County Board Briefed on Marketing, Finance

Washtenaw County Board of Commissioners meeting (April 7, 2010): Wednesday’s meeting was filled with reports and presentations, but there was no discussion on the largest action item: Approval of 39 additional positions to staff the expanded jail. A final vote on the changes will be made at the board’s April 21 meeting.

Commissioners heard from leaders of the Ann Arbor and Ypsilanti convention and visitors bureaus, who explained how they’ve been using revenue from a hike in the county’s accommodation tax, which raised $3.039 million in 2009.

That tax also came up during a report by the county treasurer, Catherine McClary. Collections have been more difficult because of the economy, she said, but all hotels are up to date on their payments. Five bed & breakfasts in the county are not. McClary’s report also included updates on the county’s investments and foreclosures, and a preview of a proposal for dog licenses.

Two other financial reports were given during Wednesday’s meeting, by interim finance director Pete Collinson and Mark Kettner of Rehmann Robson, who performs the county’s financial audits. The county was also presented with an award for its 2008 financial report – it has received the same award for 19 consecutive years, given by the Government Finance Officers Association.

Another presentation marked a transition, as the county handed over leadership for a literacy coalition it had spearheaded. Now, the campaign to end illiteracy will be handled by a community group. Read about it below.

Accommodation Tax: How is It Used?

At its Dec. 3, 2008 meeting, the board unanimously approved an increase in the county’s accommodation tax from 2% to 5%. Revenues from the tax – which is levied on rooms at hotels, motels and bed & breakfasts – fund the convention and visitors bureaus in Ann Arbor and Ypsilanti, in a 75/25 split. The increase took effect March 1, 2009.

Mary Kerr, president of the Ann Arbor Convention & Visitors Bureau, and Debbie Locke-Daniel of the Ypsilanti CVB both gave reports to commissioners, explaining how they allocated those tax dollars in 2009.

Kerr’s presentation gave an overview of Ann Arbor/Washtenaw market last year. The hotel occupancy rate was 58.9% for the year, down 6.7% from 2008. Though that’s a decrease, she noted that the occupancy rate in Washtenaw was the highest of all metro areas in Michigan. The statewide average occupancy rate was 47.5%.

For the Ann Arbor CVB, which employs 10 people, 89% of its income comes from the accommodation tax. Last year, the bureau’s share of the tax amounted to $2.159 million. All of the funds from the tax increase went toward marketing, sales and programs, Kerr said. She highlighted local participation in the Pure Michigan campaign, and – after waiting several minutes while a staff member struggled with some technical issues – played both a radio ad and a TV commercial focused on Ann Arbor and featuring voiceovers by the actor/comedian Tim Allen.

The radio ad can be heard here – scroll down to the “Original-Ann Arbor” section. It’s the same ad that Kerr played for commissioners at their Nov. 19, 2008 meeting, when she lobbied for the tax increase. [A second radio spot has also been developed, but wasn't played at Wednesday's meeting.] The TV commercial – which includes shots of Michigan Stadium, the Ann Arbor Farmers Market, Nickels Arcade and other spots around town – will begin airing in May in three markets: Cleveland, Cincinnati and Indianapolis.

Other initiatives for 2009 included an online marketing campaign, an emailed monthly newsletter, and the hosting of 50 travel writers and editors from around the country.

The Ann Arbor CVB also launched a new website – Film Ann Arbor – designed to attract filmmakers to the area. It features testimonials from directors who’ve already filmed here, including Rob Reiner (“Filming in Ann Arbor was the best time I’ve ever had making a movie”) and Drew Barrymore (“I felt like it was a blessing we got to shoot there”). Eleven films have been based or shot in Washtenaw County, Kerr said, bringing an estimated 24,500 hotel room nights, or $6 million in economic impact.

Kerr said the Ann Arbor CVB has been designated an official film office by the Association of Film Commissioners International (AFCI) – staff from the bureau will have an exhibit at next week’s AFCI locations trade show in Santa Monica, Calif. The CVB is also advertising in Variety, a film industry trade publication.

