“State of the County” Tackles $20M Deficit

Washtenaw County board of commissioners meeting (Jan. 19, 2011): Commissioners got a sober report from the county’s top administrator on Wednesday, providing a preliminary budget forecast for 2012 and 2013 that anticipates a $20.89 million deficit.

In her State of the County report, Verna McDaniel outlined areas to target in addressing the two-year shortfall: (1) $1 million in cuts to “outside agencies,” including nonprofits supported by the county; (2) $8.5 million in cuts to employee compensation and benefits; and (3) $8.5 million from organizational changes. She’s also looking to generate $2 million in additional revenue, in part by making sure fees charged by the county are set at “appropriate” levels.

Also related to the budget, commissioners approved agreements with two unions – the Police Officers Association of Michigan (POAM) and the Command Officers Association of Michigan (COAM) – that are expected to save a total of $5.6 million over a four-year period. Those savings are already factored in to the budget forecast, and do not serve to lower the projected deficit.

The board also got an update from Donald Shelton, chief judge of the Washtenew County Trial Court, who reviewed changes to the downtown Ann Arbor courthouse – including renovations to accommodate the county’s juvenile court, which is vacating its Platt Road facility later this year. The restructuring also entails merging all trial court clerk services into a “one-stop” operation at the courthouse. These changes come in the wake of the 15th District Court‘s move last weekend from the county courthouse to the city’s new municipal center at Huron and Fifth.

Court staff is working with the Ann Arbor Downtown Development Authority to address parking needs – DDA executive director Susan Pollay told The Chronicle that several options are being explored, including possible changes to the county-owned surface parking lot at Main and Ann streets.

After Shelton’s update, the board approved a renewed memorandum of understanding with the trial court, outlining the rights and responsibilities of each unit of government. The MOU calls for the county to fund the court through a “lump sum” agreement – the specific dollar amount hasn’t yet been determined. The MOU was approved unanimously with no discussion, though the topic had spurred debate at the board’s Jan. 12 administrative briefing. The debate stems in part from philosophical differences over how to fund the court.

In other business, commissioners approved a raft of committee appointments, and signed off on hiring a “cost recovery” firm who’ll review the county’s vendor contracts and suggest options for savings. And in an atypical occurrence, no one spoke during public commentary at Wednesday’s meeting.

State of the County

The county operates on a two-year budget cycle, and this year staff is putting together the 2012-2013 budget, with input from the board of commissioners, who will ultimately need to approve it. Work has already begun on that process, but on Wednesday, county administrator Verna McDaniel for the first time gave details about what to expect in the coming year, along with ways she hopes to tackle the projected $20.89 million two-year deficit.

The public was first alerted to the deficit at the board’s Oct. 6, 2010 meeting. The last financial update – for the third quarter of 2010 – occurred at the board’s Nov. 3, 2010 meeting. And on Dec. 1, 2010, commissioners approved adjustments to the budget for 2011, with additional cuts to come later this year. [.pdf of 2010-2011 Washtenaw County budget, as affirmed on Dec. 1, 2010]

McDaniel began her presentation by noting that as she was speaking, Gov. Rick Snyder was giving his first State of the State report in Lansing – and much of what happens at the state level will impact the county. In May, she’ll return with an update on that, as well as incorporating results of the county’s equalization report. The report indicates assessed property values and, in turn, a forecast of revenues from property taxes.

State of the County: Current Climate

McDaniel’s overview of current conditions started with the good news: The county’s AA+ bond rating; the fact that they’ve been able to save a $250,000 annual surplus for the general fund; and that the general fund reserves – also known as the fund balance – are above the county’s target of 8% of general fund expenditures. It’s closer to 10%, she said. [The 2011 general fund budget is $98.735 million, with a fund balance of $10.2 million.] However, she noted that the reserves would pay the county’s bills for only 42 days.

The county’s debt ratio of 1.68% is low – another good indicator, she said.

They’ve been reducing their budget since 2002, McDaniel said, reflecting declines in state revenue and property taxes. While most departments have been cut by at least 20%, some areas – including ones with mandated services – haven’t seen that level of reductions. It’s time to look at “serviceability” levels, she said, assessing the degree of service that the county needs to provide in mandated areas.

McDaniel praised the concessions from unions, as well as reductions taken by non-union employees. Last year, 14 out of the 17 unions that represent county employees agreed to cuts totaling $4.1 million in 2010 and 2011, she noted – waiving salary increases, taking furlough days and agreeing to health care premium-sharing. Just recently, two other unions representing employees in the sheriff’s office reached agreements to save an estimated $5.6 million from 2011 through 2014. [Commissioners later approved those agreements with the Police Officers Association of Michigan (POAM) and the Command Officers Association of Michigan (COAM) unions – see report below.]

