Ann Arbor: Engaging the FY 2012 Budget

How can city services be delivered in a sustainable way?

Editor’s note: On Jan. 31, the city council will begin a series of workshops on next year’s budget. The most recent status update from the city’s CFO, Tom Crawford, is that the city faces a $2.4 million shortfall if it does not reduce expenses. That figure assumes: (1) The city will receive around $2 million in parking revenue from the Ann Arbor Downtown Development Authority; (2) shared sales tax revenue from the state will continue at the same levels as last year; and (3) unresolved labor contracts will settle in a way that results in no increases to the wage structure, plus additional reductions equivalent to the cost savings the city would see if all employees were on the new health care plan.

The council has already convened two retreats on the budget – this report is a summary of those retreats.

1936 newspaper clipping

From the May 19, 1936 edition of the Ann Arbor Daily News. The scan was passed along to The Chronicle by the city's environmental coordinator, Matt Naud. Naud's source was Craig Hupy, head of the city's systems planning unit, who discovered some old papers in an antique store.

Late last year, on Dec. 4, 2010, the Ann Arbor city council held the first of two budget retreats for the next year’s budget adoption process. The current 2011 fiscal year ends on June 30, 2011, and the council will need to finalize its FY 2012 budget in May. The council typically begins contemplating the next fiscal year’s budget at a retreat near the end of the calendar year.

Two days after the first retreat, at the Dec. 6 regular city council meeting, city administrator Roger Fraser and councilmembers recapped the event, with Stephen Rapundalo (Ward 2) describing it as the best retreat discussion on the budget since he’s been on the council. First elected to the council in 2005, Rapundalo has five previous budget seasons to compare against.

The December retreat agenda reflected two main items: (1) general economic conditions; and (2) a sustainable service delivery model. The grim condition of the state’s economy was a point that was also driven home by Kirk Profit – director of Governmental Consultant Services, the city’s lobbyist in Lansing – in a presentation to the council at their Dec. 6 regular meeting.

The second retreat, on Jan. 8, followed up with a focus on services. To prepare for the retreat, councilmembers had ranked various city services by priority.

At both retreats, councilmembers and staff took the opportunity to communicate a message to city labor unions, some of whom Rapundalo characterized as not yet having seen fit to “recognize economic reality.”

And as chair of the council’s labor committee, Rapundalo has said he’ll give updates at the council’s regular meetings on the status of labor negotiations. He started the updates at the council’s Jan. 20 meeting. The implicit message communicated by the first update: Ann Arbor’s labor unions aren’t making the kind of concessions they should reasonably make, given economic conditions.

This report features highlights of the discussion from both retreats – including issues like the city’s approach to fire and police protection, solid waste and composting, as well as possible replacement of the general fund operating millage with a city income tax.

At both retreats, city administrator Roger Fraser and key city staff did their best to frame the council’s conversation not as a question of what services to cut. Instead, they tried to get councilmembers to consider which services might be delivered in a different way. The sustainability of the service delivery model depends on how the city delivers those services to residents – ranging from employment of full-time city workers, outsourcing the work, or by not offering the service at all.

To frame the context of these comparatively brief retreat highlights, we first offer a look back to 1936, when the city delivered a sidewalk snowplowing service to its residents. How? Partly by hiring in teams of horses to do the job.

How Services Are Delivered

The list of services provided to councilmembers for their Dec. 4, 2010 retreat included a blank column headed with “eliminate/modify.” In the course of the morning and early afternoon at the retreat, it became apparent that councilmembers considered all the items on the list as part of the core set of services the city should deliver. That is, there was no consensus that any of the items should be eliminated outright. Councilmembers seemed open, however, to contemplating modifications to the way that some of the city services are delivered.

How: Clearing Snow

In 1936, Ann Arbor city engineer George H. Sandenburgh delivered a report to the common council of Ann Arbor suggesting that the city would in the future need to purchase tractors in order to continue to deliver the sidewalk snowplowing service it provided at that time. [This historical tidbit comes from the May 19, 1936 edition of the Ann Arbor Daily News. A scan from that newspaper, which is the lead art of this article, was passed along to The Chronicle by the city's environmental coordinator, Matt Naud. Naud's source was Craig Hupy, head of the city's systems planning unit, who discovered some old papers in an antique store.]

