated fund balance. Also available per year is around $800,000 from millage proceeds not required for coverage of the debt service on the bond. [This does not factor in the investment income from the fund balance.]

The “big idea,” then, is to ask if any of that $800,000 per year should be reallocated to the maintenance of parks inside the city. Such a reallocation would require voter approval.

The connection between the greenbelt millage and possible use of those funds towards maintenance of city parks isn’t based just on thematic similarity. A recent greenbelt millage acquisition of a rental house on Chapin Street will result in an incremental addition to West Park when the house is demolished. And a greenbelt acquisition of a parcel on Sunset Road – on the city council’s agenda for Feb. 16 – will add to Bluffs Park.

Hieftje led off the discussion on Monday night by noting that there was a need to pay off the bonds that had already been sold. Hieftje said that the greenbelt program would benefit the community in the long-term and that it would be a mistake not to take the opportunity, especially in the current market with land values depressed. Carsten Hohnke (Ward 5) stated that he shared the mayor’s view. He added that the dollars being used are also being leveraged. Jayne Miller confirmed that the average match received for greenbelt initiatives was 35-50%.

Marcia Higgins (Ward 4) noted that the millage was passed on 2003 – she said she supported it then and she still supports it. However, she said she would not be opposed to asking voters to look at it. She pointed out that the current 0.47 mill rate could then be reset to bring it back up to its original 0.5 mill rate. [The rate has been rolled back because of the Headlee Amendment.] She concluded, “I think it should stay in the mix.”

Concerning the greenbelt millage, Sabra Briere (Ward 1) noted that concerns have been raised about the number of parks in the city. She asked for a clarification: What percentage of greenbelt money could be spent within city limits – was it 30%?

Miller clarified that there was no requirement about where the greenbelt money could be spent. It could range from zero to 100% spent in the city. With respect to greenbelt dollars that had been spent inside the city, therefore taking land off the tax rolls, Briere said she would like to think that it had been non-developable land.

Briere asked about the continuing maintenance issue for such properties. Miller clarified that for land acquired outside the city, there is money set aside for monitoring property, as part of the acquisition of development rights. When parkland is added to the city by the greenbelt millage, she allowed, maintenance costs did increase. Briere noted that those costs are paid out of the parks maintenance millage. Miller allowed that being able to maintain what the city owns now is a challenge. When parkland is added, she said, people typically want at least some trails and other amenities installed.

Hohnke clarified that for greenbelt money spent on land outside of the city, there is no maintenance cost. That’s because the deal is typically a purchase of development rights, not an outright purchase of property.

Real Estate

While the greenbelt millage is all about acquiring development rights and land, councilmembers on Monday night also talked about what to do with land already owned by the city.

Huron Clinton Metro Authority

Stephen Kunselman (Ward 3) took the opportunity to ask Jayne Miller a question related to her future position as director of the Huron Clinton Metro Authority (HCMA). Had there been any discussions about the HCMA taking over some city parks? Miller said that one of the challenges is philosophical. The HCMA is more interested in dealing with large parcels of land at 3,000 to 4,000 acres apiece, she said. Most of the city parks are much smaller than that.

First & Washington

Sandi Smith (Ward 1) asked what the proceeds from the still-pending sale of the First & Washington parcel – to be developed by Village Green as the City Apartments project – would be used for. Fraser’s answer: As a down payment on the municipal center currently under construction next door to the Larcom Building.

Old YMCA Lot

Stephen Kunselman (Ward 3) raised the question of the old YMCA lot: Why doesn’t the city put it up for sale? Fraser’s initial reply was that it’s currently generating revenue. Fraser clarified that the agreement recently struck between the city and the Ann Arbor Downtown Development Authority sends either the net revenue from the surface parking lot on that location or else $100,000 per year – whichever is greater – to the city’s general fund.

Kunselman pointed out that the city is making interest-only payments on the parcel – then ticked through the costs associated with the lot: its purchase, demolition of the building, rent for displaced residents, interest-only payments since its purchase in 2003, insurance deductible for a pending lawsuit, cost of the construction of a parking lot. Kunselman calculated that the city had invested some $5-$6 million in the parcel and that it was perhaps time to “cut our losses.”

Kunselman continued by saying that he thought it was time to give up the idea that “we, as politicians, can create affordable housing.” He suggested that the existing fund balance in the housing trust fund be transferred to the Ann Arbor Housing Commission.

Mayor John Hieftje allowed that Kunselman was making a good point, but that it was really a matter of timing – the parking provided by the old YMCA lot is currently needed, especially since the surface parking at the city-owned Library Lot was now unavailable while an underground parking garage is under construction. Once the parking structure is finished, said Hieftje, the YMCA parcel would be more valuable.