In addition to increased activity from filmmakers, Kerr highlighted the work her bureau has done in attracting labor union conferences to the area. The ironworkers union – the International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers – will hold its annual educational conference in Washtenaw County for the first time this year, after 23 years in San Diego, she said. It’s the third major union to bring its educational conference to the county. Others are the United Association of Plumbers and Pipefitters, and the National Joint Apprenticeship and Training Committee for electricians. Kerr estimated an annual economic impact of $12.5 million from these events, which include classes held at Washtenaw Community College, the University of Michigan and Eastern Michigan University.

The Ypsilanti CVB received $719,711 from the accommodation tax in 2009. The bureau’s president, Debbie Locke-Daniel, told commissioners that they used some of the additional funding to hire another full-time sales manager – now they have two of those positions.

In addition, funds were used to redesign its website, as well as to develop YAA Life, a blog that highlights communities throughout the county. Since the Internet is the primary way that travelers do research for their trips, Locke-Daniel said they’ll continue to optimize their online presence. ”My hope is that when you Google Ann Arbor, you’ll get Ypsilanti first,” she joked.

Commissioner Comments

Rolland Sizemore Jr. said he’s asked Kerr and Locke-Daniel to encourage filmmakers who come to this area to work with local schools, donating film equipment or allowing students to job shadow.

Mark Ouimet, who serves on the county’s accommodation ordinance commission, said he was impressed with the work of the CVBs, and that they’d had a dramatic impact on the local economy.

Noting the decrease in hotel occupancy, Conan Smith wondered whether the CVBs could say whether their marketing efforts had any impact on lessening the decrease, compared to what it could have been. Kerr said they’d be meeting on April 30 with members of the Washtenaw County Hotel/Motel Association – that group has already reported that the marketing has had a significant impact, she said. Locke-Daniel added that business from the film industry and unions were really the “saving grace” for the hospitality sector last year.

Smith observed that when the county first started discussing an increase in the accommodation tax, there was some concern that it might drive away business, but it appeared that the reverse was true. The CVBs haven’t heard any negative feedback from hotels about the tax increase, Kerr said.

Treasurer’s Report

Catherine McClary, the county treasurer, reported on four issues handled by her office: 1) the accommodation tax, 2) the county’s cash position and investments, 3) delinquent tax collection, and 4) potential changes to dog licenses.

Accommodation Tax

McClary explained the treasurer’s role in collecting the accommodations tax was to receive and bank the money, investing it until payouts are made each month to the two CVBs. Last year, the county collected $3.039 million from that tax – an increase of $1.5 million from 2008. [.pdf file of 2009 accommodation tax annual report]

Part of the increase was due to stepped-up enforcement, which McClary described as very difficult. In November 2009, the board approved a five-year agreement with the CVBs, from 2010 through 2014 that increased the county’s share of the accommodation tax revenues from 5% to 10%. In 2009, the 5% share totaled $160,929. The additional revenue coming to the county will be used by the county treasurer’s office to help administer and enforce the accommodations tax ordinance. [See coverage of this change in the Chronicle's report of the Nov. 11 administrative briefing.]

McClary reported that the county had obtained judgments against two hotels last year that were delinquent on the tax, but that now all hotels are current on their payments. Five bed & breakfast establishments are behind in their payments, however – she said her staff is working with them on a collections plan.

[When the board of commissioners held a public hearing on the tax increase at their Dec. 3, 2008 meeting, the only two people to speak were the owners of a bed & breakfast in Chelsea. From The Chronicle's report of that meeting:]

Only two people spoke, standing together at the podium: Jim and Kim Myles, who’ve owned the Chelsea House Victorian Inn for eight years.

Jim Myles said they were concerned about the impact of this room tax, which is being raised from 2% to 5%. He said they’d planned to lower their rates to attract more customers, so the proposed tax hike would force them to take an even greater income hit. Myles also said that since their business was on the western side of the county, they didn’t feel they benefited from marketing done by the Ann Arbor and Ypsilanti convention & visitors bureaus, which are funded through this tax. Kim Myles pointed out a trickle-down effect on the local economy: the lower income they’ll have because of the tax would result in them spending less money at other local businesses. She also said that the tax should be phased in over several years, rather than raised dramatically all at once.

The Chelsea House Victorian Inn was not among those listed as delinquent in the treasurer’s 2009 accommodation tax payment report, submitted to the county’s accommodation ordinance commission [.pdf of payment report].