But there remain many uncertainties and changes, McDaniel said, both externally and internally. Statewide, there’s a new governor in Lansing, who’ll be making proposals to deal with Michigan’s economic crisis in ways that will affect the county. The real estate market, health care reform and increased need for services by residents are all factors that will influence the budget. As an example, she noted that under the new national health care law, the county will have to pay a 40% excise tax on its “cadillac” health care plan starting in 2018 – that’s something they’ll need to address, she said.

Looking at internal factors, McDaniel noted that although she’s been with the county 29 years, she just became administrator last May, and she’s now “in the hot seat.” There are four new board members as well – elected in November and taking office earlier this month – and they’ll all need to work together to get on the same page, she said. Recent retirements in leadership – including Trenda Rusher at Employment Training & Community Services (ETCS) and Peter Ballios in finance – are also affecting the organization.

State of the County: Declining Revenues, Increased Expenses

The top five revenue sources for the general fund are unstable and declining, McDaniel said: (1) property taxes; (2) state revenue-sharing; (3) police services contracts; (4) real estate transfers; and (5) court fines and fees.

Property tax revenues are expected to drop 8.5% this year, and another 5% in 2012. Taxes and penalties account for about 60% of general fund revenues.

The county will deplete its state revenue-sharing reserves by mid-2013. Those reserves now stand at $6.67 million, and it’s questionable whether the county will receive any additional revenue-sharing funds beyond that, she said.

The future of police services contracts is also unstable, McDaniel said. Municipalities that contract with the sheriff’s office for deputy patrols have contracts that run through the end of the year, and the board will need to make some policy decisions about future contracts soon, she said. [For background, see Chronicle coverage: "What's Next for Police Services?"]

Because of the economy, real estate transfer fees have dropped from $5 million annually to about $2 million – the good news is that it’s stabilizing, McDaniel said. Court fines and fees have also dropped substantially, she noted.

In addition, there are significant unknowns regarding federal and state funding for programs outside the general fund. That’s another thing they’ll need to monitor, she said.

On the expense side, personnel expenses account for 62% of the general fund budget – $61 million – with fringe benefits now equal to about 56% of salaries, on average. Health care costs are expected to continue climbing, she said. The county also faces a $4 million liability for tax appeals. They used to keep only $100,000 in their tax appeal account, she said – now it’s funded at $1.5 million, and they’re not sure that’s enough.

McDaniel also noted that more than $8.6 million of the $30 million in expense cuts in the 2010-2011 budget were non-structural. “That follows us,” she said, and compounds.

In the 2011 general fund, 62% of expenditures relate to criminal justice – the sheriff’s office, trial court, district court, prosecuting attorney and public defender. “Needless to say, that is a priority based on where we’re spending our money,” McDaniel said.

About 70% of the county’s services are mandated, she noted, but it’s up to county officials to determine the level of service provided. The concept of what’s mandated “is so mushy that no one knows what that means,” she said – and decisions will need to be made on that issue.

State of the County: Preliminary Estimates

McDaniel led commissioners through preliminary estimates for revenues and expenditures. Property tax revenues are expected to drop 8.5% this year, another 5% in 2012 and 2% in 2013. State revenue-sharing funds will likely be depleted by 2014. Estimates are for revenues from police service contracts, real estate transfer fees and court fines/fees to remain flat. Personnel costs include 0% salary increases, but an estimated 12% increase in fringe benefit costs.

Even with 0% salary increases, McDaniel noted, the county still anticipates a deficit of $12.95 million in 2012, growing to a two-year deficit of $20.89 million by 2013. That amount equates to 207.4 full-time employees, out of the county’s workforce of 1,350 – but McDaniel stressed that they have no intention of addressing the deficit by cutting staff. Giving an employee equivalent is just a way to characterize the significance of the shortfall.

McDaniel emphasized that the numbers are preliminary, and that the amount of the estimated deficit will be adjusted, as more information becomes available. The projections are based on solid assumptions, she said, and what they do know is that they have a deep structural deficit that needs to be addressed. The economy remains volatile, and recovery is uncertain.

State of the County: What’s the Plan?

Given the current reality, McDaniel said, “we can no longer be all things to all people.” The brute reality is that things have to change – they have to focus their efforts, learn to say no, and understand that what was in the past a “need” might now be a “want.”

As they make decisions about how to address the deficit, they’ll be guided by a set of principals that McDaniel outlined for commissioners: (1) stay conservative; (2) find long-term structural solutions; (3) define core services; (4) focus on targeted “community impact” areas; (5) look for ways to collaborate; (6) identify the most efficient and effective organizational structure; (7) reduce personnel costs; (8) balance job reduction with reduction in employee compensation; and (9) be creative, yet fiscally sound.