Fraser concurred that the old YMCA lot would become more marketable when the underground parking garage is completed. Kunselman expressed some skepticism that the parcel would bring in all that much more in the future, noting that the old Ann Arbor News building was currently for sale for around $9 million.

It’s not the first time a councilmember has weighed in for unloading the lot. From Chronicle coverage of the Dec. 1, 2008 council meeting:

The item on the agenda was to approve a continued financing of the property on the corner of Fifth and William through interest-only payments. The Bank of Ann Arbor, which will provide the financing, was one of two out of seven institutions that responded to the request for bids. The other one was Chase Equipment Leasing, whose bid of a 6.14% interest rate did not compare favorably with the 3.89% offered by the Bank of Ann Arbor.

In deliberations, councilmember Sandi Smith said that she would support the continued financing of the property, because they had no other choice, but that she urged her colleagues to begin thinking of master planning the area so that the city could divest itself of the property as soon as possible. Smith noted that given the $5,000 cost of supporting a homeless person, the interest-only payments could be used to support 27 people. The math goes like this: ($3,500,000)*(.0389)/5,000.

Main & William

Stephen Rapundalo (Ward 2) suggested that the old YMCA lot merited a community discussion. An additional land parcel downtown that Rapundalo thought warranted some focus was the parking lot at Main & William, next to Palios restaurant. He noted that there were just 21 parking spaces at the lot, but it was possibly ripe for investment. He wanted to know if  it was on the list somewhere. Fraser told him it was on a list, but not near the top.

Sale of Parkland

Sandi Smith (Ward 1) cautioned that they should not be patching operations holes with capital dollars. Sabra Briere (Ward 1) noted that there was the same issue with the idea of selling parkland – patching operations with capital dollars.

Fraser responded to Briere’s point by clarifying that it was the maintenance expenses and limited use of specific parks that had resulted in their inclusion on the list provided to council. Fraser said he was not asking council to consider the capital value of parkland, but rather the ongoing maintenance cost that the parcels represented. Marcia Higgins (Ward 4) and mayor John Hiefje asked for additional information about maintenance costs for the parks that had been identified as those it made the most sense to sell, if the city were to sell any of its parks.

More Revenue?

While it’s related to how the city uses its land, and while the possible sale of the land upon which Huron Hills Golf Course sits has a controversial history, we still slot Monday’s discussion of golf courses into the section on revenue generation. One of the “big ideas” considered by the council is the idea of a public-private partnership for operation of Huron Hills Golf Course.

Revenue: Do You Golf?

Stephen Rapundalo (Ward 2) said he wanted to learn more about cost savings that could be achieved through private partnerships connected to public golf courses. He asked if the next step would be to issue an request for proposals (RFP) for Huron Hills Golf Course. Jayne Miller said she would recommend issuing an RFP – even though a private golf initiative would not be operational in time to have an impact on FY 2011, the council would get information needed to plan for FY 2012, she said. Margie Teall (Ward 4) stated that she wanted to see that happen.

Sabre Briere (Ward 1) wanted to know why Leslie Park Golf Course was not also being considered for a public-private partnership. Miller noted that Leslie represented a fairly decent chance of becoming self-sustaining and that allowing a private enterprise to take it over would essentially take money out of the city’s pocket.

Christopher Taylor (Ward 3) then introduced an analogy that flummoxed his colleagues sitting on the other side of the table: “We have the wolf by the ears with golf,” he said. Marcia Higgins (Ward 4) later asked him to clarify what he meant by that. Taylor then referenced the Jeffersonian analogy to slavery in America, which compared the U.S. relationship to slavery as having a wolf by the ears.

On the question of entering a private-public partnership on the Leslie Park Golf Course, Miller explained that a consultant [Golf Convergence] – who had been hired to look at the courses in conjunction with the creation of the city’s golf task force – found that there was little interest by anyone in either of the two golf courses. Now that the Leslie course has started to show some improvement in its finances [and now enjoys a liquor license], there had been some interest in it. Rapundalo, however, said that entering a public-private partnership on Leslie would be like “giving away our crown jewel.”

The result of the discussion – which Hieftje and Fraser took care to not label as a “decision,” but rather as giving direction to the city administrator – was that city staff will start preparing an RFP for a public-private partnership on the Huron Hills Golf Course.

Revenue: Compost as Merchant Operation

The subject of converting the city’s composting facilities to a merchant operation – that is, operated by a business – arose out of one of the “big ideas” on the list, which was to analyze the possible benefits of discontinuing the city’s leaf collection program in favor of requiring citizens to “containerize” leaves – through bagging or placing them in carts.

Responding to a question from Margie Teall (Ward 4), Sue McCormick, public services area administrator, said that while the leaf collection program was not a general fund program, costs in the solid waste fund needed to be addressed as well. [The reduction in property values affects millage revenues across the board.]