Six years earlier, a Feb. 3, 1930 report to the common council had included the following in the city’s inventory of equipment:

Snow Removal Equipment

10 Steel Snow Plows for Sidewalks 250.00
2 Standard Snow Plows              40.00
2 Wooden Plows                      5.00
2 High Speed Snow Plows           500.00
5 Doz. Snow Shovels                60.00
1 Doz. Snow Pushers                 8.00  

City Team Equipment and Supplies

1 Team Horses                   $ 300.00
1 Set Double Harness               70.00
2 Halters                           1.00
2 Stable Blankets                   1.00
2 Woolen Blankets                  10.00
3 Tons of Hay                      45.00
80 Bu. Oats                        50.00
1 Troy Dump Wagon                  75.00
1 Wagon with Wood Box              30.00
1 Pair of Bob Sleighs              10.00


That inventory comes from part of the Ann Arbor District Library’s online set of 40 year’s worth of Ann Arbor city council minutes, from 1891-1930. [Chronicle coverage of the library's presentation of the online archive to the city: "Mayor Walker: 'Print it in the NEWSPAPER!'"] Based on the city’s inventory of a single team of horses, and 10 sidewalk snowplows, it appears that the strategy used for clearing snow from sidewalks involved hiring additional horse teams to do some plowing.

The modification to the sidewalk snow-clearing service that was suggested by city engineer Sandenburgh in 1936 indicated a future where city-owned equipment would be used to do the job. Sometime between 1936 and 2010, a decision was made that sidewalk snow-clearing would not be a service delivered by the city directly – except in the form of ordinance enforcement. Currently, property owners are required by ordinance to clear the snow from sidewalks fronting their property. Chapter 49 of the city code, which deals with sidewalks, dates in relevant part from 1986:

Within 24 hours after the end of each accumulation of snow greater than 1 inch, the owner or occupant of every residentially zoned property shall remove the accumulation from the adjacent public sidewalk and walks and ramps leading to a crosswalk. The accumulation may be from any source including precipitation and drifting. Immediately after the accumulation of ice on such sidewalk, it shall be treated with sand, salt or other substance to prevent it from being slippery and the ice shall be removed within 24 hours after accumulation.

The city service of sidewalk snow-clearing can be used to illustrate a range of different ways city services can be provided, including not providing the service at all:

  • No service with respect to clearing snow from sidewalks.
  • No clearing of snow by the city except through ordinance enforcement.
  • Clearing of snow by the city through employment of temporary workers who use their own equipment (e.g. horses and plows).
  • Clearing of snow by the city through employment of temporary workers who use a mix of their own and city-owned equipment (e.g., their own horses, but city plows).
  • Clearing of snow by the city through employment of temporary workers who use only city-owned equipment (e.g., tractors).
  • Clearing of snow by the city through employment of full-time city workers, who use only city-owned equipment.

If service delivery uses full-time city workers, it’s a fair question to ask: Where do city workers live? At the Dec. 4 budget retreat, Stephen Kunselman (Ward 3) indicated a preference to have city workers live in the city of Ann Arbor – they can be ambassadors for the city in their own community, and they will take greater pride in their work. It’s not possible, however, to enforce residency requirements.

Kunselman pointed to efforts by Detroit’s mayor Dave Bing to provide incentives for city workers to live in the city. City administrator Roger Fraser told Kunselman that he was open to a conversation about that. [It did not seem to be Kunselman's intent to draw out the fact that Fraser himself doesn't live in the city.] But of all the things Fraser wanted to focus on, there were many items on the list ahead of that. It’d be a low priority in terms of his optimism about the positive impact; it’d take time, even if the strategy were effective. Fraser concluded that the potential payoff is fairly remote.

How: Funding a Service

Downtown Ann Arbor sidewalk snow clearing

Photo taken Dec. 13, 2010 looking east along the north side of Liberty Street between Ashley and Main. The Main Street BIZ district begins at the alley just beyond the green and blue downtown way-finding sign in the right of the frame.

How a service is paid for – with general fund property taxes, gas taxes collected by the state, a special dedicated millage, a special assessment district, a combination of property and personal income taxes – also counts as the way a service is provided.

With respect to clearing snow from sidewalks, the newly created Main Street BIZ illustrates how property owners can choose to impose an extra property tax assessment on themselves to fund the clearing of sidewalk snow.

After the snow and ice accumulation that occurred in the city on Dec. 11-12, 2010, there was a visible difference in sidewalk snow clearing effectiveness inside the Main Street BIZ boundary compared to outside the boundary.

Sidewalks are one thing, but even on Ann Arbor streets, snow-clearing services are not delivered to all residents in exactly the same way. At the city council’s Dec. 21, 2009 meeting, Christopher Taylor (Ward 3) reported that the city had struck a deal to subcontract out snow removal with the Pittsfield Village Condominium Association. In that area, Taylor said, the city had a hard time doing snow removal well – due to the winding streets and the lack of lawn extensions. The association contracts with a snow-removal provider that uses smaller vehicles to navigate the tighter quarters, and street snow removal is coordinated with sidewalk snow-clearing done by the association.