The board needs to set priorities to guide the administration, McDaniel said. She noted that they have a retreat set for Jan. 29 to do that. The board needs to define what it believes are the county’s core services, and to work from a customer-service approach – not just decimate programs through cuts. But whatever decisions are made to address the deficit, they must be in line with the board’s priorities, she said.

The administration will also be working department heads and other elected county officials, reviewing past reductions – whether they have already “ponied up” with cuts, she said – as well as studying options for changing the way services are delivered, and assessing what services the county can no longer afford to provide. Serviceability levels need to be part of the discussion too, she said.

She knows that employees value predictability – she said she’s told the labor management team that she’d like to see expedited negotiations with labor unions, because if they want predictability, they need to start early. After delivering that message at a recent meeting, she said, she took it as a positive sign that “no one threw up on me.”

McDaniel then outlined four areas to target in tackling the deficit: (1) $2 million generated in new revenues; (2) $1 million in cuts to “outside agencies;” (3) $8.5 million in cuts to employee compensation and benefits; and (4) $8.5 million in organizational changes and baseline reductions. She gave more details about efforts she’d like to see in each of these areas:

• Revenue generation (+$2 million): The county has limited ability to raise revenue – they can’t raise property taxes, for example, or levy sales tax. But they need to ensure that fines and fees are at “appropriate” levels, she said, and seek out alternative ways to deliver services that might generate revenues. They also need to maximize outside funding whenever possible, she said.
• Outside agencies (-$1 million): In 2011, the county budgeted $2.9 million to outside agencies – including nearly $800,000 in various dues and membership fees, $1.46 million to human service agencies, and $660,000 to special initiatives, like the economic development agency Ann Arbor Spark, among others. McDaniel noted that outside agency funding was reduced by 20% in 2010, and that most allocations support discretionary services. [.pdf file of allocations to outside agencies]
• Employee comp/benefits (-$8.5 million): There’s a focus at the federal and state level to reduce benefits to government employees, she said, and compared to other organizations, Washtenaw County still offers excellent salary and benefits.
• Organizational changes (-$8.5 million): The more structural changes they make, the better off they’ll be, McDaniel said. If they’re just “plugging the hole” with one-time cuts, they’ll be dealing with the same problems year after year. Each department must do a detailed review of line-item budgets and contracts, she said, and look at all opportunities to reorganize, collaborate and consolidate. They need to have discussions with partners in the community, looking at services the county might shift to other providers. And finally, they’ll need to eliminate services that the county simply can’t afford anymore.

State of the County: Proposed Timeline

The board will be spending the next few months setting priorities – a retreat is set for Saturday, Jan. 29 to focus on that topic. McDaniel outlined several questions she hoped they’d consider while setting priorities: (1) Do current budget allocations represent their priorities? (2) How should the general fund respond when there are federal or state revenue reductions in non-general fund programs? (3) What targeted community areas are most important to the board? (4) What balance is appropriate between funding outside agencies versus internal county services?

McDaniel urged commissioners to take the message to the community, and she provided them with a two-page executive summary outlining key points of her budget presentation. [.pdf of executive summary] McDaniel said they’ll also be holding a series of town hall meetings for employees in the coming months, which board chair Conan Smith will be participating in.

The administration will continue working with labor unions to identify possible savings. In May, McDaniel plans to provide an updated financial outlook based on the county’s equalization report, which provides assessed property values and, in turn, a firmer handle on projected property tax revenues.

McDaniel said she’ll work with department heads and other county entities – like the trial court and areas led by other elected officials, like the sheriff’s office, clerk and prosecuting attorney – to set budget targets, and develop a recommended budget for commissioners to review. The board would need to adopt the budget by year’s end – November is the targeted date for that.

State of the County: Commissioner Comments, Questions

Commissioners didn’t give extensive comments on the presentation, but did have some feedback and questions. Leah Gunn began by saying she doesn’t expect any additional state revenue-sharing to occur. “There is no revenue-sharing with counties anymore, and we have to deal with it,” she said.

Barbara Bergman wanted to ensure that any discussion about human services be cast in the broader context of public safety. They need to be aware of the costs that the criminal justice system will incur if the county doesn’t having those services, she said.

Yousef Rabhi clarified that the 0% salary increase and the recent concessions by the police unions have already been factored into the projections – even with those savings, the deficit is still projected to reach over $20 million.