Cash Position and Investments

McClary reported that the primary goal in her cash investment strategy is to safeguard the public funds, following state law and the board’s policies. Last year, her office managed nearly $150 million in investments and earned over $2 million off of that amount. At the end of 2009, $101.7 million was in CDs and money markets, $12 million was held in commercial paper, $26.66 million was in treasuries and agencies, and $7.69 million was in bank accounts.

The county invests for diversification, cash flow and yield, McClary said. Currently, the county has $250,000 in insured CDs at each of 15 banks – including locally based Ann Arbor State Bank and Bank of Ann Arbor.

She noted that the investment portfolio is lower in part because the county has been spending funds it had previously set aside for construction. [One example is the county jail expansion, which is set to open this summer.] Investments are also down because of the decrease in revenues coming into the county from property taxes, due to the economic downturn [.pdf of 2009 treasurer's report].

Delinquent Tax Collection

In 2009, the treasurer’s office collected $4.473 million in delinquent taxes and fees. Since 1999, the office has collected delinquent real property taxes on just over 92,000 parcels, McClary told the board. Of those, her office has foreclosed on 164 parcels. But those numbers are climbing, she noted.

It takes three years to get to the point of foreclosure, beginning when a taxpayer is delinquent on their taxes. In 2008, there were 26 tax foreclosures, from tax year 2005. Last year, there were 102 tax foreclosures, with 45 of those ultimately sold at auction. This year, there are 515 properties in tax foreclosure, McClary said.

The good news is that for March, delinquent taxes – a leading indicator of eventual foreclosures – were slightly lower than a year ago, McClary said. It’s the first time that’s happened in seven years. However, she still expects to see higher foreclosures in the coming months, especially on commercial properties.

The treasurer’s office runs programs for both tax foreclosure prevention and mortgage foreclosure prevention. Regarding mortgage foreclosures, McClary said her office will be holding three educational seminars in April, May and June aimed at helping people who are “under water” in their mortgages – who owe more on their mortgage than their home is currently worth. Even educated people, she said, can be financially illiterate and find themselves in difficulty.

McClary also noted that a new state law mandates that lenders give homeowners a 90-day extension if they’ve defaulted on their loan. She urged people to call the foreclosure prevention program at 734-222-9595 or email mfpp@ewashtenaw.org to get counseling and advice.

Dog Licenses

Through the treasurer’s office, the county collected $31,195 in dog licenses for 2009. Currently, the licenses must be renewed annually. [The licenses cost $5 for a dog that's spayed or neutered, and $10 for an "unaltered" dog. There's no charge for service dogs.] McClary said she plans to bring a proposal to the board of commissioners this summer, creating the option for residents to get a three-year license. That way, owners could renew licenses on the same cycle as the dogs’ rabies shots, she said. [A valid rabies vaccination certificate is required for the license.] It would also help her office better manage the workload, she said.

In addition, McClary is working with the sheriff’s department to explore the possibility of an ordinance that would allow law enforcement officers to ticket owners of unlicensed dogs for a civil – rather than criminal – infraction. Currently, not having a valid license is a misdemeanor, and officers are reluctant to issue tickets for that, McClary said.

The cities of Ann Arbor and Ypsilanti, as well as Ypsilanti Township, issue their own dog licenses. Rolland Sizemore Jr. asked why there isn’t a single licensing procedure for the entire county – McClary said she didn’t know. He asked how the county’s rates compared to those charged by other municipalities. McClary said the other rates were higher. [Ann Arbor and Ypsilanti charge $16. Ypsilanti Township charges $6.]

Other Financial Reports

Commissioners heard from both Pete Collinson, the county’s interim finance director, and Mark Kettner of the accounting firm Rehmann Robson.

Comprehensive Annual Financial Report (CAFR)

Pete Collinson dedicated the 2009 comprehensive annual financial report (CAFR) to Peter Ballios, the long-time finance director who recently retired. Ballios taught the staff to work as a team, Collinson said, and it was under his leadership that the report has been completed in a timely manner – by March 31 – for the past 13 years.