The Main Street BIZ pursued a fairly lengthy process in winning its eventual approval. At their April 1, 2009 meeting, the Ann Arbor Downtown Development Authority board authorized $83,270 to help fund the administrative and legal costs associated with that process. After that meeting, former DDA board member and downtown property owner Ed Shaffran – who helped lead the effort to create the Main Street BIZ – told The Chronicle how he saw the BIZ fitting into the funding of government services:

Shaffran said that the intent of property owners on Main Street was to provide assurance – by undertaking to assess themselves a higher property tax – that the kind of services they wanted would actually be provided into the future. Shaffran went on to speculate that this could be a pre-cursor of “a la carte government” as revenues to municipalities dwindled. He suggested that the concept of a BIZ could be extended to residential neighborhoods as well. The strategy for providing services, he said, could evolve to be a system where a minimum baseline level would be provided by government, with BIZ-like affiliations electing to augment (or not) that baseline level.

Service When It’s Not a Snow Job

At the Jan. 8, 2011 retreat, councilmembers engaged in some back-and-forth about the quality of snow-removal service in the city of Ann Arbor. Mayor John Hieftje ventured that snow removal is twice as good as it was back in 1999. Stephen Rapundalo (Ward 2) reiterated the view, which he’d expressed at the December 2009 budget retreat, that the quality of snow removal in the city is “abysmal.” At this year’s retreat, he contended that if you go to the city limits, it’s as if someone draws a line where snow removal begins and ends. [It's a point that has been noted by others.]

The city council recently approved an expenditure for a remote vehicle monitoring system that includes, among other features, the ability to track the progress of snowplowing in real time.

Snow removal, of course, is just one service of many that cities might provide.

Not Snow: Solid Waste

Collection of waste material that residents prefer not to store on their property is a basic city service – stuff that ranges from grass clippings, to leaves, empty milk jugs, old newspapers, bags of cat litter, or empty cans of shaving cream. For the city of Ann Arbor, these items correspond to one of three wheeled collection carts – a compost cart, a recycling cart, and a trash cart – which have been distributed to residents and are emptied once a week with a truck equipped with a robot arm controlled by the driver.

At the Jan. 8 retreat, public services area administrator Sue McCormick revealed an underlying assumption by staff in the solid waste program: Residents would not tolerate different days for pickup for different collection carts. Some councilmembers suggested that this might not necessarily be the case. It was left for future thought, along with the possibility that this could simply be a “legend,” along with other assumptions. Why would the flexibility to pick up different carts on different days make a difference? It’s because it might be possible to be efficient enough to collect one kind of cart with few enough routes that only a four-day schedule would be required for that kind of cart.

As for the challenge of keeping track of which days certain carts were to be set out, it was suggested that the city could deploy messaging systems that would push the information to residents.

More significant than the possibility of varying the pickup schedule is the idea of contracting out the trash collection service to a private hauler. At the Dec. 4, 2010 retreat, city administrator Roger Fraser observed that the city had spent a lot of time developing its solid waste plan. The solid waste plan suggests the idea that the city would work its way out of the business of collecting solid waste.

The city has already worked its way out of the business of part of the solid waste collection that it previously ran: At its Dec. 6, 2010 meeting, two days after the first budget retreat, the council approved a contract with WeCare Organics to operate the city’s compost facility. It was a controversial issue for many residents and had led to the postponement of the measure at the city council’s Nov. 15, 2010 meeting.

So the idea of contracting out the collection of trash at the curbside is now also in the works – based on the city’s solid waste plan. From the city of Ann Arbor 2002-2007 solid waste plan:

Three key issues were built into the survey to determine public opinion on possible program directions for reducing waste – rolling back taxes with a for-fee trash collection system, anti-litter campaigns, and food waste composting pilots. … Under a PAYT system, the financing for trash collection would be directly paid by the consumer, with a partial roll-back in taxes, while recycling, composting and other waste services would continue to be covered at no extra charge. …The majority of those interviewed (61% residential; 79% business) felt that the existing system of “tax-paid full service” was preferable to a PAYT mechanism.

Some councilmembers appeared taken slightly unaware by Fraser’s update. But Fraser reminded the council that they’d heard the idea at the previous year’s budget retreat. From The Chronicle’s report of the December 2009 budget retreat:

Reduce solid waste millage

On this proposal, the city would get out of the business of garbage collection, but stay in the business of recycling. The city would contract with a waste hauler, which would then be paid directly by residents under some kind of franchising arrangement that would allow them to “pay as they go.” That would allow a reduction in the solid waste millage, which could be passed along to residents. Or voters could be asked to continue to pay the same percentage, but direct to other areas the part not needed to fund garbage collection.

When considering whether residents would choose to continue paying the same amount even though their service had been reduced, and then pay again separately for waste hauling, Stephen Rapundalo asked, “Why would they do that?”