In response to a question from Wes Prater about personnel costs, McDaniel said that a study group was formed last fall – led by Diane Heidt, the county’s human resources and labor relations director. The study group includes managers and union leaders, and is tasked with reviewing employee benefits and exploring their options.

Trial Court: Juvenile Division, Memorandum of Understanding

Wednesday’s meeting began with a presentation by Donald Shelton, chief judge of the Washtenaw County Trial Court – an entity that includes the 22nd Circuit Court, juvenile court, probate court and Friend of the Court program. His talk focused on reconfiguration of the county courthouse, including the upcoming move of the juvenile court to the courthouse at Main and Huron in downtown Ann Arbor, from its current location on Platt Road. The changes come in the wake of the 15th District Court‘s move last weekend from the county courthouse to the city’s new municipal center at Huron and Fifth.

Following Shelton’s presentation, Dave Shirley, the county’s facilities manager, gave a brief update on the buildings at the Platt Road site, and what will happen to them following the juvenile court’s move.

In conjunction with Shelton’s report, the board also voted to approve a memorandum of understanding between the county and the trial court. The previous MOU, which outlines the rights and responsibilities of each unit of government, expired in December 2010. It did not provide details on the future budget for the trial court units, which will be made in lump sum payments. For 2011, that combined payment is $13.5 million.

Trial Court: Update on Restructuring

This is the second consecutive board meeting that Shelton has attended this year – he officiated the swearing-in ceremony for commissioners at their Jan. 5, 2011 meeting. On Wednesday, Shelton gave his report in the context of the trial court’s justice integration project, which has two major components – both designed to cut costs and improve services: (1) moving the juvenile court operations to the downtown courthouse; and (2) merging all trial court clerk services into a unified operation. The goal is to meet the county’s target of $1.1 million in cuts to the trial court budget. Shelton said the court is committed to doing its part to help address the county’s budget problems.

Shelton told commissioners that the juvenile court’s Platt Road facility is in serious disrepair and can no longer be used. Having the juvenile court in a separate location also impairs their efforts to combine clerking services, he said – it’s not a cost-effective way to operate. After the move, the trial court will offer one-stop services, so that people coming to court won’t have to look for “which pew to go to,” he said.

The merger of clerk services will result in a single location for citizens to file documents or get information, Shelton said. It will combine clerking for the circuit court’s criminal and domestic divisions, including Friend of the Court, as well as services for the juvenile and probate courts. The structural savings from the merger will allow them to meet their budgetary goals, he said.

This merger will be the most difficult aspect of the project, Shelton said. They’ve reviewed all operations and started cross-training staff, to get clerks from around the county working together.

Some major renovations to the downtown courthouse will be occurring in the next few months, to accomplish all of their goals, he said. He joked that Dan Dwyer, the trial court administrator, sent out an email to staff on Wednesday saying “the 15th District Court has left the building,” a la Elvis. They’ll be using the vacated space as part of the trial court’s reconfiguration, he said.

The juvenile court will be relocated to the third floor of the downtown courthouse, segregated from the other operations. They’re very mindful of keeping juveniles and adults separated as much as possible, he said, and the move out of the Platt Road facility will make that easier.

Shelton said they won’t be building new courtrooms or restrooms – the two most expensive parts of a courthouse – to accommodate the juvenile court. A committee has been working on ways to renovate the third floor to best use the existing floorplan, he said. The third floor was previously used by trial court judges Nancy Francis and Darlene O’Brien, who’ll be moving to the second floor.

Jury selection will be relocated from the third floor to the second floor. Part of the challenge is that every Monday morning, Shelton said, they need a large room to accommodate 150-200 people for jury selection – but they only need that one day a week. They currently close part of a courtroom to do that, he said. They’ll be renovating part of the second floor – formerly used by Judge Elizabeth Hines of the 15th District Court – into flexible space with partitions, creating a room that can be used for jury selection, then reconfigured into smaller meeting rooms during the rest of the week.

Clerk services will be consolidated on the first floor, giving citizens a single access point for court business, rather than the three different locations that are used now.

Shelton also discussed other efforts underway to improve services and cut costs. They include moving certain juvenile court services – such as probation meetings – to locations closer to the families, at either the 14A-4 District Court in Saline or the 14A-2 District Court in downtown Ypsilanti. They’ve eliminated some positions for about $140,000 in savings, he said, and increased efficiencies by training clerks to operate across different units – having juvenile probation staff assist in guardianship investigations, for example.

He finished by laying out a timeline for these changes. Renovations to the downtown courthouse second and third floors will be completed by April 22, with the juvenile court move planned on April 25. From May to August, renovations on the first floor will be done, with the goal to open merged clerk services there by the end of the summer.