Giving an overview of the county’s finances, Collinson noted that they ended 2009 with a $584,000 surplus. He said that showed the measures approved by the board to cut costs and raise revenues were effective in addressing a projected shortfall for the year. The county’s unreserved fund balance was $9.8 million, representing 9.4% of general fund expenditures – or a little over a month’s worth of money to pay the bills, he said. While good, Collinson noted that the Government Finance Officers Association (GFOA) recommends a minimum two-month reserve. He pointed out that over the years, general fund reserves have steadily increased, from less than $4 million in 1992 to nearly $10 million last year.

Several other funds in the county ended the year with a surplus, Collinson said: facilities management ($646,355), child care ($566,260), self-insurance ($421,481), Friend of the Court ($298,524) and environmental health ($106,604). He pointed out that the graphic on the slide he displayed for this information was a picture of a nest egg: “I really like clip art, I must say.”

In 2009, the county drew down about $6.5 million out of its state revenue-sharing reserve fund, leaving a balance of $24 million. Projecting ahead, the fund will be depleted sometime in 2013, he said. It’s possible that the state will refund that reserve, he said, but they can’t count on it.

Collinson said that upcoming projects for the finance staff include examining the county’s general fund cash flow, in light of the decreasing revenue-sharing reserve fund. They’ll also be making a presentation on internal controls at the board’s April 22, 2010 working session, he said. And the staff will be looking at the county’s cost allocation plan, with the goal of simplifying how it is calculated.

There are four capital projects that are slated to be finished this year, and Collinson briefly reviewed those costs: $23.8 million for the county’s enhanced emergency communication system (the 800 Mhz project), $21.7 million for the jail expansion, $12.9 million for construction of the new district court building, and $2.8 million for a fiber network.

Despite the economy, the county has maintained a solid bond rating, Collinson reported. He noted that county administrator Bob Guenzel and deputy administrator Verna McDaniel traveled to Chicago last month to meet with ratings agencies. Standard & Poor’s rates the county at AA+ and Moody’s has given the county an Aa2 rating.

Auditor’s Report

Collinson then introduced Mark Kettner of the accounting firm Rehmann Robson, which conducts the annual audit of the county’s financial report. Kettner noted that the audit gives an unqualified – or “clean” – opinion about the county’s financial statements. It’s an opinion on those statements, he said, not an opinion about the county’s financial controls or conditions. He said there were a few minor items that they reported to administration, who will be following up in writing with commissioners. [.pdf of Rehmann Robson management letter for the audit]

Commissioners had only a few comments and questions for Collinson and Kettner. Jeff Irwin said he always enjoys getting the CAFR, calling it a “tremendous cure for insomnia.” Leah Gunn congratulated Collinson for being appointed interim finance director – he was previously the county’s accounting manager. She noted that she’d first met him when she was on the Ann Arbor library board, and he had come to a meeting and explained the county’s budget to them. She also noted that the county had pinched its pennies, which resulted in the 2009 surplus – it speaks well for being careful about their finances, she said.

Mark Ouimet asked about the county’s Money Purchase Pension Plan. He said that he and Gunn feel it’s time to close the plan and move the remaining $1.9 million in assets somewhere else. There are only a dozen people in the retirement plan – all of the county commissioners, and a judge. He asked Kettner to explain how it might be terminated.

Kettner said it was his understanding that commissioners couldn’t make changes to their salaries or benefits until the beginning of their next term.

Wes Prater objected, saying there needs to be some discussion about what to do with the pension plan. Nobody has convinced him that eliminating the plan is the best option. “I, for one, am not ready to go that route,” he said.

[Retirement benefits for most county employees have been shifted out of the MPPP, a defined contribution plan, to the Washtenaw County Employees’ Retirement System, known as WCERS, which is a defined benefit plan. Commissioners contribute 7.5% of their salary on a pre-tax basis to the MPPP and receive a 100% employer match. The county also contributes to a voluntary employee beneficiary association (VEBA) on behalf of each commissioner.]

Literacy Coalition: Passing the Book

Several people who’ve been working on the Literacy Coalition of Washtenaw County attended Wednesday’s meeting. The co-chairs of that coalition – county administrator Bob Guenzel and Josie Parker, director of the Ann Arbor District Library – both spoke briefly to commissioners.