Stephen Kunselman (Ward 3) cautioned that this kind of “pay as you go” system could have the unintended consequence of encouraging the dumping of trash wherever people could find a place – something he said he’d seen as administrator of  Sumpter Township in the early 2000s.

Now, Fraser said at the Jan. 8, 2011 retreat, the city is taking a full look at that to see if there’s a benefit to exploring implementation in the next fiscal year. He told councilmembers that an alternative study on trash collection would be presented to them in March.

Not Snow: Public Safety – Police, Fire

The idea of outsourcing police services – by contracting with the Washtenaw County sheriff’s office – was briefly touched on at the Dec. 4, 2010 retreat. Barnett Jones, head of the city’s safety services, reiterated the same sentiments he’d expressed at the 2009 retreat. He brought the perspective of having previously worn a brown shirt, working for the Oakland County sheriff’s department, selling townships on the idea of contracting for police services. The difference, he said, is that Ann Arbor already has the best police force in the county. Further, he explained, the county would have to add considerably to its force in order to provide service to Ann Arbor.

In any case, councilmembers did not appear to have great interest in altering the basic way Ann Arbor provides police services – which is by hiring full-time city employees to do the job.

Fire protection was a different story. Councilmembers expressed keen interest in exploring alternatives to providing fire protection by some other means than staffing fire stations around the clock with full-time career firefighters. Jones explained that there are three basic approaches to providing fire protection: (1) volunteer firefighters, (2) paid on-call firefighters, and (3) full-time career firefighters. Jones described how departments are starting to spring up that are a blend of (2) and (3) – a combination of full-time employees, who are career firefighters, and others who are paid to be on call to perform fire suppression duties. He cited Troy as perhaps the largest city that used such a combination department for fire suppression. He suggested that Troy would not use that strategy if they didn’t think they were getting effective fire protection.

Councilmembers were keen to get an understanding about what the implications for emergency medical response would be – many fire department calls are in response to medical calls. Fire dispatch is now handled by Huron Valley Ambulance, with the goal of reducing unnecessary medical runs by the fire department. But this goal has not been entirely met. Fraser explained that there’s a need to clarify existing protocols and to clarify the exact definition of a Category 2 call. The category had been defined two decades ago by responders in the eastern part of the county, he said, and hasn’t been reconsidered in two decades. He characterized the wasted runs as translating to a multimillion-dollar impact on the system.

Stephen Kunselman (Ward 3) expressed concern that when a combination paid/on-call department was introduced in the townships, it became a way for politicians to get elected – giving jobs to their neighbors, so that they could go hang out at the fire station with the big trucks. He urged caution about implementing a combination paid/on-call fire department.

Mayor John Hieftje pointed to a decrease in the number of fires since 1970, which he attributed to good building codes, suggesting that the need for fire suppression resources is not as great now as it was historically.


The budget planning process in any year includes a number of factors that cannot be completely known. These were also discussed at the two retreats.

Unknowns: Labor Contracts – Aligning Labor, Budget Strategies

Among the city’s assumptions in planning for the FY 2012 budget is that currently unresolved labor contracts will settle in a way that results in no increases to their wage structure, plus additional reductions equivalent to the cost savings the city would see if all employees were on the new health care plan. It is, of course, not possible to know if those contracts will settle in the way the city is assuming for budget planning purposes.

What’s the city’s plan for getting the contracts to settle? At the Dec. 4, 2010 retreat, city administrator Roger Fraser and the city’s CFO, Tom Crawford, described a strategy of aligning the budget and the labor strategy. Stephen Rapundalo (Ward 2) called it the “number one issue.”

What’s meant by aligning the two strategies? It essentially means including health care costs in the equation that determines the budget reduction target for each department.

By way of background, the city has a new health plan it would like all workers to use – it includes monthly employee contributions, higher deductibles, and out-of-pocket maximums. Non-union staff have transferred to the new plan, as have a few of the city’s unions – though not those with the greatest number of employees: AFSCME, police officers, and fire fighters. The city’s net cost per employee for the new plan is $10,686, compared with $12,310 for the AFSCME workers’ plan, $13,121 for the police officers’ plan, and $12,871 for the fire fighters.

At the Dec. 4 retreat, Sandi Smith (Ward 1) expressed surprise at the cost of even the city’s plan. She said it’s twice what she pays with a self-funded plan. Fraser noted that to truly compare the plans, you’d have to compare details, and there are different assumptions about risks. He also noted that in the public sector, you can’t go in and say, “Here’s your new plan!” Implementation has to be incremental, he said. Crawford also observed that with police and fire fighters “who are out there every day, it’ll be different than …”  and Fraser completed his sentence by quipping, “… people who work in real estate.” It was a playful allusion to Smith’s line of work.