“That’s as fast as I can summarize a year’s work on this project,” Shelton concluded.

Trial Court: Commissioner Comments, Questions

Barbara Bergman thanked Shelton for his consideration of the issue regarding the interaction of adults and children at the juvenile court. She noted that though they are trying to protect juveniles from criminals, in some cases, the most dangerous adult in children’s lives is their parent. Shelton responded that the interaction between imprisoned adults and their children will likely increase, in the wake of a 2010 Michigan Supreme Court ruling. The ruling found that the state’s Dept. of Human Services violated an incarcerated parent’s rights when they didn’t allow him to be adequately involved in his children’s care. [A summary of the case is posted on the Michigan Children's Law blog.]

Bergman then asked about whether meeting space in the jury selection area would be available for the community, noting that there’s a dearth of meeting spaces. Not likely, Shelton said – they’ll be eliminating other meeting rooms as part of the reconfiguration, so the new meeting space will be well-used for court purposes.

In response to a question about the use of electronic equipment, Shelton reported that they have equipment to conduct video conferencing, and have agreements with local hospitals to hold mental health hearings with physicians and patients via video. That set-up is already on the third floor, where the new juvenile court will be located. They hope to use it to reduce the transportation of juveniles from the detention center on Washtenaw Avenue, he said. They also have a grant that will allow them to put similar technology in a courtroom on the second floor.

Bergman asked whether the court files are still in paper form – she referred to “shelves and shelves” of them at the Platt Road facility. Noting that he served on the electronic filing task force of the State Bar of Michigan, Shelton said he had assumed that by now, court files would be electronic, not paper. But money that the state had allocated for conversion to a paperless system was withdrawn. [Shelton has written about the issue, including a 2001 article from the American Bar Association's Judge's Journal, titled "All Aboard? Electronic Filing and the Digital Divide."]

Bergman asked where those paper files are stored. Shelton reported that they had a “purge day” at the Platt Road facility, to prepare for the move. As they were looking for alternative locations, they discovered that many county departments had been using the courthouse basement as a “depository,” he said – they’ve had discussions with county administration to clear out that space.

Wes Prater asked for a cost estimate on the building reconfiguration. Shelton said they wouldn’t have those numbers until construction drawings are completed.

Trial Court: Platt Road Facilities

Dave Shirley, head of the county’s facilities, gave a brief update on the fate of the existing juvenile court buildings. The 42,320-square-foot building at 2270 Platt Road, which currently houses the juvenile court staff and storage, is located on 13.5 acres. The building is 45 years old and its infrastructure is decaying – it has reached the end of its useful life, he said. An adjacent 6,680-square-foot building – the O’Brien Center at 2260 Platt – was vacated last fall because it was deemed unusable, he said. Staff of the public defender and prosecuting attorney who worked there were moved into other county offices.

Shirley said they are working with architects now to get some options for the downtown courthouse renovations.

Commissioners had several questions and comments about the move. Rob Turner, a new commissioner who’d been tapped to get involved with this project, asked Shirley if he’d encountered any complications so far in looking at the building renovations. Shirley indicated that they had not, saying that so far they’d gotten postitive feedback from the county’s building department staff on the project.

Wes Prater asked whether the final decision had been made to do this work. Rolland Sizemore Jr. – who replaced former commissioner Ken Schwartz as a board liaison to this project – said the board would need to vote at some future date to approve funding for it. Prater then asked whether the expense had been included in this year’s budget.

County administrator Verna McDaniel said they had set aside $300,000 for the project, and had asked the trial court to “see what they can kick in as well.” She pointed out that the changes will result in structural savings for the county, which will give them a return on their investment. [At a Jan. 12 administrative briefing, McDaniel had told commissioners that the court expects to see $300,000 in structural savings each year, as a result of the move.]

Prater asked what will happen to the Platt Road buildings – will they be demolished, boarded up or rented out? McDaniel said there’s been interest in the property from real estate developers, but she reminded the board that they had asked the administration not to pursue a sale of county property, because given the market’s decreased property values, it wasn’t a good time to sell. She said her staff would be preparing a report on the county’s overall building space for the board to review.

Sizemore thanked commissioner Leah Gunn for helping get parking spaces for the downtown court. Gunn – who’s also a board member of the Ann Arbor Downtown Development Authority, which oversees the downtown area’s parking system for the city – said that DDA executive director Susan Pollay has been working with county staff to accommodate the court’s parking needs. Gunn said people have been particularly concerned about parking for families using the juvenile court, and said “they will be looked after.”