Guenzel called the evening a kind of graduation. He recalled that several years ago, commissioners Leah Gunn, Ronnie Peterson and Conan Smith had supported an administrative effort to strategically coordinate the various literacy activities in Washtenaw County. That led to a board resolution in July of 2007 to create the coalition [.pdf of 2007 board resolution forming the Literacy Coalition of Washtenaw County and appointing its members]. Guenzel said the county wasn’t abandoning the effort, but was really just giving it back to the community.

Parker echoed those sentiments, and thanked the board for its vision in believing that it was possible to eliminate illiteracy. Like the county, the library isn’t backing out of the effort, she said, and will continue to support the coalition in this next stage.

As part of this transition, the coalition has hired its first coordinator, Vanessa Mayesky, who also spoke to the board. She described the Blueprint to End Illiteracy as the group’s “action plan,” with three main goals: 1) increase public awareness, 2) enhance the delivery of services, and 3) build an infrastructure to support these efforts. “We’re making progress in all three of these areas,” she said.

Among the coalition’s current projects are developing a directory of literacy providers and services; launching a local program of Dolly’s Imagination Library, which distributes free books to pre-school kids and their families; and forming a comprehensive family literacy program.

Mayesky told commissioners that the coalition plans to hold board elections at its May 10, 2010 meeting. [The meeting runs from 2-3:30 p.m. at the NEW Center's 2nd floor conference room, 1100 N. Main St. in Ann Arbor.]

To achieve 100% literacy, the coalition needs 100% community engagement, Mayesky said. They’re pursuing a path of “literacy infusion,” putting literacy development at the heart of all activities, not just in its own box. “You have put us on that path,” she said.

Month of the Young Child

Also during Wednesday’s meeting, the board approved a resolution declaring April 2010 as the Month of the Young Child. In brief remarks to the board, Mary Phillips-Smith – chair of the county’s Head Start policy council – said that as parents, they were excited about the literacy coalition’s efforts. She specifically cited Dolly’s Imagination Library, which is eventually expected to serve 21,000 children in the Ypsilanti area.

Extra Jail Staffing

Without discussion, the board approved a staffing recommendation for the expanded county jail that will add 39 full-time positions to the payroll. The corrections division currently has a staff of 103 people.

At the board’s March 18, 2010 working session, sheriff Jerry Clayton gave a detailed presentation about the recommended staffing changes. [See Chronicle coverage: "Sheriff Requests More Staff for Expanded Jail"] The main concern expressed by commissioners at that meeting was the projected nearly $2 million two-year budget shortfall in 2012 and 2013, resulting from the additional staff.

Clayton attended Wednesday’s meeting, but did not address the board. Initial approval of the staffing change was voted on at Wednesday’s Ways & Means Committee meeting, which is held immediately prior to the regular board meeting. A final vote will be taken at the April 21 board meeting.

Public Hearings Set

As part of its consent agenda, the board set upcoming public hearings on two issues. There was no discussion of these items:

• At the board’s April 21, 2010 meeting: A public hearing to get citizen input on the 2010/2011 annual action plan that the county will submit to the U.S. Dept. of Housing and Urban Development. The hearing is required in order for the county to receive federal Community Development Block Grant (CDBG) and HOME Investment Partnership program funding, administered by the Urban County. [See Chronicle coverage: "Urban County Allocates Funding"]
• At the board’s May 5, 2010 meeting: A public hearing to get citizen input on an amendment to the county’s brownfield plan, related to the city of Saline Automotive Components Holdings’ brownfield redevelopment plan. From a memo distributed to the board: “The Saline Automotive Components Holdings, LLC project will provide economic assistance to support the continued economic viability and growth of a large manufacturing facility in the City of Saline. This Amendment is to enable MBT Credit application to the State of Michigan Treasury Department for approximately $1.2 million in MBT credits. Other brownfield eligible activities related will be addressed through private financing.”

Present: Barbara Levin Bergman, Leah Gunn, Jeff Irwin, Mark Ouimet, Ronnie Peterson, Wes Prater, Rolland Sizemore Jr., Conan Smith

Absent: Kristin Judge, Jessica Ping, Ken Schwartz

Next board meeting: The next regular meeting is Wednesday, April 21, 2010 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. [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 comment sessions are held at the beginning and end of each meeting.