Fraser explained the budget and labor strategy alignment this way: Suppose every department has a base reduction target of at least 2.5%. For departments with employees who have not adopted the new city health care plan, the inclusion of health care in the equation could result, for example, in an extra 1.5% added to the target. That department’s total reduction target would become 4%.

Councilmembers and staff alike were frank during both retreats about what this implies: Unions need to accept the new city health plan, or accept the fact that there will be fewer of their members employed by the city.

Rapundalo expressed some frustration that the major unions have not yet adopted the city health plan. He characterized it as a lack of understanding and appreciation or an unwillingness to understand impacts on the entire organization. “The consequences are not going to be pleasant,” he warned.

Fraser was somewhat more accommodating of the union perspective, telling councilmembers that as elected officials they are representing citizens. But people who are selected to lead labor unions, said Fraser, while they work at the city to provide services, their task is to “optimize their circumstances as employees.”

Unknowns: DDA Parking

The city has a contract with the Ann Arbor Downtown Development Authority under which the DDA manages the city’s public parking system. The contract currently runs through 2015. The 10-year contract stipulates that the DDA will pay the city $1 million in “rent” annually, with the provision that the city could request up to $2 million in a given, year as long as the amount for the entire 10-year period does not exceed $10 million. Through the first five years of the contract, the city requested the maximum $2 million payment – reaching that $10 million mark.

Last year, in the sixth year of the contract, the DDA decided to authorize an additional $2 million not required under the agreement – a vote that was controversial on the DDA board.  It was a move that allowed the city council to revise the city administrator’s proposed budget, which averted some planned layoffs of police officers and fire fighters. The city had not assumed the additional payment as part of its budget planning. As city administrator Roger Fraser explained at the Dec. 4 retreat, the $2 million was “not a part of our optimism,” because there were no ongoing conversations between the city and the DDA at the time.

This year, the city is assuming $2 million from the DDA for its budget planning. That’s because since June 2010, the city and the DDA have engaged in a regular extended conversation via their respective “mutually beneficial” committees about renegotiating the parking contract. The strategy the committees are currently exploring is switching from a fixed fee “rental” style agreement – based on the idea that the DDA is using city-owned assets to run the public parking system – to a percentage-of-gross style arrangement, which aligns the two parties’ interests. [Most recent Chronicle coverage: "Parking Money for City Budget Still Unclear"]

Based on the most recent percentage-of-gross figures the DDA has discussed, in the next year or two, the payment could amount to slightly less than $2 million. As parking revenues increase in later years of the contract, the return to the city is projected to reach and exceed $2 million, even on the lower percentage-of-gross figures the DDA is currently discussing. The city’s CFO, Tom Crawford, wrote in response to an emailed query from The Chronicle that if the amount received by the city is slightly less than $2 million in the first year, he would probably recommend making up the difference from the general fund reserve, based on the idea that the shortfall would not persist beyond the first year or two.

Unknowns: State Shared Revenue

The concept behind the state shared revenue system is that local municipalities in Michigan have a restricted ability to levy taxes, so the state reapportions to local municipalities some revenues out of the 6% sales tax that it collects. The reapportionment comes in two flavors: the constitutional portion (15% of the 4% gross collections of the state sales tax) and the statutory portion (up to 21.3% of the 4% gross collections of the state sales tax). The legislature controls the statutory portion, but not the constitutional portion.

Historically, the amount of statutory state shared revenue received by the city of Ann Arbor has fallen from $6.5 million in FY 2001 to just under $2 million in FY 2011.

The city’s budget planning right now assumes that state shared revenue will remain stable, despite some indications from the state legislature that the state might significantly reduce it. At the Dec. 4 retreat, Fraser indicated that the budget planning decision reflects less conservatism than the city has displayed in previous years of budget planning. Conservatism means that if anything, you understate revenues and overstate expenses, so that there is maximum flexibility to adjust mid-year.

This year, the city is minimizing the conservatism on both sides, to be as lean as it can possibly be, which means there’ll be less flexibility during the year, Fraser said. The risk associated with this strategy, said Fraser, is that a budget amendment might be needed in the middle of the year, if something unforeseen occurs.

Revenue: Operating Millage or City Income Tax

Local municipalities have four sources of possible revenue: (1) property taxes; (2) fees for services; (3) state shared revenue – apportioned from the state sales tax; and (4) city income tax.

The city of Ann Arbor does not levy just one kind of property tax. Ann Arbor tax bills include separate taxes to support: general operations, employee benefits, solid waste system, debt, street repair, city parks, open space acquisition and mass transit.

An example of fees for service is the drinking water utility – residents pay for the amount of water they use.

It’s not an option for a city to levy any kind of sales tax in addition to the state sales tax. For example, the city of Ann Arbor is not legally empowered to apply an entertainment tax that could be added to University of Michigan football tickets. Part of the rationale behind the state shared revenue system is for local municipalities to have their inability to levy extra taxes balanced out by revenue that is shared with them by the state.