In a subsequent phone interview with The Chronicle, Pollay described several possible scenarios for parking that haven’t yet been finalized. The county owns the 46-space surface parking lot at the southwest corner of Main and Ann, which is currently used for metered public parking and managed for the DDA by Republic Parking. In exchange for use of that lot, the DDA provides 46 free spaces for jurors in its structure at Fourth & Washington. One option is for the county to take back that surface lot exclusively for its own use, or for the DDA to install a cashier or validation system there that would allow more court-specific parking. Or the DDA could install signs there indicating that it’s intended for users of the court, she said.

Another option would be to look at metered street parking around the courthouse, which currently allows only a maximum time of two hours. Some of those meters could be changed to allow longer hours, she said, or the DDA could install more spaces reserved for the handicapped.

The Ann/Ashley parking structure could come into play, Pollay said, perhaps by installing signs that would reserve the lower levels for non-permit parkers in the morning hours. That would push parkers who use monthly permits – including more than 200 court workers – into the upper levels, freeing up space for people using the court, she said.

Pollay said all of these options are being discussed with the county administration, but no decisions have been made. She added that the DDA is “thrilled” that the juvenile court is moving to the courthouse, bringing more activity to the downtown area.

Wrapping up discussion at Wednesday’s meeting, commissioner Yousef Rabhi suggested that they schedule a working session on the topic of the juvenile court move. Rabhi is chair of the board’s working sessions, and sets the agenda for those meetings.

Trial Court: Memorandum of Understanding

On Wednesday, commissioners approved a memorandum of understanding with the Washtenaw County Trial Court, outlining the rights and responsibilities of each unit of government. [.pdf of memorandum of understanding between county administration and trial court] A previous MOU, with similar terms, expired in December 2010.

As part of the agreement, the county will fund operations of the trial court in four “lump sums,” allocated separately to: (1) the 22nd Circuit Court [including circuit court administration, juvenile-general fund, friend of the court and community corrections]; (2) Probate Court [estates & mental health]; (3) 14-A District Court; and (4) the child care fund. The county will not have line-item budgeting authority, but the trial court has agreed to submit a bi-annual line-item budget, and provide quarterly financial projections. The amount of the lump sum payments has not yet been determined.

The agreement also states that the court will abide by the county’s policies in a range of areas, including travel, personnel and procurement.

Trial Court MOU: Commissioner Discussion

There was no discussion about the MOU at Wednesday’s board meeting, but at the Jan. 12 administrative briefing – an informal public meeting held to discuss the following week’s agenda – several commissioners voiced concerns.

During the briefing, corporation counsel Curtis Hedger described the history of the MOU. He noted that the trial court is considered a separate unit of government, but that it’s funded by a budget approved by the county board of commissioners. That dynamic has resulted in “some interesting permutations over the years,” he said.

Since 1990, the county has funded the trial court through a “lump sum” arrangement. But during the 2003 budget negotiations, the two entities couldn’t reach an agreement on the amount, and the court began the process of terminating the MOU, while at the same time asking the State Court Administrative Office to mediate the dispute. They ultimately reached a compromise that resulted in a new MOU in 2004.

In December 2009, it was the board of commissioners who voted to terminate the MOU – a notice of intent was approved, with the termination effective a year later, in December 2010. Since then, questions have been raised about how the court would handle issues like personnel and procurement processes, which have been handled in concert with the county under the MOU. County administrator Verna McDaniel had been in discussions with Donald Shelton, the trial court’s chief judge, and she recommended that the board renew the MOU. It would continue to be in effect indefinitely, with either party having the option to give one year’s notice before terminating it.

At the Jan. 12 briefing, McDaniel told commissioners that although Shelton wasn’t the easiest person to work with, he’d come to the table and it appeared they would do some belt-tightening. The MOU doesn’t include a lump sum amount, but it does clarify operational issues.

Conan Smith clarified that while the specific dollar amount isn’t indicated, the MOU does designate that a lump sum budget will be provided. He noted that he was the one who suggested abandoning the MOU a year ago, because of the lump sum arrangement. When you have a willing partner, he said, it works. But Shelton isn’t a willing partner, Smith said. He described a meeting he’d had with Shelton two years ago about the budget – his first and only one, he said – at which Shelton had indicated he’d cut programs that the board wanted, like the drug court, if commissioners cut the trial court’s budget. It was a punitive approach, Smith said, not a cooperative one.

Lump sum payments don’t empower the board, Smith continued. He acknowledged that he and McDaniel disagreed on this point, but said it was important for other commissioners to know the context. If they approve the MOU with a lump sum agreement, they’re ceding control of the budget to the trial court.