McCormick reported that they’d looked at the economic side of the equation, and that the estimated net savings using conservative estimates (not factoring in behavior changes that would reduce the number of leaves set out by residents) was $100,000. In conversation with Marcia Higgins (Ward 4), McCormick stated that the situation would be helped by additional deployment of compost carts, which can be emptied through an automatic arm.

Mayor John Hieftje noted that in his neighborhood [Burns Park] people put a few leaves each week and that this had eliminated the need to sweep the leaves into the street. McCormick cautioned against compacting too many leaves into the containers, as it sometimes made emptying them difficult. [The automated arms tilt the carts upside down – whereupon the contents are liberated from the confines of the cart through a physical attractive force, a so-called "gravity."] McCormick pointed to the benefit of bagging as (i) providing more control, and (ii) limiting the amount of disruption in the community.

Stephen Kunselman (Ward 3) quizzed McCormick on the proposed conversion of the compost operation to a merchant operation. Given the reduction in volume that would be anticipated as a result of required bagging of leaves, how would that make money? It had to be due to expanded operations to process non-resident yard waste, he concluded. McCormick deferred answering the question, saying that she’d like to take that on as a topic unto itself and provide a full analysis. [The city issued an RFP for the contract last year.]

Revenue: City Income Tax

On the question of possible sale of parkland, Christopher Taylor (Ward 3) stated that he would rather go to voters with something direct on revenue – an apparent reference to the idea of putting a referendum on a possible city income tax before voters. [The city of Ann Arbor's charter specifies that it can levy a property tax for general operating expenses or a city income tax, but not both.]

At a recent meeting of the city council’s budget committee, city administrator Roger Fraser had recommended to the council that they at least invest in the gathering of information about voter attitudes related to an income tax – in the same way that the Ann Arbor Transportation Authority recently did with respect to a possible countywide transportation millage. [The AATA's survey of 1,100 Washtenaw County voters cost $40,918, according to AATA spokeswoman Mary Stasiak.]

Revenue: Recreation Fees

On the subject of charging an additional rental fee for a third person in a canoe at the city’s canoe liveries, Margie Teall (Ward 4) asked if that was standard practice in other communities. Jayne Miller confirmed that it was an industry standard – Huron Clinton Metro Authority charges per person, for example.

Teall then ask about other users of the water besides canoes – on the analogy that the water was like a playing field. Miller noted that part of the difficulty in assessing a fee was that there were multiple places to enter and exit the water, as it was a public waterway. Teall allowed that yes, walking across a park should not result in a fee being assessed, but she was talking about organized use that might prevent other people from using the water. Miller then said, “The thing that comes to mind is rowing.”

Miller then put the question in the larger context of the Argo Dam. Its maintenance funding is currently in the city’s water fund, but needs to be moved out of that fund. [Roger Fraser has previously indicated that this is something that will be undertaken in the current budget cycle.]

Fees at recreational facilities, of course, generate revenue for those facilities. Miller referred the council to a spreadsheet that listed out each recreational facility with expenses, revenues and visitors. Asked what facilities should be closed, Miller said she had no simple answer.

She noted that it’s not a matter of how much the facility costs to operate. Once revenues are added in, the cost savings that the city gets from closing the facility are much less than the number in the cost column. An important question to ask in evaluating a recreational facility, she said, was this: Is this service being offered elsewhere? So the question was whether it was possible to close a facility but not eliminate the service.

If the city had three pools, for example, and one of them were to be closed, the service would still be available elsewhere. But, she cautioned, that could have a negative impact on the other two pools, due to capacity limitations. Based purely on the numbers, she said, the two facilities she would recommend closing were the two that she had in fact already recommended closing: Mack Pool, and the Ann Arbor Senior Center.

With respect to the senior center and the available-services-elsewhere metric, Miller said that there were, in fact, other places that people could get those services. However, she said, it was clear that it was not simply a matter of services, but rather the fact that people who visited the senior center use that as their social network.

That’s the dilemma, she said. Miller also said that the two task forces dedicated to looking at those two facilities had identified cost savings and revenue enhancements that also needed to be considered in any decision.

Tony Derezinski (Ward 2) asked about increasing fees for facility use and whether there was an elasticity of demand. Miller clarified that through the 1990s, fees had been consistently raised, but in the early 2000s they had been reduced because the city realized that they were losing customers. Miller also clarified that some of the revenue potential had to do with constraints resulting from the location of facilities in neighborhoods. Buhr Ice Rink, for example, has restricted hours of operation due to the noise from pucks and people crashing into the boards. Margie Teall (Ward 4) said she would like to see some information on the impact of raising rates.