A feature of the Ann Arbor city charter that distinguishes Ann Arbor from other Michigan cities is the relationship between the general operations property tax and a city income tax. Per the city charter, Ann Arbor can enact one, but not both kinds of tax:

City Tax Limit SECTION 8.7. (a) … In any calendar year in which the Uniform City Income Tax Ordinance is in effect on the day when the budget is adopted, the City may not levy any part of the three-fourths of one percent property tax previously mentioned …

But if the city of Ann Arbor were to enact a city income tax, it’s only the general operations property tax that would disappear – the other city property taxes would remain.

Cities can enact a city income tax under the state statute Uniform City Income Tax, which allows an income tax of up to 1% to be levied on residents of a city, and on non-residents up to 1/2 of the percentage levied on residents. For example, if a city enacted a .5% income tax on residents, then non-residents would pay no more than .25%.

Supporters of a city income tax for Ann Arbor typically defend against tax burden arguments by pointing to the fact that the city charter stipulates that a city income tax replaces, rather than supplements, the roughly 6 mill general operations property tax for residents. [For readers who wonder how much property tax they would save, the line item, on summer tax bills, is labeled CITY OPER].

Supporters also typically point out that 40% of the real estate in Ann Arbor is not subject to property tax – due to the large city park system and the presence of the University of Michigan, whose land is not subject to property tax. So funding operations from property taxes is more challenging than in cities where a greater percentage of the property is subject to a tax.

Supporters also typically point to the large number of workers who have jobs in the city of Ann Arbor – many of them at UM – who live outside the city. That translates into larger potential revenue from an income tax than in cities that have a smaller number of commuters.

Detractors of a city income tax typically point to the potential barrier such a tax might represent to businesses choosing to locate in Ann Arbor, or to the inequity of the income tax with respect to resident renters – who may not see the reduction in their landlord’s property tax passed along to them in lower rents. Some oppose the idea on philosophical grounds, arguing that applying the tax to non-resident workers amounts to taxation without representation. Income taxes as a source of revenue are also somewhat less stable than property taxes.

City Income Tax: Previous Discussions

Two years ago, at the Jan. 2009 budget retreat, then-councilmember Leigh Greden advocated for an exploration of replacing the general operating millage with an 1% city income tax. The budget retreat discussion resulted in the dissemination of a previous, 2004 city income tax study. The 2004 study had been preceded by a 1997 city income tax study.

In July 2009, the city released a more current study. But in August of that year, it became clear at a city council work session that there was no enthusiasm on the part of the council to place the issue on the ballot in the fall.

Yet at that year’s budget retreat on Dec. 5, 2009, Christopher Taylor (Ward 3) again raised the issue of exploring a city income tax. And at a Feb. 16, 2010 meeting of the city council’s budget committee, which included [and still includes] Taylor, members gave city administrator Roger Fraser the green light to conduct a survey of voter attitudes on the city income tax.

City Income Tax: Current Discussions

Through the city council and mayoral election season in 2010, the idea of a city income tax received some discussion as an issue. During his campaign, Tony Derezinski (Ward 2) in particular expressed support for the idea. He’s now part of a working group on the council, which also includes Taylor and Marcia Higgins (Ward 4), that is taking a closer look at revenue questions. At the Dec. 4, 2010 retreat, city administrator Roger Fraser expressed the same sentiment he’d conveyed to members of the budget committee back in February 2010: That he thought he had an obligation to ask the citizens to consider the income tax question before cutting services.

Fraser stressed the need to engage the public on the question, saying that the first thing people will ask is, What have you done already to address expenses? He said that they’d need to be clear about what the city had accomplished – that includes reducing the work force from a peak of 1,005 ten years ago to fewer than 750 today.

At the Jan. 8, 2011 retreat, there was some back-and-forth about whether the work group looking at the income tax question – as well as the possibility of a Headlee override – should be called a “committee” or a “work group.” Implicit context for the distinction is that council committees are supposed to do their best to conduct their meetings openly in accordance with the Michigan Open Meetings Act – based on a two-decades-old city council resolution. Work groups are not considered to have the same obligation.

Discussion at the Jan. 8 retreat included the possibility that the revenue work group would also take a look at the street repair millage. Stephen Kunselman (Ward 3) expressed some interest in wrapping sidewalk replacement into the activities the millage revenue could cover. Currently, property owners are responsible for maintaining the sidewalks adjoining their property.

Collaboration: UM, AAPS, County, Townships

At the Dec. 4, 2010 retreat, the council discussed collaboration by the city with a range of other entities – University of Michigan, Ann Arbor Public Schools, the county surrounding municipalities – as a way to maximize use of resources.