Dan Smith suggested splitting the difference – why not approve the MOU without the lump sum, and negotiate that separately? McDaniel said that if they take out the lump sum, the agreement would be pointless, from the court’s perspective. The straw that broke the camel’s back in the previous budget cycle, she said, was when Shelton didn’t want to agree to labor concessions that the county administration was negotiating with its unions. He exempted court employees from those concessions, which created tensions with the county. [Bob Guenzel was county administrator at the time – he retired in May of 2010.]

The court can do what it wants to do, McDaniel said, but she now has a commitment that they’ll work with her. However, she told commissioners, “you control the pursestrings – this is your ultimate power.” They should know, she added, that if they eliminated the lump sum agreement, they might as well tear up the MOU.

Rob Turner observed that the board can’t control how the court is run. Given that, he supported McDaniel’s approach, with the hope that the court administration will cooperate with the county.

McDaniel noted that they don’t want to end up like Wayne County, where the courts are suing the county for over $26 million. Rolland Sizemore pointed out that if the court litigates, “we’re still paying both sides of the coin.” Barbara Bergman noted that the court has previously threatened to sue over funding issues. That’s dangerous, she said, “because boys and girls in long dresses are going to adjudicate over boys and girls in long dresses” – implying that the court would receive favorable treatment in any lawsuit.

Bergman also stated that there should be “none of this crap” about Shelton not talking to Smith. Kristin Judge alluded to Smith’s “family baggage,” saying that had influenced the relationship between Smith and Shelton – Smith said he wasn’t aware of anything like that. [Smith's aunt, Nancy Francis, is a trial court judge.] Judge observed that Sizemore had been able to negotiate effectively with Shelton. She also pointed out that the courts do receive a lower budget now than in years past.

Sizemore said that Smith, as board chair, should definitely be involved in negotiations with the court. “Judge Shelton has his ways about him, but so do we,” he said.

When Bergman began to defend Smith, he cut her off. This isn’t about him or his family history, Smith said. It’s about the budget – they’re making an important strategic decision: lump sum versus line item.

Smith argued that by agreeing to a lump sum, they were taking a positional-based negotiating approach, not one that was interest-based. In a positional approach, they were simply negotiating the amount of the lump sum. An interest-based approach takes a more global perspective, looking at how the court integrates with the county, he said.

Several other commissioners weighed in to support McDaniel’s approach. She said she’s asked Dan Dwyer, the court administrator, to be part of the county’s budget planning team. That will help the court understand why the county makes certain budget decisions, she said. Even so, the negotiations will be tough, McDaniel allowed. “I’m not afraid of Judge Shelton. He’s a big guy, but I’m not afraid of him.”

The extensive discussion at Jan. 12 administrative briefing appeared to have satisfied commissioners’ interest in deliberating the issue, and no further commentary was offered at the Jan. 19 board meeting.

Outcome: At the board’s Jan. 19 meeting, commissioners unanimously approved a memorandum of understanding between the county and the trial court, with a lump sum budget agreement. The specific amount of that lump sum hadn’t yet been determined.

Police Union Agreements

At Wednesday’s meeting, commissioners approved agreements with two unions – the Police Officers Association of Michigan (POAM) and the Command Officers Association of Michigan (COAM) – that are expected to save a total of $5.6 million over a four-year period.

The 244 employees represented by POAM – who make up 16% of the county’s total workforce – had voted late last year on $4.426 million in concessions that will mostly come from forgoing raises in 2011 and 2012, and getting 1% raises in 2013 and 2014. Union members will also begin paying for part of their health care premiums – $50 a month – starting in 2013. The COAM union, which represents about 33 officers, agreed to the same concessions in a vote taken this week. Those concessions will also apply to eight non-union employees at the sheriff’s office.

In 2009, non-union employees as well as unions representing many of the county’s roughly 1,350 workers – including AFSCME Local 2733, AFSCME Local 3052, the Michigan Nurses Association, the Assistant Prosecutors Association, and the Public Defenders Association – took concessions totaling $4.13 million over the two-year period of 2010 and 2011. The POAM and COAM did not agree to cuts during that budget cycle.

At Wednesday’s meeting, commissioners Leah Gunn, Yousef Rabhi and Barbara Bergman thanked employees for making the concessions. Gunn noted the hard work of the labor negotiations team and sheriff Jerry Clayton, who helped reach the agreements. Rabhi said that as a new commissioner, much of this is new to him. But agreements like this make him believe that the future for the county is bright, and that they’ll be able to work to make the best of a bad situation.

At the board’s Jan. 12 administrative briefing, commissioner Conan Smith had noted that while these savings are extraordinary, “they don’t go far enough.” He said the county is getting about 80% of what they should be getting from the unions, and other programs will need to be cut to make up for that. The other aspect is that the POAM and COAM agreements extend beyond the 2012 and 2013 budget cycle, locking them in through 2014. “It’s definitely not a cut-and-dry, rah-rah situation,” he said.

Outcome: At the board’s Jan. 19 meeting, commissioners unanimously approved new agreements with the Police Officers Association of Michigan (POAM) and the Command Officers Association of Michigan (COAM) unions.

Commission, Board Restructuring & Appointments

As the outcome of a review of dozens of county boards, commissions and committees, at their Jan. 19 meeting the county board of commissioners voted to dissolve the Washtenaw County Election Expense Committee and the Washtenaw County Civilian Review Board.

They also voted to consolidate the Washtenaw County Drug Forfeiture Committee and the Sheriff’s Youth Community Projects and Special Projects Fund Committee into a new entity: the Sheriff’s Discretionary Committee. That committee will consist of seven members who will recommend allocations of any discretionary funds collected by the sheriff’s office.

Commissioner Yousef Rabhi asked who would be apointed to that new committee. Board chair Conan Smith said they’d be working with the sheriff’s office to determine the appointees, but he expected there would be two positions for commissioners.

The board also approved a raft of appointments to the remaining boards, commissions and committees, as well as commissioner appointments to those various entities. They had discussed these decisions at a Jan. 12 appointments caucus, a public meeting that immediately followed the board’s administrative briefing.

[.pdf file of 2011 commissioner appointments] [.pdf file of 2011 appointments to county boards, commissions and committees]

Cost Recovery Contract

Commissioners voted on a resolution to negotiate a contract with Expense Reduction Analysts (ERA), a firm that provides cost-recovery services.

The board had last discussed the issue publicly about a year ago, at a Feb. 24, 2010 administrative briefing. Jessica Ping, who at the time was a commissioner representing District 3, suggested that the county issue a request for proposals (RFP), soliciting bids from vendors who analyze spending patterns and identify ways for the county to cut purchasing costs. From Chronicle coverage of that Feb. 24, 2010 briefing:

At the board’s Nov. 19, 2009 working session, which Ping chairs, commissioners had heard a presentation about this kind of service from Fred Manuel of Alliance Cost Containment.

Barbara Bergman said she didn’t think the board had decided whether they needed this service. Ping said it was just an RFP, not a decision to proceed. Ping also noted the way the business model works doesn’t have a downside for the county. Alliance Cost Containment, for example, takes a percentage of whatever savings it identifies and implements. “It doesn’t cost us anything,” Ping said. “Why wouldn’t we do that?”

Wes Prater supported the RFP, saying that with this economy, they need to be looking at ways of doing business less expensively, “and this is one of them.”

The consensus was to direct staff to develop an RFP. Issuing an RFP does not require board approval.

An RFP was issued in June of 2010, and an evaluation committee – consisting of Gregory Dill, James McFarlane, Dave Shirley, and commissioners Jessica Ping and Kristin Judge – reviewed all vendor bids that were submitted in response to the RFP. The committee selected the company Expense Reduction Analysts (ERA).

According to a cover memo accompanying this resolution, the company will review some commodities that are purchased throughout the county, then negotiate the best price for the commodities as needed. ERA would be paid based on a percentage of what they saved the county over a one-year period. The firm would also audits accounts payable and receivable systems for inappropriate payments, overpayments, or duplicate payments. Labor and staff costs would be covered by the firm, and any labor provided by the county would be deducted from the amount of savings used to calculate the firm’s payment. Copy costs would be charged back to the firm at the rate of 20 cents a copy.

The next step is for the county administration to negotiate a contract with ERA.

Before the vote, commissioner Leah Gunn said that because this is a board initiative, she wanted to see a report on the savings they received from the effort.

Outcome: Commissioners approved the selection of Expense Reduction Analysts to provide cost-recovery services for the county.

Present: Barbara Levin Bergman, Leah Gunn, Wes Prater, Yousef Rabhi, Rolland Sizemore Jr., Conan Smith, Dan Smith, Rob Turner.

Absent: Kristin Judge, Ronnie Peterson, Alicia Ping

Board retreat: Commissioners will hold a Saturday, Jan. 29 retreat focused on setting budget priorities. The retreat is scheduled from 9 a.m. to 2 p.m. at the county administration building, 220 N. Main St.

Next regular board meeting: Wednesday, Feb. 2, 2011 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. The board’s administrative briefing, to preview the Feb. 2 agenda, will be held on Wednesday, Jan. 26 at 5:30 p.m. in the offices of the county administration building, 220 N. Main St. The board’s next working session is set for Thursday, Feb. 3 at 6: 30 p.m.