At some points, the conversation grew very specific. For example, public services area administrator Sue McCormick revealed the city would be presenting an invoice to UM in connection with traffic control and police staffing for the Big Chill hockey game, which was held on Dec. 11. Some councilmembers seemed to suggest that concessions from the university could be won by withholding city consent when the university wanted something from the city. The university’s desire to include Monroe Street as part of the UM Law School campus was cited as a specific example. Fraser, though, counseled that each situation should be evaluated unto itself. He pointed to the planned Fuller Road Station as an example of the importance of that principle.

McCormick indicated the possibility of future collaboration with UM on maintenance of longer buses. Background on this issue includes the inter-campus transportation challenge that UM faces, which could potentially be alleviated by purchasing longer, articulated coaches. UM currently has no maintenance facilities that can accommodate longer buses. But the city’s maintenance yard at the Wheeler Service Center could conceivably be used to work on such vehicles, because the maintenance bays are configured so they’re face-to-face. Nothing has come to fruition yet with UM on that possibility, McCormick reported.

Fraser stressed that any collaboration was a slow process, even when partners are willing. He pointed to the new integrated funding model for human services, which involved a collaboration between the city, Washtenaw County, the Urban County, Washtenaw United Way, and the Ann Arbor Area Community Foundation. Fraser said that effort required just short of 24 months – and the only thing that was done was to change a process. No organization gave up any of their authority. It wasn’t that it was uncomfortable, he said, but each one of the groups had boards and they each had their own process for approval.

Regarding the city’s relationship with other municipalities, Fraser described how he and the mayor had begun in 2003 working to change the nature of the relationship of the city of Ann Arbor and its neighbors. He said if he were to describe the nature of the relationship that he saw when he arrived in 2002 between the townships and the city of Ann Arbor, he felt Ann Arbor would have been described as “self-absorbed and selfish and not willing to play fair with others.” There was a lot of healing that needed to be done before the city could even begin to have a conversation about collaboration on service delivery, said Fraser.

But that had not been true with Washtenaw County, Fraser said:  ”[Bob] Guenzel and I hit it off right away.” [Guenzel was until last year Washtenaw County administrator – he retired in May 2010.] Fraser said that he and Guenzel had even talked about combining the city and the county together, but as a practical matter it’s not authorized under state law. But Fraser concluded that Guenzel’s and his vision were very similar in terms of looking for opportunities to seek collaboration.

Public Engagement

At both retreats, city councilmembers and city staff acknowledged the challenge of engaging the public effectively. Fraser noted that most citizens don’t pay attention to a fine level of detail. The city can put the information out there, he said, but the question becomes: “What information can be provided and what can we expect them to retain?”

At the Dec. 4, 2010 retreat, Mike Anglin (Ward 5) suggested that then was the time to engage the public on the question of re-thinking how fire protection would be provided. Stephen Rapundalo (Ward 2) objected, saying that at that point they had nothing to propose. So councilmembers grappled with the question: When should public engagement start? Regarding the community task forces that were eventually formed two years ago to study Mack Pool and Ann Arbor Senior Center – resulting in plans to help keep the facilities open – Sue McCormick noted that those processes didn’t begin with engagement, but rather with a proposal to to eliminate those facilities. Christopher Taylor (Ward 3) suggested that public engagement would most effectively begin with a proposal to do something different.

Fraser’s remarks made mid-retreat can serve as a summary of the message the city hopes to communicate to the public. The city can’t continue to pare down the number of people it employs and continue to provide the same services. “Our future has to be different. Your expectations have to be different. The community’s expectations have to be different about what it is that they can expect from us as an organization. … There’s nothing on the horizon to suggest that denial will work.”

Coda: Retreating to Luxury?

In recapping the first retreat at the Dec. 6 city council meeting, Fraser pointed out that the council’s budget retreat was not held in a luxurious location, but rather one of the crew work rooms at the city’s Wheeler Service Center on Stone School Road. [While not austere, the crew work rooms are in no way comparable to the Book Cadillac hotel, where Washtenaw Community College trustees held a retreat in March 2010.]


  1. January 31, 2011 at 11:45 am | permalink

    Changing trash removal to a system whereby individuals pay for their own trash removal is a bad idea from any direction you look at it. It is not a budgetary savings because a reduction in the millage is intended. It does not enhance service in any foreseeable way. It is regressive since even lower-income households would have to pay the same amount (the present property tax-paid system is roughly proportional to income and assets). It could cause trash hoarding and dumping. Depending on how administered, it could result in additional traffic through neighborhoods. It removes incentive for the city to offer recycling and composting.

    I don’t remember discussion of this when the Solid Waste plan was updated. It certainly doesn’t match my picture of how our city should deliver this most essential of municipal services.

  2. By Laura Bien
    January 31, 2011 at 12:35 pm | permalink

    Neat old article about horse snow removal, on sidewalks too, apparently. It seems to suggest that the city did not maintain a stable of horses for road work but perhaps subcontracted the work as needed from nearby farmers, perhaps.

  3. By Mark Koroi
    January 31, 2011 at 12:45 pm | permalink

    “Barnett Jones, head of the city’s safety services, reiterated the same sentiments he’d expressed at the 2009 retreat. He brought the perspective of previously having worn a brown shirt….”

    It is to emphasized that Jones did not belong to the group popular in 1930s Germany. LOL

    On a serious note. A caveat to City Council members that support for a City Income Tax was one of the reasons given by the electorate for voting Leigh Greden out of office in 2009. Expect organized opposition to any City Council who expresses any support whatsoever for putting such a measure on the ballot. Also, Ypsilanti voters turned down such a proposal in a landslide.

  4. January 31, 2011 at 2:50 pm | permalink

    Dave, the City Council has an official Budget Committee. How does the membership of this committee compare with the membership of the “work group” (Taylor, Higgins, and Derezinski)?

    Has anyone said why the regular Budget Committee is not handling the work group’s tasks?

  5. January 31, 2011 at 4:13 pm | permalink

    Re: [4] Derezinski is not a member of the council’s five-member budget committee, which consists of Higgins, Taylor, Briere, Anglin, Rapundalo. [Link] to Legistar listing of all city boards, commissions, task forces, committees, and the like.

  6. By Peg Eisenstodt
    January 31, 2011 at 5:23 pm | permalink

    The City of Ann Arbor regularly points out that it has cut its number of employees substantially in the past few years. What I don’t ever recall seeing is a tally of how many of those retirees were hired back as consultants (I personally know of several) and how many long-term consultants they actually have. While it may at first seem like a good idea to offer early retirements, does it really save money if they hire the individuals back and pay them as long-term consultants in addition to their retirement pay and benefits? I think it would be helpful to have this type of information reported. This might also be a question for Washtenaw County. Has anyone checked into this?

  7. January 31, 2011 at 10:49 pm | permalink

    Re #6: Excellent point. I won’t point fingers at any specific person but I do know of examples. What the city administration did was to reduce the employee head count at the expense of the pension fund. The consultant-employees may even be paid at a higher rate (though I don’t know that) but are not chargeable to current overhead (benefit) funds. It’s all a matter of which pocket the money comes from. Or was that buckets?

  8. By mr dairy
    February 1, 2011 at 4:31 pm | permalink

    Hey Dave, did you get that promised follow up on the sidewalk program from Fraser? Still waitin’? lol

    #7 re: shifted expenses. BINGO! Fewer employees, particularly lower wage union jobs, percentage increase in better paid professional positions and contract workers, it doesn’t take a genius to figure that out.

    We’ll know where the bottom is when they come after the pensioners and their health care.

  9. By Steve Bean
    February 2, 2011 at 11:06 am | permalink

    @1: My recollection is similar to yours, Vivienne. The update to the Solid Waste Plan discussed PAYT, but not privatization. I think Dave somewhat conflated the two options in his reporting. I wouldn’t be surprised if council members did likewise in their interpretation of the plan and the options before them. I disagree that PAYT is a bad idea. Privatization (again, a distinct option from PAYT), however, would be, for the reasons you state. PAYT could result in less waste landfilled, less subsidization of wasteful practices/behaviors, and higher recycling and composting rates without much increased risk in illegal dumping. The key is in how it’s structured and presented (which the plan excerpt that Dave included referred to as “three key issues”.) Also note that the recommendation was for only a partial rollback of property taxes. The remainder would be needed along with the fee revenues in order to keep city trash collection operations running and to inform residents and businesses about waste reduction practices.

  10. By Steve Bean
    February 2, 2011 at 11:25 am | permalink

    Reading through the solid waste section of the report more carefully, it seems that Fraser might be conflating “pay as you go” (privatization) with “pay as you throw” (PAYT), which might account for the reaction of some council members. While previous budget discussions may have introduced consideration of the former, the Solid Waste Plan Update only referenced the latter.

    Given that the survey was conducted about ten years ago in a very different economy and that citywide commercial recycling has since been implemented, along with single-stream collection and various improvements to the overall system, reconsidering PAYT is worthwhile. Privatization still is not.

  11. February 2, 2011 at 12:13 pm | permalink

    Thanks, Steve.

    Actually we have already implemented a version of PAYT in the sense of a limited volume of municipal waste (the A2 Carts). We have also eliminated the bulk pickup, free drop-off, and Christmas tree pickup.

    The move to privatization is particularly suspect when it is combined with eliminating a source of revenue that already exists (the solid waste millage). City administrators don’t appear to like dedicated millages. They actually dictate what services are to be supplied.